A New Century begins in North Dakota
North Dakota is not an exciting place, assuming you aren’t in energy. If you are in energy, it is the future, and will be for decades. This state has the lowest unemployment rate in the country with some observers claiming that if you have “two feet and a heartbeat, you can get a job”. And the vast majority of these jobs are either directly or indirectly related to energy. There are endless opportunities as the state has energy reserves so big that some suggest energy independence for the US (but that is another story). What are the resources?
To begin with, The Bakken Oil Reserve is massive with billions of barrels. With new technology coming online, the costs of fracking will decrease and new fracking technology will allow more and more oil to be extracted. Thus, we need to find the companies developing and implementing new drilling and fracking technology. The reserve covers the northwest region of North Dakota and extends into the northeastern section of Montana and southern Saskatchewan. The most recent estimates have 18 billion barrels and that is enough to supply the US with about 25 years of oil. The natural gas estimates vary as widely as the oil estimates do. Thus, this is a not a short term play, especially for drillers, suppliers and pipelines. So how does one play the Bakken in the market?
First, find the companies: Concho Resources Inc., EOG Resources Inc., Continental Resources Inc., and The Marathon Oil Corporation are all there just to name a few. Second, who has long term strategic plans and good management? Finally, who is translating these operations into growth on the top and bottom line. It is important to remember that just because they have operation in the reserve doesn’t mean the stock price will do well. But the fact that they have committed major resources to this area is a real plus. It is the oil services companies and pipelines that I will be watching closely.
North Dakota is also rich in wind energy. In fact, one government study suggested that there is enough wind energy in three states – Texas (west), Kansas and North Dakota – to supply all 50 states. It needs to be noted that it is only a total energy supply and since wind cant be controlled, wind energy will never be relied upon for the majority energy. It will, however, supply 20%. If a smart grid is added, you can increase that number to 30%. For what it worth, Alaska has endless wind energy but the technology to transport it is yet to be implemented.
Back to North Dakota and wind. Depending on the study, North Dakota can supply about 25% of the U.S.’s energy needs but it will never reach that level. With cities like Chicago not so far away, there is a huge market for investors. Companies like Vestas and GE manufacture wind turbines and they would likely be involved. There are other types of energy such as biofuels that will be grown in North Dakota but that is at least a decade away – or is it? Should cellulosic ethanol become a reality, North Dakota will the richest state – by far.
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