Hess and Halliburton have built, or are building, major office buildings and equipment yards in what had been dusty farm towns, as they add capacity to their oil production capacity in the area.
Hess has earmarked almost $5 billion in capital expenditures for the Bakken region alone in the past two years. It budgeted $1.8 billion for Bakken capital in 2011 and recently bumped its 2012 outlook to $3 billion.
Hess is in the proces of doubling the capacity of a gas production plant in Tioga, North Dakota, in the middle of the Bakken field, where it has also just completed a sparkling new regional headquarters building.And it recently got government approval to build a 430-mile pipeline that will bring ethane, which is produced from natural gas that comes along with crude oil from the wells, north to Calgary, Alberta Canada. Hess also has about 900,000 acres under lease in the area, making it one of the largest exploration companies in the region. Hess is also expanding its shipping capacity by expanding an existing rail loading facility. It has nine "train sets" or unit trains comprised of engines and hundreds of tank cars in the area, which provide it the capacity to ship 54,000 barrels a day out of the region and to refineries. Hess executives said in a conference call early this year that "net production from the Bakken in 2012 was forecast to average 60,000 barrels of oil equivalent per day or twice the 2011 average of 30,000 barrels of oil equivalent per day. We expect net Bakken production to further increase to 120,000 barrels of oil equivalent per day in 2015." Three years ago, Hess' Bakken production averaged only 15,000 barrels of oil per day. Halliburton, which earned more than three-quarters of its 2011 income in North America, and most of that from the Bakken, is such a big presence in the town that is in the center of the Bakken boom, Williston, that locals joke that they should rename it Halliburton. In addition to a huge new office building, repair and construction facilities and storage yards, Halliburton is building and buying residential real estate throughout the region to house its growing workforce. Halliburton, which says it is "the leading service provider in the Bakken with more people and capacity than any other provider," announced a year ago that it planned to add 11,000 new jobs in North America, and most of them in the Bakken region. This in a state with the nation's lowest unemployment rate of just under 3%. The national average is about 8.3%. Halliburton's heavy capital spending in North Ameica will hurt results in 2012, according to Morningstar. Customers switching from gas to oil production, "added pumping supply, and higher raw material costs, combined with logistical challenges from the higher levels of equipment needed for the new basins have placed pressure on crew utilization levels, prices, and supply chains. "As a result, we expect lower operating margins in North America in 2012" but that "some of these costs will be temporary, as the rig switching and associated cost challenges will be alleviated after the gas rig count bottoms in 2012."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV