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3 Ways to Strike Texas Oil Profits... Without Exxon

Written by Keith Kohl
Posted January 16, 2019

13 down, one to go.

Say it with me again, over and over until it sinks into the market.

That’s the unofficial mantra adopted by Texas oil drillers for 2019.

Last October, oil companies extracted crude oil from the Texas soil at an incredible rate of 4.7 million barrels per day!

If Texas were admitted into the ranks of OPEC, it would rank second only to the Saudis.

In the last few months, the Lone Star State successfully surpassed Iraq’s oil output of 4.6 million barrels per day.

Keep in mind that Iraq’s production has doubled since 2008.

But let’s put a bit more perspective on this extraordinary amount, shall we?

Recently, I mentioned that oil output across the entire United States averaged just 5 million barrels per day in 2008.

That means within a single decade, Texas pushed its crude production to new heights. And let’s be brutally honest here: It’s all thanks to the vast tight oil resources it holds.

But we can get a little more specific, can’t we?

Back in November, the USGS confirmed what we’ve been talking about for more than five years. They announced the largest continuous oil assessment in both Texas and New Mexico.

Now, don’t get me wrong, dear reader. Anyone could’ve told us there was a lot of oil in Texas.

Yet it seems people are finally starting to catch onto where all that Texas tea lies in wait.

Three years ago, the USGS released a report that showed an estimated 20 billion barrels of oil was contained within the Wolfcamp.

That certainly caught the attention of more than a few investors... but we knew the real value to the Permian Basin was far more than this.

You see, that 2016 assessment only looked at the undiscovered, technically recoverable resources in the Midland Basin’s portion of the Wolfcamp shale.

More importantly, we knew it was only a matter of time before the truth came out.

I’m talking about the other side of the Permian Basin.

The greater Permian Basin actually consists of a few component basins. Naturally, the Midland portion received the lion’s share of the attention for nearly a century.

But that’s about to change.

For this new assessment, the USGS turned its eye to the real Permian prize: the Delaware Basin.

This time, its geologists are estimating that an eye-popping 46.3 billion barrels of undiscovered, technically recoverable resources are locked away in the Delaware’s Wolfcamp and overlying Bone Spring formations in Texas and New Mexico.

3 Ways to Strike Texas Oil Profits… Without Having to Buy Exxon

Between 2008 and 2018, oil extraction in the Permian Basin more than tripled.

However, knowing the real potential of the Permian Basin is one thing.

For individual investors to capitalize from it is something entirely different.

And the last thing you want to do is blindly put your faith in Big Oil.

After all, it’s the Exxons of the world that dominate headlines.

Some of you can probably remember back in 2009, when Exxon spent $41 billion to buy XTO Energy. In 2017, it doubled its Permian presence after shelling out $6 billion to pick up roughly 250,000 acres in the play.

A year ago, the company announced that it was planning to dish out more than $2 billion in its Permian infrastructure and triple its production within the next seven years.

Despite the fact that shares of XOM actually look cheap after last month’s volatility, my veteran readers know just as well as I do that we can do better than Exxon right now.

So for the sake of skipping over Big Oil this time, here are three Permian players worth your attention.

Controlling more than 750,000 gross acres in the Midland Basin, Pioneer Natural Resources (NYSE: PXD) is one of the largest oil operators in the Permian Basin. According to the stats at the Texas Railroad Commission, Pioneer was the Permian’s top oil and natural gas operator in 2016, producing more than 59.3 million barrels of crude and 118 trillion cubic feet of natural gas during that year.

Of course, the 22 rigs Pioneer is currently running in the Permian Basin is more than double the number of total oil rigs currently running throughout the entire state of California.

After its merger with Newfield Exploration, Encana Corp. (NYSE: ECA) became the second largest producer in North America, with its Q3 output averaging 577,000 barrels of oil equivalent per day.

Yet Encana has something else up its sleeve that has so far been kept under the radar: its game-changing new tech that’s taking oil production in the Permian Basin to the next level. And word around the campfire is that it’s like frac’ing on steroids.

Of course, that’s not to mention the fact that Encana is one of the few drillers generating positive free cash flow right now.

Rounding out our list of must-see Permian players is Callon Petroleum (NYSE: CPE). I’ve been touting the Delaware to you today, and Callon’s ~87,000-acre position in the Permian has helped it increase production during Q3 by 55% year over year, with its Delaware wells outperforming its previous production forecasts.

Like I said, 13 down, one to go... and that last OPEC member is backed up against a wall.

Next week, I’m going to show you exactly why the Saudis are struggling more than they’re letting on and why the House of Saud is betting big on U.S. energy dominance.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.


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