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2015/03/31

The 100-Year Oil Itch

History books often gloss over  second-place finishers, which is what happened at a farm in Glenn Pool, Oklahoma 100 years ago...
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This photo of the Bakken oilfield shows something very peculiar...

It's a strange, never-before-seen phenomenon this energy boom is causing... something that's never happened in America before.

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The 100-Year Oil Itch
By Keith Kohl | Tuesday, March 31st, 2015
Keith Kohl

You've probably never heard of the Glenn Pool gusher.

Don't worry, you're not alone.

History books often gloss over second-place finishers, which is what happened at a farm in Glenn Pool, Oklahoma 100 years ago. You can only fit so much information in school textbooks, after all, and ours decided to teach more famous stories about the oil industry.

gusher11

I'm sure you've heard about the Drake well in Pennsylvania, or even the Lucas gusher at Spindletop, right?

For Robert Galbreath and Frank Chesley, two wildcatters working an oil rig in the early hours of the morning on November 22, 1905, the Glenn Pool gusher was a life-changing event. They were the ones drilling the Ida E. Glenn No. 1, the well that kick-started Oklahoma's oil industry. The well was named after the farm's owner.

The two men were actually living on the rig the morning they struck oil. But the Glenn Pool gusher deserves a little more credit. Children that learn about Spindletop in history class aren't told certain things, like the fact that the oil extracted from the Lucas well was thick and sour.

The Ida E. Glenn, on the other hand, was pumping the kind of light, sweet oil that refiners drool over.

I know it's easy to overlook the Sooner State's part in the U.S. oil boom, with states like Texas and North Dakota dominating today's oil headlines, but Oklahoma is the fifth-largest oil-producing state in the country; production has nearly doubled since 2010.

Needless to say, the discovery was followed by a mad rush of wildcatters looking to tap into the oil fortune below Oklahoma's soil.

Frank and Bob's well pumped oil for nearly six decades before it was plugged and abandoned, and more than 340 million barrels of oil have been extracted from the Glenn Pool oil field since 1905.

And though things may have changed a bit since those days, when two men could run a drilling rig in Oklahoma for five bucks a day, the opportunity to generate a lifetime of wealth from oil is alive and healthy.

All you need to do is realize where our oil boom is taking us...

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The 100-Year Oil Itch

There's a reason why the story of the Ida E. Glenn well was fresh on my mind recently.

Yesterday, the Energy Information Administration reported that U.S. oil output, including lease condensate, grew by 1.2 million barrels per day to 8.7 million barrels per day last year. The EIA also noted that this was the largest volume increase since record keeping began in 1900.

eiaoil11

What some people may not realize, however, is that 65% of the United States' domestic oil production comes from just five states, or that production is locked in an irreversible decline in at least one of those: Alaska.

More importantly, there's another story of two men living on a drilling rig on a piece of Oklahoma farmland that has always seemed extraordinary to me.

You see, people had a good idea that they'd strike oil in the more famous oil regions of the United States.

People in North Dakota knew as far back as the early 1950s about the vast oil resources locked tightly in the Bakken formation. Native Americans were well aware of the oil seeps in Texas long before the W.H. Abrams well was drilled in the Permian Basin.

What sets the Glenn Pool gusher apart is that the two men had no geological reason to drill where they did. They were wildcatters in the truest sense of the word.

Fortunately, you don't need to be nearly as lucky as them to turn a profit on today's oil boom.

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A Profit in Any Market Storm

For all the advantages that come with extracting in excess of 9 million barrels of oil every day, there's one area that hasn't caught up with tight oil production: infrastructure.

In some states like Texas, where the oil industry has been around for 115 years, infrastructure has managed to keep pace. However, states that are relatively new to the oil boom simply weren't prepared to deal with tremendous volumes of crude.

That has led to companies finding alternative ways to get their product to market.

In North Dakota, this meant using railroads and outdated tanker cars. And if you're wondering why we're suddenly seeing stories of oil train derailments more often, just remember how much that traffic has increased over the last few years:

chart oil by  rail1

The reason isn't because it's cheaper. Most people understand that it's far more efficient to transport oil by pipeline compared to using railroads.

It's because North Dakota's oil production surpassed its pipeline capacity a few years ago.

The oil-by-rail boom is about to experience a rough patch. Not only will the public become outraged by the next major oil explosion caused by an inevitable future derailment, but now the rail industry is also going to have to deal with any safety regulations that are sure to pass through Congress.

North Dakota is gearing up for an infrastructure boom.

I can't put it any clearer than that.

Yet it's not the massive players like Enbridge that will yield the most bang for your buck. Truth is, there's a stock right now that's trading nearly four times cheaper than Enbridge but offering a dividend that pays out triple the annual yield.

But I don't want you to simply take me at my word. I want you to see this burgeoning opportunity for yourself.

I strongly urge you to take a moment and learn the full details right here.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

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