“That’s the way commodities work, whether it’s oranges or wheat or oil," said Ron Ness, president of the North Dakota Petroleum Council. “Prices follow the news.”
In an analysis of oil stocks activity, the Twin Cities-based internet newspaper MinnPost.com reports this week that stocks of companies working in the relatively serene Bakken “seem to be benefitting from turmoil in the Mideast,” as traders and investors bid up stocks of those companies faster than they do for those of the big global companies.
In the six weeks since Jan. 20, just before large-scale protests began in Cairo, Egypt, six oil companies with operations in North Dakota saw their value rise almost 13 percent. By comparison, MinnPost.com reported, the six “global oil giants” that constitute the Dow Jones Integrated Oil Index — including Chevron, Exxon, Shell and BP — saw their combined market value rise 7 percent.
In the past six months, the market value of the six Bakken players, including Whiting Petroleum, Northern Oil & Gas and Continental Resources — has gone up 46 percent, compared to 38 percent for the bigger international companies.
Oil companies have been drawn to the Bakken since hydraulic fracturing, horizontal drilling and other new technologies made extraction and production more economically viable in recent years. With rising oil prices — reaching $102 a barrel today — those companies have put up impressive financial numbers.
“Their numbers have been strong, their performance has been strong,” Ness said. “That would only make sense because buyers pick their stocks by what they think is trending up.
“Of course, all things that trend up can also trend down, as we saw in 2008-2009,” when oil prices sank. “We would prefer a more stable, predictable price.”
Ness said he would attribute today’s rosy picture for Bakken oil companies more to general economic developments.
“The economy seems to be recovering, and demand is up,” he said. “Even before this Libya thing, the price had been trending upward a bit.”
Investment Underground, an Internet investment analysis site, has identified Continental Resources — one of the principal players in the Bakken — as likely to gain significant stock value.
Writing on the site, an analyst explained why such companies are likely to fare better than Halliburton and other majors that have exposure in such volatile regions as Libya: “Operating on the Bakken Shelf in the vicinity of the Dakotas, you couldn’t find much better political insulation.”
Continental announced earlier this week that its total 2010 production of 15.8 million barrels represented an increase of 16 percent over 2009, the Minot Daily News reported.
“We achieved our 2010 production target and again reported strong growth in oil-concentrated proved reserves,” CEO Harold Hamm said. “We’re on track today for 30 percent production growth in 2011.”
Bakken is ‘for real’
Bruce Oksol, a Williston, N.D., native and retired military man who closely follows developments in the Bakken through his milliondollarway blog, also suggests “there’s more to it” than the threat of disruption in the Middle East.
“First, new investors are starting to realize the Bakken is ‘for real,’ ” he writes this week. “Second, seasoned investors are starting to understand the Bakken may be bigger than originally thought.
“The Bakken oil companies started their run-up well before recent events in the Mideast.”
Another site monitoring oil industry activity for investors, bloggingstocks.com, reported last month that “despite impressive recent gains, Barron’s says shares of companies with stakes in the area still have upside potential,” as $100-a-barrel oil has drillers exploring the Bakken aggressively.
“The Bakken boom is still young, so much so that local restaurants are having a hard time hiring new staff due to the sudden surge in demand for youthful laborers,” the site reports. “We do not believe the street has fully valued the Bakken drilling that has already been permitted, let alone the Bakken acreage held in portfolios that has yet to be permitted and drilled.”
And seekingalpha.com, which describes itself as “the premier website for actionable stock market opinion and analysis, and vibrant, intelligent finance discussion,” an analyst noted this week that Continental Resources has 23 rigs operating in western North Dakota and is drilling 22 wells a month — with a reported 100 percent drilling success rate.
At just $80 per barrel of oil, a company executive estimated a 7.3 to 1 return on investment and called the Bakken “the most economic play in the country.”