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Could the next oil boom be right here in the United States?



April 18, 2008 – Comments (7) | RELATED TICKERS: XTO.DL , MRO

Last week, the United States Geological Survey published an estimate that the shale rock deposits called the Bakken Formation, which stretch from North Dakota to Montana, could hold as much as 3.7 billion barrels of oil (see article: Bakken Shale in US may hold 3.7 bln bbl oil - USGS).  If this estimate proves to be accurate, Bakken would be the largest single deposit of oil in the continental United States.

Much like Canada's oil sands, oil shale is an unconventional source of the oil that takes a lot of energy to convert.  The Bakken Formation was discovered all the way back on the 1950's, so it's not like we didn't know it was there.  In fact, a number of companies looked into producing oil from oil shale when the price of oil skyrocketed in the 1970s.  At the time it was deemed not economically viable.  Well, the high price of oil has caused many companies to look towards Bakken again as a potential source.  New technology, including horizontal drilling, makes recovery of oil from there easier and the USGA's huge new estimate of the area's potential reserves have some people absolutely giddy about Bakken’s potential.

A number of smaller oil shale stocks have gone absolutely bonkers lately.  Unfortunately, I am not invested in them.  I do own XTO, which just last week announced that it is purchasing Linn Energy's oil shale assets in the Marcellus Shale formation in Pennsylvania and West Virginia for $600 million (see article: XTO Energy to buy Linn Energy assets for $600M).  So I have some exposure there. 

I also own stock in Marathon Oil (MRO), which I bought awhile ago before I even knew that it has 320,000 net acres in Bakken.  According to Marathon’s web site, its Bakken stake "has the potential to add more than 20,000 net barrels of oil equivalent per day of production by 2012."  I even found a handy picture of Marathon’s stake which I have included at the bottom of this post.

A third company with oil shale exposure is Hess (HES).  Despite my affinity for the lowly New York Jets, I do not currently own Hess stock.  Hess recently announced that it is increasing the number of drilling rigs that it has in the Bakken area from six to eight.

Other oil shale plays include Brigham Exploration (BEXP), Continental Resources (CLR), EOG Resources (EOG), Kodiak Oil & Gas (KOG), Petrobank (PBEGF.PK), Petroleum Development Corporation (PETD), and Whiting Petroleum (WLL).  It will be interesting to keep an eye on oil shale companies in the coming months and years.  If oil prices remain this high…or higher, and the USGA’s estimates prove to be accurate a lot of money is going to be made by the companies that are investing in this area.



Long XTO & MRO

7 Comments – Post Your Own

#1) On April 18, 2008 at 2:26 PM, nuf2bdangrus (< 20) wrote:

Thanks...I am going to be focusing on R&P, and you have added to my research list.

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#2) On April 18, 2008 at 3:19 PM, TMFDeej (97.71) wrote:

You're very welcome, nuf2bdangrus.  Have a great weekend.


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#3) On April 19, 2008 at 12:17 AM, cluelessmorgan (83.84) wrote:

good info.  I'm long on MRO and digging around for some shales, so this was helpful, thanks.

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#4) On April 19, 2008 at 3:22 AM, kristm (99.72) wrote:

If a certain political party sweeps in this fall that oil will be legally untouchable. There's probably some kind of endangered frog or a rare tree or perhaps an orphaned deer or polar bear living in the area that would be destroyed through the development of those oil reserves.

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#5) On May 03, 2008 at 8:30 PM, eskatonic (28.55) wrote:

congress and all three presidential candidates are too focused on loving ethanol and hating oil to let new production at home happen :(


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#6) On May 07, 2008 at 3:37 PM, bantisprincess (67.10) wrote:

Some of these new oil rigs they want to build would be populated areas. Such as the ones in Texas. I saw the talk about the shale an they were talking 350 rigs around the airport in this case.

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#7) On May 14, 2008 at 8:26 AM, ateet (< 20) wrote:

this is good

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