by Aaron Levitt | April 8, 2014 12:02 pm
If I was Saudi Arabia, I’d be shaking in my boots right about now. The reason? America’s shale boom is kicking ass and taking names.
As more energy firms have begun to hydraulic fracking to tap our wonderful geology, oil and natural gas production in the U.S. continues to surge. The sheer amount of energy that these E&P firms have been able to unleash is truly staggering. And what’s more, that amount has managed to crush even some of the most liberal projections of production.
According to data provided by U.S. Energy Information Administration (EIA), U.S. shale oil production averaged around 3.22 million barrels per day in the fourth quarter of 2013. Adding in offshore production and other more traditional fields, that number rises to 7.84 million barrels per day. Overall, that amount is enough to make the U.S. responsible for 10% of the world’s total production.
And that percentage of the world’s total is set to keep growing as places like the Bakken and Eagle Ford keep on pumping out record amounts of crude oil. Which is why investors need to add a dash of U.S. oil stocks to their portfolio. Here are five of the best stocks to buy today to play our rising production.
When it comes to shale, EOG Resources (EOG) wears the crown among oil stocks.
Not only does EOG hold great positions in the Bakken Shale and hot-bed Permian Basin, but it basically wrote the book on oil drilling in the Eagle Ford. And it’s still adding chapters to that book.
EOG’s latest find in its massive Eagle Ford position — around 693,000 acres — could be one of the best gushers found in a while. The E&P firm’s five new wells in the region have managed to produce an average of 13,000 barrels of crude oil per day. That’s pretty impressive, as the wells have only been operating for a few weeks.
What’s also impressive is that crude oil being pumped out of these new wells is that it’s deliciously light. Meaning it’s quite easy to “crack” into gasoline and other petroleum-based products. With discoveries like that, it’s no wonder why EOG stock has surged to a 24 year on the news.
And after a recent stock split, EOG shares have continued their march upwards. While it isn’t the cheapest among oil stocks, it’s one of the best. And that makes EOG a big buy.
Sometimes the best oil stocks can be the small fires. Case in point: Kodiak Oil & Gas (KOG).
KOG is up-and-coming player in North Dakota’s Bakken shale. However, while its market cap may be small, its prowess for producing crude oil is not. By focusing its operations on the Williston Basin in North Dakota, KOG has seen its oil production surge. Overall, KOG managed to increase its oil production by 100% last year versus 2012’s numbers — averaging around of 29,200 barrels of oil equivalent (BoE) per day.
That strong performance helped KOG deliver strong earnings and cash flows for the fourth quarter and full year of 2013. However, Kodiak isn’t resting on its laurels.
With higher capex spending planned for this year, the energy firm is looking to drill more than 100 wells in 2014 in the Bakken. These additional wells should help KOG boost its production by an additional 45% this year.
With plenty of reserves in the ground and rising production, KOG shares could be one of the best U.S. oil stocks to buy now.
After spinning out its refining operations as Marathon Petroleum (MPC), Marathon Oil (MRO) is quickly becoming a shale superstar, turning a monster buy of acreage in the Eagle Ford back in 2011 into steadily rising production.
MRO managed to grow its Eagle Ford oil production from a paltry 8,000 barrels per day back in the fourth quarter of 2012 to more than 100,000 barrels in the fourth quarter of 2013. The key for Marathon was its ability to improve drilling times as well as lowering costs per well by using new state-of-the-art advanced rigs.
As with 2013, MRO promises to spend roughly 60% of its $5.9 billion capex budget on the Eagle Ford and other shale plays in the U.S. Marathon execs. Predict that spending will result in a 30% boost in production for the energy firm.
With some non-core international assets on the chopping block, MRO will be able to plow that cash back into the Eagle Ford and boost its production even further. In the meantime, investors are treated to a 2.1% dividend.
The Eagle Ford and Bakken aren’t the only places helping produce mammoth amounts of oil and natural gas. The prolific Permian Basin — located in West Texas and New Mexico — is also quickly becoming a hotspot of activity.
And leading the way is Pioneer Natural Resources (PXD).
PXD holds more than 900,000 gross acres and more than 7,000 wells in the region. While most of those are conventional wells located in the West Spraberry field of the Permian, Pioneer has recently commenced a program of unconventional drilling in the shale field’s Wolfcamp Basin. In total, PXD predicts that it has nearly 10 billion barrels of potential resources in the play. Current production is only about 93,000 barrels a day.
To tap that potential, PXD plans on spending 76% of its $3 billion in CAPEX spending for 2014 tackling unconventional wells in the Wolfcamp and Spraberry.
While PXD shares aren’t exactly cheap — currently trading at P/E of almost 30 — the company is the leader when it comes to fracking the Permian. So, that premium is perfectly justified.
While it has been recently gaining attention for its legalized marijuana industry, Colorado should be on anyone’s radar when it comes to picking oil stocks. That’s because its Niobrara field is poised to be an upcoming shale powerhouse.
The formation is estimated to hold around 2 billion barrels of oil according to the EIA and has a similar gravity as oil pumped out in Alaska’s North Slope. That makes it perfect for refining in California’s various facilities.
Leading production in the region is Noble Energy (NBL).
NBL holds 610,000 acres and manages to produce around 100,000 barrels of crude oil each day from the Niobrara. An aggressive capex and cost-savings program — dubbed Integrated Development Plan and using multi-pad drilling — should help NBL reach 250,000 barrels per day by 2018.
Overall, the Niobrara should continue to be a cash cow for NBL, while it tackles some ambitious projects in other parts of the world. That makes it one of the best oil stocks to buy in today’s market.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2014/04/oil-stocks-nbl-eog-pxd-mpc-kog/
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