December 04, 2012 at 11:18 AM EST
The Oil Field that Keeps on Giving
Keith Kohl shares his take on Obama's $180 billion payday -- and why it won't keep investors from striking oil in the Bakken.

This Article Originally was Published here: http://www.energyandcapital.com/articles/Obama-Bakken-Oil/2860

Everyone has a lead foot once in awhile. But some motorists, like my neighbor, are more afflicted with a propensity for speed than others...

Which is why he was staring at a rather hefty ticket yesterday.

He started listing the usual excuses — from being late for work to not realizing how fast he was going — before the officer had even finished looking at his license and registration.

When he was recounting the incident, I told him next time he should just point a finger at OPEC. If it weren't for the oil cartel, there wouldn't have been flashing lights in his rearview mirror to begin with.

Hear me out...

Tricky Dick's Big Plan

Last week, I discussed how every president since Nixon has had a grand scheme to transition the United States to energy independence. And while each and every one has failed, we can't say they didn't try.

This includes Tricky Dick.

Nixon had plenty of motivation to curb our country's oil consumption. After all, the 1973 oil embargo on the U.S. from OPEC nations led to price spikes and major supply disruptions.

By that time, domestic production had fallen from its 1970 peak by nearly one million barrels per day. With less oil being pumped out of U.S. wells, I'll give you one guess who our go-to source was for crude...

Nixon's plans to lower U.S. oil demand included a maximum speed law, which was implemented in the 1974 Emergency Highway Conservation Act and set the national maximum speed limit at 55 miles per hour.

Though it was part of a bigger plan to cut gasoline use, the effect was hardly worth writing home about: The goal was to cut gasoline consumption by 2.2%. It succeeded in reducing less than half that amount.

Today nearly 40 million speeding tickets are issued every year. With an average cost of $150, speeding tickets add about $6 billion to state revenue.

As you read recently, some states are doing much better than others when it comes to generating revenue... and leading the pack is North Dakota.

The Oil Field that Keeps on Giving

Of course, speeding tickets are a drop in the bucket compared to President Obama's $180 billion payday.

Four years after one fateful USGS oil reassessment, and North Dakota has been thrust into the spotlight. Things are in full swing today in the tight oil play.

But take a closer look at Uncle Sam's cut, and you'll see that this oil field will be the gift that keeps on giving for decades to come...

In September there were slightly over 7,658 producing wells in the entire state of North Dakota. Since the USGS oil reassessment in April 2008, approximately 3,885 more wells have come online. And according to the state's Oil and Gas Division, the number of wells targeting the Bakken Formation will swell to as high as 45,000 over the next several decades.

Remember, the government is making around $4 million per well from taxes. Assuming they hit that higher estimate of 45,000, that's a nice little chunk of change. We're talking about roughly $180 billion.

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Each well also generates more than $7 million to whomever controls the royalties. That alone will create a new breed of North Dakota millionaires.

But I'll be frank; the North Dakota land rush is nearly over. Companies have been positioning themselves for years, and the early profits have already been scooped up by individual investors.

The boom, however, is far from over...

Unconventional Oil Profits

The second stage of the Bakken boom is about to ramp up, and I want to show you exactly how it'll happen.

Technology is the next step.

Looking at North Dakota's monthly oil stats, you'll notice something peculiar. Producers are becoming increasingly efficient at drilling. The amount of oil per well being extracted has been growing steadily.

And it's all thanks to new technology and companies perfecting older techniques.

This is allowing some of the strongest Bakken companies to cut costs as well as overall drilling time — just one of the reasons more wells are being drilled with fewer rigs.

One of my favorite North Dakota producers expects to cut the cost of their Bakken wells by more than a third over the next few years. Another has more than doubled in the last three weeks!

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Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

This Article Originally was Published here: http://www.energyandcapital.com/articles/Obama-Bakken-Oil/2860



The Oil Field that Keeps on Giving originally appeared in Energy and Capital. Energy and Capital, a free daily newsletter, offers practical investment analysis in the new energy economy.
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