Plains All American Pipeline, L.P. (PAA), Enbridge Energy Partners, L.P. (EEP): Is the Bakken Turning Sour?

If the souring of the Bakken becomes more widespread it could have a big impact on the profitability of higher-cost producers like Kodiak Oil & Gas Corp (USA) (NYSE:KOG). Because it costs the company $10 million on average to drill a well, its rates of return are already lower than its peers in the $8 million per well range. Additional costs from hydrogen sulfide mitigation equipment or special pipelines will slow growth and crimp profits.

While the problems don’t appear to be widespread, it’s an area to watch. It goes without saying that the safety of employees and protecting the environment should remain top priorities for all companies involved in the Bakken. However, those priorities come at a cost and some companies can afford that cost better than others. As an investor, keep a close eye on costs, because if the oil is souring then costs will likely increase.

The article Is the Bakken Turning Sour? originally appeared on Fool.com is written by Matt DiLallo.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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