Oilfield Daily News

We’re all aware of the Keystone Pipeline.

It’s the $7 billion project that would send a much-needed 1.1 million barrels of crude oil per day from Canada’s oil sands to the American Heartland.

But you’re probably a bit fuzzy on what its status is.

Because of fiery political rhetoric and backroom maneuvers, it can be tough to figure out where the project stands.

I offered my no-spin take a few weeks ago, when the headline was that Obama “killed” the Pipeline, concluding:

This man has an election to win over the next ten months.

He can’t kill a pipeline that would create thousands of jobs, break a supply logjam in Oklahoma, and carry between 500,000 and 1 million barrels of secure Canadian oil to the States every single day.

It will happen… eventually.

A Tale of Two Pipelines

In addition to the Keystone XL, Canada also has plans to build the $5.5 billion Northern Gateway Pipeline, which would send oil to a British Columbia port for export to Asia (China).

That pipeline has a capacity of 525,000 barrels per day.

Combined with the Keystone, the two pipelines would send 1.625 million barrels per day out of Canada.

To be clear, the Canadian government wants to build both pipelines. With reserves second only to Saudi Arabia and Venezuela, it would be an economic boon to the Great White North. And Prime Minister Stephen Harper has shown he’s willing to play politics to make it happen.

After Obama’s decision two weeks ago to postpone the Keystone, Harper publicly said he was “profoundly disappointed,” and spoke of the need to “diversify” Canada’s oil industry.

That’s code for “sell it to China.”

The thing is, Enbridge’s (NYSE: ENB) Northern Gateway is facing the same environmental pressures as TransCanada’s (NYSE: TRP) Keystone.

Currently, the former project’s Joint Review Panel is canvassing public sentiment along the pipeline’s 731-mile proposed route. Already, more than 4,000 people have signed up to testify, and I’m assuming not about how much they want a pipeline in their backyard.

What’s more, together the pipelines could move 1.625 million barrels per day.

For the most recent month that data is available — October 2011 — Canada exported 47.03 million barrels, or 1.52 million barrels per day. And data from the Canadian Association of Petroleum Producers shows total production will hit 3.5 million barrels per day in 2015, 4.2 million in 2020, and 4.7 million in 2025.

So throw the politics out the window. Canada has enough to fill both pipelines.

Harper just wants to have his cake and eat it, too. And I don’t blame him.

~~eac_nat_gas~~

A North American Comeback

The real story here is being buried by political spin…

It isn’t about whether the United States or China gets Canadian oil. It isn’t about environmentalism. It isn’t about Obama.

The real story here is a veritable North American oil rush.

We’re just fighting over where it will go and who will make the most money.

As I told you in my last update on this pipeline situation, oil is a global market. A fight over where a pipeline should reside doesn’t change the amount of the stuff in the ground.

Sure, the political angle will play a supporting role in this year’s U.S. election. And yes, the environmental crowd may get a “victory” by tying both pipelines up in court for a few years.

But at the end of the day, I believe both pipelines will be built.

The oil sands in Canada and the shale in the U.S. will both be fully developed.

To think otherwise is naïve.

And to get caught up in the trivialities of politics and environmentalism surrounding this development is to seriously take your eye off the ball.

There’s a reason China invested $16 billion in Canadian energy in the past two years and $6 billion in the U.S. in just the past few weeks…

A major oil production boom is underway.

~~nat_gas2~~

~~nicks_signoff~~

The Keystone XL and the Northern Gateway originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Exxon Mobil Corporation (NYSE: XOM) reported fourth quarter profits of $9.4 billion, up 2% from quarter four of the previous year.

Fourth quarter earnings per share were $1.97, up 6% from $1.85 per share, a year earlier, while revenue rose 15.6% to $121.6 billion, narrowly surpassing analysts’ estimates of $119.7 billion.

Exxon attributes its quarterly gains to the 25% spike in oil prices seen in the last three months of 2011.

It seems the rise in oil prices largely compensated for the 9% decrease in oil and gas production, despite the global gas giant’s record spending of $36.8 billion on crude and natural gas exploration projects in 2011, up 14% from 2010.

After $10 billion of capital and exploration expenditures with little ROI, the Irving, Texas-based company also cited a decline in its refining and chemical operations’ earnings.

Exxon CEO and chairman, Rex Tillerson, provided a more optimistic synopsis of quarter-four earnings and expenditures:

ExxonMobil recorded strong results while investing at record levels to develop new supplies of energy that are critical to meeting growing world demand, and supporting economic recovery and growth.

Exxon shares fell 1.2%, to $84.50, in premarket trading Tuesday morning.

Until next time,

Stephanie Ginter

Exxon Mobil Posts Q4 Earnings originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Publisher’s Note: For the past week, we’ve been telling you about our upcoming free informational seminar about investing in precious metals.

Well, the day is almost here… The seminar begins tomorrow at 6 p.m. (EST). So if you want answers to any gold or silver questions you may have, take a moment to sign up today.

Brian Hicks

Until recently, he’s kept it pretty quiet.

In fact, when he ponied up his first billion for a piece of this action, he barely made a peep.

The only reason I found out about it is because I know some of the players behind the scenes…

These are the money guys that tend to keep a low profile, yet are typically the most important guys involved in these types of deals. And that’s the way they like it.

Regardless, for the past 12 years, Warren Buffett has been meticulously building his position in some very select modern energy markets. And in typical Buffett fashion, he’s going make billions.

Fortunately, you can get a piece of this action, too.

You just need to do two things:

First, tune out all the hype and B.S. spewing from Washington and the mainstream media about modern energy technologies. They know nothing, and are nothing more than parasites. As investors, they are of zero value to us.

Second, the next time you look at a solar panel, wind farm, or state-of-the-art, super-efficient co-generation plant, remember one thing: These were not built for treehuggers; these were built for very wealthy investors.

Modern energy technologies don’t exist to appease environmentalists. They exist to make very rich individuals even richer.

Buffett Loves Renewable Energy… and Natural Gas… and Nuclear… and…

Warren Buffett isn’t hanging out in drum circles talking about clean air. But he is making billion-dollar clean energy deals — and he’s actually been doing so for more than a decade.

And last week, Buffett upped the ante on clean energy once again by announcing that his MidAmerican Energy Company is officially forming a branch dedicated solely to the development of modern renewable energy.

The new branch will be broken down into four units:

• Solar

• Wind

• Geothermal

• Hydro

MidAmerican’s already got more than $9 billion in wind and solar alone, and more is expected this year.

The energy giant — which is the largest electricity provider in Iowa, Wyoming, and Utah — is clearly bullish on renewable energy. And management isn’t shy about making this new growth strategy known.

In fact, MidAmerican VP Jonathan Weisgall pulled no punches last week when he told reporters this move was simply a vote for renewable energy and not some random bet.

Of course, Buffett’s no fool either, and he isn’t putting all his eggs in that “clean energy” basket…

While the Oracle of Omaha clearly understands that the long-term outlook on energy will not be dictated solely by fossil fuels, MidAmerican’s conventional energy investments will continue to butter most of its bread for years to come.

~~eac_alt_energy~~

Natural Gas, Oil, and Nuclear: Buy What Buffett Buys

MidAmerican already transports 8% of the country’s natural gas through its own pipelines, and Burlington Northern Santa Fe (which Buffett owns) moves oil from the Bakken region in North Dakota to refineries.

Interestingly, with the Keystone Pipeline construction delayed (I say “delayed” because only a fool believes this pipeline won’t be built), oil producers will now have to rely even more on Burlington.

This is a very bullish case for freight rail this year — and of course for continued production in the Bakken, particularly in the Three Forks region, where we’ve been telling you to load up for months.

Buffett’s also big on nuclear — but not in the way you might think.

You see, back in 2008, MidAmerican tried to do a deal in Idaho, but that fell through before Buffett ponied up any real money. He then looked to get a piece of Constellation’s Calvert Cliffs nuclear reactor, but French state-owned utility EDF beat him to the punch.

Then Fukushima happened, which resulted in Buffett losing interest in conventional nuclear power generation, saying: “[conventional nuclear] isn’t going to happen because the psychology has changed.”

But here’s what a lot of media reports missed: Even after Fukushima, MidAmerican’s nuclear energy unit had been sniffing around a different kind of nuclear technology — small modular reactors.

Buffett may be in tune with the kinds of risks folks are willing to take when it comes to power generation, particularly after one of the worst nuclear meltdowns in history, but he also embraces and doesn’t run from disruptive technology.

Could these small modular reactors prove to be a disruptive technology that could make Buffett even richer?

Perhaps. But that’s not the only disruptive technology in the nuclear space right now.

And I would argue that small modular reactors are nothing compared to a recent breakthrough in nuclear fuel technology that allows for both increased safety and lower operational costs, the latter being a big deal as conventional nuclear simply could not exist today without massive government subsidies.

Of course, thanks to a new development in nuclear fuel technology from our neighbors to the north, these huge nuclear subsidies could be a thing of the past.

And the company behind this development?

Well, let’s just say that between its truly disruptive technology and the fact that the president of this company was recently appointed as the head of the World Nuclear Association’s Fuel Technology Group, it’s probably going to be one of the easiest triple-baggers we’ll see in 2012.

My colleague Nick Hodge actually has some video of this company’s technology in action. Interestingly, he’s the only analyst on the planet who was allowed the necessary access to obtain this footage. Not even the big dogs over at Goldman could get their hands on it.

But that’s how it goes when you’re willing to get your hands dirty instead of sitting behind an antique desk in some overpriced Wall Street office.

Of course, it won’t be much longer before every Wall Street hack is jumping into this stock…

~~nuclear_signup~~

~~jeffs_signoff~~

Warren Buffett Renewable Energy Investment originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Recently, the EIA dropped another bombshell on the shale gas boom.

We’ve had front-row seats to the surge in natural gas production that’s taken place in the United States over the last seven years.

And finding those plays has never been much trouble.

According to the EIA, almost 90% of the total technically-recoverable shale gas resources are located in just three regions: the Northeast, Gulf Coast, and Southwest.

But lately, the government has been sending mixed signals when it comes to shale gas…

So what happened?

Remember last year when the United States Geological Survey released its report stating the Marcellus Shale formation (the largest shale gas play in the U.S.) held more than 400 trillion cubic feet of natural gas?

At the time, it was huge jump over their previous estimate of just 84 TCF.

Then, just as Obama delivered his “all-of-the-above” plan to develop domestic energy sources, the EIA suddenly had other ideas…

A few days ago, Nick Hodge explained how the United States will become an LNG exporter as early as 2016.

And we know that companies like Cheniere are already lining up long-term contracts for gas shipments reaching as far as India and China.

Yet even with the latest revision, that 2016 date will be met — and here’s why…

Even the latest trimming of Marcellus reserves doesn’t diminish the role that these shale gas resources will play for the next several decades; nor does it significantly change the big picture when we break down our natural gas production:

Some things aren’t going to change — and that includes our growing reliance on natural gas.

As you can see above, more than half of our future natural gas production will be from shale and tight gas resources.

The Opportunity is There for the Taking

If you were looking for news to bump natural gas prices from their weakest levels since 2001, the Marcellus revision has already helped push natural gas 20% higher this week:

click image to enlarge

Investors will be hard-pressed not to be optimistic over natural gas in the long run.

The only question for investors now is when to jump in feet first.

You can find more profit ideas for today’s market, below…

Enjoy your weekend,

Keith Kohl
Editor, Energy and Capital

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Natural Gas Rebound: Obama’s Most Profitable Slipup Yet
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The Only Logical Solution: Buy Gold  
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Montana’s Second Oil Boom Begins: Why Montana Oil Profits Won’t Leave Investors Out in the Cold
Montana’s oil industry won’t stay in North Dakota’s shadow for much longer…

Shale Implosion? originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

In his recent State of the Union Address, President Obama outlined a comprehensive plan to increase jobs, increase natural gas and clean energy production, and reduce our dependence on foreign oil.

In order to optimize domestic oil and gas resources the Domestic of Interior is to lease out 38 million acres in the Gulf of Mexico, potentially yielding 1 billion barrels of oil and 4 trillion cubic feet of natural gas.

The Department of Interior is also expected to finalize a deal that makes 75 percent of offshore resources available in the Gulf of Alaska.

The president also put forth a plan that aims to harness America’s nearly 100-year supply of natural gas, which could create more than 600,000 jobs, a move coupled with rules that would require the disclosure  of chemicals used in fracking operations on public lands.

To reduce the nations dependence on foreign oil, a competitive grant program is being implemented to encourage communities to develop medium-and heavy-duty trucks that run on natural gas or other alternative fuels. 

The grant is also designed to coax communities into developing transportation corridors that will allow trucks fueled by liquefied natural gas to transport goods and implement programs that will convert public transportation vehicles to run on natural gas.

A new research competition is also underway to discover ways of storing and harnessing our abundant supplies of natural gas.

The President also reaffirmed his commitment to clean energy.

Obama aims to double the share of electricity from clean energy sources by 2035, hoping to create a domestic market for clean energy technologies.

Public open lands will be made available in an attempt to boost energy security as well as create new jobs. The Department of Interior will issue permits for 10 gigawatts of renewable generation of capacity, sufficient to power 3 million homes.

Tax incentives will be created aimed at continuing successful provisions vital to the continued domestic growth of clean energy manufacturing and are estimated to create up to 100,000 jobs.

Republicans are critical of both the President’s commitment to reducing dependence and creating jobs citing his refusal to grant a permit to TransCanada (NYSE: TRP), which would allow the construction of the Keystone XL pipeline.

Key Republicans accused Obama of stifling energy production and not being fully committed to creating jobs in America.

Until Next Time

Nate

Obama’s Agenda: Clean Energy, Jobs, and Reduce Dependence on Foreign Oil originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

They’re playing a global game of chicken.

At stake: nearly one-fifth of the world’s oil supply.

And it appears as though nobody wants to flinch first.

Sure, we’ve heard the bluffing before; but the latest warning from Iran that they will definitely close the Strait of Hormuz if the EU oil embargo interrupts their crude exports could prove disastrous.

Of course, Obama made his position clear during his State of the Union address on Tuesday night — and it didn’t bode well for a peaceful resolution:

The regime is more isolated than ever before; its leaders are faced with crippling sanctions, and as long as they shirk their responsibilities, this press will not relent. Let there be no doubt: America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal.

So much for not flinching…

We may only give the president’s hard-lined words a passing thought, especially considering our oil imports from Saudi Arabia have fallen by about 30% over the last four years — and continue to decline.

Some countries can’t say the same…

Chinese Woes and Canadian Cheers

Between Saudi Arabia and Iran, almost two million barrels per day are flowing into China.

As the second-largest crude buyer in the world (yes, Uncle Sam still holds on tightly to that crown), they can’t be too happy with U.S. foreign policy at the moment.

Then again, we’re not expecting China to sit idle while a third world war looms. And we have a good idea where they’re looking to secure that energy.

A North American Energy Comeback

Make no mistake about it: Canada and the U.S. are flush with natural gas.

Now, that’s not to say consumption has tapered off. Rather, we’re consuming more of the stuff than ever before:

And as Nick Hodge explained yesterday, that demand is going nowhere but up from here on out.

But even when our natural gas supply glut eases over the next few years (a situation I’ll delve into deeper next week), there will still be a certain degree of shipping it across the Pacific — especially with prices this low here at home:

For investors, some charts can get even uglier:

It wouldn’t surprise me if Obama had a stake in UNG. Despite all the bullish rhetoric in his speech, he got one part dead wrong.

~~eac_nat_gas~~

Obama’s Slipup

Oddly enough, it wasn’t just Obama’s ‘No Options Off the Table’ approach to dealing with Iran that caught me off guard.

I practically fell out of my chair after the president said, “Our experience with shale gas shows us that the payoffs on these public investments don’t always come right away.”

It was easy to see how he had missed the mark with that statement. Had he followed my Energy and Capital readers and me in 2010, he could have nearly doubled his investment on burgeoning shale plays like Range Resources (NYSE: RRC):

Believe me, that’s not an anomaly for us.

The increase of M&A deals steamrolling through North America has given investors a sudden flurry of profits.

One of the best recent examples of this was last summer when BHP shelled out $12.1 billion in cash for Petrohawk Energy. That same day, shale gas investors pocketed a 61% premium on their Petrohawk shares.

In 2008, we saw the same situation unfold as ExxonMobil bought out XTO Energy, a strong natural gas player in the U.S. Exxon’s entrance into the shale industry — one that came with a $41 billion price tag.

Although Obama didn’t get the memo on how profitable these companies can be, we can certainly understand why he was excited, can’t we?

After all, our domestic gas production is on the verge of exceeding our consumption, with billions of dollars in future LNG exports all but guaranteed.

And the EIA is optimistic that our crude output will reach 6.7 million barrels per day by 2020.

You see, there’s a reason this surge in M&A deals will continue over the next few years…

Fact is, many of the large oil and gas companies are having a tough time keeping their own production afloat — and they’re willing to spend billions to do it. ConocoPhillips, for example, just announced a 17% increase in year-over-year revenue, yet production declined by almost 8% in their fourth-quarter production.

As for the payoffs for public investments, Mr. Obama, the future of our U.S. oil and gas production is ripe for the picking.

~~nat_gas2~~

~~keiths_signoff~~

Natural Gas Rebound originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

On Tuesday, President Barack Obama’s State of the Union address outlined a number of successes in the recent past and focuses for the nation moving into 2012.

One of the hot topics was his attention to clean energy.

The President noted that in 2011, the United States cut down dependence on foreign oil, but he acknowledged that this small decline isn’t enough.

He called for a move away from oil subsidies, turning toward renewables instead.

“It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable and double down on a clean energy industry that never has been more promising.”

One way to end foreign dependence is an increase in renewable forms of energy, and he proposed providing more incentives to energy companies.

He urged Congress to “set a clean energy standard that creates a market for innovation.”

The President even expressed his opinion that moves should be made to prevent further climate change.

His address announced a move by the U.S. Navy to purchase a large portion of clean energy capacity, and he urged others to follow suit.

He called for incentives for manufacturers to upgrade their energy plans to renewable sources.  Not only will it eliminate waste, but it will also save the companies money.

“Their energy bills will be a hundred billion dollars lower over the next decade. And America will have less pollution, more manufacturing, more jobs for construction workers who need them.”

Appealing to both sides on fracking, he announced that he will be sure companies participating in hydraulic fracturing proceed safely and expose the details of their processes.

The President did not mention his recent rejection of Keystone XL or the specific failure of Solyndra.

That’s all for now,

Brianna

State of the Union’s Energy originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

We’ve been meandering down a path of energy insecurity ever since the Carter-era gas lines.

As a nation, we use 19.14 million barrels of oil every day. We produce just 7.51 million barrels per day (mbd).

We are 61% energy dependent. This isn’t opinion; this is a fact taken from the most recent data right on the U.S. Energy Information Administration website.

The rest comes mainly from three countries:

1. Canada, 2.53 million barrels per day

2. Mexico, 1.15 million barrels per day

3. Saudi Arabia, 1.08 million barrels per day

No other country gives us more than a million barrels per day.

Nigeria and Venezuela used to, but we now get 983 mbd and 912 mbd from them, respectively, as Peak Oil’s grip takes hold.

The question has always been: How do we cut our 61% (11.63 million barrels per day!) dependence on foreign oil when we’ve never produced more than the 9.63 million barrels per day we generated at our peak in 1970?

Gas Time

That same EIA has forecast a boom in shale production will lead to a 20% increase in oil production and a 29% increase in natural gas production.

Concerning natural gas specifically, we produced 21.65 trillion cubic feet (tcf) in 2010. We’re expected to produce 27.9 trillion cubic feet in 2035.

But here’s the thing…

The United States only used 24.64 trillion cubic feet in 2010, which means we’re about to go from a natural gas importer to a natural gas exporter.

Much of it will be natural gas liquids, or LNG.

The switch is expected to happen in 2016 with an export capacity of 1.1 billion cubic feet per day, rising to 2.2 billion cubic feet per day by 2019.

And that has a lot of companies and investors very excited right now.

As Reuters recently noted:

The search for higher-value energy resources has prompted companies such as Chesapeake and Halliburton to shift drilling from “dry gas” fields to those that are “liquids-rich,” meaning they contain oil or natural gas liquids such as propane, butane or ethane, whose prices are based on those of crude oil.

Even foreign companies are rushing in…

China Petroleum & Chemical (NYSE: SNP), otherwise known as Sinopec, has paid $2.2 billion to access Devon Energy’s (NYSE: DVN) fields in the Utica, Tuscaloosa, and Niobrara Shales.

France’s Total (NYSE: TOT) has paid $2.3 billion to Chesapeake (NYSE: CHK) to access 25% of its 619,000 acres of Ohio’s Utica shale.

~~eac_nat_gas~~

Political Support

Shale gas actually has support from both sides of the aisle.

We know where the Drill, Baby, Drill crowd stands.

But look what the Democratic White House had to say at the beginning of 2012, as part of a report called, Investing in America: Building and Economy that Lasts:

Only a few years ago, fears of a looming natural gas shortage led to significant investments in the rapid construction of liquefied natural gas (LNG) port facilities that could enable the United States to import vast quantities of natural gas. Projections from the Energy Information Administration (EIA) as recently as 2005 suggested expanding natural gas imports for decades. Without the prospect for adequate domestic supplies of natural gas at reasonable prices, companies increasingly pointed to overseas operations where they could access large quantities of low-cost natural gas.

Since the mid-2000s, however, the discovery of new natural gas reserves, such as the Marcellus Shale, and the development of hydraulic fracturing techniques to extract natural gas from these reserves has led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users. The potential benefits to the U.S. economy are substantial.

An abundant local supply will translate into relatively low costs for the industries that use natural gas as an input. Expansion in these industries, including industrial chemicals and fertilizers, will boost investment and exports in the coming years, generating new jobs. In the longer run, the scale of America’s natural gas endowment appears to be sufficiently large that exports of natural gas to other major markets could be economically viable.

Twenty Years of Uses

The above snippet mentions a few of the potential uses for our newfound gas wealth, namely lower costs for industries like industrial chemicals and fertilizers.

But there’s much more than that…

You’ll also enjoy lower home energy costs.

Already this year, the price of natural gas has fallen below $2.50 per million British Thermal Units (MMBtu), a price we haven’t see in more than a decade.

That will translate to your bottom line — and the bottom lines of companies that use large amounts of it.

Dow Chemical (NYSE: DOW) and Westlake Chemical (NYSE: WLK) have both announced they’ll make major investments in new facilities because of low natural gas prices.

Vallourec (PK: VLOWY), a French maker of oil and gas drilling supplies, is investing $650 million in an Ohio steel mill that will produce pipes for fracturing… and create 350 jobs.

Companies like Westport (NASDAQ: WPRT) are hard at work making car engines that run on natural gas. Cummins is working with them on natural gas-powered big rigs.

Clean Energy Fuels (NASDAQ: CLNE) is building the network of fueling stations that would keep those cars and trucks topped off.

Cheniere (NYSE: LNG) has signed three 20-year contracts worth $28 billion to ship LNG to Britain, Spain, and India.

Shell (NYSE: RDS-A) has said it will build a “world-scale” natural gas processing plant in Ohio, Pennsylvania, or West Virginia.

It’s all part of revived natural gas market that grew by 63% in 2011 to $31 billion — and that will grow another 19% this year to $37 billion.

Over $30 billion of that will be in the United States, where 19,000 new wells will be fracked this year, up from 16,000 last year — creating tens of thousands of jobs along the way.

~~nat_gas2~~

~~nicks_signoff~~

U.S. to Be Natural Gas Exporter originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

We can’t help but feel sympathetic for Montanans.

Much like the rest of the country, Montana’s oil production was in a downward spiral for as long as anyone could remember.

Between 1981 and 1999, the state’s output was cut in half.

Things weren’t looking good…

But at the turn of the century, good news finally struck. (Remember, we’re talking years before the shale revolution began — nearly a decade before the USGS’s reassessment of the Bakken formation in 2008.

The newfound success was thanks to the discovery of the Elm Coulee oil field, located in Richland County on the eastern edge of the state, in 2000.

By 2005, development was in full swing:By June of 2006, Montana reached the 100,000 bbls/d mark for the first time in history (with more than half of that amount coming from just Elm Coulee).

A year later, the field was considered the highest-producing onshore field in the lower 48 states discovered since 1950.

Unfortunately, the fairy tale didn’t last. We know how Montana’s oil fortune played out.

Despite the good news, state production fell by more than 30% over the last five years. And at the same time, Montanans had to sit back and watch neighboring North Dakota’s fame and good fortune take off…

For the good folks of the Treasure State, the grass really was greener on the other side. And the economic impact has been nothing short of a miracle.

The reasons for Montana’s envy are many:

First, there’s the 3.4% unemployment rate that North Dakota enjoys (more than half of Montana’s own unemployment rate)…

Then there’s the nearly billions in revenue the state will make over the next few years…

And North Dakota residents are getting wealthier by the day. According to the U.S. Dept. of Commerce, personal income in the state grew by 6.9% in the first quarter of 2011 compared to the fourth quarter of 2010…

Tack on the fact that all this growth isn’t slowing in the slightest…

With more than 10% of all the oil and gas rigs in the United States drilling on the western side of North Dakota, it’s only a matter of months before it surpasses the production rates of Alaska and California.

~~shale_gas~~

Investors Won’t Be Left Out in the Cold

We’ve said so before, but Montana has become the forgotten step-child of the U.S. oil boom.

Which is just one of the reasons why most investors won’t see these profits coming.

All the telltale signs of an upcoming boom are there, and I believe some of the best sleeper picks for 2012 and 2013 will come from the Treasure State.

This may be the year that Montana regains some of the spotlight.

We’ve been following the increased activity in Montana’s oil and gas industry throughout 2011, and certainly won’t be surprised if the state doubles — or even triples — current production in the next three years.

As you can see below, the number of oil rigs drilling on Montana soil has surged 137% compared to last year:

Although it’s nowhere near the number that North Dakota has, it’s a good sign going forward.

And some of those drillers have been very successful. Several months before it was bought by Statoil for $4.4 billion, Brigham reported a new record initial production rate for its Johnson well in Richland County, Montana.

All the major Bakken players have a stake here, from Continental Resources to Whiting Petroleum.

Of course, both of those Bakken investments have panned out well for early investors:

Seeing both of those Bakken stocks nearly double since early October, most people think they’ve missed out.

What they don’t realize, however, is that the next stage of the U.S. oil renaissance is only beginning…

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Montana’s Second Oil Boom Begins originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.

Apache Corp (NYSE: APA) was up on Monday after announcing its decision to purchase Cordilla Energy Partners III.

The deal, worth $2.85 billion, will be paid in both cash and stocks, and it will add a large number of valuable assets to oil and gas company Apache.

Cordillera owns 254,000 acres in the Anadarko basin, an oil- and gas-rich shale formation that stretches across Oklahoma and Texas.

Along with the acquisition of this acreage, Apache will also receive the company’s 71.5 million barrels of oil equivalent.

Cordillera currently produces 23% liquid gas, 30% oil, and 47% gas from its wells and obtains most of its revenue from these sales.

Apache will be adding to its already strong foothold in the Anadarko basin, an area it has been developing for 50 years.

This deal will add power to Apache’s hold in the region, though Leo Mariani of RBC Capital Markets doesn’t think the terms of the deal are top notch:

“The ultimate price is $6,000 an acre and gas prices need to go up in the next few years for them to make money on this.”

As hydraulic fracturing, or fracking, has increased the supply of natural gas in the U.S., gas prices have fallen and will likely continue to do so.

Cordillera’s development of the Anadarko basin includes a large number of fracking wells.  Fracking has been under environmental scrutiny because of claims that it causes small earthquakes and pollution to drinking water.

In the acquisition, Apache will pay $2.25 billion in cash.  The additional $600 million will come from common stocks.

This follows an announcement that Canadian Pembina Pipeline Corp (TSE: PPL) will purchase Provident Energy Ltd (NYSE: PVX).

The consolidation of these energy companies is enabling increased domestic development, something that will decrease dependence on foreign oil, particularly from OPEC.

Apache was up 0.71% on Monday to $97.49.

That’s all for now,

Brianna

Apache to Buy Cordillera Energy originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.