Breakeven Dynamics in North Dakota Oil: A Contrarian’s Playbook for the Next Price Surge

The North Dakota oil patch is at an inflection point. As U.S. shale rig counts stabilize near decade lows and global oil prices hover near $65 per barrel, the stage is set for a supply-driven price rebound. For investors willing to look past short-term volatility, the state’s undervalued producers—operating on the edge of the breakeven threshold—are primed for a revival. Here’s why now is the time to buy.

The Breakeven Catalyst: Why $65 Matters

North Dakota’s Bakken Shale producers face a stark reality: their average breakeven cost hovers around $55–$65 per barrel (see Figure 1), driven by declining well productivity, logistical constraints, and rising operational costs. When WTI crude prices dip below this threshold—a scenario seen in early 2025—operators slash capital spending, idle rigs, and halt marginal projects. This creates a self-reinforcing cycle: rig reductions → supply curtailment → price support → renewed investment.

Supply-Side Dynamics: The Tightening Vise

The data is unequivocal: North Dakota’s oil output has fallen 16% from its 2019 peak, despite a surge in 2023 rig activity. Why? Declining well productivity (EURs dropped 67% since 2020) and geological limits force producers to drill deeper into less profitable zones. The rig count, now at 32 active units, has stabilized—not because of profitability, but because of breakeven pressures.

When prices dip into the low $60s, the math becomes brutal. At $60/barrel, producers like Empire Petroleum (EPMR)—with a breakeven of $60–$65—face cash flow crunches. The result? Production cuts, not just in North Dakota but across U.S. shale. This is critical: shale’s ability to ramp up quickly has been a global supply buffer for years. Now, that buffer is eroding.

The Contrarian Opportunity: Low-Cost Reserves and EOR Innovation

The winners will be operators with low-cost reserves and operational agility. Consider Chord Energy (CHRD), the Bakken’s largest producer post its $3.8B Enerplus acquisition. Its $60/bbl breakeven and 1,800 undrilled locations give it scale to thrive when prices rebound. Similarly, Empire Petroleum (EPMR)’s Enhanced Oil Recovery (EOR) project in Starbuck—a 70% production recovery post-winter setbacks—highlights resilience in technology-driven extraction.

These companies are playing defense now, but their offense will pay off. Their shares trade at 1.2x EV/EBITDA (vs. Permian peers at 2.5x), offering a margin of safety.

Risks? Yes. But Structural Bullishness Outweighs Them

Bearish arguments focus on demand destruction (e.g., EV adoption, recession fears) and OPEC+ supply discipline. Yet structural constraints in the Bakken—a $5/barrel transport discount, gas takeaway bottlenecks, and exponential well decline rates—mean production growth is not just slowing but reversing.

Even a modest 300,000 bpd supply cut (equivalent to 0.3% of global demand) could push prices back to $75+. For context, the Bakken’s output fell **11,000 bpd in February 瞠e 2025 alone due to cold weather and cost pressures.

Buy Now—But Look for Catalysts

The catalyst for a rebound is clear: oil prices breaking through $65 and sustaining momentum. Watch for these signals:
1. Rig count declines (already at 32, further cuts likely if WTI dips to $60).
2. EOR breakthroughs—Empire’s hydrocarbon vaporization tech (targeting 550–650°F heat) could slash breakeven costs.
3. Global supply shocks—Bakken’s role as a marginal supplier means even minor disruptions (e.g., Middle East tensions) amplify price spikes.

Final Call: Position for the Next Oil Cycle

North Dakota’s producers are the canaries in the shale coalmine. Their breakeven struggles signal peak shale supply—a once-in-a-decade opportunity to buy assets at distressed prices. With global demand growth outpacing non-OPEC supply growth for years to come, this is a structural bullish call.

Act now: Allocate to CHRD, EPMR, and other Bakken-focused names trading at 2020-like valuations. The next leg up in oil prices won’t wait long.

Note: This analysis assumes WTI prices stabilize above $60 and geopolitical risks (e.g., OPEC+ cuts, U.S. policy) remain contained.