Jealousy will be the deathblow for OPEC.
For now, we’ll call it an intense case of sibling rivalry in OPEC, with the oil cartel’s most prestigious members embroiled in a heated battle of sabotage.
Although the last country you’d expect to hold a grudge over oil production would be Saudi Arabia, their envy over a fellow OPEC member stems from something the Saudi princes are quickly losing — access to the same cheap, easy-to-get oil that Iraq is enjoying for the time being.
In the latest spat between the OPEC brothers, the Iraqi Prime Minister accused both the Saudis and Qatar of openly funding insurgents in the western Anbar province.
All is not well in their crude wonderland… and it’s only by a technological miracle that we’re finally unburdening ourselves from their oil debt.
Drill, Baby, Drill
Step back from OPEC’s in-fighting for just a minute.
These squabbles will inevitably escalate as the cost to extract crude oil outside of Iraq soars as the Saudis inject an ever-increasing amount of seawater into their Ghawar wishing well; it’s a losing battle for both sides.
Besides, there are much more lucrative opportunities in the crude oil market… and make no mistake, the drill, baby, drill mantra is alive and well in the United States. Nearly half of all the oil and gas rigs operating throughout the world are found within U.S. borders.
In fact, there are more rigs drilling for oil in the U.S. now than when Baker Hughes Inc. began counting them 27 years ago!
Although the count is still far from the 4,530 rigs that were running in 1981, current production around 8 million barrels per day is only slightly off of the 8.5 million barrels per day the U.S. was producing back then.
Despite the Saudis’ bitterness over the cheap crude still locked in Iraq’s oil fields, imagine the seething hatred they’ll soon hold over the state of Texas in the near future.
The Lone Star State has more than double the amount of rigs than the Saudis, and the state’s crude output will soon top 3 million barrels per day.
That may seem laughable to Saudi princes now, but their anger will become palpable when Texas fields add another million barrels per day to the total, topping more than 4 million barrels per day in 2015. For the record, that would make Texas the third largest OPEC producer.
Remember, approximately 70% of Saudi oil exports are bound for refineries along the Gulf of Mexico.
By now, it shouldn’t come as a surprise to my readers that nearly one out of every five oil rigs in the United States is drilling in what is easily the largest oil play in North America: the Permian Basin.
The USGS estimated more than 100 billion barrels was locked in West Texas — and that was 19 years ago!
As you can probably guess, the situation has radically changed since then, with horizontal drilling dominating the North American oil and gas landscape. Just think of how many times we’ve seen the USGS change its mind after re-assessing one of these plays. They more than doubled their last Bakken estimate in 2013.
The fields in West Texas were responsible for approximately 13% of U.S. oil production last year.
For some of the herd, it’s all too easy to be lazy and stick with the biggest fish in the pond. And yet, a $27 billion company like Pioneer Natural Resources — the second largest producer in the Permian Basin — would have returned a tepid 7% over the past six months.
Despite the roughly 450 wells that Pioneer Natural Resources will drill into the Permian Basin’s largest field in 2014 (about 55% of which will be horizontal), the company is still trading at over 30 times its forward earnings.
Or perhaps ExxonMobil is a better horse to bet on? Through its XTO holdings, the world’s largest publicly traded oil and gas company increased its acreage in West Texas to more than 1.5 million net acres.
But are $200-per-share drillers and massive land grabs by Big Oil truly the best opportunities out there?
Hardly.
Finding those diamonds in the rough outperforming the biggest West Texas oil players is even easier than you might think. I’ve uncovered one small pure Permian play that’s outperforming the rest of the field:
And this $8 gem in the Permian Basin is just getting started.
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.
Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.
