2011: The Year of Tectonic Shifts in the Bakken?

A couple of days ago I posted a comment in which I stated that I felt that 2011 will be a year of mergers, acquisitions, and major acreage deals in the Bakken.

Within a day or two of posting that comment, a well-researched analysis posted on the Bakken Shale Discussion Group board added weight to my earlier comment.

It is simply becoming more and more difficult for the smaller operators to keep competing with the bigger operators in the Bakken.

Bigger cap companies are able to out-bid on top leases; smaller operators are losing their leases because they have neither the money nor the rigs to drill a well to hold the lease by production; they are unable to compete for the little spare takeaway capacity; and, they don't have the cash necessary to build their own infrastructure for gathering and shipping their oil to regional pipelines. Larger operators have dedicated fracking crews and are less subject to delays in well completion due to lack of fracking crews. I would assume larger operators have better access to capital markets and/or folks experienced in working with Wall Street venture capitalists.

(Let me digress for a moment: it is said that there is more than enough takeaway capacity for the Bakken production, but in the same breath it is said that 10 percent is still shipped by rail and 10 percent is trucked to Canada, both more expensive modes than pipeline. When Enbridge shut down pipelines for repair recently, my hunch is that there were temporary hiccups in moving oil out of the Bakken, and the bigger operators were able to nudge out the smaller operators if push came to shove for access to the pipelines.)

Although the reasons were said to be related to changes in tax law, it is also possible that Anschutz saw the writing on the wall and was one of the first relatively large operators to get out while the getting out was good. Just an opinion, but the comments on the discussion board certainly make one wonder.