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Building the Bakken: One on One with Jason Spiess: A conversation with Ken DeCubellis
Jason Spiess: Tell Me a
little about your company Black Ridge Oil & Gas.
Ken DeCubellis: So we are a Bakken focused only and a non operator. So the way I like
to tell people, everyone is hearing about the shale plays across the country, and it's
a, you know, we are participating in that shale revolution here domestically but are
laser focused only on the Bakken. And the reasons for that are twofold. Number one we
love the fact it is an oil play. 90-95% of the hydrocarbons that come out of the ground
are oil. And second we have some strong ties to the Basin. Our, the guy that heads our
land group, Mike Isely, his wife is from Williston. And so she still has family there. So it is
important for us as we continue to grow the company that we have that boots on the ground
capability to get new deals and new leases to acquire to help us to continue to fuel
our growth. JS: How long has your company been incorporated
or a company you mentioned it is specifically Bakken so I imagine it is relatively young.
KD: October 2010 is when we acquired our first lease in the Bakken. So that's what two, two-and-a-half
years. So we are relatively new entrant the play.
JS: How many locations do you guys have? KD: In terms of offices?
JS: Yes, offices. KD: We have one main office which is outside
Minneapolis. JS: Is that relatively easy or does that pose
some difficulty being a Minneapolis company doing business out in the Bakken.
KD: You know you can fly direct from Minneapolis to Williston now. I had no problems getting
a flight here to Minot. And you can actually, you know, one of the time I came out here
I took the Amtrak out of St. Paul. You get a sleeper car you leave at 11 p.m., wake up
the following morning in Minot. So we don't have any problems getting here. Michael is
typically out here once a month. And so, you know we don't see any issues there. We like,
you know, we, we, a lot of our relationships on the investor side are out of Minneapolis.
Our current banker is a Minneapolis-based banker. And so we don't see difficulties with
our location. JS: Ah, Observations. From the first time
you set foot in the Bakken to now. What have your observations been since 2010.
KD: It's getting crazier. Ah, its, there's activity at a peak. I don't see any slow down
now. The story I like to tell is the last time I was out here, in Williston in November.
The time I took the train. And I had a return train leaving Williston station at 7 p.m.
Michael and I were driving around the Watford City area, you know in Dickinson down in that
area, the southern part of the play. We left Dickinson around 3:30 p.m., and we could not
get to Williston in time because of the traffic. And so, it's a great story, he told me, "Ken
don't worry the next eastern stop for Amtrak is Stanley. We'll drive that way and get you
to Stanley." And so we were south of the river, could not, you can only cross at one point.
Traffic was backed up again. We missed the Stanley pickup as well. It's great though.
It speaks to how the big investors and operators are very active here. We continue to drill
a lot of wells. There's a need for infrastructure, we are seeing that investment across the board.
Not just to get the oil and gas out of the Bakken to the refineries, but on the simple
things, like expanding the roads. Adding more housing and hotel space, restaurants, etcetera,
it's at an all time high. JS: Governor Ed Shafer, former Governor Ed
Schafer told me in an interview this is a technology boom than an oil boom. You thoughts
on that. KD: I completely agree. I used to work for
Exxon Mobil. And, um, in the early 2000's into 2006, Exxon was worried, as was the rest
of the country that we were running out of natural gas here. They embarked on a multi-year
program investing about 30 billion dollars in the Middle East, in a country called Kutar,
to get access to the natural gas in Kutar, um, liquefy it, ship it over to the US, regasify
it off shore and get it into the grid. Thirty billion dollars. OK. Now what Exxon is trying
to do is take all the natural gas that we are producing here in this country and export
it. So they are going in the opposite direction. Two drivers behind why the energy situation
has flipped completely on its head in a short period of time. It's the advent of horizontal
drilling and hydraulic fracturing. And it's the combination of those two which is very
technology focused that has unlocked this potential. There's a guy named Mitchell, who
tried this back in the 80's, um, in the Barnett Shale, down, which is below Fort Worth. And
he was trying and trying for a decade or so, he finally partnered with the DOE, the DEO
had some shale data that they were analyzing in Pennsylvania. They combined that data and
the technology took off from there. JS: How long do you think the Bakken play
will go one for? KD: There's really going to be two phases.
Um, the oil itself, once the wells are in place will produce, you know, anywhere 25-30-35
years, OK, so you will continue to see production. I think the bigger question is how long do
we see the crazy level of investment on the drilling side. And um, that's really going
to be moderated by the fact that , you know, out here in Western North Dakota we just don't
have the access to the pipeline infrastructure needed to get the oil to the refineries. So
until that investment occurs, it's really going to moderate how crazy the operators
go at producing more and more oil. Cause you don't want to produce more than you can take
away. The end of it I think, I think we will see this activity for about 5-10 years at
a peak level, then it might, ah, kinda, moderate from there. But it will, you know, the big
wild card, is if they find more productive formations. Continental recently talked about
a third bench of the Bakken in northern McKenzie County, ah, um, I think the Three Forks layer
which hasn't been fully understood yet, which is that layer below the Bakken shale, ah,
could be very productive as well, if, depending on how productive those layers are this could
continue for even longer. JS: You mentioned natural gas earlier, former
Public Service Commissioner told me "natural gas is the real wild card out here in the
Bakken." Ah, Governor Jack Dalyrympl sought out and found a buyer in Japan for natural
gas. You mentioned Exxon, also Dow Chemical has been working on ways to capture that natural
gas. KD: Yes.
JS: How undervalued is natural gas? Meaning, when people think of the Bakken, oil comes
to mind. KD: Right
JS: Should people be thinking more about natural gas?
KD: Without question and the reason is it's not dry gas, it's wet. So you hear people
talking about NGLs, Natural Gas Liquids. That's things like Ethane, Propane and Butane. You
mentioned Dow Chemical, Dow wants Ethane because they can turn that into Ethylene, which is
a precursor for polyethylene and other types of plastics and rubbers. And so the petrochemical
industry itself is forecast to add about 30 billion dollars of capacity expansion here
in the US to get access to that natural gas and convert it into plastics. So it's a big
deal here. You know today unfortunately we just don't have enough of the infrastructure
in place to capture the gas in the Bakken, and treat it, and fractionate it out the NGLs,
but once that happens you won't see as much flaring anymore, and that wet gas trades at
a significant premium to the dry gas, and so economically it benefits everybody as well.
JS: It's really interesting because most people will think of crude oil and the amount of
natural gas, could there be another boom based on natural gas and does it mean technology
is that important for the capturing? KD: When you say boom, here in the Bakken?
JS: Yeah in the Bakken, everyone thinks its crude oil, but could there be an additional
boom because of the natural gas? KD: Yeah, I don't know boom. Still volumetrically,
it's not as significant as the oil. Like I said over the long-term many forecasts have
for every barrel you produce out of the ground about 90% of it will be crude. But with that
said, that 10% or so of NGLs is very very economically attractive, so I wouldn't call
it a boom, but the economics will improve significantly.
JS: Any advice you might have for someone coming to the Bakken play. Whether it is a
25-year old guy driving out there to paint his destiny with crude oil or it is a gentleman
like yourself going out there as a seasoned businessman.
KD: I have a lot of folks come to me at various conferences that I speak to across the country,
a lot of people in Minneapolis that say "I have this kind of a project." It could be
a restaurant, it could be whatever, they say how to I participate in this. What I tell
them is to get out there. Get out to Wiliston, get out to Dickinson. Get out to Stanley.
Walk around, meet people, understand the situation, then be willing to take the risk. Because
at the end of the day, the simple solution if you are an entrepreneur is to not act,
and by not acting you are missing this revolution. It's truly a revolution that is occurring
now and that's why we are so excited at Black Ridge to be participating in this. When people
talk about us producing more oil on a daily bases than Saudi Arabia, that's the potential
we have. When they talk about North America becoming an oil exporter in energy independence,
we were not thinking anything like that 6 or 10 years ago. So its really a revolution
and its exciting to be a part of. JS: Thank you very much.
KD: Thank you, appreciate it. To watch the video interview of Jason Spiess
and Brian Hymel, visit www.buildingthe bakken.com. Building the Bakken Radio show can be heard
weekends on I-94FM Dickinson and 103.9FM Fargo. Spiess can be reached at Jason@buildingthebakken.com.