Years back, a colleague and I made the 1,650-mile trek to the Gulf of Mexico. Our destination was supposed to be Houston, but we ended up a little further southwest in Corpus Christi.
It was the spring of 2006, at the height of the U.S. economy before the crash, and we were importing over 300 million barrels of crude every single month.
Then again, it probably goes without saying that our dependence on foreign oil was near its peak. We had yet to see the fruits of the horizontal drilling taking place in states like North Dakota.
The imports seemed endless at the time. One massive tanker would come as another was leaving, and the residents of Corpus Christi had grown accustomed to the flood of traffic as streets were clogged with towering semis picking up their next load.
I even remember one exec remarking at the time, “The imports are nonstop, it looks like we are almost at capacity. If we don’t expand we’ll have to send the tankers to Houston or Galveston.”
Unfortunately, the expansion never came.
Of course, things really hit the fan not too long after my trip, and the chaos that erupted in the summer of 2008 from the housing crisis caused crude prices to plummet as low as $33 per barrel by December.
Today, it’s a much different scene in Corpus Christi.
The Heart of the South Texas Oil Bonanza
Perhaps the most obvious change is that the amount of oil we import is declining. And in case you’re wondering just how much of an effect our growing oil production is having on imports, just take a look at the chart below:
Click Chart to Enlarge
As you can see, the amount of oil being imported through the Gulf Coast (which accounts for half of all U.S. oil imports) has fallen by more than one-third over the last eight years.
In fact, news that broke this Monday highlights the 180-degree turn we’ve taken even more.
Port data from Corpus Christi shows that crude oil shipments out of the energy hub hit a record high this June. Looking at the stats, you’ll find that 560,000 barrels of oil per day left the port, headed to other terminals on the East Coast and in Mexico — a 5% increase over May of this year and an astounding 61% surge since June of last year.
It’s just another milestone we can add to the books.
And it makes sense that these record shipments are coming out of Corpus Christi right now. The port rests in the heart of South Texas, where Eagle Ford wells extract more than one million barrels of oil every single day.
Then again, the fact that this formation is conveniently located next to the Gulf of Mexico will come in handy if the U.S. lifts its oil export ban.
Playing the Port Game
There’s no doubt that these port cities will be able to take advantage of increased petroleum exports — especially as output in the Eagle Ford continues to break records.
In fact, there’s already a group of companies hustling to expand the existing facilities to accommodate the future growth in oil production that’s expected to continue well into the next two decades. Take Valero Energy (NYSE: VLO) as an example. The refiner has been booming since the Eagle Ford started pumping out record amounts of crude oil, giving it access to cheaper supply.
The stock is already up 177% since 2009 and has been climbing higher alongside our tight oil production. In fact, North American crude made up 83% of the refinery’s feedstock during the first quarter of 2014.
Yet the opportunities are still there… if you know what to look for.
After all, South Texas is one of six oil-producing regions that accounted for 95% of the growth in U.S. oil production over the last several years.
In two weeks, I’ll tell you about three small, relatively unknown investment gems in the Eagle Ford with a huge amount of growth still ahead of them.
Keep an eye out for my report to hit your email inbox soon.
Until next time,
Keith Kohl
