Bakken Formation

Definition:

The Upper Devonian-Lower Mississippian Bakken Formation is a thin unit within the central and deeper portions of the Williston Basin that spans Montana, North Dakota, and the Canadian Provinces of Saskatchewan and Manitoba¹. The Bakken Formation consists of three main sections: the lower shale member, the middle sandstone member, and the upper shale member¹. These three sections, or members, represent a vast source of energy resources that has been estimated by the United States Geological Survey to contain, conservatively, 3.65 billion barrels of oil, 1.85 trillion cubic feet of associated/dissolved natural gas, and 148 million barrels of natural gas liquids¹.

As stated in the United States Geological Survey report “Assessment of Undiscovered Oil Resources in the Devonian-Mississippian Bakken Formation, Williston Basin Province, Montana and North Dakota, 2008”.

http://pubs.usgs.gov/fs/2008/3021
/pdf/FS08-3021_508.pdf

Money Management Knowledge Base:

In 1995, The United States Geological Survey assessed the Bakken Formation. The results indicated that there were an estimated 151 million barrels that could be extracted⁴. With new breakthroughs in energy exploration and extraction, new technologies have drastically altered that projection. In 2008, the USGS released a more recent study that estimated the same region as having 3-4.3 billion barrels of retrievable oil⁴. That’s 25 times the amount estimated in 1995. With such a potentially large amount of retrievable resources, the Bakken Formation represents the largest domestic oil field since the Alaska’s Prudhoe Bay discovery of 1968².

In addition to the Bakken shale formation, there is a second oil shale reservoir located directly beneath the middle Bakken known as the Three Folks reservoir⁶. The discovery of the Three Folks reservoir could drastically alter the early projections of recoverable oil in the region. According to the Chief Operating Operator of one of the top oil producing companies in the region, the Three Folks reservoir could increase the amount of retrievable oil in the Bakken region to 24 billion barrels of oil⁶.

The scope of the Bakken Formation is such that the production of crude oil in North Dakota, the state where most of the exploration and extraction has occurred within the U.S., more than doubled from 1999 to 2009 according to the U.S. Energy Information Administration⁵.

Information as stated on the U.S. Energy Information Administration website: http://eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpnd1&f=a

The increase in domestically produced oil and natural gas resources could have a profound impact on the U.S. economy. With an increase in the supply of oil on the world market, the price should decrease in accordance with the laws of supply and demand. A decrease in the price of oil could impact the U.S. economy in a major way, if for no other reason than the fact that the United States consumes around 7 billion barrels of crude oil annually.

References:

1. Assessment of Undiscovered Oil Resources in the Devonian-Mississippian Bakken Formation, Williston Basin Province, Montana and North Dakota, 2008. United States Department of the Interior, United States Geological Survey. April 2008. Web. 7 March 2011.

2. Prudhoe Bay, Alaska. Encyclopedia of Earth. 9 October 2006. Web. 7 March 2011.

3. Technology-Based Oil and Natural Gas Plays: Shale Shock! Could There Be Billions in the Bakken? Energy Information Administration, Office of Oil and Gas, Reserves and Production Division. November 2006. Web. 7 March 2011.

4. 3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation – 25 Times More Than 1995 Estimate-. United States Geological Survey. 10 April 2008. Web. 7 March 2011.

5. Petroleum & Other Liquids: North Dakota Field Production of Crude Oil (Thousand Barrels). U.S. Energy Information Administration – EIA – Independent Statistics and Analysis. 25 February 2011. Web. 7 March 2011.

6. Alster, Norm. U.S. Oil Producers Ramp up Bakken Shale Output. Investor’s Business Daily. 8 February 2011. Web. 7 March 2011.

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Chlebina Capital Management is a money management firm that primarily serves, but is not limited to, Akron, Cleveland, Medina, Canton, and the surrounding Northeast Ohio. Larry Chlebina, President of Chlebina Capital, is the primary financial advisor who developed the Integrated Tiger Strategy. The Integrated Tiger Strategy is an investment approach that seeks to achieve aggressive capital appreciation while balancing risk.