With the shocking potential of the shale oil boom finally starting to sink in, the only real challenge left is finding the best investments in this exciting slice of the energy industry.
Let's start the hunt by looking at where oil production is accelerating the most.
Total U.S. oil production last year grew by approximately 1 million barrels a day, according to BP's Statistical Review of World Energy, but most of the gains came from just three shale oil fields: the Bakken in North Dakota, and the Eagle Ford and Permian Basin, both in Texas.
That's why Money Morning Global Energy Strategist Dr. Kent Moors said "It's practically raining money" in Texas.
Here's a look at some of the impressive numbers coming out of these three fields:
- In the second quarter of this year alone, there were 1,050 new wells drilled in the Eagle Ford, according to oilfield services supplier Baker Hughes. Over the past year, a total of 4,092 new wells were drilled there.
- International energy analysts Wood Mackenzie project that Eagle Ford shale oil output will jump 50% this year, to an average of 844,000 barrels a day.
- The Permian Basin had 9,061 wells drilled in the past year, the most in the United States, and the Bakken had 2,357 new wells drilled.
- Wood Mackenzie forecast tight oil production in the United States to exceed 5 million barrels a day by 2019 - just a few years away - with more than half of that total coming from the Bakken and Eagle Ford.
And even those numbers are only the beginning.
Wood Mackenzie says that by 2025, production in the Bakken could reach 1.5 million barrels a day, and production from Eagle Ford could reach 1.35 million barrels a day.
The firm thinks the Permian has even more potential, with oil production reaching as high as 3.5 million barrels a day by 2025.
Given such stunning increases, the companies most active in these locations will be among the best investments in shale oil.
But the names on this list may surprise you...
Where to Look for the Best Investments in Shale Oil
Or maybe it's the names not on the list that is most surprising.
Although it may be hard to believe, the shale revolution is not being led by the major oil companies such as Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), and Royal Dutch Shell plc (NYSE: RDS.A).
Big Oil got into the game late, beaten to the punch by a group of small- and medium-sized independent oil companies.
In fact, the man who brought fracking technology to the fore was George Mitchell, who recently passed away at the age of 94. His company, Mitchell Energy & Development, began using fracking techniques as early as 1982 to tap into gas in the Texas Barnett formation. By 1998, he had proven fracking was a viable technology.
The company that bought Mitchell's firm in 2001, Devon Energy Corp. (NYSE: DVN), was also a pioneer in combining fracking with horizontal drilling.
Over the past decade, many of these smaller independent energy companies adopted these technologies.
In addition, these firms also began snapping up acreage in the most promising regions of the country while Big Oil seemed almost blissfully unaware of the revolution happening right under its collective nose.
While production by the independents has been growing like mad on the back of the shale oil boom, most of the Big Oil companies have seen annual production growth languish in the low single-digit range. Exxon's production, for example, will actually be down in 2013 for the second consecutive year.
"The smaller companies are beating them [big international oil companies] into a pulp when it comes to results," Fadel Gheit of Oppenheimer & Co. told the Financial Times.
The Most Prolific Energy Investments
The strategic moves made by the independent energy companies in the United States over the past decade certainly have paid off.
They constitute some of the best investments in energy now. Notice how they dominate a list of the leading producers in the three most prolific oil basins over the last year:
- Bakken: Continental Resources Inc. (NYSE: CLR), Whiting Petroleum Corp. (NYSE: WLL), and Hess Corp. (NYSE: HES).
- Permian Basin: Occidental Petroleum Corp. (NYSE: OXY), Pioneer Natural Resources (NYSE: PXD), and Apache Corp. (NYSE: APA).
- Eagle Ford: EOG Resources Inc. (NYSE: EOG), ConocoPhillips (NYSE: COP), Cabot Oil & Gas Corp. (NYSE: COG), and Chesapeake Energy Corp. (NYSE: CHK).
Two stocks from this list that investors should focus on are EOG Resources and Cabot Oil & Gas.
EOG Resources, which drills in both the Eagle Ford and the Bakken, expects to increase its crude oil production by 35% in 2013.
And Cabot Oil & Gas, which is involved in the Marcellus and Eagle Ford, says its production will grow by about 54% this year. Over the past 12 months, its output grew a whopping 77%.
Note: According to Dr. Moors, the second stage of the U.S. energy revolution is just getting under way now. And there's one key component that will drive the best investments in this next major phase of the shale energy boom.
Don't miss: The Shale Oil Boom Is Going Global (Starting With This Huge Deal in Argentina)
Related Articles:
- Financial Times:
Smaller Companies at Vanguard of US Shale Oil Revolution - Financial Times:
Mid-Sized Independents Riding High on Shale Oil Success - Fuel Fix:
US Oil and Gas Will Surge for Years, Firm Projects - Fuel Fix:
New Wells Proliferate Across the Eagle Ford Shale
Credit: Money Morning - Only the News You Can Profit From http://feeds.moneymorning.com/~r/moneymorning/jOLe/~3/5Yf-VtKx0Yk/
