Best Oil Stocks to Buy as U.S. Jumps to World's Top Oil Producer

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It's time to look at oil stocks to buy as the United States gets ready to surpass the world's biggest oil producers.

Earlier this month, the International Energy Agency (IEA) reported that the United States will jump past both Russia and Saudi Arabia as the world's top oil producer by 2015.

Oil production in the United States will rise from 9.2 million barrels a day in 2012 to 11.6 million in 2020.

For Saudi Arabia, that figure is expected to drop from 11.7 million in 2012 to 10.6 million in 2020. Russia will drop from 10.7 million barrels a day in 2012 to 10.4 million in 2020.

According to the IEA, the shale boom is the main driver of increased U.S. oil output, especially in North Dakota and Texas.

"It all began with the massive growth in the Bakken shale beginning in 2008, when the U.S. Geological Survey (USGS) revealed that the now famous formation held nearly 4 billion barrels of recoverable oil," Money Morning Global Energy Strategist Dr. Kent Moors wrote to his Oil & Energy Investor subscribers.

In 2011, the USGS estimated that recoverable reserves of crude oil in the Bakken actually totaled 11 billion barrels, up from the 2008 estimate.

"Now the Bakken is being eclipsed by an even more productive shale formation in southern Texas known as the Eagle Ford Shale," Moors said. "Often referred to as the Texan Bakken, oil production in the Eagle Ford oil jumped 60% in June from the same month the year before."

In fact, some of the most profitable oil stocks over the past few years have had ties to the Bakken Field in North Dakota and Montana and the Eagle Ford Shale in South Texas. ConocoPhillips (NYSE: COP), Hess Corp. (NYSE: HES), and Kodiak Oil & Gas Corp. (NYSE: KOG) all have operations in one or both of these locations.

U.S. output is expected to plateau by 2020, however. At that point the United States will lose its ranking as the top oil producer and relinquish the title back to the Middle East region by the start of the 2030s, says the IEA.

While the traditional oil behemoths were focusing on international oil fields, smaller oil companies were able to position themselves in these emerging American territories in North Dakota and Texas. The best oil stocks to buy now might not be household names, but they are now ready to reap huge gains from the American oil resurgence.

Here are two we like now...

Two Oil Stocks to Buy Now

Continental Resources Inc. (NYSE: CLR): With a market cap of nearly $21 billion, CLR is by no means a small company, but compared to its oil brethren Exxon Mobil Corp. (NYSE: XOM) at $411 billion and Chevron Corp. (NYSE: CVX) at $236 billion, the term "midsize" is appropriate.

Continental Resources is the largest leaseholder in the Bakken Field. The Bakken was described by the USGS as "the largest continuous crude oil accumulation it has ever assessed," and Continental owns more than 1.7 million acres of land there.

In December 2012, CLR produced 67,522 barrels of oil equivalents (Boe) per day from the Bakken. The Bakken accounts for approximately two-thirds of Continental's total production.

Being a member of the prolific Bakken producers is a sweet spot for any energy company.

"[The Bakken is] massive, one of the largest pure oil resource plays in the world and we've de-risked 3,800 square miles for multiple benches," CLR's founder Harold Hamm said in a third-quarter earnings call. "It's onshore American, it's 85% oil, and Bakken is one of the most consistent, high quality crudes anywhere in the world."

CLR's third-quarter report brought good news to shareholders with earnings per share of $1.61, which was up from an estimate of $1.48. Continental also reported a 5% jump in production from the previous quarter, and a 38% jump from the previous year.

That was the 13th consecutive quarter of production growth for Continental.

CLR stock has already reaped large gains from the increased U.S. oil output, up 48% in 2013. It currently trades north of $109 per share.

It may be trading near its all-time high, but with strong Q3 results and production on the rise, CLR stock still has room to grow.

EOG Resources Inc. (NYSE: EOG): EOG Resources operates with a market cap of more than $46 billion, and is another "midsized" oil stock to buy before 2014.

Most important to EOG's production is its operation on the Eagle Ford Shale. Located in Southern Texas, Eagle Ford is one of the most actively drilled targets for oil and gas in the United States.

According to EOG's 2013 10-K, "EOG was one of the first companies to recognize the potential of the Eagle Ford Shale and captured what EOG believes to be the best crude oil acreage position within the play."

In 2012, EOG watched its crude oil production from Eagle Ford alone increase an astounding 150% to 94.4 million Boe from 37.7 million Boe in 2011.

EOG Resources also owns acreage in the Bakken Field and reportedly increased its gathering and processing activities in that area in 2012.

In its 2013 third-quarter reports, EOG posted a year-over-year increase of 39% in its total crude oil production. It posted earnings of $2.32 last quarter, up from an estimate of $2.06

Year to date, EOG stock has climbed more than 44%, and the oil stock reached an all-time high in late October. It's currently trading above $165 per share.

Like CLR, EOG is trading high, but should continue to climb along with U.S. oil production.

The U.S. boom has created an abundance of oil, and this "supply shock" is turning the oil market on its head. And this has GLOBAL ramifications...

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