Is Bakken Shale the New American Gold Rush?

You know the labor market is tight when the local McDonald’s starts handing out $300 signing bonuses. Workers are coming in from all over, making it tough to find housing. They might sleep in their trucks or pitch tents, but it can get 50 degrees below zero, which makes such a move dangerous.

There is also a chronic shortage of hotel rooms. I browsed the Web to see if I could find a room. I checked the Super 8 motel – no rooms available. I checked a few others – no rooms there, either. I used Priceline to search, and there were no rooms available. What’s going on here?

Local ranchers are becoming millionaires overnight. The 4 Bears Casino reported a 60% increase in sales last year. This is a boomtown. Or boomtowns. Even the state government is in surplus.

The above is a composite of what’s going in North Dakota, around the Bakken Shale formation. As The Wall Street Journal put it: “A massive oil reserve buried two miles underground has put North Dakota at the center of a revolution in the US oil industry, a shift that has radically altered the fortunes of this remote area.”

The Bakken Shale could hold more than 4 billion barrels of oil and stretches under North Dakota and Montana (and Canada, but I’m only talking about the US piece, here). If that number is correct – it comes from the US Geological Survey – then it would be the biggest oil field discovered in the contiguous US in more than 40 years…

In February 2008, we picked up shares of Kodiak Oil & Gas (AMEX:KOG), a small Bakken player, for $1.94 per share. By June, they traded for over $4 per share. So you can make good money speculating on the Bakken.

Chris Mayer
for The Daily Reckoning

The Daily Reckoning