Connecting the Potash Dots. Yes, It Involves The Bakken (at least the location)

Here's another set of dots to connect. It starts with Warren Buffett buying the Burlington Northern railroad.

BHP Billiton recently announced plans to build a huge potash loading terminal at the Port of Vancouver, Washington. BHP has also announced intentions to buy Potash Corporation.

Ninety-four (94) percent of all potash produced in North America comes from Canada. However, it was recently announced that the state of North Dakota granted a permit for a potash mine. This is the first potash mine permit issued by the state in three decades (specifically, since 1976). North Dakota's potash reserves are in the Bakken area.

Connecting the dots results in a lop-sided hexagon.

The potash terminal alone is a pretty exciting story, especially for those of us who still remain bullish.

Oh, back to Warren Buffett. BHP accepted proposals from Burlington Northern Santa Fe and Canadian Pacific to carry potash to the port terminal. Who knew that Warren Buffett bought BNI for carrying potash to Vancouver?

By the way, here's another story on Greenbrier for investors.

Resolute Energy: Another Bakken Play

Resolute Energy is yet another energy company that I was unaware of until today's edition of the Oil and Gas Journal which reported joint venture activity between Resolute and Marathon. Resolute is not entirely new to the Bakken; it has previously partnered with GeoResources in North Dakota.

The real question is why a fairly large company (MRO) with a market cap of $21 billion, debt of $7 billion, annual cash flow of $6 billion, and $2 billion cash on hand would partner with anyone, much less a small cap company (REN) with a market capitalization of about $600 million.

I can think of only two reasons. I suppose others can think of a lot more.

Investopedia: Three Forks Sanish

Another great investors' article on the Bakken. This time about companies targeting the TFS and the pipeline companies.

Companies mentioned in this article include five in which I hold (and accumulate) shares: CLR, WHX (WLL), NOG, EEP, and ENB.

Investing: Mergers and Acquisitions

A Wall Street provides three reasons why we will continue to see M&A activity:

• Companies have cleaned up their balance sheets making M & A possible
• Companies are earning "nothing" on their cash due to low interest rates
• In this economy, only way some companies can grow is through acquisitions

The reporter left out at least two more reasons:

• Those low interest rates make deals more inviting
• Depressed stock market has resulted in companies being unfairly undervalued

In the Bakken, there are at least two more reasons:

• High CAPEX and aggressive drilling program can often exceed companies' cash flow
• Operators can lose leases if drilling not begun

Clear Water Field Very Active

Of the ten (10) permits granted in the North Dakota Bakken today (August 26, 2010), eight (8) were in the Clear Water field. The field hasn't impressed me that much, but it may be better than it appears. I suppose time will tell.

Hess Granted Six Permits in Same Section

This is at least the third time Hess has been granted permits for six (6) wells in the same section. These will be long laterals, three running north and three running south, a six-well Orion Belt. The file numbers are 19452 - 19457 and are located in the southeast quadrant of the southwest quadrant in section 15-157N-90W. The section is located in the Clear Water oil field.

The six wells will be located 650 feet from and parallel to the south line and at intervals of 1,560; 1,610; 1,660; 1,710; 1,760; and, 1,810 feet from the west line.

The names of the wells:

RS-Ball-157-90-2227H-1
RS-Ball-157-90-2227H-2
RS-Ball-157-90-2227H-3

RS-Johnson-157-90-1510H-1
RS-Johnson-157-90-1510H-2
RS-Johnson-157-90-1510H-3