2013 Is the Golden Age for These Oil Companies: Phillips 66 (PSX), EOG Resources Inc (EOG), Whiting Petroleum Corp (WLL)

The golden age of the Bakken
For exploration and production companies in the region, the improved takeaway capacity means that they can also increase production without as great of a compromise on price.  In 2012, Continental and Whiting Petroleum Corp (NYSE:WLL), the two largest producers in the Bakken, both increased their daily production rates quarter over quarter by 42% and 22%, respectively.

While this is a positive for all producers in the Bakken, it is much more important for the small E&P companies in the region like Kodiak Oil & Gas Corp (USA) (NYSE:KOG) and Triangle Petroleum Corporation (NYSEMKT:TPLM). Several of the larger players would be able to find a method to move product regardless, but sufficient takeaway capacity opens up the possibility for these smaller companies to compete. In 2012, both companies increased their daily production rates by more than 280%, and if takeaway capacity remains high, then they could potentially see similar results in 2013.

What a Fool believes
In EOG’s most recent conference call, CEO Mark Papa made the declaration that the Eagle Ford would pass the Bakken in production within two years. If producers continue to produce at these levels, though, the Eagle Ford will have to ramp up production very fast.

What is even more promising for the Bakken players is that even greater profits can be had. Not only are producers becoming more efficient, but transportation costs are likely to drop as well. As wonderful of an ally as rail has been for the Bakken, it is still about a $10 premium to traditional pipeline transportation. Once pipelines start to catch up to Bakken production, they will replace rail and the extra couple of dollars for transportation will go back to the producers.

The article 2013 Is the Golden Age for These Oil Companies originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter@TylerCroweFool.The Motley Fool has no position in any of the stocks mentioned.

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