Prime Minster David Cameron recently declared that the government will be “going all out for shale” and recently unveiled a series of incentives to spur its development. These include allowing local governments the ability to keep 100% of the taxes raised from fracking sites in their counties. Additionally, Cameron’s plan allows for shale gas companies to pay royalties directly to homeowners and landowners. This is similar to how the system is set up here in the U.S. Other politicians in the U.K. have expressed Cameron’s views and have praised the new tax scheme and royalty agreements.
Lastly, public perception about fracking in the U.K. has begun to turn positive, with many citizens seeing the value in tapping the nation’s energy abundance.
Energy Stocks Winning in the U.K.
When you combine just how much potential the United Kingdom has in terms of resources with its pro-fracking government, the investment practically pays for itself. Think of the U.K. as the U.S. back before the boom in natural gas took off — when firms like Chesapeake (CHK) and Continental Resources (CLR) were small fries.
But the U.K.’s vast appeal and profit potential hasn’t gone unnoticed from some of the big boys on the block.
Widely held energy stocks like Exxon Mobil (XOM) and Norway’s Statoil (STO) have recently expressed interest in and bid on acreage auctions in the U.K. But two of best opportunities could be France’s Total (TOT) and BG Group (BRGYY).
Partnering with several smaller energy stocks, TOT recently acquired a 40% stake in two exploration licenses in the gas-rich Gainsborough Trough basin. That region could hold up to 48 Tcf worth of natural gas and has been the site of traditional and conventional drilling for years. That could prove to be successful — as we have seen here in the U.S., many of today’s unconventional superstars were conventional producers back in the day. Overall, TOT will begin seismic testing and horizontal drilling in the region later this year.
As for BG Group, the firm’s main utility parent, Centrica, purchased a 25% stake in the Bowland Basin last June. That puts it in the driver’s seat in tapping that formation’s massive potential. Its smaller partners in the field are some of the only E&P firms approved for fracking at this time.
Fracking in the U.K. is about to take off. Both TOT and BRGYY are the currently the two best energy stocks to play the upcoming revolution.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.