How Bakken Oil Is Revitalizing the Prairie Economy

090813_PC_clarkCalling North Dakota “big sky country” would be an understatement. The clouds hang low and there is a density to them that sparks quick contemplation of the floodgates they can unleash.

There is a raw beauty to the prairies, with lush fields of wheat and grasses almost ready to be harvested.

In the Bakken oil region, shiny new pumpjacks litter the landscape. And it’s not just in North Dakota, but Montana and the Canadian provinces of Saskatchewan and Manitoba as well. The commodity is revitalizing the entire region.

But what stands out aren’t the pumpjacks, but all the activity going on around them. It’s all the services that are required to extract and move the oil that grabs your attention, and there is big money being spent to make it happen.

Also, the endless lines of oil railcars, with their shiny new paintjobs, line the Bakken region. One young man I spoke with was particularly enthusiastic about his prospects in the railroad services business. He said that his employer can’t find enough workers for the business they have. He was in full recruitment mode.

Williston is a small, busy town that is very much dedicated to serving the needs of agriculture and the oil patch. Of particular note is the construction going on; countless long-stay apartment buildings are in construction. An existing building advertised a furnished apartment for $700.00 a week.

Also noteworthy is the presence of oil and gas services companies like Halliburton Company (HAL), which has a substantial presence on the outskirts of town. Oil services are a big deal in the Bakken oil region. Everything has to move by truck; therefore, the business of freight in this region is a good one. Massive well valves take up entire flatbed trailers. The huge drilling rigs themselves require an enormous amount of infrastructure just to get set up.

The landscape in this part of the world is obviously changing. As route 1804 comes close to the Lewis and Clark State Park, views of Lake Sakakawea include large gas flares from oil well sites.

And then there is all the simple infrastructure you see around new pumpjacks, like large steel storage tanks, piping, fencing, electricity, security, and construction equipment. It’s the economic activity of spin-offs that you see, not the oil gushing from the ground.

With West Texas Intermediate (WTI) crude oil prices holding steadily above $100.00 a barrel, the business model for Bakken is a good one. Yet with everything in demand (including pricey Bakken stocks), value is skewed and getting the best bang for your buck isn’t so prevalent. (See “How to Make the Current Oil Situation Work for You.”)

Looking at all the activity that goes into creating a working pumpjack, I’d say that services are the way to go from the investor’s perspective. Even a spin-off industry like railroad services is relatively attractive compared to the built-in high expectations of junior Bakken stocks.

In any case, the landscape of the vast prairies is changing quickly. The oil boom has brought renewed prosperity to what has long been an agriculture-only economy. I suspect many locals wish it would remain that way.