It seems odd that hydraulic fracturing — a revolutionary technology that has unlocked vast deposits of previously inaccessible natural gas and oil reserves — should find itself at a crossroads in the quest for America’s energy future. But that’s where energy companies and investors find themselves now.
On the upside, accessing vast energy reserves buried in North American shale deposits has been a bonanza for companies like Cabot Oil & Gas (COG), Halliburton (HAL) and Baker Hughes (BHI). But fracking’s opponents got a boost last week when an Environmental Protection Agency document revealed that the method may have caused methane to leak into household water wells in Pennsylvania, according to a Bloomberg report. Recent studies also say fracking increases the likelihood of earthquakes.
While the jury is out on fracking’s future, don’t expect an outright ban in the near term. But if public safety concerns rise — and citizen support for stronger regulation rises with them — energy investors should be prepared to roll with boom or bust scenarios.
Here are two stocks each to play winning — and losing – fracking scenarios: