SeekingAlpha article on how to play the Bakken now: the pipelines.
The Bakken production is being held back or will be held back by lack of infrastructure to ship all that oil -- according to the story. I'm not sure how accurate that is, and if production is being held up, to what extent?
But remember: record number of wells in the Bakken and drillers are completing wells in record time could put pressure on takeaway capacity in the future.
I hold ENB and EEP; ENB for growth and EEP for income. I have posted recently on ONEOK. I follow the TransCanada story but do not hold.
ENB and EEP are both affected by the recent upper Midwest (Michigan) oil spill.
By the way: the SeekingAlpha article did not cite the source for it's statement that Enbridge intends to double its capacity in North Dakota but I believe I was the first to catch that interesting tidbit in a photo caption of a local newspaper.
Milliondollarway, ONEOK, TransCanada, and Enbridge.....yup.
Have you heard anything about N.D. putting a cap on drilling because it is exceeding the ability of the infrastructure to keep up?
ReplyDeleteNo, I have not heard anything along that line. That would be big news. And lots of talk in coffee shops which I would definitely hear. When/if I do, I will certainly report it.
ReplyDeleteI think the SeekingAlpha author was hyping the pipeline story. Corporate presentations of the oil companies working in the Bakken show current takeaway capacity slightly more than what is being produced.
In addition, the EOG / BNI railroad terminal is shipping much less than it could. A second railroad oil terminal is either being built or will be built. Both terminals are scalable.
For the past two years there has been a shortage of takeaway capacity but not a significant problem right now, although that's why folks say Bakken oil sells at a discount to the benchmark. But right now, the oil companies say there is adequate takeaway capacity.
The state of North Dakota does limit production of individual wells and entire fields if excessive natural gas is being flared. Once the wells come in, if there is a lot of natural gas, pipelines are laid to gather that natural gas. Driving around at night, I see a lot of flaring, but it's only at the newer wells. Once the well is established, the flaring pretty much ends.
Pipelines are probably running at full capacity and more pipeline will have to be put in to keep up with production. The state won't limit production.
By the way, about two years ago, producers were penalized $10 -$20 per barrel due to lack of pipeline capacity. Producers shipped less, not because the state told them to, it was pure economics.
Some message boards suggest EOG is getting a premium of $2 - $3 per barrel to ship by train. Regardless, it is more expensive to ship by rail.
Thanks for your response and thanks for your blog, I enjoy reading it every day.
ReplyDeleteI would never purposefully steer anyone wrong, but I don't always get all my facts straight. If I find out I've made a mistake, I correct it. With a long comment like the one I just posted above, there could be some minor errors, but as far as I know it's pretty accurate.
ReplyDeleteThank you for your kind comments.
Tomorrow I drive to the the far southwestern corner of North Dakota, so I can see all the activity along the North Dakota-Montana border.