Black Gold Keeps Flowing in the Bakken

BISMARCK, N.D. -- No one seems more out of place at an oil and gas conference than Jim DeSeyn, president of Solargy Lights. "Thanks for stopping," DeSeyn said, jumping -- literally -- out of his seat to chat with an attendee who lingers at his booth in the exhibit hall at the 20^th Annual Williston Basin Petroleum Conference.

Neche, N.D.-based Solargy Lights is a privately-held company that focuses on green solutions for outdoor lighting. It's an anomaly here at this industrial expo, surrounded by companies largely promoting equipment related to hydraulic fracturing and advanced horizontal drilling.

And frankly, the quote from William Wordsworth on the sign above the Solargy Lights booth -- "Come forth into the light of things, let nature be your teacher" -- doesn't really help win over the crowd. So when I ask "Why solar?" DeSeyn smiles and sighs. "Glad you asked. Not everyone has been so nice."

Oil and gas workers can be a tough crowd. It's a group that seems to define "business casual" -- the required attire for the conference -- as jeans worn with a shirt bearing a company logo (cap or cowboy hat, optional). These men and scattered women pass up the free pens, the notebooks, the key chains -- the standard conference giveaways -- in favor of cup holders, bottle openers, and safety glasses. And while the bowls of chocolates and other candies at each booth seem to remain relatively full, the exhibitors handing out popcorn (with jalapeno topping), draft beer, and Slim Jims ("The only known cure for Male Spice Loss" according to manufacturer ConAgra Foods) are popular.

But for guys like DeSeyn, it's apparently worth the abuse. More than 4,000 people from 46 states and nine countries are attending the three-day energy conference at the Bismarck Civic Center here this week. Why? In the past six years, North Dakota has surged from the ninth-largest oil-producing state in the nation to the second. It just surpassed Alaska, and now trails only Texas.

The state is the home of the Bakken, a giant oil-shale formation that straddles the US border with Canada. It underlies Western North Dakota, Eastern Montana, and extends into two Canadian provinces, Saskatchewan and Manitoba. Historically, wells were drilled conventionally: A drill was plunged, vertically or directionally, into an oil field to extract the liquid, like a syringe pulling fluid from a water-logged sponge. But unconventional oil plays are less like a sponge and more like a Brillo pad, explained Frank Mosley, director of the economics and finance program at Minot (N.D.) State University.

To coax the oil from that rigid Brillo pad-like rock, energy companies have to soften it with high-pressure bursts of water and a proppant, typically sand, through a process known as hydraulic fracturing, or "fracking" for short. While conventional drilling and production can extract 40% of a reserve, unconventional drilling -- at present -- can only extract 2% to 10%.

Mosley estimated energy companies have to get 100 barrels of oil a day from their Bakken wells at present prices to break even. But thanks to improvements in technology and production, most wells can now produce more than 1,000 barrels daily.

A record number of rigs are drilling into the Bakken and the Three Forks-Sanish formation, a layer of sand and porous rock directly below the Bakken shale, according to the state's Department of Mineral Resources. State records show North Dakota drillers are now producing close to 575,000 barrels daily, up from 348,000 barrels a day in early 2011 and just 262,000 barrels a day in early 2010.

North Dakota could double its oil production by 2015 to more than 1 million barrels daily, putting it on par with Texas "if everything goes our way," the state's top oil regulator told industry and government officials at the conference yesterday. Lynn Helms, director of the state Department of Mineral Resources, said the increase hinges on a strong global economy, steady oil prices, and a favorable federal regulatory climate.

Numerous public companies are poised to benefit. In recent years, numerous energy companies have built up large acreage positions throughout the region, including Continental Resources (NYSE: CLR), EOG Resources (NYSE: EOG), Hess (NYSE: HES), Marathon Oil Corp. (NYSE: MRO), Northern Oil & Gas (NYSE: NOG), Statoil (NYSE: STO), and Whiting Petroleum Corp. (NYSE: WLL).

Other potential beneficiaries include pipeline companies like Enbridge Energy (NYSE: ENB); BNSF Railway, a subsidiary of Berkshire Hathaway Inc.Baker Hughes (NYSE: BHI); Halliburton (NYSE: HAL); and Schlumberger (NYSE: SLB). (The Bismarck Tribune offers a great Bakken Stock Watch. You can access the paper's comprehensive list by clicking here.)

So that brings us back to Solargy Lights. Solar? Really? At an oil conference? "Well, we have wind solutions, too," DeSeyn said.

And then he put it all in perspective:

Sometimes the sites where the companies are drilling are so remote that it's hard for them to run electrical lines for their lighting needs. These are 24-hour operations, after all. And someone told me, I don't know if it's true, that someone stole two Bobcat generators from one of the North Dakota drill sites. Those are big pieces of equipment. But we offer solar powered security cameras.

Ahhh... Now it makes sense why there's a solar company at an oil and gas conference. But DeSeyn still might want to rethink the whole Wordsworth thing. Maybe a quote from John Wayne instead... you know, something like, "We're burnin' daylight."