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3 Stocks Hitting Gold in the Digital Oilfield

Big Data has come to the oil patch, and these three stocks are the ways to play it

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Technology is changing the way we produce energy. Advances in drilling — such as horizontal drilling rigs and hydraulic fracturing — have allowed oil stocks like Range Resources (RRC) to pull an incredible amount of oil and natural gas from North America’s shale rock.

digital-oil-field-CSCO-BHI-ROKBut the latest leap in oil and gas technology isn’t so much about tapping new resources, but how to manage them. As new sources of energy have become increasingly challenging to develop, the E&P industry has turned to computerized operations in order to process the sheer amount of data thrown off by wells.

That technology has been dubbed “the digital oilfield,” and it’s set to expand exponentially as more wells are tapped across the world. For investors, playing this new world of well data management could be as big and profitable as the oil itself.

Staggering Growth in the Digital Oilfield

According to the Energy Information Administration, as of the end of 2012 there are nearly 483,000 producing oil and gas wells dotting the U.S. countryside and they all have one thing in common — they throw off tons of data. From flow rates to changes in underlying pressures, each well is constant dance of changing variables. And like many industries, understanding these variables can improve efficiencies and production amounts.

Which is why more energy firms like Exxon Mobil (XOM) are changing the way they look at tapping and monitoring a well. Big Data has come to oilfields.

With the era of “easy oil” over, the costs continue to skyrocket for finding new sources of supplies and tapping those resources. With ever-increasing CAPEX budgets and dwindling profit margins staring them in the face, E&P firms have turned to digitizing operations and data mining in order to allow for real-time decision making and improvements in efficiency.

Overall, these digitizing efforts can reduce costs while improving flow rates and production amounts, meaning you can squeeze even more energy out of each well, even more cheaply than before. That’s a huge win for an oil producer’s bottom line.

New advancements in wireless technology, improved well-bore sensors and data-mining software have all contributed to the rise of the digital oilfield. Globally, oilfield data management spending hit roughly $18.7 billion in 2011. However, it’s only getting bigger.

According to analysts, the U.S. alone is set to see digital oilfield spending surge by 57% over the next two years to reach $16.9 billion. As more producers turn to data mining in order to improve their wells, analysts expect that by 2022, the digital oilfield subsector will be worth north of $33 billion — a compound annual growth rate of 4.8%.

That means early investors can make big bucks. Here are three of the biggest and earliest players on the trend.

Article printed from InvestorPlace Media, http://investorplace.com/2013/12/rok-csco-bhi-digital-oilfield/.

©2017 InvestorPlace Media, LLC