The Motley Fool

Rockin’ the Bakken

According to a recent release from the U.S. Geological Survey (USGS) the booming Bakken Formation that encompasses North Dakota, Montana and South Saskatchewan (although this part wasn’t part of the survey) hasn’t even begun to hit its stride.

The USGS conducted an updated oil and gas resource assessment for the Bakken Formation (U.S. only) and a new assessment for the neighboring Three Forks formation.

The Survey found that these formations contain an estimated 7.4 billion barrels of undiscovered, technically recoverable oil.  This is a two-fold increase from the previous estimate.

The total resource is essentially split between the two formations.

Now, 7 billion barrels of oil is relatively paltry when it comes to comparing the Bakken to some of the world’s great oil reserves.  The Canadian oil sands for instance contain reserves of more than 160 billion barrels.  However, to have this source of light crude so close to home is highly significant for the U.S.

Who wins?

For Canadian investors, perhaps the most risk averse way to play this find is through pipeline operator Enbridge (TSX:ENB,NYSE:ENB).

The Bakken is still new as oil fields go and therefore relatively little infrastructure exists (ie. pipelines).  Enbridge is there in a big way as the company has extended a pipeline that ran from North Dakota to Saskatchewan and joined it to the company’s Mainline with a link in Manitoba.  The Mainline is then able to distribute Bakken oil to the U.S. Midwest, Midcontinent and eastern Canada.

Moving out the risk curve, it stands to reason that if the entire resource has expanded, producers may see their individual reserves expand as well.  This bodes well for Canadian-based producers such as Enerplus (TSX:ERF,NYSE:ERF) and Crescent Point (TSX:CPG).  Both have reasonable Bakken exposure in their portfolio of assets.

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Fool contributor Iain Butler does not own shares in any of the companies mentioned in this report at this time.  The Motley Fool has no positions in the stocks mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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