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The U.S. oil industry has been reborn, with oil flowing from new fields like North Dakota's Bakken at rates not dreamed of just a few years ago – and it has created a new crop of best investments for those hunting for energy profits.
U.S. oil production climbed from a low of 5 million barrels a day in 2008 to 7.2 million barrels per day in February of this year.
The first stage of the U.S. oil revolution is pretty much over.
This stage saw U.S. oil independents mainly, such as Continental Resources (NYSE: CLR), conduct exploration and spend roughly $53 billion on an acreage buying spree in the lower 48 to secure drilling rights in the most promising locations. Today, there are approximately 10,000 wells a year being drilled in the U.S., according to Bloomberg News.
That phase, while not over, is fading into the background. As early as last spring, Chesapeake Energy (NYSE: CHK) said that all of the major untapped oil deposits in the continental U.S. had been found.
The second phase of the U.S. oil revolution is now beginning… a phase that will be led by technology. The best investments will be the companies using these latest advancements.
Technology's Huge Role in Creating Oil's Best Investments
Technology will be the key component in this phase due to the fact that oil is tougher to extract from shale rock than gas is.
Money Morning Global Energy Strategist Dr. Kent Moors has pointed out many times that unconventional oil is more expensive to produce than conventional oil. In fact, shale oil is about 20 times more expensive to extract than to get oil from Middle East fields.
U.S. shale oil wells are different too than offshore wells, which can cost upwards of $100 million each. Onshore shale wells cost only $10 million initially. But these wells have a rather steep production rate decline, so continued drilling is required to sustain the output from the field.
But that does not mean independent oil companies cannot still turn a profit.
The Financial Times pointed out that in 2012 Continental Resources reported a profit increase of 72% on the back of a 58% rise in oil production.
But other independent energy companies weren't as fortunate…