Harold Hamm's pet peeve? It might be the WTI-Brent spread, and Bakken is at the "bottom of the barrel." Solution: more pipelines, and fast.
Cites statistics that show average return from three fields:
- the Bakken: 25 percent
- the Permian Basin: 40 percent
- the Eagle Ford: 50 percent
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Maybe a good way to close the subject ... 
This is actually very scary. Ed Schafer made a big push a few years back to lower oil extraction taxes due to the cost of production in ND. One of his many valid points was fracking will move to other areas that have better infrastructure, more housing, more workers and lower taxes on oil (texas, colorado and wyoming to name a few). I wasn't overly concerned because I thought the Rate of Return in the bakken greatly exceeded other areas. But if this is true and Harold Hamm has been right on with every thing, ND, its surplus (see story a further down this blog) has real potential issues. If the ROI's discussed are so different, I am wondering why would you stay in ND. The only reason or maybe the best reason is the fact there is more oil here and you make it up over time. Kent
ReplyDeleteI agree. I am hoping that the average is brought down due to poor results by just a few companies and the cost of shipping Bakken oil all the way to the coast.
DeleteOn the other hand, rate of return as suggested by Apache suggests things are not that bad in the Bakken oil patch:
http://www.milliondollarwayblog.com/2012/06/how-good-is-bakken-apache-perspective.html
Oasis, Continental, Kodiak, and Whiting don't have much choice, as the majority of their holdings are Bakken.
ReplyDeleteEOG, Burlington, XTO, Marathon, Occidental are another story.
By Hamm's tacit admission, EOG is well positioned with its huge Eagle Ford poistion.
Hamm needs to partner with OneOK partners and get that pipeline to Cushing built asap.
Excellent, excellent points. Thank you. In fact, for investors, your points are well taken. I don't own any shares in ONEOK, so I am not saying this with any hidden agenda, but I am very impressed with with what I've seen them do in the Bakken.
ReplyDeleteActually the CLR has options and can move elsewhere. So if the biggest player in the region starts to move it will have a ripple effect. You don't want the R and D moving elsewhere. CLR based on what I am hearing is going to roll out a couple of initiatives that will have ramifications across the bakken if they can pull it off. It will lead to long term growth if they pull it off because it will bring cost structure in line with rest of the country and their ROI's in line with the other play's mention. And the fact they might be the closest the bakken has to an 800 pound gorilla, they might be able to dictate some of the changes.
ReplyDeleteUnless the world quits using oil, I think we are going to be quite surprised what we see in the Bakken a year from now.
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