January 21st, 2014
by Matt Insley, Daily Reckoning
Buy the rumor, sell the news. That's how you make money in today's fast moving marketplace.
Well the rumor mill - and I use that term lightly because these are much more than just mere rumors - is running full-tilt in the oil patch these days. Trust me when I say that a lot of the profit opportunities that you'll read about in these pages are right on the outskirts of Rumorville.
In the next few minutes I want to share with you an oil rumor from America's Midwest. If it proves to be true - which I think is highly likely - there's a profit opportunity to be sure...
But first, before we get to the juicy rumor, let's cover the cold hard facts.
North Dakota's Bakken, the darling of the Midwest's oil boom, is ramping up production at an alarming rate. At last check Bakken production is expected to reach over one million barrels per day - representing 12% of the crude production in the U.S.
This is no flash in the pan either...
A run-up like this takes time, money, hard work and ingenuity - all of which you'll find in somewhat transient fashion in the heart of Williston, North Dakota, the heart of Bakken country.
You'll find plenty of oil in the prairie, but you'll also find rumors.
On my latest trip to Williston I heard all sorts of tall tales, you're guess is as good as mine as to what is true - The Walmart is one of the top-10 busiest in the U.S., the McDonald's is second only to the one in Times Square, if you go to the other side of town the roads have 4 inch ruts.
I can tell you some stuff I saw with my own eyes: the local taco joint pays 15/hr, the streets are lined with trucks, the traffic is so hectic they've set up temporary traffic lights, the parking lot for the local Applebee's looks more like a truck dealership and so on.
So you see, there are plenty of stories to go around. Some true. Some not so much.
However, if you find a truth-filled "rumor" early enough it can be highly lucrative.
Which gets us back to the rumor I'd like to share...
Over the holiday break I received an email from a reader in North Dakota. In short, he said one company he follows has achieved 100% payback in less than a year on their wells, they've improved their completion techniques, started seeing less depletion per well, increased their rig count in their acreage's sweetspot and "reportedly" have 7 of the top 10 Bakken wells.
"[This company] seems to have really figured things out" the email goes on.
All rumors, right? Hearsay? Let's have a look...
After looking into much of the story, most if not all of the facts above are confirmed by company data. This could be the lucrative rumor we're looking for.
The company is EOG Resources (EOG.)
Currently the #2 producer in the Bakken (second to Continental), EOG has stunning growth potential in the Midwest. I've covered EOG in the pages of my Daily Resource Hunter newsletter before, so you may be familiar with them. But a quick refresher shows that the company has production in the Bakken, Permian Basin as well as the Eagle Ford.
Focusing on the Midwest "rumor" mill, EOG has an impressive resume - and looks like 2014 could be another year of outstanding production growth.
New fracking procedures (utilizing more stages and more sand), controlled costs (by self-sourcing frack sand), lower decline rates, increased efficiencies.
For instance, EOG's average 30-day "initial production" rate in 2012 was 894 barrels per day. In 2013 that number jumped to 1,337, representing a 49% increase in initial production per well. Of note, EOG also has 7 of the top 10 highest producing (initial production) wells in the Bakken.
Add it all up and it's no wonder I'm hearing EOG is able to pay off 100% of its wells within a year's time.
The company is moving fast in the Midwest. Before the rumors spread, might want to take a look at adding some shares yourself.
Keep your boots muddy.