Some recent comments on the Bakken formation by the head of a major independent oil and gas company have once again raised the question of how much oil is present in this high-growth play in the United States.

IN PICTURES: Top 5 Most Hair-Raising Contracts

Continental Resources
Harold Hamm, the Chairman and CEO of Continental Resources (NYSE:CLR), said that the Bakken formation in North Dakota and Montana may contain as much as 20 billion barrels of recoverable oil. Hamm also included the reserves from the Three Forks formation in his figures. The Three Forks is a less developed oil bearing formation that lies below the three members of the Bakken. Continental Resources has close to 900,000 net acres under lease in these two plays.

U.S. Geological Survey
This is much higher than the official government estimate of the amount of oil contained in the Bakken. In 2008, the U.S. Geological Survey estimated that the Bakken held mean undiscovered volumes of 3.65 billion barrels of oil, along with 1.85 trillion cubic feet of natural gas and another 148 million barrels of natural gas liquids. This estimate was limited to the Williston Basin, and excluded Canada as well as other basins in the United States where the formation is present. A previous assessment by the U.S. Geological Survey released in 1995 reported that the Bakken had 151 million barrels of oil.

North Dakota
North Dakota also has its own assessment of the Bakken and Three Forks formations, and as you might expect, it differs from the estimate given by Hamm and the U.S. Geological Survey. In 2008, North Dakota estimated that the Bakken contained 149 billion barrels of oil in place, of which 2.1 billion barrels is technically recoverable. Two years later, North Dakota assessed the Three Forks formation at 20 billion barrels of oil in place, of which 1.9 billion barrels is technically recoverable. These two estimates referred only to North Dakota, and excluded Montana and Canada.

Another Saudi Arabia?
The mother of all Bakken estimates comes from Dr. Leigh Price, who worked for the U.S. Geological Survey. Price estimated that the Bakken could generate between 271 billion and 503 billion barrels of oil with an average of 413 billion barrels. Price came up with a higher amount than his peers because he argued that oil from the Bakken had not migrated to the Mission Canyon or Madison formation and was thus still trapped within the Bakken. Price also put a recoverable estimate at the Bakken resource at 50%, implying that approximately 200 billion barrels of oil could be recovered from here.

His methods of calculating the amount of oil in the Bakken are controversial and not accepted by some scientists. His paper is entitled "Origins and Characteristics of the Basin-Centered Continuous Reservoir Unconventional Oil-Resource Base of the Bakken Source System, Williston Basin," and can be found on the internet fo those that want to read his arguments. (Before jumping into this hot sector, learn how these companies make their money. To learn more, see Oil And Gas Industry Primer.)

Who to Invest in
Continental Resources is one of the largest operators in the Bakken, but there are many other exploration and production companies involved here. Here is a summary of the players and acreage positions:

Company Net Acreage
Whiting Petroleum (NYSE:WLL) 579,000
Oasis Petroleum (NYSE:OAS) 300,000
Brigham Exploration (Nasdaq:BEXP) 368,000
Kodiak Oil and Gas (NYSE:KOG) 72,000
Hess Corporation (NYSE:HES) 500,000
GeoResources (Nasdaq:GEOI) 46,000
Marathon Oil (NYSE:MRO) 385,000
Occidental Petroleum (NYSE:OXY) 200,000
SM Energy (NYSE:SM) 81,000

The Bottom Line
Some recent comments on the potential of the Bakken formation prove that he amount of oil and gas resources present in a basin is a difficult estimate to make. It's certain that controversy over the potential of the Bakken will continue for many years. (The next hot spot for energy plays in North America is the Alberta Bakken. Check out The Alberta Bakken.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing Basics

    Learn How To Trade Gold In 4 Steps

    Trading spot gold or gold futures, equities and options isn’t hard to learn, but the activity requires skill sets unique to these markets.
  5. Economics

    The Effect of Fed Fund Rate Hikes on Gold

    Explore the historical relationship between interest rate increases and the price of gold, and consider what effect a fed funds rate hike might have on gold.
  6. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  7. Savings

    Easy Ways to Go Green and Stay Budget Friendly

    Social entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
  8. Investing

    Top Investment Banks In The Energy Industry

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  9. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  10. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  1. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  2. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  4. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  5. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  6. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!