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shale oil stocks
- How to Find the Best Investments in Shale Oil
- The Shale Oil Boom is Going Global (Starting With This Huge Deal in Argentina)
- Chinese Firms Increase Stakes in U.S. Shale Oil Projects
- The Next U.S. Shale Oil Boom Could Be in California
- Shale Oil Stocks are Poised to Earn Investors Big Profits
- The Top Five Eagle Ford Shale Oil Stocks
- Ride the Boom With These 5 Bakken Oil Shale Stocks
- How to Profit from the "Shale Oil Bubble"
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Some of the best investment opportunities today are in the energy sector. And there's one area in particular that's becoming so lucrative companies are tripping over each other to take part in it. But which are the best investments? We can tell you exactly where to start looking...
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The U.S. and Canada dominate the shale oil boom, but that’s about to change. Dr. Kent Moors details where these other big shale oil reserves reside.
According to Bloomberg News, Chinese energy companies, both state-run and private, are seeking to invest more than $40 billion in U.S. shale energy.
Readers may remember the Chinese oil and gas producer CNOOC Limited's (NYSE: CEO) $19 billion bid for U.S.-based refiner Unocal, which was rejected by federal regulators in 2005. (Unocal later merged with Chevron Corp.)
Although CNOOC was recently able to complete a $15.1 billion purchase of Nexen Inc., a Canadian oil and gas company with assets in the Gulf of Mexico, outright takeovers of U.S. energy assets by Chinese companies are probably still not welcome.
Chastened by its experience with Unocal, CNOOC has not attempted to buy any U.S. company outright.
However, after developing a relationship with Chesapeake Energy Corp, (NYSE: CHK), CNOOC has purchased stakes in specific Chesapeake projects in Colorado and Wyoming.
"They didn't come over here and try to buy Chesapeake," Chesapeake CEO Aubrey McClendon told The Wall Street Journal. "They came over here to buy a minority, non-operating interest in an asset and not take the oil and gas home."
So why do the Chinese want to invest billions of dollars to fund shale oil and shale gas projects in the United States when it won't be able to export the energy products back to China?
The Monterey Shale under California is huge - "15.42 billion barrels of recoverable oil" huge. So far, though, geological challenges have made it difficult to get Monterey Shale oil out of the ground; it's just too deep down. But thanks to new fracking technologies, companies are starting to have success there. Is it time to invest?
It's all thanks to huge deposits of shale oil.
At least four new major shale oil plays including the Bakken in Montana and North Dakota, the Eagle Ford in Texas, and the Marcellus in Pennsylvania and New York, may have more than 20 billion barrels each of recoverable oil.
Each of these new shale oil plays has the potential to double the total reserves we have today.
In fact, the "shale oil revolution" will soon make the United States the world's leading producer of crude oil, a report from Goldman Sachs Group Inc. (NYSE: GS) recently predicted.
The United States will produce more than 10.7 million barrels of oil per day by 2017, the report said. That's more than any other country, including Saudi Arabia.
And even though oil prices are in a short-term swoon, the glut of shale oil is about to make savvy investors a huge fortune.
That's why you need to take a hard look at a particular group of shale oil stocks that stand to benefit most from this boom.
But first, you need to know how this came about.
Recently Money Morning told you about the Bakken oil shale boom. The Eagle Ford shale oil formation in south Texas is nearly as large, and production there is ramping up rapidly.
Eagle Ford is among the largest U.S. shale oil deposits, with recoverable reserves estimated as high as 7 billion to 10 billion barrels.
But Eagle Ford is also "liquids-rich." That means it has a high concentration of oil versus gas -- a major attraction at a time when oil prices are high and natural gas prices are at historic lows.
Many oil companies are eager to get in on the action at Eagle Ford, and expectations are running high.
"We are evaluating a series of projects ... that could literally double our company's earnings over the next few years," Curt Anastasio, CEO of NuStar Energy (NYSE: NS), told Reuters.
Another oil company CEO, Bill Klesse of Valero Energy Corp. (NYSE: VLO), thinks Eagle Ford could have an impact even beyond bigger profits.
"It's going to back out sweet crude imports into the United States, and that's going to happen by 2014," Klesse predicted, speaking at Valero's annual meeting earlier this month.
Indeed, the statistics coming out surrounding the Eagle Ford shale oil operations are impressive.
Data from the Texas Railroad Commission, which regulates energy in the state, tells an amazing story. Shale oil production increased nearly seven-fold from 2010 to 2011, from an average of just less than 12,000 barrels a day to about 83,400 barrels a day.
And that could explode to 500,000 barrels a day by the end of 2012, Klesse said, with output expected to double to 1 million barrels a day "in the next few years."
Impact of Eagle Ford Shale Oil UnderestimatedEagle Ford has progressed so quickly that a forecast of its economic benefits became outdated almost as soon as it was issued last year.
A study by the Center for Community and Business Research at the University of Texas San Antonio's Institute for Economic Development in early 2011 projected the Eagle Ford formation would directly and indirectly contribute $21.5 billion and 68,000 full-time jobs to the 20-county South Texas region by 2020.
Last week UTSA released a follow-up study.
It found the Eagle Ford contributed $25 billion to the local economy in 2011 -- $3.5 billion more than the 2020 projection.
The new UTSA study says Eagle Ford will pump about $62.3 billion into the local economy by 2021. The job creation number increased to nearly 117,000.
"We view the Eagle Ford activity as an economic opportunity of a lifetime," said Mario Hernandez, president of the San Antonio Economic Development Foundation. "The key goal is the increase in investment and jobs. And if the communities will partner with the private companies that are creating these jobs, it can be a win-win for everybody."
Growth that outruns forecasts is good news for investors. Money Morning has sorted through the many choices to zero in on five Eagle Ford shale oil stocks that could do particularly well:
With activity ramping up rapidly - production has soared from 100,000 barrels a day in 2005 to 494,000 barrels a day in February - the Bakken oil shale boom could turn out to be just as big, if not bigger than the California gold rush 1849.
Last week we told you about how the Bakken oil shale boom has affected Williston, ND. The town has an absurdly low unemployment rate of 0.8%, and the average pay for the oil company jobs is about $90,000.
One way to take advantage of this boom yourself would be to move to North Dakota.
But with dozens of companies flocking to the region, a much easier way to get in on the boom is to simply invest in some Bakken oil shale stocks.
The allure of big profits has attracted dozens of companies to the Bakken oil shale formation. The list ranges from industry giants like Exxon Mobil Corporation (NYSE: XOM) and ConocoPhillips (NYSE: COP) to pipeline companies like Enbridge Inc. (NYSE: ENB).
With oil prices expected to keep rising, and the production in the Bakken not expected to peak until 2020, it will be hard not to make money in Bakken oil shale stocks.
"Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska," Harold Hamm, CEO of Continental Resources Inc. (NYSE: CLR) - one of the major players in the Bakken oil shale boom -- told The Wall Street Journal last October. "We expect our reserves and production to triple over the next five years."
Still, some Bakken oil shale stocks will benefit more than others.
For example, the really big companies like Exxon, with large global operations, will see less of a boost than companies with operations concentrated in the Bakken and other North American shale deposits.
Money Morning has taken a look at these Bakken oil shale stocks and found five companies positioned to benefit most from this historic find's tremendous potential.
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However, that doesn't mean this investment frenzy is evidence of a "shale oil bubble."
Instead, it's a classic sign of an investment trend - one that will continue throughout 2012 creating an opportunity for investors to profit.
Consider that in just the past two weeks:
- French oil major Total S.A. (NYSE ADR: TOT) invested $2.3 billion in Chesapeake Energy Corp.'s (NYSE: CHK) Utica Shale operation in eastern Ohio.
- China Petroleum & Chemical Corp. (NYSE ADR: SNP), spent $2.2 billion for a 30% stake in five Devon Energy Corp. (NYSE: DVN) shale projects.
- And Japan's Marubeni Corp., a commodities trader, agreed to pay $1.3 billion for a stake in Hunt Oil Co.'s Eagle Ford shale property in Texas.
The Reality Behind the Shale Oil Bull MarketThat's a clear sign to investors that interest in shale deposits among foreign energy companies is beginning to heat up.
And to hear the mainstream media tell it, these companies are overpaying for access to U.S. shale deposits.
In fact, they claim that has led to astronomical valuations and the formation of a "shale oil bubble."
But that that perception is actually only half right: While the value of shale deposits has skyrocketed, the reality is that the higher prices are fully justified based on the increasing demands for oil and gas.
What's more, the foreign companies that are paying top dollar for access to U.S. shale assets aren't just paying for access-they're also paying for expertise.
"Foreign majors needaccess to technology andexpertise, as well as being able to putsome portion of reserves on their books," said Money Morning Global Energy Strategist and Editor of the Oil & Energy Investor Dr. Kent Moors. "For that they are quite prepared to farm in for a minority position in development projects."
In return, U.S. energy companies get the investment dollars needed to develop costly and complex reserves.
These foreign investments also give U.S. companies the money they need to acquire more land leases and increase their odds of hitting an especially productive gas or oil reservoir known as a "sweet spot."
That, Dr. Moors says, is where the "bubble" talk comes from.
"U.S. operators cannot afford to under-commit and that has led to an inflation in land prices," Moors said. "Those prices are nowrather out of proportion toa NYMEX gas price of $2.60 per 1,000 cubic feet and hugestorage volume dueto amild winter."
Still, the demand curve for gas will eventually move up as a result of increased usage in electricity generation, replacement of crude oil in petrochemicals, and a renewed emphasis on liquefied natural gas (LNG).
These energy companies, therefore, are taking a medium-term view. In short, they believe that once demand and prices begin to rise, these higher land values will be justifiable.
So where do investors fit in?...
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