"The President wasted his time..."
When Boone Pickens mentioned this in a recent interview on CNBC, the quote immediately stuck in my mind. To be honest, relying on Saudi Arabia for oil is simply foolish. Seriously, do you honestly believe OPEC can raise their production past the projected 12 million barrels per day? And even though Saudi Arabia is one of the few countries in the world that stands a chance of raising current production, that's more like trying to stick your finger in a crack to stop the peak oil dam from breaking.
Just for a minute, let's assume (I know it may be difficult) that the Saudis are able to significantly raise their production to more than 12 million barrels per day. By then, how much do you think that oil is going to cost us?
And the best part, of course, is that if we don't buy it at that high price, China will.
On Saturday, my colleague Ian Cooper talked about the upcoming boom in wind energy. As you know, Boone has been one of the biggest supporters of wind energy.
But wind isn't the only energy source praised by Pickens.
In the wake of record crude oil prices (reaching as high as $129.60 during trading today), natural gas has followed suit.
Investing in the Natural Gas Explosion
Whenever I mention a natural gas boom, I'm specifically referring to unconventional sources. After all, unconventional natural gas makes up more than 40% of U.S. production. For those of you who are not trained geologists, think of unconventional source as a deposit that needs a greater amount of technology or investment to extract the natural gas. Different types of unconventional natural gas include coalbed methane, tight gas sands and gas shales.
Here's a good way to look at it:
And believe me, the boom has already started.
We've gone over the Barnett shale play in the past. That was back in September when natural gas cost about $6 per mcf, almost half of what it trades for today. Still need proof that Barnett shales are still heating up? Between 1985-1995, the number of wells operating in the Barnett play grew dramatically from 25 to more than 300. Since 2003, that number swelled to over 500 operating wells.
Since companies have had tremendous success drilling in the Barnett shale, many have looked for even greener pastures.
Take the Marcellus gas formation, for example. Located in the Appalachian basin, the Marcellus has been estimated to hold up to 167 trillion cubic feet of natural gas in place.
Yet there's another natural gas deposit that has producers excited. This time, they're looking at the Haynesville shale in eastern Texas and northwest Louisiana. The Haynesville natural gas shale is found in a vein approximately 11,000 feet underground.
Although the Haynesville shale is being touted as the largest onshore natural gas field, it's a little too tell exactly how much natural gas is down there, that's not stopping companies rushing to grab acreage in the play.
Don't be surprised to see some familiar players dipping their hand a variety of basins...
Haynesville Natural Gas
Not surprisingly, Chesapeake Energy (NYSE: CHK), is putting the Haynesville shale to the test. As the third largest producer in the United States, Chesapeake is no stranger to natural gas. Natural gas makes up 92% of the company's production.
With success in the Barnett, Marcellus and Haynesville shales, Chesapeake has had an impressive year so far:
In March, the company announced plans to develop its 300,000 acres in the Haynesville shale and expects to pick up another 200,000 acres in the future. Chesapeake even stated, "...the Haynesville shale could potentially have a larger impact on the company than any other play in which it has participated."
As long as natural gas prices continue to rise alongside crude oil, Chesapeake will continue to outperform the rest of the field. I wouldn't be shocked share prices double again over the next few years.
Until next time,
Keith Kohl
P.S. While I'm on the subject of white-hot energy plays, many of my readers have already made their first round of profits off the massive Bakken formation. The best part, however, is that its not too late to get a piece of the action. If you're interested, I'd recommend checking it out for yourself at the $20 Trillion Report.
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