The Williston Basin’s Bakken and Three Forks formations along with large and small cap players in it like Continental Resources, Inc. (NYSE: CLR), Phillips 66 (NYSE: PSX), Hess Corp (NYSE: HES), Kodiak Oil & Gas Corp (NYSE: KOG) and Norstra Energy, Inc (OTCBB: NORX) have been reporting their share of good news recently that should keep oil and gas investors excited about the region’s prospects. But first a bit of a geology lesson mixed in with geography: The Bakken formation covers around 200,000 square miles of the subsurface of the Williston Basin and underlies parts of Montana, North Dakota and Saskatchewan. Underneath the Bakken is the Three Forks formation which extends further east across North Dakota, west into Montana and as far south as South Dakota. Together, these formations potentially contain huge amounts of oil and gas that has large cap and small cap oil and gas players alike excited.
So why should you get excited right now about oil and gas players in this region? Consider the following good news to recently be reported:
- A LOT More Oil and Gas. An updated assessment published by the US Geological Survey (USGS) estimates the Williston Basin contains twice as much crude and three times more gas than previously thought as they included estimates for the Three Forks. Specifically, USGS estimates there are at least 7 billion barrels of oil and 6.4 billion cubic feet of natural gas that could ultimately be recovered from the formation with at least a 50% probability – up from 3.6 billion barrels and 1.7 billion cubic feet when the last assessment was published in 2008. However, some market participants or drillers in the area are far less conservative about the area’s drilling prospects – especially as technology continues to improve.
- Continental is Even More Bullish. Continental Resources, which pioneered exploration in the region, is one market participant that’s bullish. In September 2012, Continental Resources gave a presentation with revised estimates that included lower parts of the Three Forks with the the total amount of oil originally in place (OOIP) rising from 577 billion barrels of oil to 903 billion and the amount that is technically recoverable coming in at 20 billion barrels to as much as 32 billion, 36 billion or even 45 billion. It should be noted though that the Three Forks is a thicker and more extensive layer than the Bakken, but only 5% of its area has been tested. In addition, the USGS thinks there could be between 2.8 and 4.6 billion undiscovered barrels of oil recoverable from the Bakken with its estimates for the Three Forks ranging from 1.6 billion to 6.8 billion.
- Phillips 66’s Earnings Call Comments About North Dakota's Bakken Crude Oil. During Phillips 66’s recent earnings conference call, Tim Taylor, the executive vice president for commercial, marketing, transportation and business development, stated that moving crude oil by rail to its refineries on the East and West Coasts to replace more expensive imports adds $12 to $16 in per-barrel costs. Nevertheless, he added that “fundamentally, that crude needs go that direction."
- Hess Corp Beats on Profit in Part Due to Bakken Oil. Under pressure from investors to improve returns, Hess Corp recently reported a better-than-expected first-quarter profits as Bakken production rose 55% to 65,000 boe per day. Bakken production this month will likely stay around that level as Hess Corp builds an inventory of wells that have been drilled, but aren’t completed yet. In addition, it was noted that the cost to drill a well in the Bakken has fallen 36% year-over-year to $8.6 million.
- Norstra Energy Meets Initial Farm In Requirements. There is plenty of room in the Williston Basin’s Bakken and Three Forks formations for everyone, including up and coming Norstra Energy, which is actually focused on the overlooked Montana Bakken area where it holds over 12,000 acres of land. Norstra Energy has recently announced it has satisfied its financing obligations under the farm in agreement with Summit West Oil after providing funding for exploration activities on the South Sun River Bakken Prospect. In addition, Norstra Energy will file an application with the Deutsche Boerse AG to list shares on the Berlin Stock Exchange in order to attract investor attention there as European companies increasingly consider moving parts of their operations to the US where energy costs are lower. Otherwise, it should be noted that Norstra Energy is up 85.9% since it started actively trading in early March.
Given all of the above good news coming from the Williston Basin’s Bakken and Three Forks formations, investors and traders alike should be keeping an eye on both large cap and small cap oil and gas players there.