Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18
The Value of Bitcoin - 11th Jul 18
America a Nation Built on Lies - 11th Jul 18
China, Asia and Emerging Markets Could Result In Chaos - 11th Jul 18
Bullish Gold Markets in the Big Picture? - 11th Jul 18
A Public Bank for Los Angeles? City Council Puts It to the Voters - 11th Jul 18
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - 11th Jul 18
Argentina Should Scrap the Peso and Dollarize - 11th Jul 18
Can the Stock Market Close Higher For a Record 10th Year in a Row? - 11th Jul 18
Why Life Insurance Is A Must In Financial Planning - 9th Jul 18
Crude Oil Possibly Setting Up For A Big Downside Move - 9th Jul 18
BREAKING: New Tech Just Unlocked A Trillion Barrels Of Oil - 9th Jul 18
How Trade Wars Penalize Asian Currencies - 9th Jul 18
Another Stock Market Drop Next Week? - 9th Jul 18
Are the Stock Market Bulls Starting to Run? - 9th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Shale Oil Stocks are Poised to Earn Investors Big Profits

Commodities / Crude Oil Jun 29, 2012 - 07:31 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDon Miller writes: With oil production soaring in the United States, shale oil stocks will be pumping out profits for years to come.

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.

Fracking Frees Up Shale Oil
In short, we have "fracking" to thank. You've probably heard of the term by now.

Fracking − injecting wells with chemicals, water, and sand to force natural gas and oil out of rock − has turned the energy markets upside down.

Fracking is freeing up enormous amounts of crude from previously unattainable oil deposits. The technology is also making some abandoned wells viable again.

Counting the output from Canada and Mexico, a recent report by Citigroup Inc. (NYSE: C) declared North America "the new Middle East."

But as production has accelerated in North Dakota, the Canadian tar sands, and the Rocky Mountains, oil has been piling up in the Midwest, particularly Cushing, OK - a primary storage area for U.S. crude.

As it happens, that's good news for us.

The Opportunity of Shale Oil Stocks
Inventories of U.S. crude increased by 2.9 million barrels to 387 million barrels last week, the highest level since July 1990, theEnergy Department reported.

This development is what's behind our investing opportunity in shale oil stocks.

You see, all that new oil has to run through pipes to get where it's going.

Right now there simply isn't enough pipeline capacity to carry the oil sitting in Cushing to refineries in Texas and Louisiana. And without a way to get the oil out of Cushing, prices for oil there has dropped.

Since this glut began in 2011, prices for the same quality crude have been $8-$25 lower at Cushing than along the Gulf of Mexico, where prices closely follow that of Brent crude in Europe, according to a study by the Energy Institute at Haas.

Prior to 2011 there was enough pipeline capacity to keep the price difference between Cushing and the Gulf at less than $2.

It's easy to see how pipeline companies can profit from this situation - and several are already making their moves.

Seizing the Shale Oil Opportunity
Recognizing the dire need for their services, pipeline companies are stepping up and increasing capacity as quickly as possible to move the shale oil out of Cushing.

The best shale oil stocks fall into the category of master limited partnerships (MLPs).

MLPs own and build pipelines and almost everything else involved with the transportation and storage of oil, and are required to pay out all their profits as dividends to shareholders.

Money Morning's Global Energy Strategist Dr. Kent Moors advises investors to take a close look at MLPs, especially so-called midstream providers who are experiencing a wave of mergers and acquisitions (M&A).

"The market will produce a rising number of pipeline, processing, gathering, and storage facilities mergers, with the position of MLPs and the equity issuances from them, becoming even more decisive," Moors said.

Because of unique tax laws and the potential M&A activity, MLPs provide genuine potential for both price appreciation and a dividend well above market averages, Moors says.

One good candidate is Enbridge Inc. (NYSE: ENB) which recently was involved with a partner in a pipeline that will carry 150,000 barrels of crude daily from Cushing to the Gulf.

This is the first of a number of pipeline projects - including the southern leg of the Keystone pipeline − scheduled to come on line in the next few years.

Another is Linn Energy (Nasdaq: LINE). Linn is involved in the actual production of shale oil and gas and has around 2.8 trillion cubic feet of gas-equivalent reserves, assuring future production growth.

Best of all, Linn is fully hedged through the end of 2013 and more than two-thirds hedged through 2014-2015. Whether gas is at $2 or $15, the company should be able to maintain its payout of 8.06%.

For more information on these kinds of investment opportunities, you can sign up for Moors' free newsletter, Oil & Energy Investor, by clicking here.

Source :http://moneymorning.com/2012/06/28/shale-oil-stocks-are-poised-to-earn-investors-big-profits/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules