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Bakken Oil Profits

To call the explosion of the Deepwater Horizon oil rig and the subsequent well damage that’s allowed millions of gallons of oil spill into the Gulf of Mexico a tragedy is an understatement.   

 

Eleven men died when that rig exploded on April 20th. And now, critical fisheries along the coasts of Louisiana, Alabama and Mississippi are being destroyed. The commercial fishing industry in these states is threatened and a way of life for these fishermen may be coming to an end.   

 

An oil slick is reportedly nine miles off the coast of Pensacola  

 

BP itself is under siege, too. The stock is in a virtual freefall as repeated efforts to cap the leak have failed. It could be months before the leak is stopped. Costs to the company could hit $22 billion. And that’s if BP didn’t do anything wrong.   

 

It’s inevitable that BP will be found in violation of Clean Water and Refuse Act laws. But there could be criminal charges coming, too. The New York Times has recovered internal documents that suggest there were “serious problems and safety concerns” with the Deepwater rig. BP is also being investigated for lying about its ability to deal with oil spills. And not only that, BP may have been misleading regulators and taking shortcuts to get the rig working.   

 

It seems clear that, at best, BP acted recklessly. And if you’re starting to see parallels with the way financial companies ignored risk and deceived regulators before the financial crisis of 2008, you’re not alone.   

 

It may not be fair to lump every corporation in, but there is a disturbing trend of negligence and deceit in Corporate America.  

 

If the financial crisis and this latest crisis don’t put an end to the Ayn Rand-ian belief that enlightened self-interest is enough to regulate human behavior, I don’t know what will.   

 

It’s a fact of life: there is a certain percentage of the human population who will sacrifice their own long-term well-being for immediate material gain. They may be street-level criminals or CEOs. We demand that the police force protect us from the street level thug. But we have shown a pattern of demanding less protection from the thugs in corporate offices. That must change.  

 

That’s probably enough philosophical ranting for one day.   

 

It’s always a bit tricky to go after investments that will directly benefit from a disaster. But we are investors and traders, and it is our job to always look for opportunity. So I hope you can excuse me for seeking out the opportunity in the wake of the Gulf of Mexico oil spill.   

 

Moratoriums on new drilling permits in the Gulf have been extended for 6 months. Other offshore drilling initiatives have been shelved. And it’s a certainty that stricter safety rules will be in place if and when drilling in the Gulf resumes.   

 

The net effect of this will be less production from the Gulf of Mexico. It will also mean higher costs for drillers in the future.   

 

To me, this leads to two inevitable (and profitable) conclusions. 1: less production means higher oil prices. Oil prices might not rise today, but they will rise. 2: investors will seek out oil companies that don’t have the perceived risk associated with offshore drilling. 

 

That means land-based oil exploration companies. And there is a situation in North Dakota that every investor should be paying attention to.   

 

It’s called the Bakken oil pool. As part of a larger geological formation called the Williston Basin, the Bakken contains a verified 5 billion barrels of oil. And the real total could be much higher.   

 

The Bakken is not new. Geologists and oil companies have known about the oil in this area for at least 40 years. But the technology to successfully and economically pump the oil didn’t exist until recently.   

 

Hess (NYSE:HES) and other big oil companies are active n the Bakken. But it’s the small drillers that are truly exciting because they grow their earnings and revenues exponentially as they bring their Bakken drilling operations on line.   

 

I recently recommended one such company to my Energy World Profits readers. This company has two of the top-performing Bakken wells. Initial flow rates were above 5,000 barrels a day. And its production costs are around $14 a barrel.   

 

This company has completed 23 Bakken wells. Average production is 2,679 boepd (barrels of oil equivalent per day). But that’s just the beginning. It has 474 other drill sites, and has an 11 year plan to drill 200+ wells over the next 11 years.   

 

This company is the proverbial cash cow.   

 

Energy World Profits readers recently bought this stock at $14.50 a share. Even with weak oil prices, it’s rallied to $16.50. And when oil prices start moving upward, this stock will keep moving higher.   

 

And that’s just one stock. I’ve recommended two other Bakken oil companies with phenomenal upside potential.   

 

Click here to access my research report on Bakken oil companies, and find out how you can buy in for under $4 a share