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Posts : 1838
Join date : 2008-10-30
Age : 67
Location : Florida

PostSubject: The Oil boom companies   Tue Nov 20, 2012 7:13 pm

The shale revolution wasn't led by Big Oil. To take one example, the key technique known as "slickwater fracturing" was pioneered by Union Pacific Resources, now part of Anadarko Petroleum (APC -0.32%, news), and Mitchell Energy, now part of Devon Energy (DVN -1.40%, news).

Big Oil has, in fact, been playing catch-up by buying acreage from smaller oil producers or buying the small producers outright. For example, Exxon Mobil (XOM -0.19%, news) bought 196,000 acres in the Bakken formation from Denbury Resources (DNR -0.97%, news) for $1.6 billion.

The problem with these deals, if you're an investor, is that they aren't big enough to move the needle at Big Oil. Take Royal Dutch Shell's (RDS.A -0.30%, news) purchase of acreage in the West Texas Permian Basin from Chesapeake Energy (CHK +0.74%, news) in September for $1.94 billion. That acquisition tripled Shell's production from unconventional sources and marked a major milestone in the company's march to have 250,000 barrels a day in worldwide production from shale by 2017. Even if the company hits that goal, shale would still make up just 6% of Shell's forecast 2017 production.

No, as I have written earlier -- as early as Oct. 21, 2011, in this post on Big Oil snapping up smaller players -- if you want to buy producers to take advantage of the U.S. oil boom, it's better to buy the small companies that staked out big acreage early. Names like Pioneer Natural Resources (PXD +0.35%, news) and Concho Resources (CXO -2.35%, news) might be familiar, since I've owned them on and off in my Jubak's Picks 12- to 18-month portfolio.

neer is also currently a member of my long-term Jubak Picks 50 portfolio. The stock is up 5.28% since I added it to that portfolio on Jan. 13, but it's down 9.2% from its Sept. 14 high on worries about the global and U.S. economies. Concho Resources is down 12.3% since I sold it on May 21 at $90.26 for the same reasons. Other names to look at include Oasis Petroleum (OAS -1.21%, news), Devon Energy, Rosetta Resources, (ROSE -1.74%, news), EOG Resources (EOG -1.02%, news) and Approach Resources (AREX -1.79%, news).

By Jim Jubak

Ready for the US energy boom?

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