Contrary to popular belief, hydraulic fracturing didn’t start five years ago…
That’s just when people began to notice the flood of oil from North American shale formations like the Bakken.
And it certainly didn’t start at the birth of the shale boom, when George Mitchell was tinkering with horizontal drilling and hydraulic fracturing back in the early 1980s in the Barnett Shale…
Believe it or not, this technology has been around for over six decades.
The first time an oil well was successfully fractured was back in 1949, at the Hugoton gas field in Kansas — although things were quite different back then. Rather than injecting millions of gallons of water, like drillers do today, Stanolind Oil actually used a thousand gallons of gelled gasoline to fracture the limestone at a depth of more than 2,400 feet. (Can you imagine how the use of napalm would go over today?)
Fortunately, companies have gotten much better at the process — and investors have been cleaning up ever since.
Industry Savior… or Necessary Evil?
While we’ve been pumping wells with water, sand, and chemicals for 64 years, the uproar didn’t really start until the U.S. kick-started its tight oil and gas boom in the mid-2000s.
And let’s be honest about something: No administration will ever place a blanket moratorium on hydraulic fracturing in the United States. And a few state bans that we’ve seen in places like New Jersey are laughable when you consider it has no oil or gas drilling activity to curtail!
Truth is a nationwide moratorium would cripple the U.S. oil and gas industry. That’s not hyperbole. It’s the reality of our country’s energy situation.
To date, there have been an estimated 2.5 million frac jobs worldwide. Since 1949, well over a million frac jobs have been performed on oil and gas wells in U.S.
And as many as nine out of every ten new onshore wells will undergo some sort of fracture stimulation.
It’s these onshore wells that are driving U.S. oil production…
During the last three years, our domestic crude output has jumped a little more than 1.6 million barrels per day.
You can see in the chart above where much of that production increase took place. Texas and North Dakota — just two states — have accounted for 72%.
To say the shale boom has been “explosive” would be an understatement.
Back in 2010, insiders were projecting that production in the Eagle Ford Shale would be 800,000 barrels per day by 2016 (for perspective’s sake, that amount equates to approximately 68% of the state’s average production in 2010)…
Those insiders were off by a long shot. Oil production in the Eagle Ford broke passed that mark last year — four years ahead of schedule!
I’ve seen predictions that it’ll top a million and a half barrels per day within the next three years.
And in case you were wondering, there wouldn’t be a single drop of production in the Eagle Ford, Bakken, or any other of the now-famous shale plays now in the media spotlight without hydraulic fracturing.
How to Gouge Big Oil
Lately, we’ve talked a lot about how game-changing drilling technology is quickly becoming the norm in the biggest shale hot spots in North America.
For proof of just how effective technology has been in producing North America’s resources, look no further than the change in production time: The average well in the Eagle Ford took about 40 days to drill in 2010. In 2013, just three years later, companies have nearly cut that time in half.
So, where do we as investors go from here?
Well, today I want to talk about the purer investments out there for individual investors.
Take one look at the chart below, and you’ll see why we’re sticking with traditional service companies like Halliburton over the major integrated oil companies like ExxonMobil…
Even despite having a market cap only one-tenth of ExxonMobil’s, Halliburton’s recent returns have crushed what XOM has delivered shareholders.
Just think of how much capital ExxonMobil and friends are pouring into unconventional oil here in the States. You might recall when they shelled out $41 billion for XTO Energy a few years back — or their more recent $1.6 billion deal for Denbury’s Bakken acreage.
I’ve said before that the smaller, picks-and-shovels plays will be the real cash cow in the energy boom. To that end, we’ll dig into three alternatives still flying under everyone’s radar on Friday.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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