2 Stocks Poised to Profit From the Coming Oil Boom
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For the first time in nearly 20 years, government estimates project that te U.S. will produce more oil than it imports. Not only should this bring stability to American pump prices, but it also provides a great opportunity to make money through energy stocks. ExxonMobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) are two big names preparing to make a killing. But there’s more--below is look at which companies are prepped to capitalize on the next U.S. oil boom.
Unrest abroad and production back home
Thanks to the growing unrest in the Middle East, the American government is reconsidering its energy policies. These policies brought a significant drop in land leases and drilling permits under the Obama administration, down nearly 40% during his tenure. Companies with no choice migrated away from the U.S. toward other emerging markets. But change is coming. New developments in Alaska, North Dakota, and Texas are leading the way to record highs of American oil production.
American production leader Chesapeake Energy (NYSE: CHK) capitalized on the new trend. After strong first-quarter earnings with production up more than 56% year-over-year, Chesapeake recently announced it will raise its target for 2013 American oil production by 1 million barrels. Why so much? Well, Chesapeake reaped the benefits from its tremendous performance in the Eagle Ford Shale of Texas.
After nearly two decades of dependency on foreign oil, it seems hard to imagine a radical American recovery. But the proof is in the pudding. Note the chart from the U.S. Energy Information Administration (see below). Production is on its way back home, and in a major way.
It might just be time to realign your portfolio. To oil giants, booming oil production in the U.S. is like tossing an underhand pitch to Barry Bonds. Smack. Homerun. And like Chesapeake, both ExxonMobil and ConocoPhillips are ready at the plate.
ConocoPhillips is emerging from a transition period during which it sank millions of dollars into technologies to help unlock the black gold that experts never thought possible – the unreachable oil. With effective research and development, ConocoPhillips is looking ahead to a successful stretch of oil production.
Company targets estimate a peak production of a staggering 1.9 million barrels of oil per day. Much production will come from the now unlocked Eagle Ford and Permian basins in Texas and North Dakota, which feature oil and natural gas. And with the most attractive price between the oil giants, along with a healthy 4% payout, ConcoPhillips is a buy even for value investors.
ExxonMobil is not far behind. Earlier this year, ExxonMobil and a few other producers pledged $1 billion to the development of the North Slope of Alaska. ExxonMobil's project is focused on tying into a Western pipeline bringing an additional 10,000 barrels a day into production. Yet ExxonMobil’s vision extends just as far south as it does west.
The company also is making arrangements for the creation of a $10 billion terminal in Texas, to export the predicted excess oil production. Thus, ExxonMobil isn’t going to just make money on American consumption – but also might become the leader in exporting to foreign nations.
Missing the boat
A few companies haven’t shown much interest in the shift toward greater U.S. production. BP (ADR) (NYSE: BP) is going to great lengths to begin a five-billion rand investment project in South Africa. BP’s chief executive is quoted as saying
“With the improving investment climate, especially policy stability being presented in South Africa, BP has decided to invest significantly for the benefit of all our stakeholders.”
While BP is showing mild interest in Alaska, clearly the company’s focus for shareholders isn’t in America. And BP isn’t alone--Chevron (NYSE: CVX) isn’t overly interested in North America. On its company webpage, Chevron discusses its exploration and production. The page features subheadings of Partnering for Growth in the Caspian, Investing in the Asia-Pacific Region, & Growing with Africa and Latin America, but fails to mention anything about oil production in the U.S.
Chevron is especially focused in Ecuador, attempting to overturn a $19 billion environmental judgment against itself. This case, along with growing projects in Asia, is diverting Chevron’s economic and intellectual capital away from the U.S.
Back to the future
It’s time to celebrate. A new oil boom will create jobs, better control gas prices, and decrease dependence on foreign oil. For the first time in two decades, the U.S. is expected to produce more oil than it imports. As a result, many companies will amass great wealth. The question is whether or not you will participate.
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This article was written by Ian Finney and edited by Chris Marasco. Chris Marasco is Head Editor of ADifferentAngle. Neither has a position in any stocks mentioned.The Motley Fool recommends Chevron. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!