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Forget Dow 20,000... Focus on THIS

Written by Keith Kohl
Posted January 25, 2017

A few years ago, you’d have thought some energy investors were building a new religion based entirely on U.S. shale.

I myself made a pretty optimistic claim in September of 2014:

I do know this: The oil and gas revolution is just getting started. The U.S. will be in the driver’s seat for energy for decades to come — mark my words.

After more than two years and a brutal bear market, I still stand by those words.

In fact, the U.S. is in an even better position now than I’d expected back then! And while everyone’s got their attention on oil, it’s the other half of this revolution I’m making my bets on today...

Turn on the Gas

In late 2014, both oil and natural gas markets felt a sting after OPEC countries decided to pump oil at a rate far above their ceiling of 30 million barrels per day.

This was all brought on by Saudi Arabia’s utter refusal to compete against the tight/shale oil boom ignited by U.S. drillers. It took nearly 30 years of getting the formula right... and those companies are not only getting the hang of tapping into these unconventional sources, but it turns out they’re becoming more efficient with every new well drilled today.

In fact, the very early stages of the shale boom actually took place in the Barnett play near Fort Worth, Texas, where George Mitchell was pairing his horizontal drilling techniques with hydraulic fracturing.

Domestic natural gas production jumped from around 1.5 trillion cubic feet each month in 2005 to about 2.3 trillion cubic feet. To put a little more perspective on this growth, it added nearly 10 trillion cubic feet to our supply that year.

But like I said, they’re getting better with each well.

Don’t take my word for it. Check it out yourself:

eacnewwelltexas

As you can see, new wells in the Marcellus region are extracting a tremendous amount of natural gas today.

After decades of being a net importer of crude oil and natural gas, the U.S. was suddenly in a position to become a net exporter of both!

Forget Dow 20k… Focus on Energy

The catch in our newfound energy wealth, however, was long-standing sanctions that prevented U.S. producers from tapping into foreign markets. These were originally meant to protect the country from becoming too dependent on foreign sources and losing all hope of gaining energy independence.

The game changed entirely soon after the shale boom... and eventually, so did the export ban.

If you weren’t aware of this yet, it may be one of the most profitable situations for everyday investors to take advantage of: as of January 2016, the U.S. started exporting both crude oil and natural gas, the latter in the form of LNG.

These exports have been going to countries all over the world, and they’re expected to ramp up in coming months.

Truth is, they already have.

Due to an unusually cold winter that China is having this year, the country is boosting its LNG imports.

Below, you can see firsthand how this is a boon for natural gas players in the Lower 48:

image2AsiaLNGEnergyandCapital

There it is, dear reader... inevitability.

It really was only a matter of time before natural gas players in the United States started greedily eying up Asia’s LNG market. It also helped that Asian spot LNG prices jumped after experiencing supply shortages from a few facilities in Angola and Australia.

Well, gas exports out of the Sabine Pass LNG terminal hit a new record recently, exporting 12 shipments containing 42.8 billion cubic feet of natural gas, most of which headed towards Asia.

If you’re looking for the rub in all of this, it’s the fact that just one area has singlehandedly driven U.S. natural gas production — and still does to this day!

Next Wednesday, we’re going to break down the supply side of the situation and take a look at whether or not your natural gas stocks are worth the value you paid.

Until next time,

Keith Kohl Signature

Keith Kohl

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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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