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Chaos, Panic, Blood, and an Opportunity With an Oil Driller

Written by Keith Kohl
Posted February 26, 2020

More chaos, more panic, and more blood.

Watching the Dow Jones drop like a stone over the last two days wasn’t nearly as surprising as you might first think.

And it certainly shouldn’t be to you, either.

Keep in mind that the ugly two-day drop this week was preceded by one helluva run three-year run that saw the Dow Jones climb 78% higher.

As my colleague Luke Burgess told you recently, the Dow Jones has increased by more than 27% since the first COVID-19 case was confirmed.

Like I said last week, it all comes down to who has your trust.

We’re now at over 80,000 confirmed cases, with new cases of the infection spreading across the globe, reaching as many as 30 countries.

Not only has it spread to the Middle East, with over a dozen deaths confirmed in Iran, but the country’s own health minister reported that he has it.

COVID-19 has even made its way to Brazil, right smack in the middle of Carnival.

What could possibly go wrong?

How can things get worse for the already panicked investment herd?

Well, enter the Center for Disease Control and Prevention's (CDC) Principal Deputy Director Dr. Anne Schuchat onto the scene. She suggested that it’s likely the coronavirus will cause a pandemic.

Now you can see this situation for what it is: opportunity.

Oil Blockades and Tin Foil Hats

COVID-19 has slashed China’s oil consumption by approximately 4 million barrels per day according to the Vitol Group.

Make no mistake, the bears are out in full force.

Putin is making it easy for them, too. You might recall that Russia has been hesitant to accept another production cut with OPEC.

Will OPEC go it alone? Right now, the Saudis are in talks with both Kuwait and United Arab Emirates to cut output by up to 300,000 barrels per day.

Never mind the fact that roughly one million barrels per day of Libyan oil exports are shut down due to a blockade on its oil ports, or that the looming collapse of Venezuela’s oil industry is closer than most would care to admit.

Until we know the full extent of the coronavirus’ impact, fear and panic will run the herd right off the cliff.

For the third time this month, WTI prices dropped below $50 per barrel this week.

One thing has become glaringly obvious by now — when this storm passes, you should already have your targets in sight.

That window of opportunity won’t be open for long.

Forget Russia and OPEC for now.

All eyes should be focused on the one area where most of the growth in global crude supply has taken place — North American tight oil.

The IEA has projected that between now and 2024, the United States will account for 70% of the total increase in global capacity. According to its report, that’s another 4 million barrels per day that will be tacked onto the United States’ domestic output.

That’s going to be impossible with crude prices languishing around $50 per barrel.

Take three of our largest, most well-known tight oil plays: the Bakken, Eagle Ford, and Permian Basin.

Oil production in the Eagle Ford has flattened out over the last year, and while the same could be said for recent output in the Bakken, North Dakota drillers may be hitting a wall as they move further away from the sweet spots.

Growth outside of West Texas has been stagnant.

That puts everything on the shoulders of the Permian Basin, where more oil is extracted everyday than anywhere else on the planet. At more than 4.8 million barrels per day, more crude is flowing out of the Permian than even the once-mighty Ghawar oil field.

Yesterday, as oil stocks across the board took a deep hit as oil dipped below $50 per barrel, there was one that stood out from the crowd.

In a sea of red, shares of this tiny driller had exploded higher on strong drilling news.

I’d call it one of the best-kept secrets in the U.S. oil patch today, and the investment herd still hasn’t caught on to the fact that these guys are sitting on almost 4 billion barrels of oil.

But here’s the beauty of this… It doesn’t need $100/bbl oil to turn a huge profit for its shareholders.

You need to see the details behind this one for yourself.

And you can, at no cost to you, right here.

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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