North Dakota Producers Looking at Crude Falling to $30

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Tuesday, December 30, was the last time that the posted price of West Texas Intermediate (WTI) crude oil topped $50 a barrel. That price indicated how much Plains Marketing, a division of Plains All American Pipeline L.P. (NYSE: PAA), was willing to pay for a barrel of WTI crude. On Monday, January 5, Plains said it would pay $46.25 per barrel for WTI. Indeed, $40 oil is already here

Crude prices on the NYMEX fell below $50 a barrel briefly on Monday, but managed to close the trading day at $50.04. Tuesday morning the price fell to $48.47 in early electronic trading.

The really bad news is the price that Plains Marketing is offering to pay for crude oil produced in the Bakken shale play. Williston Basin Sweet (equivalent to WTI) fetched just $33.44 a barrel on Monday; Williston Basin Sour fetched just $24.33. No other grade of crude on the Plains price bulletin was priced lower than Williston Sour.

In our earlier look at the top producers in the Bakken, we noted the added transportation costs of $19 a barrel for Bakken crude headed by rail to the east coast and $11 a barrel for crude headed to the Gulf coast by pipeline. Adding the transportation cost to east coast refineries to the posted price of $33.44 gives a price per barrel at the refinery of $52.44. Because east coast crude is benchmarked to Brent, not WTI, the price paid was 1.2% below Monday’s closing price of $53.11 per barrel of Brent.

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The calculation for Bakken crude headed for the Gulf coast is similar, though slightly worse. The impact on Bakken producers’ stock was immediate and unpleasant. Here is a look at just three.

Whiting Petroleum Corp. (NYSE: WLL) is the largest producer in the Bakken, following its acquisition of Kodiak Oil & Gas. Whiting’s shares dropped more than 10% on Monday to close at $29.74, in a 52-week range of $24.13 to $92.92. In the third quarter of 2014, Whiting’s average sales price for a barrel of crude was $86.78. That number is ancient history.

Continental Resources Inc. (NYSE: CLR) dropped nearly 11% on Monday. Continental’s average selling price in the third quarter of last year was $85.49. Continental’s stock closed on Monday at $34.65, in a 52-week range of $30.06 to $80.91.

Hess Corp. (NYSE: HES) produces about 85% of its 74,000 daily barrels in the Bakken. The company’s average selling price in the third quarter was $86.01. The company’s stock dropped nearly 5% on Monday to close at $70.55, in a 52-week range of $63.80 to $104.50.

The outlook for Tuesday’s trading session does not offer a lot of reason to hope for a rebound.

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