I was listening to hedge fund guru and energy baron T. Boone Pickens on CNBC the other day and, as he always has, he wants to stop the flow of OPEC (Organization of the Petroleum Exporting Countries) oil into this country. This, folks, is not fiction; it is actually realistic, given the surging production of domestic shale oil and natural gas. Pickens wants to create a North American energy partnership through which the United States would align with Mexico and Canada to develop an energy conglomerate.
In my view, this makes sense, and it could perhaps drive oil prices lower, which could create a buying opportunity for investors (albeit I doubt the big oil companies would want such a thing to happen).
The oil patch is driving riches from Texas to North Dakota and Montana. The price of West Texas Intermediate (WTI) crude is holding above $100.00 per barrel.
The key to energy independence will be the ability to drive shale oil production higher. Consider that in 2012, shale gas represented 39% of total natural gas production in the United States, making it the top shale oil producer worldwide, according to the Energy Information Administration (EIA). Canada came in second at 15%. The numbers are estimated to get even bigger and with this, I see a buying opportunity.
Even the “cartel” OPEC realizes the impact of shale oil on its operations. In a report undertaken by OPEC in 2013, the cartel estimates a decline in its market share as shale oil production rises. (Source: Lawler, A., “OPEC to lose market share to shale oil in 2014,” Yahoo! Finance web site, July 10, 2013.) This has made shale stocks a buying opportunity.
On the large-cap side, the largest shale oil stocks play in the Bakken oil fields is Continental Resources, Inc. (NYSE:CLR). With close to one million net acres in the region, Continental Resources could be a buying opportunity.
In the mid-cap area, a company with explosive growth, which could be a buying opportunity, is Kodiak Oil & Gas Corp. (NYSE:KOG). The company has about 154,000 net acres of land in North Dakota.
Its revenue growth has been stellar with revenues growing from $11.3 million in 2009 to $904.61 million in 2013. Kodak Oil & Gas holds big promise going forward as a buying opportunity in shale oil.
Finally, on the small-cap front, a more speculative shale oil buying opportunity may be Triangle Petroleum Corporation (AMEX:TPLM). The company explores and produces shale oil and natural gas from the Bakken Shale and Three Forks formations in North Dakota and Montana. As far as acreage, Triangle has about 94,000 net acres in exploration.
Triangle has been seeing strong insider buying with 9.19 million shares bought by insiders over 10 transactions during the past six months, which is bullish and suggests a buying opportunity. The revenue side also looks strong, with revenue growth estimated at 82.1% in FY15 (ending in January) and 31.5% in FY16.
The bottom line here is that you cannot ignore the rising significance of shale oil and the above three stocks each represent a buying opportunity you should consider.
Disclaimer: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. The opinions in this e-newsletter are just that, opinions of the authors. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose.