There’s
no better place to start your search for the best oilstocks to buy nowthan deep in the heart of Texas –
especially its shale formations.
Texas
has two of the largest shale formations in the country. One, theEagle Ford shalein the southeast part of the state,
has been a hot topic among investors for years.
The
other, thePermian Basin, has multiple formations, including the Cline
Shale, that have grown increasingly attractive (and potentially lucrative) as
new discoveries have been made.
These
new discoveries are making the Permian Basin the most oil-rich region in the
nation.
But one
shale formation in the Permian Basin – the Wolfcamp – has stood out in particular,
and it’s poised to make investors a big score this year.
In
fact, some analysts estimate that the Wolfcamp Shale formation is thesecond-largest oil field in the world.
The Wolfcamp Shale Formation: Vast
Untapped Potential
According
to some estimates, the Wolfcamp Shale contains up to 50 billion barrels of oil
equivalent – second in the world after Saudi Arabia’s Ghawar.
That
compares to the Bakken, which the U.S. Geological Survey in April 2013
estimated held a total of 7.4 billion barrels of recoverable oil.
This
field is more challenging than the one in Saudi Arabia thanks to a complex
geology that requires higher production costs. The Wolfcamp is actually three
different shale formations stacked atop each other like a layer cake.
The
“upper” Wolfcamp Shale formation sits 3,800 feet beneath the ground.
The “lower” Wolfcamp Shale formation sits 5,700 feet deep. And the
Cline Shale is a little more than 7,300 feet below ground level.
Being
able to tap into the various levels requires a great amount of technological
prowess – an ability a number of oil and gas companies now have and can put to
use thanks to the recent fracking boom.
Given
the technological abilities of American engineers to tap these fields, a wide
number of companies and investors have rushed to purchase available land so
production can begin.
Two Stocks to Buy to Profit from
the Wolfcamp Shale
There
are two companies working in the Wolfcamp Shale formation that are among the
best stocks to buyto
profit from this discovery.
The first
is a defensive play against loweroil pricesin
2014, while the other has the confidence of three of America’s greatest
investment minds…
The first Wolfcamp stock to buy isDevon Energy Corp. (NYSE:DVN).Devon
owns approximately 250,000 acres in the Wolfcamp and opened 19 wells in 2013.
So far, Devon’s wells have provided a strong production rate of more than 1,000
barrels of oil equivalent per day. But what’s important for 2014 is that the
company has used hedging as an effective strategy to combat declining oil
prices.
In the
fourth quarter, Devon hedged 142,000 barrels of oil production per day at $95.
Meanwhile, it has hedged 138,000 barrels of oil production per day for all of
2014 at $92 per barrel. If oil prices decline due to a dramatic glut of supply
in 2014, Devon will be well-positioned as a defensive play, with upside as more
production comes online, particularly if oil prices increase.
The
second name, and the biggest company to push into the Wolfcamp Shale formation,
is Pioneer
Natural Resources (NYSE:PXD).
This company has been buying land in the region since the 1980s and owns
900,000 acres in West Texas’ biggest oil field. Pioneer believes its share of
the formation is roughly 7 billion barrels of oil equivalent, which is
profitable even at $80 per barrel.
In
October 2013, Pioneer Chief Executive Officer Scott Sheffield said the Wolfcamp
“could possibly become the largest oil and gas discovery in the
world.”
The
economic outlook and regional success of Pioneer has caught the attention of
investment titans Stanley Druckenmiller, John Paulson, andGeorge Soros. The
latter, Soros, owns 964,000 shares of the company.
Moving
forward, the Wolfcamp will provide a wealth of energy profits for investors. As
the year progresses, be sure to check back here for midstream companies
operating in the Wolfcamp Shale formation that will also be among the best
investments 2014.
http://moneymorning.com/2014/01/09/two-stocks-buy-tap-massive-wolfcamp-shale/
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contained therein do not necessarily reflect those of Smallcappower.
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