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buffalonate (93.03)

Any Oil Shale Experts On Here?

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May 24, 2011 – Comments (20) | RELATED TICKERS: CLR , WLL , EOG

Oil experts predict that within 10 years U.S. oil production will increase 40% due to hydraulic fracturing in the oil shale.  I have been buying the Bakken stocks every time oil prices crash and this has been very profitable for me to play the technicals but I was wondering about the longterm production.  I manage about 500K for my parents and I am considering a longterm investment of about 50K into the Bakken and Niobrara stocks for them.  I believe this is a great investment for the next 10 years but how long will the oil shale plays last?  I am trying to put them in stocks they won't need to trade for 15 years or so.  I believe these companies will eventually run out of oil to drill and will revert to natural gas drillers.  Any help would be appreciated.    

20 Comments – Post Your Own

#1) On May 24, 2011 at 1:03 PM, L0RDZ (80.03) wrote:

You'll get crushed thinking long term    unless you owned the stocks before ?  buying now is  risky ?  oil is going down  at some point and the valuations will also.

I would instead  consider perhaps  LINE    LINN energy,  but  don't buy all at once....

LINE  has favourable tax  on its distributions they arent taxed until you actually sell the stock....

LORDZ.

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#2) On May 24, 2011 at 1:25 PM, TMFBlacknGold (98.16) wrote:

A 40% increase in our production may seem like a lot, but relative to the number that is increasing - our production - its not even in the rounding error of our needs or future needs.

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#3) On May 24, 2011 at 1:26 PM, buffalonate (93.03) wrote:

I wouldn't buy them in until oil crashes significantly.  I think the dollar will strength significantly over the next year which will bring oil prices down.  I am just trying to figure out an educated guess as to when peak oil shale will come and when the oil shale production will run out.  My guess is that most of the oil shale companies will be bought out in the next few years anyways so it is probably a mute point. 

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#4) On May 24, 2011 at 1:51 PM, L0RDZ (80.03) wrote:

LINE has been the one doing the buying.....

they hedge  and  pay their unit holders the  benefits of  said oil and natural gas.

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#5) On May 24, 2011 at 2:21 PM, mm5525 (< 20) wrote:

I hear nothing but great things about the Bakken Shale, but a shale expert I am not. I do follow oil and natural gas prices closely, and I have a very heavy emphasis on energy in my personal portfolio. Who knows how long the oil/nat gas up there will last.  

I have dabbled in and out of LINE for years. It's a good company that has hedged well, but what I like is they used to be primarily a natural gas producer and have shifted more to oil. I was not aware they were involved in the Bakken though. I thought they were all TX, OK, CO, and CA. I wish I still owned it today but had some big gains in it even at somewhere like 28-29.  

As far as a pick I would have for you is PAA, Plains All American Pipeline. It's a MLP but it has oil/ng pipelines in both Canada and the USA and is right there in the Bakken Shale up in ND as well as everywhere else in the USA. Plus, it's not really tied to the price of oil itself as it is an oil servicer "toll road" so is not as volatile as the e&p companies, and it pays a very nice distribution of 6.29%, which might appeal to your parents as a nice stream of income.  

I own PAA, and here's a link to their asset map:

 http://www.paalp.com/fw/main/Our_Asstes_-_PopUp-1570.html

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#6) On May 24, 2011 at 2:26 PM, buffalonate (93.03) wrote:

LINE just bought into the Bakken but they paid a lot for it.  They were too late to the party.  I prefer the companies that were there from the start.  They got their land cheap.  WLL, EOG, HES, CLR, BEXP, and OAS all got their land early.

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#7) On May 24, 2011 at 2:45 PM, L0RDZ (80.03) wrote:

Line's distribution to its unit holders will only increase thanks to their  acquisitions.   In a few years  don't say that LORDZ didn't offer  some decent advice.

As to being late  to a party ???  not really,  its still going to be a great party, only now its more a party,  before it was only  a thought a prayer  and a  dream.

I bought me some LINE  way back  at   16  a share and have added as high as  38.50  a  share with news of the  recent  BAKKEN  purchases.

You asked for something your parents wouldn't have to worry about trading  for the next 15 years  and while thats not an easy answer,  I believe mine was among the best. 

But you have to decide that for yourself.

Not to be or seem like  A  RICHARD ,  why are you asking for advice on  TMF   when you think yourself  such an oil expert ????

Just wondering ?

:)

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#8) On May 24, 2011 at 4:06 PM, buffalonate (93.03) wrote:

Linn Energy is not a bad company but it produce only about 54% oil and natural gas liquids.  Its big exposure to natural gas which is much less profitable will give it much less money to reinvest in the future.  It has very little acreage in the 3 most productive oil shale plays, the bakken, niobrara, and eagle ford.  I don't think it is a bad company I just think there are many other companies with more upside due to owning better acreage.  I get a lot of my information from a blogger named Michael Filloon who writes a lot about the oil shale stocks on Seeking Alpha.  Here is an article from him talking about the oil shale companies with the best oil shale acreage.http://www.buzzbox.com/news/2011-02-01/play:pure/?clusterId=3139088  I have only owned oil shale stocks for a few months so I am far from an expert but I have done a lot of research into the stocks with the most upside and Linn Energy wouldn't make my top 10 list.  I asked a question on Motley Fool for 2 reasons.  One being that I am sure there are people on here who know more about the subject than me and I have never heard anyone say how long they think the oil shale plays will produce. 

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#9) On May 24, 2011 at 4:28 PM, L0RDZ (80.03) wrote:

OIl shale is relatively  new, anyone saying how long  such wells will last  are only  guessing  some are guessing with more  information.

The risks and rewards  can be great.   There are no guarantees, what I like  about LINN  is  that the distributions  are mostly guaranteed by  their hedging  ~  they are disciplined  hedgers.

I don't know the other companies, I can only say that I've been extremely happy learning  and  investing  in LINE.

 I thought the price they paid  was fair.

http://en.wikipedia.org/wiki/Hydraulic_fracturing

RISKS

Environmental and human health concerns associated with hydraulic fracturing include the contamination of ground water, risks to air quality, the migration of gases and hydraulic fracturing chemicals to the surface, and the potential mishandling of waste.

 The potential costs associated with possible environmental clean-up processes, loss of land value and human and animal health concerns are undetermined.

A 2010 EPA study discovered contaminants in drinking water including: arsenic, copper, vanadium, and adamantanes adjacent to drilling operations; however, the EPA stated a broad range of sources including drilling or agricultural activity too could be responsible.

New technological advances and appropriate state regulations are working to study and safely implement the process.

Arguments against hydraulic fracturing center around the extent to which fracturing fluid used far below the earth's surface might pollute fresh water zones, contaminate surface or near-surface water supplies, impact rock shelf causing seismic events or lead to surface subsidence.

However, well casing failures and failures of the well grouting systems may have been responsible for gas migration into drinking water aquifers in Dimock, Pennsylvania.  The transport, handling, storage and use of chemicals and chemical-laden water can also cause accidents that release materials into the environment, though this does not occur during the hydraulic fracturing process itself.

 

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#10) On May 24, 2011 at 5:13 PM, buffalonate (93.03) wrote:

My point with Linn Energy is they don't have great acreage.  Their upside is not nearly as great as the companies with big acreage positions in the Bakken or Eagle Ford.  I like OAS, CLR, EOG, BEXP, SSN, COG, and NOG.  All of which have really good acreage in the Bakken and some also hold a lot of acreage in the Niobrara.  The Eagle Ford shale play also holds a huge amount of oil.  The companies who own large positions in the Eagle Ford are FST, Rose, and HK.  I think all of these have much better upside than LINE. 

I realize there are environmental concerns with hydraulic fracturing but they have been doing it for 50 years with no big problems.  They will never ban it because it will provide us energy independence and the money and jobs involved is astronomical.  I am sure there will be new regulations coming into place to make sure the wells are constructed properly and that the Frac water is properly disposed of. 

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#11) On May 24, 2011 at 5:36 PM, L0RDZ (80.03) wrote:

Buff line is not about owning good acreage ?    they  buy proven  wells  and  land  where they will install   long life  wells. 

Line is not about speculation and  risk.

http://en.wikipedia.org/wiki/Oil_well

Take  this statement for what its worth  : from a rig person.

When I am on a rig I am concentrating on the well I am drilling, not another one.


Bakken, and other shale formation wells all have one thing in common. Some 75% of the life time production occurs in the first one to three years of the life of the well. After that, for the next 6 or 7 years, the well puts out enough to pay a small profit or at the least, pay the overhead.


Development of the Bakken has been spotty with increases of activity followed by periods of relative quite. I am not sure, but this may be due to the nature of the wells with new, strong production arousing interest followed by declining interest when the peak production passes. Some of them have been producing 12 years but the median seems to be 7 to 8 years.

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#12) On May 24, 2011 at 5:40 PM, L0RDZ (80.03) wrote:

When someone says the words never  or  similiarly absolute terms. 

Not good.

 

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#13) On May 24, 2011 at 5:54 PM, buffalonate (93.03) wrote:

I repeat they will never ban it.  It would be a political nonstarter to try to stop hydraulic fracturing.  I am listening to an add on TV right now that is advertising how many jobs drilling provides.  If they tried to ban it those adds would be all you heard.  In a worst case scenario the federal govt would create strict regulations but Republicans would fight tooth and nail to stop it and they would win.  The amount of oil these companies in the Niobraze, Bakken, and Eagle Ford are sitting on is huge.  That is far from speculative as these oil wells produce 99% of the time.  The wells are highly profitable and dependable or there wouldn't be such huge amounts of drilling going on there.  Why do you think Linn bought acreage there?

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#14) On May 24, 2011 at 6:17 PM, L0RDZ (80.03) wrote:

I'm just talking Buff  no  need to get defensive not that I think you are ?

The government doesn't need to ban something to make it not as  attractive  ~   they could just as easily  regulate the heck out of  Fracking  to  make  the drilling  unattractive and all the land rights no longer as valuable.

Just look at what happened with deep water drilling and what  BP  did.   Who's to say that one  nasty accident doesn't do to fracking what BP   did to  oil production in the gulf.

So  I just hope  as a fellow fool  advisor that you always keep that in your  analysis  of  potential  values, assets,  and liabilities.

I think you are aware that OBAMA is not really pro-oil  or drill.

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#15) On May 24, 2011 at 6:23 PM, L0RDZ (80.03) wrote:

I only  pray  that  British petro  stays  away from  FRACKING..

 

those guys could screw up a wet dream.

 

LORDZ

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#16) On May 25, 2011 at 9:59 AM, TMFBabo (100.00) wrote:

Just curious: why the Bakken and Niobrara over the Eagle Ford? It seems to me that the Eagle Ford has the potential to be the most prolific, but maybe you're suggesting it's also more fuly valued compared to the other two plays?

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#17) On May 25, 2011 at 9:59 AM, TMFBabo (100.00) wrote:

By the way, I'm bullish on the oil shales long-term, so I'm genuinely curious to hear your thoughts.

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#18) On May 25, 2011 at 10:29 AM, buffalonate (93.03) wrote:

The Eagle Ford is great too.  I just haven't done as much research on the those companies as the other plays.  I believe Petrohawk, Forest Oil, and Murphy are the biggest plays in the Eagle Ford.  There are several smaller plays in the Eagle Ford. They are Penn Virginia, Crimson Exploration and Talisman Energy.  The Eagle Ford is better than the Niobrara I just haven't gotten around to doing much research into them yet.  I have heard that they can refrack the same spot 4 or 5 times so I am guessing the shale oil will last 20 to 30 years but I don't know.   

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#19) On May 25, 2011 at 10:36 AM, buffalonate (93.03) wrote:

Michael Filloon on seeking alpha and investopedia both have a lot of good information on the shale plays.  They are worth reading. 

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#20) On May 25, 2011 at 5:06 PM, buffalonate (93.03) wrote:

I did some more research today and found that the Bakken is probably two to 3 times as productive per well as the Eagle Ford or Niobrara on average.  I also found that the Niobrara seems to be more productive than Eagle Ford but it is a newer play so it hasn't received as much hype.  I was checking a lot of earnings reports today and it definitely seems that the niobrara produces more oil per well than Eagle Ford.  Here is a website about shale oil you should check out.  www.shaleoilplays.com

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