“If you thought mountains of wealth were made in the Bakken, then check this out…
“A strange side effect of this oil boom is set to pay out even MORE regardless of how oil prices move…And there’s one company I’m particularly excited about.”
That’s the intro to the latest ad from Keith Kohl for his Energy Investor newsletter, and it’s all about flaring gas and how it’s gonna make us filthy, stinkin’ rich.
You see, when companies produce oil they generally also produce natural gas — but in the Bakken and in many other oil-producing areas, there’s not enough monetary incentive for companies to have built the infrastructure to profitably handle that natural gas… so instead of bringing that gas out of the well, shoving it into a pipeline in North Dakota, and sending it on its way to generate electricity in California or heat homes in Chicago, they just burn it off right at the well. That’s the “flaring” that you hear about, and that you might have seen pictures of.
This is especially true in the Bakken because the field grew so fast and so explosively over just the past ten years or so — there isn’t even enough pipeline capacity for the crude oil, either transport pipelines or gathering pipelines, so huge amounts of the stuff travels in trucks and, as many investors have been quite aware, on trains (generating a few headline-grabbing disasters as those trains have derailed — Bakken crude is apparently light and very flammable). And if they haven’t even put in enough infrastructure for the lucrative oil production, you can bet that there’s less still for the “afterthought” natural gas production (and you can’t move the natural gas on trucks or in train cars, they need either at-the-well consumption — as from the various companies trying to sell small generators that are trucked to gas wells to turn flared gas into electricity — or a pipeline).
Kohl’s argument is, essentially, that one of his favorite stocks is going to profit from that — with the tailwind coming from the fact that North Dakota is fighting all this flaring with new regulations that require capturing more gas (both the government and the royalty-receiving landowners want the gas sold, not wasted), and from the fact that, over time, the Bakken will become more of a natural gas-focused field and they need to prepare for that evolution. None of this is a deep, dark secret — the Wall Street Journal had a good article about the situation last Summer, when (much) higher prices made it perhaps more of a headline issue.
What, then, is the stock that Keith Kohl is hinting at to profit from the buildout of natural gas infrastructure in North Dakota? Here are the clues:
“See, the companies that build these pipelines and processing facilities already have a two-year backlog.
“And one small Oklahoma builder in particular is on fire.
“In fact, some estimates say it has a whopping $4 billion in revenue already booked for the next two years.
“And it’s no wonder…
“It is operating at the heart of North Dakota’s boom in the Willis