EOG Resources and the Bakken Shale

EOG Resources (EOG), a large oil and gas exploration and producing company, is a major driller in North Dakota’s Bakken Shale.  The companies’ former name was Enron Oil and Gas.  It was spun off in 1999 from Enron Corporation (yes, that Enron).  Unlike its disgraced parent, EOG has prospered and now has a market capitalization of $14 billion.
EOG is active in the US, Canada, offshore Trinidad, and the North Sea.  In the US it has interests in the intercontinental region, Fort Worth Basin, Upper Gulf Coast area,  Permian Basin,  Rocky Mountain area, south Texas. Gulf of Mexico, and  Appalachian Basin with approximately 3,204,000 net undeveloped acres.
As of December 31, 2007 EOG’s reserves were roughly 75% natural gas (7.75 trillion cubic feet equivalent) and 25% oil and natural gas liquids (179 million barrels).  In the intercontinental US region the company has a strong presence in North Dakota’s Bakken Shale play.   This, because of the massive reserves found right here in the US, has been in the news a lot in recent years.
The Bakken shale underlies some 200,000 square miles of land in North Dakota, Montana and Saskatchewan in depths up to 10,000 feet.  Basically it consists of shale overlain by sandstone and dolomite, overlain by more shale.  The oil tends to accumulate in the porous siliciclastic dolomite layer.  OIl is not new here as it was discovered back in 1951, but until recently, due to cost, recovery has been slow.  In 2007 EOG produced 1,452,789 barrels of oil from the shale.  Just one year later, in 2008, EOG wells produced 8,613,534 barrels of oil, a 493% increase (see bakkenshale.blogspot.com).  New technology, such as horizontal drilling, has allowed greater exploitation of this formation in recent years.
L.C. Price, a geologist working for the U. S. Geological Survey (USGS) estimates Bakken shale may hold as much as 500 billion barrels of oil. This is a massive, almost like Saudi Arabia!  However, even under the best conditions, the previously linked report says extraction is profitable only at a price of $50/barrel or more.  Even with the latest technology, the USGS in their April 2008 report says only  3-4.3 billion barrels may be recoverable, less than 1%.  Nonetheless, the USGS says Bakken shale “is the largest “continuous” oil accumulation ever assessed by the USGS”.
Some of EOG’s oil wells near Parshall, North Dakota rank among the most prolific land drilled wells in the US, producing over 1000 barrels a day.  This bonanza has made the rural area around Parshall quite prosperous, almost in a Beverly Hillbilly manner.
If you have confidence (as I do) that technology will continue to improve and the price of oil will go up, you may wish to invest in companies active in Bakken Shale.  In addition to EOG check out ConocoPhillips (COP).  ConocoPhillips, with their Burlington Resources acquisition, has a large Bakken presence.  As an aside, ConocoPhillips also owns some 13% of LUKOIL CO (LUKOF.PK), a Russian company with massive oil reserves. That, of course, is a story for some other time.  Also, check out Continental Resources (CLR) and Hess Corporation (HES) as they also have stakes in the Bakken.
Disclosure: No positions at this time.