We discuss the peaks and valleys of ND oil production with Kathy Neset

Kathy Neset, President of Neset Consulting, talks with us about the oil production trends in North Dakota.

FULL TRANSCRIPT:

(Please note - this transcript was copied from an electronic captioning service. We apologize for any errors, spelling, grammatical, or otherwise.)

Chris Berg:
The president of Neset consulting, Kathy Neset, joins us to talk about the important of North Dakota oil play. Looks like things are starting to turn around in the Bakken. I want to start big picture and work our way down scale. Let’s talk about a trump administration and what it means for energy independence and the Bakken specifically.

Kathy Neset:
I would begin with the trump administration bringing a reduction in the regulations to the industry. And I always want to point out that so important to realize that doesn't mean there is less regulation in the industry as a whole; it means they're handled on the state level.

CB:
Speaking of that, it looks like the senate bill is going to get passed and we're going to have a new environmental agency in the state of North Dakota.

KN:
This seems redundant.do you want to see another regulation or regulatory body in place? But it frees up department of health, and I think it's a good tradeoff.

CB:
What's the downside?

KN:
More regulation.

CB:
Interesting.so that said, EPA head, Scott Pruitt, good or bad?

KN:
Excellent.

CB:
The Dakota Access Pipeline seems like it's going to be a big boon for our state, taking trucks off the road. What's the greatest benefit for North Dakota?

KN:
Safety for our people, just as you pointed out, safety on the road, getting more of these trucks and rail reduced. It’s going to be -- it's also safety for our environment. I mean, we all here just enjoy our beautiful North Dakota landscape, the great northern plains is unmatched, unparalleled, I believe. The Dakota Access Pipeline is going to be the safest way to transport oil.

CB:
What do you say to the naysayers, about leaks.

KN:
I say the technology involved in these new high-tech pipelines is far superior to what we have in place and what we're comparing it to, and even far superior to the technology that has advanced with the rail and the trucks on the road, so overall, the safety is monumentally higher.

CB:
What's the break-even point right now in the Bakken for producers?

KN
I was in Denver and Houston here in the last few weeks, and it depends upon where you are, basically speaking, what I heard was, boy, we like $55 crude oil, sure we would like to see it closer to $60, and we will be, you know, full-tilt ahead. I would say somewhere in that range. Break-even is probably slightly less than that.

CB:
Wow! I thought you were going to hit me with a 30, 35 number.

KN:
As a break-in -- it depends upon where you are. The core part, you can break even, depending upon the technology and method used, something less than 40 dollars.

CB:
This is from continental resources, recently at an event. Harold Hamm says the U.S. needs measured production like opec.do you agree?

KN:
Yes.

CB:
How do you do that?

KN:
I think it would be a measured production, but I think it will be done in a different method than what OPEC is doing. I think it will be done, it would be done in a broader brush.

CB:
How do you do that in a free market?

KN:
You still have to work in a free-market system, obviously, so I think the competitive model will still exist, but I think there has to be some sort of way. I personally think the industry itself will regulate that --

CB:
Would you break it on the market cap of the company?

KN:
Not necessarily, no.

CB:
Okay. What was stated, he goes this will end badly, talking about how essentially right now, because prices are so low, they're going to cannibalize, he says this will end badly, I’m changing my view to much lower for much longer.

KN:
I disagree, because the value of crude oil continues to increase. I will even take off the table what we hope wouldn't happen, which would be some geo political catastrophe somewhere in the world that would change the entire game. But based on just normal activity, I think we have a need for this crude oil.

CB:
But you see demand diminishing across the globe, there is a lot more solar taking place as well. Demand is diminishing. The thing I always try to appreciate is that technology's only going to improve, and you know this probably better than anybody. Right now we're getting x amount out of each piece of rock, we're increasing what we're getting out of every square inch of rock, why do prices go up, if there is this -- I don't want to call it an unending supply, but a huge supply.

KN:
It's a huge supply, huge supply, and what a great blessing, but the increased energy, between oil, amongst oil and wind and solar and nuclear and all the different methods, you also must look at the changing demographics of this world. I just came from a conference down in New Orleans, and shell oil was talking about the demographics of this world going to nine billion people. The energy demands of this great planet are monumental and growing.so I do believe that the demands are going to grow along with the technology and supply that is out there.

CB:
You talk about the break-even point being 55 or so. Fairly recently, the midland basin and shale camp is three times bigger than Bakken, that we have access to. Should North Dakota look at cutting taxes for oil companies even more to try to entice them to stay here, lower production costs, and keep production moving?

KN:
I don't believe so. I believe we're at a fair tax system right now. I do believe that, you know, the benefits, obviously the state of north dakota.it also is a fair system at this point, the measure that we're at right now. I don't think we have to go head to head direct competition for those other basins. They have other resources. The Bakken is pretty exclusive for us as well.

CB:
Thanks again to Kathy. She did a great job, we did a Facebook live video. Go to our Facebook page if you want to see more of that. Part 2 will be tomorrow night with madam president Neset. We’ll look at some of the administrative bloat, and what can she do to maybe reshape, change, or ensure that students are getting the best bang for their buck.



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