If I told you an oil discovery in 1951 could save your retirement you’d think I was kidding. Either that, or you’d think I was talking about some sort of Middle East investment scheme.
I can hear it now, “Matt, all the big U.S. oil fields found back then are dry holes today, there’s no money left. And I’m not investing in Saudi Arabia. Either way, you’re off your rocker!”
Today I’ll prove the naysayers wrong — with a look at America’s largest “sleeping” oil field. This dormant giant will offer profit potential like no other investment you’ve seen…
And thus started the Bakken oil boom of 1951.
Well, not really. North Dakota’s oil boom never really took off in the 1950’s.
The sweet spots in the Bakken were specific locations that included natural fractures of the source rock — they were few and far between. And it soon became evident that the North Dakota oil boom wasn’t set for the same fame as that of Texas or California. Surely, the Bakken boom of 1951 made some folks rich, but it wasn’t a game-changing discovery back then.
Indeed, for over 50 years the Bakken formation lay mostly dormant.
Fast forward to today and the Bakken giant is waking up. This 1951 oil discovery has changed the game for U.S. oil production — landing North Dakota as the No. #2 oil producing state. New technology has unlocked the vast potential of the Bakken and now modern-day oil prospectors are adding to the over 600,000 barrels of production per day.
It’s a sight to be seen Williston, ND — a bustling small town where profit opportunities abound.
From my recent boots on the ground trip to this Bakken region, one company in particular should be on your radar, Statoil (STO: NYSE.) The company is set to make a killing, producing oil from the now-prolific Bakken oil formation.
Today I want to give you a highlight of what Statoil is doing onsite, and show you a few unique advantages they have over the competition.
Before we move forward let’s get one thing straight…
The best part of my job is being able to independently hunt for hot resource plays, and relay my findings to you. Oil, gas, gold, silver…you name it and we’ve got it on our radar. But it’s important to note that you and I don’t report to any special interests.
So while you read today’s article, and each article, just remember that I’m not controlled by any of the companies that I write about…and what you read is 100% independent. I check out a deposit, management, the investing environment, the stock chart, add it all to the overriding macro economy and publish my best ideas for you. Simple as that. Heck, this is the same advice I’d give my dad.
With that said, my quest recently led me to far-stretching fields of North Dakota. I went onsite with Statoil and today I want to share my independent opinion of what’s happening out west.
Without futher ado, let’s get our boots back on the ground in the booming Bakken!
A Day Onsite With Statoil…
I had to double check my directions for my early morning boardroom meeting with Statoil’s management — after all, Google Maps can’t seem to keep up with this booming town.
Before we went out to kick some rocks, I heard from Senior Vice President Torstein Hole. Torstein oversees Statoil’s development and production activities in North America and was able to show that the Bakken is one of Statoil’s top tier U.S. plays, along with production in the Marcellus and Eagle Ford.
Let’s put this in perspective, Statoil is a Norwegian, semi-national, oil company. Less than a year ago they bought big, acquiring Brigham Exploration for full exposure to the Bakken — with over 375,000 acres. For Torstein to be stationed in North Dakota gives direct credence to the global nature of this energy opportunity.
When asked about the longevity and impact of America’s shale boom Torstein says we’re “still in the early days in shale.” That’s especially true in North Dakota. As he put it, “the current production in the Bakken will be long lasting. 30-40 years of production.”
So you see, the big picture that we’ve painted about America’s shale boom is just getting underway. Torstein’s comment was surefire vindication of the importance of the massive Bakken oil play.
Just to bring the discussion full circle, Henry Bakken, the Williston farmer, was a Norwegian descendant. So, over 60 years after the formation was named “Bakken.” the Norwegians are back! Statoil is betting big on U.S. energy, especially in the Bakken, and giving you a chance to profit.
Muddy Boots In The Bakken…
After a short boardroom meeting, we hit the busy roads checking out fully active drilling and fracking operations – these sites are working 24/7, 365 days a year (even in the winter, sub-zero temperature and 50 mph wind.)
One of the first stops was an innovative drill site, where Statoil utilizes a Nabors (NBR: NYSE) drill team. The key here was that instead of drilling one well and then moving along to a new site, the specialized drill rig is capable of “walking” a few meters along the drill pad to drill multiple wells.
At this particular site, Statoil was planning four wells. All four wells would be drilled by the same rig using the same drill pad. Here’s a look:
This multi-well design is highly efficient and reduces overall drill time and costs. The picture above shows you the specialized Nabors rig — the yellow “legs” on each corner allow the rig to lift up and “walk” a few meters over to drill another well. I wish I was there to see that!
After the drill rig walks around and drills the four-well setup (each well 10,000 feet down and 10,000 ft horizontal) it’s time for the “well completion” to begin. Here’s what that stage looks like:
As you can see in the picture above there are three (of the four) wells lined up in a row — each well-head is surrounded by a yellow platform to allow for the completion process. Onsite along with Statoil is the Halliburton (HAL: NYSE) completion team.
These guys go in and hydraulically fracture and stimulate each well — on site they call this a “zipper frack,” meaning they frack the wells one right after another. And you guessed it, since there are four wells right in a row it’s highly efficient. Much quicker than traditional one-well setups where a frack team would have to move from site to site.
What you don’t see in the picture above is the magnitude of this completion site. I’d have to say there were 30 trucks on site here — a mobile command unit where Halliburton monitors the fracking process, pump trucks, sand trucks, water recycling units, storage trailers, and more.
Everything is engineered at this stage of the game, right down to the sand!
Since the Bakken doesn’t have the same physical properties as other shale or tight oil plays, Statoil utilizes special composite sand in its fracking process. As you can see above the sand is human engineered into strong little spheres. This product can withstand the immense geologic pressure, 10,000 feet below in the Bakken formation. It lasts 3–4 times longer than natural sand, propping open fracture points and allowing the oil to flow for longer durations.
So far you can see that Statoil uses the best of the best service companies — Nabors and Halliburton. Nabors offers the walking rig setup and Halliburton offers its own proprietary expertise on the completion stage. No complaints from me! After all, this kind of technology and know-how all adds to the bottom line.
Another thing you didn’t see in the pictures above, on the completion site, was Statoil’s latest fracking technology. At the site pictured above, Statoil is utilizing a brand new water-recycling technology. This process reuses 50% water from other frack operations. As I’m told, It’s a “game changing” technology that could lead to complete reuse of fracking fluid — instead of having to treat or dispose of it otherwise. Saving fresh water and money? Sound good to me!
Next, we made our way to an active production well, along with some of Statoil’s midstream infrastructure — a brand new 40,000 barrel storage facility, with nearby access to pipe and rail transportation.
Pictured above is one of Statoil’s storage units — although it doesn’t look big, it’s about 5 stories tall and holds 40,000 barrels of crude.
One factor that sets Statoil apart from its competition is the company’s ability to move and market the oil it produces. After all, there are plenty of oil producers in the Bakken, but how many can say that they’ve maximized their midstream logistics? In other words, you’ve got to make sure you have a profitable place to sell your oil.
Besides storage facilities Statoil also has a deal set up for 1,000 rail car capacity to move oil from the Bakken, through Wyoming, down to Cushing, Oklahoma. This is the same rail infrastructure that Warren Buffet bet big on…
Statoil also has the potential to send oil to a pipeline in Clearbrook, Minnesota which also flows to Cushing.
These options, along with storage, are vital to making sure you get the best price for your oil. In fact, Statoil has a trading center in Stamford Connecticut set up just to monitor its oil and gas marketing. So when the company produces oil from the Bakken or Eagle Ford, or natural gas from the Marcellus, they can make sure they are actively seeking the best market.
Add it all up and Statoil is way ahead of other companies when it comes to technology, efficiency and midstream logistics in the Bakken.
Think about it, it’s still been less than a year since Statoil acquired this Bakken acreage, (with the Brigham Exploration deal) and they are already far ahead of the game. The Bakken acreage was a timely purchase and is already streamlined and ready to profit.
I’ll leave you with one last anecdote from my site visit…
I had time to talk about the Brigham acquisition with Statoil’s Vice President of Bakken Operations, Lance Langford. Lance is an important piece to the story, since he worked for Brigham for over 15 years and now brings his years of experience directly to Statoil’s day-to-day operations.
I half-jokingly asked Lance how the transition was going from Brigham to Statoil. Heck, just five hours on site with these guys I already knew the transition was seamless. He agreed, and couldn’t have been happier with the way things have worked out.
Brigham worked hard for years learning from the Bakken and buying up a lot of the sweet spots in the formation. Today, Statoil is moving forward with the same gusto.
At this point I looked to Lance and went on a little resource rant about how Statoil is one of the best companies I’ve seen in a while — and how I’m glad they are hitting the ground running in the Bakken and other U.S. shale plays. To top it off I said it’s got to be great working for an established company with so much potential, that still pays a 4% dividend. He just smiled and nodded.
With Statoil, we’re talking about a massive, diligent, safe, efficient, innovative company that is incrementally making money in America’s shale patch. The Bakken is just one example of this.
As the energy boom surges ahead, Statoil will offer you a solid, safe way to play America’s bountiful future…in a Norwegian sort of way.
Keep your boots muddy,
P.P.S. A special thanks to Christine Wigand, Stephen Bull and Statoil for hosting this trip to Williston. This American energy boom will impact the U.S. economy in a positive way for decades to come, it’s great to get out there and see it in action. Thanks! To check out a my recent Daily Resource Hunter exclusive interview with Stephen Bull, click here.
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