5 Shale Plays for 2013 $APC $HES $COP $MRO $RDS.B
By Contributor Stephen Edson
U.S. domestic oil production is on the upswing after hitting the bottom of the trough in 2008. Current production of 6.6mmboe/d is well below the 10mmboe/d peak in 1970/1. Breakthroughs in technology have changed the economics of Shale oil & gas extraction, accelerating the contradiction of Hubbert’s peak theory. Shale oil economics require between $60 and $80 barrel oil to justify the extraction cost. Given the variability of Shale economics, it is important to focus on core plays that have large reserves and low decline rates. Let’s look at 5 E&P companies whose assets have set them up to outperform.
Anadarko Petroleum (APC): Anadarko is active and ramping up in the Marcellus and Eagle Ford shales and also has a presence in the Haynesville, Permian, and Niobara (Wattenberg/Rocky Mountains) shale regions. Anadarko also has non-producing acreage in the emerging Utica Shale play in central Ohio.
Hess Corp. (HES): Hess Corp. is in the super-prolific Bakken Shale, a growing production presence in the Eagle Ford, and is performing appraisal activity in the Utica Shale. HES’s strategic infrastructure in North Dakota significantly enhances the value of its oil and gas resources there. The gas in the Bakken is rich in NGLs and LPGs.
ConocoPhillips (COP): COP has multiple unconventional drilling activities in the U.S. including the Wolf Camp, Avalon, Lewis, Bakken, Niobrara and Mancos shales. But it is the Eagle Ford where COP is starting to get recognition. Total shale production was 102 mboe/d in Q3 2012, up 100% from Q3 2011 levels.
Marathon Oil Corp. (MRO): Marathon also has growing production in the Bakken and Eagle Ford oil shale plays in the U.S. Rounding out her shale portfolio, MRO has acreage positions in the Anadarko Woodford, the Powder River Basin, Piceance Basin and Niobrara/DJ Basin in the Rockies, and the Marcellus in Pennsylvania.
Royal Dutch Shell (RDS.B): RDS acquired about 618,000 acres in the Permian Basin from Chesapeake Energy back in September. Royal Dutch Shell has additional acreage in British Columbia, in Kansas’ Mississippi Lime, and the Marcellus Shale. Smaller acreage plays are also located in Ohio, Wyoming, Colorado and California.
The above E&P companies have exposure to core shale positions in their portfolios that bode well for 2013. The reserve size, low capex requirements, and low decline rates are the qualities that distinguish their shale assets from other plays. For the stock investor, the above operators offer a diverse asset portfolio ripe with M&A potential, economics that are less sensitive to a downward movement oil prices, and strong dividend yields.
Stephen Edson is a finance professional within the upstream oil & gas segment. Mr. Edson focuses on going public transactions as well as public / private equity and debt investment into ventures and funds. Mr. Edson provides finance expertise at to support portfolio ventures through offering project and corporate finance advisory to private and public companies in upstream E&P and OFS. Finance structures include include senior debt, mezzanine debt, private equity placement, and IPO.
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Good tips, thanks. I was surprised that there was no mention of Continental though, especially after their recent exploration of the Three Forks, which raised their estimate of oil in place in the Bakken to 903 billion. Of course, Harold Hamm is a big cheerleader, no question. I was going to say “big ham,” but that was too cheesy even for me.
“Big Ham” has many good reasons to be optimistic. There’s a good case to be made for Continental’s(CLR) place in an investor’s portfolio with revenue growth expected to be 35% in FY2013 and a trading discount of 16.5x forward earnings compared to its five year average of 27.7. While the increase in barrels in the ground resulting from the Three Forks development is very substantial, the net present value of such resources is diminished by the timing of the development, lack of delineation and unproven economics. In due time.
Stephen here are a number of Eagle Ford Shale favorites as well.
NuStar Energy – Spun off from Valero, NuStar is an oil transportation company that currently operates two pipelines out of Eagle Ford.
Valero Energy Corporation – Operates as an independent petroleum refining and marketing company. The company operates through three segments: Refining, Ethanol, and Retail.
Murphy Oil Corporation – Through its subsidiaries, engages in the exploration and production of oil and gas properties worldwide. It explores for and produces crude oil, natural gas, and natural gas liquids.
Boardwalk Pipeline Partners, LP – Through its subsidiaries, engages in the ownership and operation of integrated natural gas pipelines and storage systems in the United States.
Forest Oil Corporation – Forest Oil Corporation an independent oil and gas company, engages in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in the United States.
Rosetta Resources – Rosetta Resources Inc. (Rosetta)is an independent exploration and production company engaged in the acquisition and development of onshore energy resources in the United States of America.
http://turnkeyoil.com/oil-stocks/eagle-ford-shale-stocks/
Great call BD. Here are a couple more in the Bakken we like:
Kodiak Oil and Gas – Kodiak Oil and Gas, Inc. engages in the acquisition, exploration, exploitation, development, and production of crude oil and natural gas in the United States. The companys oil and natural gas reserves and operations are primarily concentrated in the Williston Basin of North Dakota and Montana, and the Green River Basin of Wyoming and Colorado.
EOG Resources – EOG Resources, Inc., together with its subsidiaries, engages in the exploration, development, production, and marketing of crude oil and natural gas primarily in the United States, Canada, the Republic of Trinidad and Tobago, the United Kingdom, the People’s Republic of China, and the Argentine Republic.
http://turnkeyoil.com/oil-stocks/bakken-shale-stocks/