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Reviving Mexico's Oil Industry

Introducing... the 51st State of the Union

Written by Keith Kohl
Posted October 25, 2013

Draw up the papers now...

I wouldn't be surprised to see Congress welcome two more Senators into the fold.

And I'm not referring to the potential statehood of Puerto Rico.

No, the 51st state of the Union will be a country that's about to build very close ties to the U.S. oil and gas industry.

While the image of illegal immigrants flooding across the Rio Grande is a hot topic on Capitol Hill these days, what you may not realize is that there's a group of people that has desperately been trying to get in to Mexico.

Truth is, they've trying in vain to tap into Mexico's oil industry for the better part of the 20th century, ever since that fateful day back in March 1938, the day Mexico's president nationalized the country's oil resources.

As it turns out, those U.S. companies may finally get their wish — offering individual investors like us a chance to get in on the ground floor of a brand-new shale revolution.

Mexico's Next "Cantarell Moment"

There's absolutely no doubt in my mind that you've heard of these companies before. They're among the biggest names in the business, spending billions of dollars every year in the U.S. oil patch.

But reforming Mexico's energy industry is only the first step that will throw the door wide open for companies like ExxonMobil, Chevron, and the rest of Big Oil.

What's the reason for this sudden policy reversal, you ask?

Mexico is trying to find what I call its next "Cantarell moment"...

The discovery of the supergiant Cantarell field was the single greatest moment in history for Mexico's oil industry. But it was short-lived.

You are likely aware that production from the Cantarell Complex peaked at slightly more than two million barrels per day in 2003. Today the field pumps less than 400,000 barrels per day, a trivial amount compared to its former self.

More important, perhaps, is the fact that Mexico's overall production has fallen to less than 2.5 million barrels per day.

So you can understand why the country is desperate to revitalize its dying oil industry...

But that isn't going to happen without developing the 13 billion barrels and 545 trillion cubic feet of recoverable tight oil and gas resources buried under Mexican soil.

Consider it the most lucrative game of follow the leader in history, with Mexico hoping to mimic the tremendous success U.S. producers have seen.

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6 Green Pastures for Shale-Driven Investors

And it's not just one region that's making Mexico green with shale envy.

In fact, there are six.

The Energy Information Administration recently mapped out these plays in its inaugural Drilling Productivity Report, published just a few days ago:

eia 6 basins

The EIA's report simply supports what we've been taking advantage of since 2006 — as well as identify six groundbreaking shale plays driving U.S. oil and gas production.

The very first line of the EIA report says it all: “The six regions analyzed in this report accounted for nearly 90% of domestic oil production growth and virtually all domestic natural gas production growth during 2011-2012.”

In other words, all the hype about the U.S. energy boom isn't hype.

These plays don't end abruptly at the U.S. border, either. The Eagle Ford Shale, for example, extends south into Mexico. Remember, this is the same play where production grew to over a million barrels per day within a five-year period.

We're fully expecting the Bakken to accomplish this same thing in five years.

The only question left is which horse to back in this energy race.

Fortunately, that decision will be easier than you think.

The Good, the Bad, and the Outrageously Profitable

In my last article, I showed you how Continental Resources, one of the best North Dakota drillers, drastically outperformed Big Oil — returning an impressive 58% to investors over the last 12 months.

But let me say that one of the biggest mistakes you can make in investing in the U.S. shale boom is in thinking the Bakken is the only game in town.

Try to picture a small group of companies that is not only pumping out one-third of the United States' oil supply, but is also within striking distance of Mexico's shale wealth...

Now let me show you how just one of these plays stacks up against both the Bakken and Big Oil:

clr 10-25

These kinds of moves are just part and parcel of the energy gains my readers have been raking in from this all-out North American energy race...

And it's only going to get better from here on out.

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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