Bakken Oil Gains From Natural Gas Strains

North Dakota's oil boom – the biggest oil boom this generation has witnessed – is experiencing an interesting paradigm shift amidst plunging natural gas prices.

An increasing number of fracking crews are moving on to oil wells to drill as opposed to drilling for natural-gas from shale deposits...

Recently, there's been quite an influx of oil workers near the Bakken shale formation as the unseasonably warm winter allowed them to train the workers to prepare the wells for drilling and production; especially the hydraulic fracturing method.

Typically, not everyone is as willing to work in the winter up in North Dakota. However, this year's mild temperatures and lack of freezing precipitation meant more workers were willing to stay put.

Consequently, energy companies have actually fracked more wells than they drilled for the first time in five months, according to state data released earlier this month. That being said, oil output actually has the potential to grow more quickly than last year (which marked a 35 percent growth rate). 

For the last three years, smaller oil companies with thin pockets were forced to wait for two to three months before they could book fracking crews and get oil out of their wells. As more and more wells were drilled, that backlog has grown.

Last year, an average 12 percent of all oil wells were idled in North Dakota. Even so, output in January hit 546,000 barrels per day, doubling in the last two years and pushing the state ahead of California as the country's third-largest producer.

As natural gas prices have dipped down to a 10-year-low, some big energy companies are canceling some serious business plans. Major companies like Chesapeake and Encana are halting previously planned procedures for new wells and shutting down some existing natural-gas wells as well. Instead, they are sending employees to drill and frack for oil.

Some firms – Halliburton, Baker Hughes and Schlumberger – are shifting gears and sending their workers to oil fields as opposed to shale gas wells. Calgary-based Calfrac recently transferred one crew into the Bakken close to the end of last year.

Meanwhile, FTS International is focusing on operations in Utica (a new prospect in western Pennsylvania and Ohio) as opposed to the shale-dense Barnett formation.

Finding skilled frackers with the necessary work-ethic to stay focused for 12-hour shifts for two weeks before getting even one day off is a struggle, despite the desirable salaries offered:

Easing personnel constraints suggest recruiters may be meeting with success in nationwide campaigns to attract workers with specialized knowledge of complex pumps and hazmat trucks -- and a willingness to brave harsh conditions.

Even with U.S. unemployment at 8.3 percent, such skilled labor remains in short supply despite salaries from $70,000 to $120,000 a year. In North Dakota, unemployment was just 3.2 percent in January, the lowest rate in the nation.

Once a fracker is hired, it takes at least six months just to train someone how to use a fracking pump, says David Vaucher, analyst with IHS Bambridge Energy Research.

Therefore, oil companies prefer experienced workers but haven't had much luck finding them lately. The majority of those experienced workers had been working on extracting natural gas due to the recent surge in supply. Now however, due to the slump in gas costs, companies and workers are moving on to oil wells in hopes of making greater profits.

And although the fracking process is a controversial one, it hasn't really been received as negatively in North Dakota as it has in other parts of the country. Companies are drilling away at record levels.

The number of idle wells waiting to be completed in the state reached a record 908 last June, the result of a new drilling rush and heavy spring floods. Only 733 wells were idle in August as crews caught up, but the figure crept steadily higher until the start of this year.

Now, the industry may be turning a corner in North Dakota, the fastest-growing oil frontier in the world.

Amidst these natural gas pains, it sounds like oil may be on its way to pick up some substantive gains.

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