America is about to have a five-year window when it dominates the oil industry, according to the International Energy Agency, which is plenty of time to make a profit.
America is about to have a five-year window when it dominates the oil industry.
Speaking at a news conference in London, International Energy Agency (IEA) chief economist Fatih Birol said that, as of 2015, the United States will become the world’s largest oil producer. And it will reign supreme until 2020, when “there will be a major dominance of Middle East oil” once again.
The U.S., he says, may be enjoying a surge in oil production now, but its reserves aren’t ultimately as significantly sized as those belonging to OPEC-member countries. So it can only offer so much for so long.
That mid-term bullish, long-term mediocre view on American output may prove to be too conservative though. With continuing technological improvements — many of them American-led — helping producers unlock new fields previously considered inaccessible, the U.S. could enjoy a much longer boom time than that.
After all, it was only back in September 2013 when Bloomberg reported, “The Gulf [of Mexico] is heading for record deep-water output equivalent to almost 2 million barrels of oil a day in 2020, according to industry researchers Wood Mackenzie Ltd. The U.S. estimates about 15 billion barrels of recoverable oil remain to be found in the Lower Tertiary” — a layer of earth the industry previously regarded as hopeless.
Two million barrels of oil a day in 2020 hardly seems like America is set to dry up anytime soon, as Birol claims. But even if the IEA is spot-on, 2015 to 2020 still gives investors plenty of room to make a profit on this upcoming, limited-time-only trend.
Not just natural gas; America is oil-rich too
Most Investment U readers and Oxford Club Members have heard of America’s natural gas boom a time or two over again by now.
Energy and Infrastructure Strategist David Fessler has especially taken a keen interest in natural gas bonanzas like the Marcellus and Utica shale formations, which offer enormous reserves of natural gas once thought off-limits to drillers.
What’s not as well publicized, however, is that there’s a resurgence in oil production as well. It might not exactly be Jed Clampett’s kind of day with black gold geysers shooting up independently, but the result is the same: They’re still shooting up … and making certain people a lot of money in the process.
Again, according to the EIA:
• Oil production in the Permian Basin, located mostly in Texas but spreading into New Mexico, exceeded a million barrels per day late in 2011.
• In August 2013, the Eagle Ford — also located in Texas — topped 1 million barrels per day as well.
• By 2014, Montana and North Dakota’s Bakken fields will become the ninth largest super-giant oil field in the entire world.
That’s all very important, since the world is still much more heavily dependent on oil than it is on natural gas. There’s a greater demand and more profit to be made off of the much more expensive resource.
Knowing that, traditional energy companies have continued to focus heavily on harnessing the profit power of oil, “leaving the [natural gas] field open to smaller and more agile companies…” as The New York Times reported two weeks ago.
That focus may very well have hurt many of the bigger names, Exxon Mobil (NYSE: XOM) included, last quarter. But 2014-2015 should ease that pain … and then some.
Drill, baby, drill
There are a number of companies invested heavily in North American oil fields that should see their output and intake increase going forward into next year and beyond for at least the midterm…
• Chevron (NYSE: CVX) has a significant drilling presence throughout California, the Gulf of Mexico, Colorado, Michigan, New Mexico, Pennsylvania, Ohio, Oklahoma, Texas, West Virginia and Wyoming. In fact, net oil-equivalent production from the U.S. made up around a quarter of the company’s 2012 total output.
• Anadarko Petroleum Corporation (NYSE: APC) calls its U.S. hotspots its “growth engine,” which it takes very seriously. Anadarko is currently exploring new sites in Ohio and Colorado, with already existent operations throughout Texas, Pennsylvania and six other states. And, yes, it’s already profiting off of some of the aforementioned oil shale plays the IEA has been highlighting lately.
• Devon Energy (NYSE: DVN) has a well-established presence throughout North America. Though its Canadian operations have been fueling its growth lately, it has a solid base in the Rocky Mountains, mid-continent, Permian Basin and Gulf Coast regions of the U.S. This includes significant shale plays that should only get stronger going forward.
Many oil-focused energy companies are hurting right now thanks to public perception of falling oil prices mixed in with some less-than-stellar quarterly statements. But with the right companies, those pullbacks can be used as good buy-in opportunities.
If the U.S. really is set to run the oil industry in 2015, oil companies heavily invested in America should start seeing their stocks run up beginning sometime next year.
Jeannette is a member of the Investment U research team. You can read more by her here.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.