Protests Over Gas Drilling Process
Somnath is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Protests could not hold back the oil and drilling industry stocks from soaring.
Environmental activists in the US and several other countries held protests over the last weekend against hydraulic fracturing (fracking) of rock to release natural gas trapped in underground formations, demanding a ban on the process which potentially causes groundwater contamination and air pollution.
Worldwide, opposition to drilling and fracking has escalated dramatically over the past year, and the oil and gas industry has intensified its public relations campaign to eclipse the dangers of fracking from the public. Nevertheless, fracking continues to remain a contentious issue worldwide. Those in favor of the technology argue that generating more natural gas helps to reduce air pollution from dirtier fuels, like coal. The US Environmental Protection Agency and other state regulators say fracking can be done safely and American Lung Association says it can help reduce air pollution.
Drilling deeper
Oil is one of the most important natural resources known to mankind and is the principal natural resource that fuels most economies in the world. Nearly 98% of everything you have or do is in some way related to crude oil. Heat for your home, gas for your car, 2 liter plastic bottles for pop, and petroleum jelly are just a few examples of products created from crude oil. The United States has the greatest standard of living in the world, as well as the largest economy. Why? Because the U.S. has always tried to maintain control over the supply and price of oil. Unlike the 1970s, when the U.S. was held at bay by OPEC withholding oil production for political reasons, the growth of the oil industry during the 1990s, and beyond, will be more likely be determined by the laws of supply and demand. As democracy and capitalism are spreading around the world, global oil consumption is at record levels. Oil is the one commodity absolutely essential to this tidal wave of global growth. It’s literally the blood supply of capitalism. If you’re a developing country, you need all the oil you can get to drive your trucks, your cars, your planes, and ships. You need oil to run your factories, machines and power plants so necessary to a modern industrial economy.
An immense market and the promise of continuing growth are why oil and gas is such a sure investment.
The major players in drilling industry
Chesapeake Energy Corporation (NYSE: CHK) calls itself the most active driller in the country, with operations in 15 states, from the Rockies to Texas to Pennsylvania. The company is a good example of how "independent" doesn't necessarily mean small. As of December 31, 2011, the Company owned interests in approximately 45,700 producing natural gas and oil wells that produced approximately 3.5 billion cubic feet of natural gas equivalent per day, net to its interest. The company operates in three segments: exploration and production; marketing, gathering and compression, and oilfield services. Chesapeake has built itself as a gas company, but it is increasingly looking for "liquids-rich plays," according to its annual report. Gas wells generally produce oil and other hydrocarbon liquids as well in varying amounts, depending on the geologic formation. With oil prices high and gas prices low, many companies are seeking more wells that are oil- and liquids-rich, particularly in North Dakota, southern Texas and Pennsylvania.
Chesapeake has a market cap of $12,703 million and the current dividend yield of the company is 1.83% with a P/E ratio of 6.49. Its EPS for the past 2 quarters, (from earliest to most recent quarter) -0.11, 1.29 have been increasing. The current return on equity is 16.17%. The Total Debt/Equity ratio is low at 82.22%. The revenue growth is 6.74%, while its earnings growth rate is 8.30%.
Anadarko Petroleum Corporation (NYSE: APC) is one of the biggest independent oil and gas producers in the country, with exploration or production work in all major domestic drilling areas as well as in South America, Africa, Asia and New Zealand. Worldwide, natural gas makes up just over half of Anadarko's reserves, but 87 percent of the new wells it drilled in the United States last year were gas wells. Like many other companies, Anadarko is increasingly looking for oil- and liquids-rich production this year. Anadarko’s operations in the United States include oil and natural-gas exploration and production onshore in the Lower 48 states, onshore Alaska, and the deepwater Gulf of Mexico. During the year ended December 31, 2011, the Company’s operations in the United States accounted for 87% of total sales volumes and 90% of total proved reserves. Anadarko’s Rocky Mountains Region (Rockies) properties are located in Colorado, Utah, and Wyoming and are a combination of oil and natural-gas plays. As of December 31, 2011, Anadarko operated approximately 14,300 wells and has an interest in approximately 9,500 non-operated wells in the Rockies. Anadarko operates fractured carbonate/shale reservoirs, tight gas assets, and coal bed methane (CBM) natural-gas assets, as well as enhanced oil recovery (EOR) projects within the region. The Company also has fee ownership of mineral rights under approximately eight million acres, which passes through Colorado and Wyoming and into Utah (Land Grant).
Anadarko has a market cap of $34,558 billion. It’s EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were $7.98, $6.78, -$0.28, $1.52 and -$5.32. The current sales figure is $13,707.0 million. The Total Debt/Equity ratio is high at 73.30%. The revenue growth is good at 28.04%.
Devon Energy Corporation (NYSE: DVN) is an independent driller primarily active in the United States and Canada. The company is in the process of divesting operations in Angola and Brazil, its only holdings outside of North America.
More than 70 percent of Devon's U.S. reserves are in natural gas, with most of that lying in Texas' Barnett Shale. It also owns natural gas pipelines, plants and treatment facilities in many of its producing areas. Devon is engaged in the commercial development of natural gas from shale and coaled formations, and it is a using steam to produce oil from the Canadian oil sands. During the year ended December 31, 2011, the Company drilled 1089 wells in the United States and 1045 wells in Canada.
Devon has a market cap of $24,060 million and the current dividend yield of the company is 2.77% with a P/E ratio of 9.98. Its EPS for the past 2 quarters, (from earliest to most recent quarter) 1.02, 1.16 have been increasing. The current return on equity is 11.11%. The Total Debt/Equity ratio is low at 47.71%. The revenue growth is good at 15.82%.
The drilling industry is on a growth spree and no protests can hold it back. One of the few sectors I am still bullish on is the oil and gas sector. The United States is in the early innings of becoming energy independent. Over the last 10 years, the U.S. economy has undergone the largest economic expansion in history and cheap oil has fueled this unprecedented growth. The oil and gas drilling industry holds a strong growth chart with lot of promises.
SomnathGuha has no positions in the stocks mentioned above. The Motley Fool owns shares of Devon Energy and has the following options: long JAN 2013 $16.00 calls on Chesapeake Energy, long JAN 2013 $25.00 calls on Chesapeake Energy, long JAN 2014 $20.00 calls on Chesapeake Energy, and long JAN 2014 $30.00 calls 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.If you have questions about this post or the Fool’s blog network, click here for information.
