naip mineral owners presentation 11/09

Welcome

Welcome Mineral Owners November 13, 2009

Oil and Gas in NDWhat it means to ND Mineral Owners

1. North Dakota Oil and Gas Overview; Bakken and Three Forks

2. Economic Impact; developments trends

3. Challenges: Oil and Gas Tax Policy

4. Changes to tax policy

Bakken and Three Forks

Bakken-Three Forks Play Moved ND from 9th to 4th in U.S.

149 Billion Barrels1-2%

Recoverable2.1 billion recoverable

Three Forks 50% size of the Bakken

North Dakota Oil Production and Price

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,0001970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

Bar

rels

per

Day

$0

$50

$100

$150

$200

$250

$300

$350

$400

ND

Sw

eet

Pri

ce $

/bar

rel

History Bakken Maximum Bakken Most Likely Bakken Minimum

$/Barrel History & DOE-EIA Projected $/Barrel Most Likely $/Barrel Maximum

Drilling follows economics

0%

50%

100%

150%

200%

250%

300%

350%

Change in Oil Price (WTI) Change in Drilling Activity Change in Production

Peak Drilling:98 Rigs (Nov 2008)

Peak Oil Price$145/Bbl

Low Oil Price: $31/Bbl

54 Rigs

$69/Bbl

299 KBD

The Bakken/Three Forks:

• 1,057 Bakken and Three Forks wells

• 3,422 drilling and spacing units approved

• 335 of 381 wells past 12 months

• 10,000 drilling and spacing units possible

Recently in North Dakota

08/08 1/09

NYMEX Price per Barrel $147 $31ND Price Per Barrel $125 $24 Difference is Distribution, not quality

Production (BOPD) 215,000 187,000Rigs 98 31120 Jobs for Each Rig

Current Status:

NYMEX $77ND prices $68Production 230,000Rigs 62

Eco-pads: 10% cost saving

4 wells @ pad; less trucks

North Dakota’s EconomyNDSU Study$8 Billion Gross

Business Volume

$400 Million Royalties

46,000 Jobs

Contributions to North Dakota Oil and Gas Production Taxes

2007-2009 $794,000,000

General Fund $71 M

School Trust Fund $37.7 M

Foundation/Stabilization Fund $37.7 M

Permanent Oil Tax Trust Fund $475 M

(POTTF)

Water Resources Trust Fund $75.4 M *

*(05-07: $25.82M; 07-09 projected: $41M)

ND Oil Trust Fund$794 Million 2007-2009• $6.5 million Veterans

Home• $350,00 Peace Garden• $23 million Higher Ed• $115 Million Property Tax

• 2007-2008

• $300 Million Property Tax• 2009

• 1. Market Forces • Price/Economics/Costs• Infrastructure (price discounts)• Housing/labor/roads

• 2. Public Policy/ND/US• US Tax Policy

• ND Tax Policy

• 1. Market Forces • Price/Economics/Costs• Infrastructure (price discounts)• Housing/labor/roads

• 2. Public Policy/ND/US• US Tax Policy

• ND Tax Policy

Challenges

EOG Rail Facility at Stanley ND

Images provided by EOG

ND Oil TaxesThird Highest in the US5% Gross

Production

6.5% Extraction

11.5 % 0ff Gross Revenue

11.5% Tax Impact to Mineral Owners

11.5% paid by mineral owner too

Impedes Mineral Development

Hor/Vert

Horizontal & Vertical Production By Month1986 Through September 2006

Slide Text

Robert Harms 701-471-0959

www.northernproducers.com

North Dakota Tax Policy?

Desired change: 9% “off ramp” -from extraction tax- in lieu of price triggers

-retain gross production rate

-increase investment in ND

-increase tax revenues (more production)

-Bakken more economic; not “millionaire” oil wells

North Dakota Tax Policy cont.

Makes ND more competitive (MT-0%-9%)Improves Revenue ForecastingMoves toward flat, more simplified tax systemImproves business climate-for long range planning

North Dakota Legislation

House Bill 1235

11.5% 7% New Drilling Incentive$4.5 million; 75,000 barrels; 18 months Expires in 36 months Not applicable above $70

Robert Harms 701-471-0959

www.northernproducers.com