Prospectin' the Bakken

North Dakota. Black gold. Trailer parks.

This week, I went to visit the Bakken oil-shale fields of North Dakota and Montana, where oil production has tripled in 10 years and the roads are choked with construction vehicles and oil equipment. There's a gold rush for oil workers, investors, and businessman looking to make a buck off the boom.

I was flying on a plane supplied by Clint Lohman, a Montana businessman whom I had met through a mutual friend, who invited me on a trip with a group of big investors looking to expand their portfolios in the Bakken.

We set out at Gallatin Field, Bozeman, Mont., at about 7:00 a.m.; flew to Missoula, Mont., to pick up some businessmen interested in a project that Lohman was putting together; and then set out for Watford City, N.D., a 1.5-hour flight from Missoula on a Beechcraft King Air C90 twin-turboprop.

What were we hunting for? Oil leases? Rigs? No -- we were looking at trailer parks.

Call it the classic "picks and shovels" strategy. During the California gold rush, it was said that selling picks and shovels was the best business strategy -- and more consistent than actually prospecting for gold. It makes sense: Go where the money is, and sell a basic need.

(Click the image below to begin the slideshow.)

Bakken Here We Come

Leaving the Montana mountains for North Dakota.

The Bakken needs housing. With a flood of thousands of oil workers, North Dakota's infrastructure is being taxed. There's little housing stock, some towns have doubled or tripled in size, and there's nowhere to put people. That's where the real estate investors step in.

The flow of money, investors, and oil workers is likely to continue for some time. Investment is pouring into the Bakken these days. Multinational oil companies such as the Hess Corp. (NYSE: HES) are investing billions for a sustained oil production boom. Hess alone has allocated at least $1.8 billion in investment in the Bakken.

Daily production in the Bakken has risen from about 100,000 barrels per day to nearly 400,000 barrels per day in less than ten years. For reference, the United States consumes about 19 million barrels per day, so the Bakken could actually make a difference if it can close in on the million-barrel-per-day mark.

Other major public oil companies making Bakken investments include Whiting Petroleum (NYSE: WLL), Marathon Oil Corp. (NYSE: MRO), EOG Resources (NYSE: EOG), Brigham Exploration (Nasdaq: BEXP), Enerplus Resources Fund (NYSE: ERF), and many others.

Hopes are high, despite the fact that the Bakken has disappointed before. In the 1980s, the oil industry expanded in fits and starts and then sputtered as prices came down. But Lohman says that in speaking with local oil executives, he's gotten the sense that they expect a more sustainable boom. Anything less than a 10-year cycle will be disappointing.

As we descended into Watford City, N.D., it was clear that this was a town ill-prepared for an influx of billions in global capital. A patchwork of farms and oil rigs was interrupted occasionally by the famous "man-camps," clusters of trailers and tents sprouting up in the hills like ant colonies.

This is where the oil workers hole up while they earn $35 to $45 per hour on the oil rigs, plus overtime if they want to work weekends. Many of the oil workers travel from places such as Oklahoma and Texas and leave their families at home, living in the camps for work.

Once on the road, it was easy to be overwhelmed by the truck traffic which crawled across every piece of pavement, parking lot, and dirt road in the area. There were oil tankers, pipe-haulers, and ubiquitous "frack trucks," large box-like containers carrying the water that would be used in the hydraulic fracturing process to release the oil -- a controversial technique that has made the Bakken a viable economic entity but an environmental question mark.

As a friend remarked later, "That was how I imagined Russia looking."