Oil Majors Investing Billions Into Bakken Shale $HES $HAL
The Bakken Shale is making millionaires out of land / mineral owners as well smartly played investors. The Bakken Shale is the largest play in the USA with the Eagle Ford Shale close behind.
The biggest concern for potential investors in the Bakken Shale oil-producing region of western North Dakota is: “How long will it last?”
Judging from the huge amount of explorative drilling and infrastructure building going on and witnessed in a tour of the region, most of the world’s leading oil industry firms are here to stay, given estimates there’s at least a 30-year window of prosperity.
A big lure is that it is a “can’t miss” oil field, as the odds are that an explorative well will be productive are 98%. Local experts say this oil play is more like “mining” rather than “wildcatting” where historically the odds were one-in-three that a well would come in.
A completed Bakken well, which has an average life of 29 years, generates $22 million in net profit over its lifetime, according to the North Dakota Industrial Commission’s Oil and Gas Division.
Hess and Halliburton have built, or are building, major office buildings and equipment yards in what had been dusty farm towns, as they add capacity to their oil production capacity in the area.
Hess has earmarked almost $5 billion in capital expenditures for the Bakken region alone in the past two years. It budgeted $1.8 billion for Bakken capital in 2011 and recently bumped its 2012 outlook to $3 billion.
Hess is in the process of doubling the capacity of a gas production plant in Tioga, North Dakota, in the middle of the Bakken field, where it has also just completed a sparkling new regional headquarters building.
Halliburton, which says it is “the leading service provider in the Bakken with more people and capacity than any other provider,” announced a year ago that it planned to add 11,000 new jobs in North America, and most of them in the Bakken region.
This in a state with the nation’s lowest unemployment rate of just under 3%. The national average is about 8.3%.
Halliburton’s heavy capital spending in North Ameica will hurt results in 2012, according to Morningstar. Customers switching from gas to oil production, “added pumping supply, and higher raw material costs, combined with logistical challenges from the higher levels of equipment needed for the new basins have placed pressure on crew utilization levels, prices, and supply chains.
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