Eagle Ford Shale is Sparking an Employment Boom in San Antonio
Edgar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I thought it was blown out of proportion at first, but I saw the effects of the boom with my own eyes two weeks ago in my recent trip to San Antonio, Texas.
When I was purchasing my rental property there in 2006 to escape the subprime crisis woes, I had one idea in mind – asset preservation, due to conservative home equity laws. After seeing the transformation of north San Antonio in the last 18 months with manufacturing job growth, low unemployment, and a surging rental market, my ultimate goal has shifted to a possible sale within five years. The seventh most populous city of United States is now benefiting from Texas’s bread and butter – crude oil.
Eagle Ford Shale is a rock formation underlying much of South and East Texas roughly 400 miles long, which is rich in oil and natural gas fields. The shale is 50 miles wide and is an average of 250 feet thick at a depth between 4,000 and 12,000 feet. It contains a high amount of carbonate, which makes it brittle and easier to use hydraulic fracturing to obtain oil or gas. The reserves are estimated at 3 billion barrels with potential output of 420,000 barrels a day and a forecasted job growth of 60,000. Which companies are poised to benefit from all this?
Well, let’s start with the oil drilling giant, Halliburton (NYSE: HAL), which decided to build a $50 million operations base in the heart of San Antonio. It has hired 1,500 workers just for the operations center with average salaries of $70,000 a year. Its rival, Schlumberger Ltd. (NYSE: SLB), did not waste a minute and opened its doors to San Antonio, a $20 million compound with 500 plus workers with salary ranges of $25,000 to $85,000 a year. Another large player, Baker Hughes (NYSE: BHI), is on a complete drilling spree. The chart below depicts the count of rigs for oil (blue dots) and natural gas (red dots) all along the shale that the company established.
At a local bar, while the Texans were cheering on the Spurs in the playoffs, I was discussing the explosive oil boom with my new tenant, who actually works for Weatherford (NYSE: WFT), a fairly smaller company that provides equipment and services, which is paying for all of his relocation costs. Company stock tumbled 50% since February of 2011, but has been seeing an accelerated revenue growth as well as increased interest from hedge fund mogul Daniel Loeb of Third Point LLC.
The last small cap player in the exploration and acquisition side making headlines is Forest Oil Corp. (NYSE: FST), which owns vast land tracts in the Eagle Ford shale. Although I’m not that fond of their balance sheet, I am keeping a close eye on their rising oil and natural gas sales volume, which have increased more than 40%.
With the technological advancement of hydraulic fracturing and horizontal drilling, there is not a doubt in my mind that the aforementioned companies will see no problem increasing their volume of sales. However, Weatherford could yield the largest gains versus the other giants, and recover the majority of its losses it took from the prior year.
edgarambart30 has no positions in the stocks mentioned above. The Motley Fool owns shares of Halliburton Company. Motley Fool newsletter services recommend Halliburton Company and Schlumberger. 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. If you have questions about this post or the Fool’s blog network, click here for information.