There’s $118 Billion in Future Riches Still Trapped in North Dakota

Oil and gas companies from around the world are planning to spend $15 billion to drill new wells in the Bakken shale this year. This money is being spent in an attempt to unlock even greater riches. In fact, according to oil and gas industry analyst Wood Mackenzie the Bakken and Three Forks formations still hold $118 billion in remaining value. That value will be realized as energy companies unlock the nearly 20 billion barrels of oil that are expected to be recovered over the life of the play. 

In fact, while Wood Mackenzie and others think the industry will eventually extract 20 billion barrels of oil, there's up to 900 billion barrels of oil that's believed to be saturating these rocks. This is why Conteniental Resources CEO Harold Hamm thinks that some day new technology will eventually enable the industry to extract 45 billion barrels of oil from these formations. 

If the industry can figure out how to extract more of the oil that's trapped in the rock formations it could make the $118 billion in future profits look like pocket change. That's why we're seeing Continental Resources, Oasis Petroleum, and Kodiak Oil & Gas all spend money to do density tests. These projects test how close wells can be drilled. In Kodiak's case it's drilling its wells 600 feet apart by drilling up to 16 wells in a drilling unit. That's enabling it to extract more oil per section, which is pushing up the net present value of each drilling section as the following slide shows.