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Trading Lessons

What’s Driving America’s Oil Boom (This Could Make You a Bundle)

Commodities / Crude Oil Jun 29, 2014 - 03:05 PM GMT

By: Money_Morning

Commodities

The amount of oil produced in the U.S. has skyrocketed more than 50% over the last six years.

Now small towns all across the U.S. are filling with new-found wealth… and a new breed of millionaires.

Who’s leading the way? It certainly isn’t the big major oil companies.


They may have service stations on almost every corner, but their production numbers lag way behind average U.S. production rates.

In fact, according to a new report by audit firm EY, a subsidiary of Ernst & Young Global, the fastest growing oil companies in America are the smaller, more nimble outfits.

They may not yet be household names, but they will be.

And their stocks are rising as quickly as their reputations…

The Brave New World… of Oil

The catalyst for this unprecedented oil boom can be traced to one word.

Shale.

Now, shale doesn’t give up its oil easily, which is why shale oil is termed “tight.” Newer techniques such as hydraulic fracturing, or “fracking,” are necessary to separate crude oil from the shale deposits that surround it.

When a barrel of oil sold for much less than it does now, fracking cost more than the oil was worth. Small towns in places like North Dakota earned their livelihoods from farming.

People were just scraping by.

But the discovery of massive shale oil deposits in the Bakken Shale basin of North Dakota turned wildcatters, motel owners and truck drivers into almost instant millionaires.

It also transformed America’s smaller oil companies.

According to the EY report, it’s the smaller companies, not the giants, whose fortunes are being made in the oil fields of North Dakota. Exxon Mobil and Chevron may at the top of the list of the world’s largest oil companies, but thanks to the shale oil boom, ConocoPhillips, Occidental Petroleum, Marathon Petroleum, Valero Energy, and others are gaining on them.

As Energy Intelligence, an independent energy analysis firm, noted, “The North American shale revolution is starting to impact (the list of top oil companies), with… US independents… showing unusual strengths.”

The numbers tell the story.

While ExxonMobil’s oil production has only grown by 13% over the past decade, companies such as Abraxas Petroleum have boosted production by 63% in the past two years alone. Stock prices have followed suit. Abraxas is up over 84% since the beginning of the year. InterOil Corp. jumped 27% in 2014. Ultra Petroleum is up over 34% since the beginning of the year.

None of these companies are household names. But for investors, they’re the names to know.

“Companies with integrated refining operations, such as Shell Oil Company and Exxon Mobil Corp., face challenges when it comes to finding and pumping oil and gas in shale regions,” notes the EY report.

Those challenges come down to one factor: the ability to be nimble in the fast moving, fast growing shale oil sector.

Before the lumbering giants can get there, the smaller, independent companies are snapping up the acreage and drilling rights, and building their operations in the middle of one of the biggest oil discoveries in American history.

Here’s how big it is.

The U.S. Geological Survey estimates that there are over 500 billion barrels of oil in the Bakken Formation, with billions more in the surrounding Williston Basin. That would make it second only to Texas in terms of oil reserves.

But with much of the oil reserves in Texas already claimed, North Dakota represents an unprecedented opportunity for both independent oil companies and the investors who take advantage of their soaring stock prices.

And those stocks could soar for a long time.

Experts predict it will take 20 years to develop the 35,000 wells the area can support, and decades before the oil fields are exhausted. As long as oil remains over $60/barrel – the benchmark West Texas crude is currently above $106/barrel – extracting shale oil using current technology is profitable.

But you don’t have to move to North Dakota or wait decades to make a bundle on this boom. Fifteen million people in 32 states are already cashing in.

All of them have one thing in common: their lives will never be the same.

You see, what’s going on in the Bakken is just a small part of a much greater story. Anyone who can look beyond the “household names” in oil and energy can profit.

Kent has all of the details right here. It’s a backdoor way for anyone to stake their claim.

Source : http://oilandenergyinvestor.com/2014/06/whats-driving-americas-oil-boom-make-bundle/

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