The Coming Bust of the Great Bakken Oil Field

There has been a lot of Fanfare on the huge increase of oil production coming from the Bakken Field located in North Dakota.  There are many stories of people moving to the state to take advantage of the new OIL BOOM.  It seems like everyone is going there to start a new life and make it rich in one of the coldest areas in the United States.

However, with all BOOMS, comes the inevitable BUST.  This was true shown by the famous example of the 1800’s California gold rush:

california_gold_production

According to the article, “The Bakken Boom: The Modern Day Gold Rush”:

Despite the low productivity of the labor-intensive process of gold panning, annual production grew from just over 1,400 ounces in 1848 to more than 3.9 million ounces by 1852. To put this into perspective, prior to 1848, cumulative U.S. gold production amounted to just over 1 million ounces.

Of course nuggets are easier to find than flakes, and the great majority were discovered in the first few years. By 1852, only four years after gold was first discovered, California gold production began a rapid descent. Production declined 50% by 1862 and 80% by 1872.

The decline was only barely checked by the adoption of ‘hydraulic mining’ – a process by which massive amounts of water under intense pressure is used to disintegrate entire hillsides. At the North Bloomfield mine, for example, 60 million gallons of water per day eroded more than 41 million cubic yards of debris between 1866 and 1884. (http://www.sierranevadavirtualmuseum.com/docs/galleries/history/mining/hydraulic.htm)

Typical of all BOOMS, production increases exponentially, peaks and then declines in the same fashion.  However, Even with high-tech hydraulic water mining techniques, the industry could never produce more gold than it did in 1852 when it reached nearly 4 million ounces.

BAD NEWS FOR THE BAKKEN:  Decline Rate of 63,000 Barrels A Day

The EIA – U.S. Energy Information Agency is now putting out data on the individual shale oil and gas plays in the country.  While the American public and world have been made aware of the huge increase in oil production coming from the Bakken, few are privy to the dark side of the equation.  The Bakken’s daily decline rate from their existing oil wells has reached a staggering 63,000 barrels a day.

bakken-63000-oil-decline-chart-1

This means, that every day the Bakken pumps oil, its existing wells are now declining 63,000 (bd) barrels a day.   As you can see from the chart above, the rate really started to decline in a big way after 2011 when the average daily decline was only 20,000 bd.  In less than 3 years, this rate has increased more than 3 times (63,000 bd).

This next chart gives us the total as well as net oil production increases month over month:

bakken-legacy-decline

The EIA is showing what is indicated to take place in December over November.  If we look at the actual data that comes out of the North Dakota Department of Mineral Resources, Bakken oil field production in September hit 867,123 bd.  The difference to reach that 1 million barrels a day is coming from the Montana portion of the Bakken.

Here is an actual screenshot of the ND DMR’s monthly report released November 5th:

ND Directors Cut

Moreover, if we look at total production, again using the North Dakota DMR’s data, their total oil production data for the state in September was 931,940 bd.  This includes oil production outside the Bakken and Three Forks (data for Bakken in the EIA charts includes Three Forks).

Astonishingly, 93% of North Dakota’s oil production comes from the Bakken region alone.

The Bakken Drilling Frenzy Gives The Illusion of Sustainable Growth

The typical American believes the United States has all this hidden oil and gas resources that we can easily tap into.  I just had a conversation with a neighbor yesterday who told me that he couldn’t understand why we weren’t “ENERGY INDEPENDENT.”  Gosh, if I had a dollar for every time someone said that…

Again, the public is only told about all the huge increases in production, but for some strange reason, MSM tends to omit the negative side.  The only way oil production is increasing in the Bakken is due to the massive amount of new wells that have been added.  The chart below reveals the illusion of this sustainable growth:

bakken-production-producing-wells

First, the figures in white represent North Dakota’s total wells producing for their production of the Bakken.  Even though the graph includes Montana’s production, it still gives us a good idea of the huge increase in oil wells it takes to grow production.

Second, in 2008, the Bakken in North Dakota only had 479 producing wells, however at last count in September when then Bakken was producing 867,123 barrels of oil a day, it took 6,447 wells to do so.  Thus, the energy companies drilling and producing oil in the Bakken have to keep increasing wells each month (and year) to offset the huge 63,000 bd decline.

For example, there were an additional 135 new wells (ND) producing in Sept. over Aug. which added 20,589 bd of production.  If there were only say 100-105 new wells added that month, production would have remained flat or possibly declined for Sept.

Lastly, the best and most productive wells are exploited first leaving the dead-beats for last.  This will make things even more fun as the peak and subsequent bust finally arrives.

The Coming Bust of The Great Bakken Field

As with all oil fields, there are only so many sweet spots and areas to drill.  The 63,000 bd decline rate at the Bakken only has one way to go — and that’s higher.   If the present trend continues (highly likely) then we are going to see a daily decline rate of 75-85,000 barrels a day by the end of 2014.

Thus, the shale oil players are going to have to make those drilling hamsters work even harder as they will need to increase more wells each month just to grow production.  At some point in time (sooner rather than later), the daily decline rate will reach a figure that these companies will be unable to offset.

There are only so many drilling locations available and once they run out, the Great Bakken Field will become a BUST as the high decline rates will push overall oil production down the very same way it came up.

Those who moved to the frigid state of North Dakota with Dollar signs in their eyes and images of sugar-plums dancing in their heads will realize firsthand the negative ramifications of all BOOM & BUST cycles.  At this time, the word “Cold” will have more than one meaning.

Once the Bakken and Eagle Ford oil fields peak and decline, the United States has no other “ENERGY RABBIT” in its hat.  This is precisely why investors need to understand energy and why its important to own physical assets such as gold and silver.

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28 Comments on "The Coming Bust of the Great Bakken Oil Field"

  1. Is it true or just FUD that fracking ruins the environment by polluting underground water and has been known to cause underground tremors? My other concern is the enormous amounts of water needed for this process which we badly need going forward.

    • Hi Rodster — Look up “Gasland Debunked” on YouTube. Rgds

      • Oh sure, let’s direct someone to look at something produced by a wing-nut who also still thinks Climate Change isn’t real in order to make them believe something that truly is destroying the planet is “safer than you thought”.

        It’s scary real Rodster.

  2. they’ll tap the permian basin with more vigor next, and to hell with the water supply.

  3. Yesterday I listen KWN Markets & Metals Wrap, Bill Haynes talked about the bakken oil field, He said this thing is real. I was very surprised that I hear something like that on KWN.
    I could not imagine that he by into it and it made me a little confused. Sometimes it very difficult to fight the propaganda everywhere around you. Thank you Steve for this information.
    I have a final question to anybody here what is your guess when and at what production level the bakken field will peek.

    GermanReader

    • GermanReader,

      The problem with analysts today is that they are too specialized. This was the major reason why I started to research energy and the EROI – Energy Returned on Invested back in 2008. The gold and silver community back during this time did not really discuss falling ore grades or the huge increase of CAPEX spending as a result.

      Today, there is more awareness of falling ore grades as well as energy costs, but again, most analysts are clueless to the details of the energy industry. Bill Haynes is a bright guy and I have listened to him for years. But, he does not understand the following as it pertains to the oil industry:

      1) falling EROI
      2) decline of available net oil exports (peaked in 2005)
      3) high decline rates of Deep Water & shale oil

      These are all important factors, but the one that is very critical and gets no coverage at all in the industry is the decline of Available Net Oil Exports. We must remember, an oil exporting country uses a certain amount of their oil production for their domestic economy.

      What happens over time to every oil exporter is that production peaks and then declines on top of increasing domestic consumption. So, we have a double-whammy. The chart below by Jeff Brown shows how ANE – Available Net Oil Exports peaked in 2005:

      In 2005, ANE- Available Net Oil Exports shown in the green portion of the chart, was 40.7 mbd (million barrels a day). However, in 2012 it declined to only 34.4 mbd. That’s a loss of 6 million barrels of oil a day supply to the 155 remaining oil importers.

      ANE = what remains after the top 33 oil exporters take out their oil consumption as well as China & India. As you can see from the chart overall production (in dark red) does not decline all that much until 2020, but ANE falls down to almost half.

      Of course this forecast could be off and the decline of ANE not as bad by 2020, but its much worse than just overall oil production. Everyone looks at the total oil production figure, but does not consider this decline of net oii exports.

      Part of the reason that ANE declines so much is due to the forecasted increase in oil consumption by China & India (shown in light red).

      NO ONE… and I mean NO ONE in the oil industry looks at this except a few analysts such as Brown, etc.

      steve

  4. So in 2008, it took ~500 wells to produce ~175000 barrels of oil per day. That’s 350 barrels per day per well.

    In 2013, it takes ~6500 wells to produce ~850000 barrels a day. That’s ~130 barrels per day per well.

    Paints a pretty picture.

    • Markus,

      And on top of it all, these figures don’t include wells that they have been shut-in. We don’t know how many wells are no longer commercially viable or did not pan out as expected. So, that 6,447 producing well figure does not include all the wells that have been shut-in which makes the overall picture even more bleak.

      steve

  5. As was the case with the gold rush, in the long run the majority of people who came out the best were the entrepreneurs who supplied goods and services to the miners. Last year I was planning a trip across the mid-west and a convenient stop-over location happened to be around Midland, TX. I normally stay at La Quinta Inn’s and was floored to find the rates in that whole area to be through the roof. To show the still existing example; the most expensive La Quinta I can find for next Tues/Wed in downtown NYC is the La Quinta Manhattan at $154.99 – $169.99 per night. Go out to the “middle of nowhere” Midland, TX and the rates are $269.99 – $289.99 per night for a room.

    Steve, do you have any similar charts showing an estimated cost per barrel as this exponential drilling frenzy takes place?

    • Fred,

      Something else about the BOOM… aye? I hear the same kind of thing taking place in North Dakota. People are making business decisions based on the Bakken producing a high amount for years if not decades. Unfortunately, I think there are only a few years left before things peak.

      Fred, according to the work done by Rune Likvern, the average break-even for the Bakken is about $80-$90 a barrel.

      Furthermore, the Eagle Ford is declining at an average annual rate of 24,000 (bd) barrels a day for the past two years. Eagle Ford is now declining 83,000 bd:

      steve

  6. Thanks for this research.

    I had read some time ago that water consumption was astronomical with the drilling in ND but recent rhetoric in MSM and some alternative news suggests that new methods have dramatically decreased water consumption and environmental problems. Do you have a feel for if this is bullshit?

    Secondly, poor EROI means that they’re using lots of diesel fuel to drill. Of the diesel that is used to run all those trucks and equipment, how much of it comes from conventional oil? I know this is probably hard to calculate, however I’m wondering WHEN we get to a point where you have to frack using frack oil to get things rolling?

  7. Is there any possibility that the latest fracking tech can produce longer lasting wells. Per that bastion of truthiness, THE USA TODAY

    The boom will continue for decades, says William Fleckenstein, a petroleum engineering professor at the Colorado School of Mines, which receives funding from the fossil fuel industry. He says major shale regions are performing better than expected. Though well productivity falls quickly after the first year or two, he says the initial gush gives investors a quick payback.

    “The technology is going to improve,” he says, adding that forecasts based on shale wells drilled even a few years ago won’t be accurate. He points to EIA data, released in October, that shows how rig productivity has increased over the last year for new oil wells in the Bakken and Eagle Ford and for gas wells in the Haynesville and the huge Marcellus shale, which stretches from New York south to West Virginia.

    • John,

      What Mr. Fleckenstein is not including in his analysis, is that no shale gas companies are making money. ZIP. Actually they are spending on average nearly 2 times their operating cash flow on CAPEX.

      According to Art Berman, the Marcellus Shale gas field has ZERO commercial wells at $4 mmbtu and the price today is $3.64. He does say that 6% of the Marcellus is commercial at $6 mmbtu, but that is not the whole Marcellus field and we still are nearly $2.50 below that commercial $6 mark.

      The companies that are focusing on the tight oil and liquid plays such as the Bakken and Eagle Ford are making a little money.

      Now, in many industries when you spend the CAPEX, you get to enjoy the profits and returns down the road. However, the shale energy industry does not have that luxury. Due to the huge annual decline rates, they have to keep spending more money to drill more wells to keep production from declining.

      Furthermore, Mr. Fleckenstein does not reveal that most shale oil & gas wells are down 90% by year five.

      I believe Art Berman and Bill Powers are two of the best energy analysts who understand the shale industry. Art Berman believes we have maybe 4-5 years left at the Eagle Ford and the Bakken maybe 3-5 years. That is before peak.

      steve

      • Gas is at $3.64 because of shale gas. Before it was at $13. The problem was the ridiculous interest rate set by the Fed misallocated capital to gas drilling, so much so that the price cratered. Companies will go bankrupt, and the price will go back up to where it is profitable again.

        • JamesD,

          The Price of shale gas falling into the toilet had less to do with the FED and more to do with the mismanagement of the shale gas companies such as Chesapeake — the poster child on how to destory shareholder value in shale gas. All these companies early on went into these shale gas fields and paid handsomely for the land and lease payments.

          So, once you start drilling shale gas wells, you can’t stop or production falls even faster than shale oil at 40% per year. The glut was created by the shale gas companies trying to keep the illusion of growth. This is what killed the price of natgas.

          These shale gas companies are loaded with debt so the only way to keep what little cash flow they could get for such a low price of natgas, was to continue drilling and producing…. which depressed the price further.

          Yes, the price of natural gas will rise to double-digits as production declines, but don’t bank on production to increase anytime soon once this occurs…. if ever.

          steve

      • Agree. That is a huge difference I pointed out in an article not long ago which stated that natural gas is running out and peaking. Many have shifted away from NG for a bigger payday in oil and NGL. You can’t make money on NG of $4 or less except by exporting it where it fetches several times more in foreign markets.

  8. Shale oil is a strange animal, but the massive decline rate is a “good” thing, let me explain. When you drill a well, you get up to 3000 bpd. The well pays for itself in a few months. 6 months later the production is cut in half. After 1 year you are probably around 500 bpd. By the way, these wells have a lot of associated gas with them, which also adds to the profit. After that, you get a more typical decline curve.

    For the near future, expect production to increase and costs per well to decline. This is due to pad drilling. What is nice about the shale oil is that it is everywhere, in two layers. So you can put 16 wells on a pad. Really cuts costs. Companies are now going whole hog to pad drilling, so expect production to keep going up.

    By my reckoning, the boom is on for another 5 years. After that production will start to decline. And I work there. As for the comment on fracking, it is a big lie that it pollutes. The reporters mistakenly reported on the “new” technology of hydraulic fracturing, a 1947 technology. We have over 1 million wells fracked i the US. The new technology was using sliding sleeves in a horizontal bore.

    • JamesD,

      While I appreciate your insight, the data coming from the North Dakota Department of Mineral Resources released this chart from one of their very own presentations on a typical Bakken oil well:

      The average oil production for the year is 427 barrels a day or 156,000 barrels for the first year. Then as you can see, production falls off a cliff. So, very few if any of the Bakken wells are producing 3,000 barrels a day out of the gate.

      Furthermore, your notion that the well pays for itself in 6 months is a nice one, however the evidence shows that the estimated cummulated free cash flow of the Shale Oil Players in the N.D. Bakken has reached almost a negative $16 billion as of March of this year.


      (chart by Rune Likvern — Fractional Flow)

      I would imagine the financials have changed somewhat more positive since the companies have multiple wells on a pad. According to Rune Likvern, here are the following costs for a Bakken Well per barrel:

      Royalties of 15%, production tax of 5%, extraction tax of 6.5%, OPEX at $4/bbl and transport (from wellhead to refinery) $12/bbl and interest of 5% on debt (before corporate tax effects).
      No hedging assumed, no dividend payouts, no retained earnings no income from gas/NGPL sales (which on average now grosses close to $3/bbl).
      ——————-

      I do believe the companies are making some money in the Bakken, but no where near the kind of returns that you may have been led to believe.

      In addition, a great deal of the associated gas from the Bakken is being flared due to the lack of infrastructure and high cost of gathering it.

      Lastly, the Bakken could continue to increase production for several years, but once it peaks, the decines will be like 40% per year. So… again, once these shale oil fields peak…. the United States has no energy alternatives.

      steve

  9. A few production numbers from 5 wells. Oct 2012 43,226 bbl. Jan 2013 34,223 bbl. Sept 2013 21,781 bbl. These wells are in Dunn County , ND. Yes our checks are getting smaller and crude is around $72 /bbl now.

    • Jay T,

      Thanks for sharing that info. If I do the math we have the following average for those 5 wells during those months:

      OCT 2012 = 279 barrels per well
      JAN 2013 = 221 barrels per well
      SET 2013 = 145 barrels per well

      That’s nearly a 50% decline in just a year.

      steve

  10. Another concern is that we just had a very large oil spill from a Tesoro pipeline and it was 11 days until the press and public was informed of it.

  11. Let me get this straight. In 2011 there were 2116 wells declining at 20,000 bpd. Now there are 6447 well declining at 63,000. So each well is declining at about 10 bpd (!!!!) and has been at a steady rate of decline for the last 2 years

    • Polar,

      Its accumulative. Again, by the end of 2014 it will be somewhere in the neighborhood of 80,000 bd. Furthermore, these figures do not include the number of wells that have been shut in.

      Sure, the Bakken will continue to increase production for the next few years, however, once the peak hits, its over — and over fast.

      steve

  12. Hi Steve

    I would be interested to hear your thoughts on Bitcoin (and how it will affect gold/silver moving forward)?

    Is Bitcoin the new precious metal?

    Bitcoins are absolutely soaring in value and gold/silver keep going down…just saying (and looking to understand why gold/silver keep going down but Bitcoin keeps skyrocketing).

    Thanks.

    • Jason,

      While BitCoin is an interesting way to put a value on an “Electric Currency” competing with the global fiat currencies, I tend to agree with Ron Paul’s view on this and that is…. Paul likes to be able to put money in his pocket.

      BitCoin is complicated program that is run by algorithms which I can honestly say, I don’t have a great deal of knowledge. My concern in the future, is also the viability of electronic systems. In a peak energy environment we will head back towards more local economies. James Kunstler talks about this a great deal at his blog Kunstler.com.

      Technology as we have used it, will suffer from diminishing returns… and this will continue. That is why I believe the precious metals which have over a 2,000+ year history as money, is a perfect example of NOT TRYING TO REINVENT THE WHEEL.

      Lastly, gold and silver store “Economic Energy” (term coined by Mike Maloney) in a physical form. An ounce of gold or silver can be exchanged as value anywhere in the world today… as it has for thousands of years. Bitcoin needs a complex electronic system for it to work, whereas the precious metals can be traded in the most basic economies.

      steve

  13. Also, one thing I found interesting is how a company like Kodiak is using ceramics instead of fracking sand. They spend more up front but the results are far better in the return and duration of a well.

  14. I think SRSrocco is on track with this post. As he points out with the California Gold rush American history is littered with Booms and Busts. However within the so called boom years of the California gold rush, there were many, what I would call town/local area busts. Some town would be booming, then the gold slows down, people hear about some other location(s) and people packed up and left for the next boom town that was producing the huge gold. That usually took towns that had in the range of 3 -15,000 people down to 200-500. So yes the larger boom was on, but different areas went bust as the people moved away.

    With the oil and natural gas business it works the same way. You have geographical areas that go absolutly crazy for a period of time, then die.
    For example in Sublette County Wyoming the boom item (they do produce smaller amounts of oil) is natural gas. Pinedale and Big Piney were quiet little towns and starting in around 1999 the boom started. The gas exec’s and company people touted how the boom was going to last for at least 30 years, how we wouldn’t see a drop off in drilling until 2018 to 2030, but the boom would still go on.

    It’s called in the business “the ramp up” phase. The ramp up in Sublette County went on until 2003 early 2004, then stayed fairly steady (they call this the plateau phase) from 2004 to mid 2008, then things started slowing down which I have heard called “the drop off” phase.

    It wasn’t widely known but one day in late 2008 10,000 people were laid off. Most of the locals didn’t see this directly because these were guys living in man camps. All the locals noticed was a slow off in the amount of money (workers spending money on eats, groceries etc) that flowed through the county. Little by little things have slowed down This continued from late 2008 through fall 2013. You can see some businesses have closed their doors, or slowed down so dramatically that they close early and open later. Restaurants that used to stay open until 11 on weekends and 10 during the week are closing (or wanting to) at 8:00 PM or 9 at the latest. Several restaurant owners describe that everything dies right at 7 to 7:30. Same thing with bars. They get a few patrons, but pretty much everything falls off. The county has two local papers and what they are now in terms of size and advertising is much, much smaller. In fact if you took both papers, put them together, they wouldn’t come close to what they were during the boom years. Last weekend people that work there told me that 400 people got laid off in the patch the previous week. One business owner said that business had really slowed down and his gross revenues for his business the last 6 months was very close to what he had pre boom years and he couldn’t live on it now.

    Enterprise pipeline people say they have noticed the slowdown as well. They put about half the natural gas down the pipeline that they did during the boom.

    Sure gas is still plentiful, wells could still be producing, etc etc, just the cycle of the energy industry.

    That being said I know quite a few people from company executives to workers in the oil business in North Dakota. Same thing. Said things had ramped up in ND and pleateau’ed in late 2007. From 2008 they were riding the pleateau until this year. All without fail have said they have noticed a slowdown hit this last August and has continued. One company executive said that they watch these cycles and his company has been slowly moving equipment, people and assets down to Texas where things were booming.

    So even though the Bakken is producing, that oil is flowing like water, etc etc, companies are slowing moving to other locations. Yes there are MANY other locations in the United States that would produce as much or more oil then what is produced in the Bakken. Many untapped. Still doesn’t make any difference with the boom bust cycle.

  15. Several other economic things happen during the periods of ramp up, plateau, and drop off.

    1) Homes that would be $50,000 to $120,000 in a normal, non boom city are suddenly “worth” $250,000 to $450,000 so that is what they sell at. People were buying them at that price with the thought they would be living there 20 – 30 years based upon assurances that the boom was going to last 30 years. The other reason that people do that is when at least one member of the family is making $100,000.00 plus per year, and perhaps the other spouse so what if they are paying $4000.00 per month for a house payment. Once the drop off begins, lay offs happen and that same house is down to the original price range of $50,000 – $120,000, the owners are upside down in it perhaps jobless so they walk away and let it go for foreclosure so they can move on to the next boom town. I have seen this quite a number of times. One place I know has quite a few empty houses.

    2) Apartment and House rentals. 1-2 bedroom apartments that would be $250.00 to $500.00 per month rent in a non boom city are suddenly getting $1400.00 to $2400.00 per month. House rentals were the same. At one point I saw two bedroom, one bathroom house renting for $2500.00 per month and going up. Three bedrooms and a garage were above $4000.00 per month. Trailers were the same way. In one boom town I lived a bunch of 60s era, single wide trailers that had been pretty much abandoned because of holes in the floor (2 – 3 foot in diameter) you could see dirt through, were put back in service by the owners, patched holes with some plywood and charging $4500.00 per month rent….because whom ever rented could rent out the other bedroom for $2000.00 per month. The other thing that is noticeable is during boom times apartment/house rentals don’t stay on the market for more then a day. Sometimes less than that because desperate people will go down to the newspaper office and be there when the paper comes out so they can call and lock in a rental.

    3) Food costs were astronomical. I saw Hamburgers/Cheeseburgers starting at $10.00, if you wanted fries or chips that was extra and a drink was extra on top of that. So you could easily get into the $15.00 plus range for a burger. Chicken Fried Steak complete dinner was $19.95 plus a drink. If you wanted any kind of basic steak you started at $25.00 per plate and went up.

    Most everything else was up in terms of costs as well.

    So how does this contribute to the bust? What you have is 5-8 years of really inflated prices and land lords, real estate agents, restaurant owners and other businesses making more money then they have ever made in their lives. So everybody grows “used to” making and spending that much money.

    Long forgotten are the years where if you had a job that payed $30K per year, that was really good money for that area. In fact people I know in North Dakota tell me that in the pre boom era jobs that paid $20-34K per year were considered really incredible high paying jobs.

    Then the drop off happens and suddenly making $20,000 a year is great money under the conditions but people can’t survive on it because they are used to spending $100,000 per year. Most people believe what they hear that booms are going to go on for 20-30 years and don’t pay any attention to what is going on around them, watching for the warning signs and other indicators. That causes the drop off’s to not be noticeable at first and usually takes 1-3 years to become apparent to most people..

    At the end of that period, houses either aren’t selling as fast or not selling at all, apartment’s and rentals stay on the market for a long time and eating establishments slow way back. Now people notice a huge decrease in their cash flows which hurts them because they themselves “got used to” the large sums of money that were coming in and were spending it just as fast as it came on on various things.

    The only people that survived are those who banked their money and didn’t go on a personal spending spree themselves or those who sold their business during the boom and made a huge amount of money, moved away so they weren’t paying high costs. One restaurant owner in a boom town owned the place for years before the boom. Let it ride about 5 years after the boom started, then sold. Said prior to the boom he probably could of sold it for $150,000 but ended up selling it for around $900,000 during the boom. Did the same thing for his house. Said he paid $60,000 for it years ago, sold it at the height of the boom for $350,000. Walked away and moved out of state to a cheaper cost of living and to be closer to his children.

    For the folks in the Bakken area by the time the slowdown/bust is “apparent” to people, it will be way too late to sell your house, business or anything else because the devaluation process on assets will have already started and nobody is around that wants to pay what you are currently asking for the asset.. Sure you are going to hear all the usual gas/oil field fare about how it’s going to pick up next year, how some big company is going to come in and save the day and hire a bunch of people but that doesn’t happen. If they aren’t there now, they won’t be.

    If you live in the Bakken, ask yourself these questions.
    1) If I wait until the bust/slow down is apparent, can I survive on an income level that was at pre boom levels? If the answer is NO you need to start planning and have large sum of money put away for that.

    2) Have i increased my debt load (personal and business) and can I make payments based upon pre boom levels of income. If the answer is NO you need to start planning for that and have enough money put away that you can clear all your debt’s if you had to with cash in the bank.

    Not to be repetitive, but the absolute key, critical piece of information is by the time the bust/slow down is “visible” or “becomes apparent” it is more then likely too late if you own a business/in debt and can’t afford to move to another boom location.

    The next piece of critical information is when the lay offs start happening they won’t be readily visible or apparent because it is guys in the man camps out in the sticks or small groups of guys here and their. There will be no news reports in the local paper or TV as companies do not like to announce this kind of thing. Even if a company did it would be a question of the local media would print anything as bad news might disrupt their advertising dollars. So they may know something is going on (typically not) but choose not to report it pleading that they had so many other things to report on, or the company wouldn’t confirm it. Remember that there are many $$$$$$$ reasons why people don’t want to print absolute honest information. It is called milking the boom for every last dollar.

    So next and last critical suggestion. Don’t rely upon your local news outlets for totally reliable information on the state of the boom. Check sites that do actual rig counts on a monthly basis, then go back for quite a few years for comparative purposes. Every rig is 120 jobs off hand and another 450 directly related jobs. Each job in the patch translates to two at the local level, say fast food, C stores, etc. Follow different company’s that are working in the patch. For example one major company who in years past was doing oil and gas. With the boom of natural gas the company focused on natural gas. Once the price went down they took a hit and are now laying of/restructuring and apparently are planning to get back into the oil side of the business. Check out the companies stock holder and financial reports. It may surprise you to find out that all these companies you think are wallowing in money are in debt to their eyeballs to banks. Many went out and took out loans so they could speculate. When prices go down, it puts the pinch on them. Even though production may be astronomical, if they don’t readily have 60 million handy to give to the bank, they are up a creek. If you know people actually working for different companies they tend to know if lay offs are happening, or if things are slowing down, people are getting moved to other locations.

    This isn’t everything but a few of the indicators to look for.

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