naip mineral owners presentation 11/09
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TRANSCRIPT
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Welcome
Welcome Mineral Owners November 13, 2009
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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
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Bakken and Three Forks
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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
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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
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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
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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
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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
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Current Status:
NYMEX $77ND prices $68Production 230,000Rigs 62
Eco-pads: 10% cost saving
4 wells @ pad; less trucks
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North Dakota’s EconomyNDSU Study$8 Billion Gross
Business Volume
$400 Million Royalties
46,000 Jobs
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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)
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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
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• 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
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EOG Rail Facility at Stanley ND
Images provided by EOG
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ND Oil TaxesThird Highest in the US5% Gross
Production
6.5% Extraction
11.5 % 0ff Gross Revenue
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11.5% Tax Impact to Mineral Owners
11.5% paid by mineral owner too
Impedes Mineral Development
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Hor/Vert
Horizontal & Vertical Production By Month1986 Through September 2006
Slide Text
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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
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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
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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
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Robert Harms 701-471-0959
www.northernproducers.com