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A Different Way to Find Eagle Ford Profits

Keith Kohl

Written By Keith Kohl

Posted May 7, 2011

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publications.

Just think of all the times you’ve cringed as someone’s obnoxious, high-pitched cell phone goes off repeatedly in a quiet theater…

For me, it wasn’t a packed crowd of movie-goers that gave me a few dirty looks as my ringtone sounded.

Because of all the places my phone decided to ring, it was just as I moved onto a drilling rig in South Texas.

Fortunately, I was quick to answer it.

Unfortunately, my colleague on the other end didn’t lift my spirits…

It was mid-week, and I knew some bad news was on its way.

“Oil just toppled, natural gas is spiraling down the drain. Even silver is continuing its descent.”

By the time I hung up, one of the guys from the rig was standing next to me. When I told him that crude just fell below $100 a barrel, he simply shrugged.

The news hadn’t bothered him one bit… And why should it?

After all, we were standing in the middle of one of the hottest oil plays since the Bakken emerged several years back.

And here in the Eagle Ford play, things were on the up-and-up.

It’s the reason CNOOC shelled out billions of dollars last year for a stake in the area.

In March, KNOC (Korea National Oil) ponied up a billion and a half for a one-third stake in Anadarko’s Eagle Ford interests. That deal was valued at nearly $16,000 per acre — the highest amount paid to date.

And they’re not the only taking notice of this opportunity…

Another Way to Invest in the Eagle Ford

Let’s face it: It’s easy to be long on energy. There’s simply too much potential at stake.

Sure, we can find the best and brightest drillers out there — which is why I was on that rig in the first place.

But when it comes to the long term, nothing beats infrastructure.

Kinder Morgan, for example, announced on Thursday it would spend $855 million for PetroHawk’s gas-gathering pipelines in the Haynesville.

A few days before that, Valero Energy Corp announced plans to build a 50,000 barrels/day oil pipeline from the Eagle Ford to its Three Rivers refinery. In the release, the company said it expects to triple the amount of Eagle Ford crude processed at the refinery.

And as usual, patience truly pays off in this sector:

KMP VLO chart

Of course, these infrastructure plays are just one way to play energy… Below you’ll find several more opportunities for profit.

Enjoy the weekend

Keith Kohl
Editor, Energy and Capital

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