Meet the Cline Shale

Keith Kohl

Written By Keith Kohl

Posted May 3, 2013

“I can’t believe they’re dumb enough to go through with it.”

The sun was just peeking over the top of the horizon as we plowed our way towards Midland.

The four-hour drive from Dallas had been easy enough to navigate — just point your car west and give the gas pedal some lead for about 300 miles…

I was in a good mood that morning, but I couldn’t say as much for my travel companion.

I dismissed his pessimism at first, thinking perhaps he wasn’t a morning person, but I changed my theory when I looked over and saw the headline of the story he was reading in the passenger seat.

Given our location, I thought it had something to do with Abilene. “What’s that?” I asked him.

Turns out the article wasn’t about Texas at all, but rather a trio of new laws making their way through the California legislature.

Interestingly enough, the three bills would essentially accomplish the same thing (government efficiency at its best): In effect, they would establish a moratorium on hydraulic fracturing.

“How can they not see how huge fracking will be for them from here on out? That’s like telling someone 3,000 years ago that indoor plumbing is gonna be big,” he said, exasperated.

I understood why my colleague was so skeptical. But a bigger thought had come to mind…

If California bans hydraulic fracturing, Texans are going to make a fortune.

Meet the Cline Shale

The news story about the anti-frack bills made the last two hours of the trip seem to pass quickly, and we finally arrived in West Texas.

Last Tuesday I mentioned how unconventional plays like the Eagle Ford were the rising stars of Texas’ oil revival. I also told you there are other shale plays like it that haven’t yet made it onto Wall Street’s radar — like this one, called the Cline Shale.

This up-and-coming play is approximately 140 miles long and 70 miles wide.

cline shale 5-3

One of the reasons you might not recognize the Cline is because it’s widely known by another name, the Lower Wolfcamp.

Either way, everyone is comparing it to the Eagle Ford…

The light, sweet crude locked in the Cline Shale is the same light, sweet crude refiners salivate over. The oil there has an API gravity is between 38 and 42 degrees, another similarity it has with the Eagle Ford.

And the nearly four million barrels of recoverable oil per square mile coupled with analysts’ reports suggest it would amount to more than 30 billion barrels of high-quality oil at Texans’ fingertips.

There aren’t many guarantees in life, but one of them is that if someone strike oil in Texas, you can bet they’re going after it.

Texas: The Friendly Oil State

Last year, the top five oil-producing states accounted for 61% of U.S. production.

Narrow that list down to even the top three, and the amount is still more than half of the United States’ domestic output.

And somehow I’m still constantly amazed by the attitude toward energy development and how much it differs among our largest oil producers!

The latest push by California lawmakers to ban hydraulic fracturing would have a devastating effect on the state’s oil production.

An IHS report last year suggested California’s unconventional oil and gas-related employment is expected to grow 50%, providing 153,000 jobs by 2020. In fact, oil and gas activities added $10.4 billion to the state’s economy during 2012, which is projected to more than double by 2035.

Barring some new breakthrough, California’s oil and gas production will wither and die without hydraulic fracturing. That’s the reality of the situation.

And saying this proposed moratorium is for the sake of advancing renewable energy sources like wind is bunk. The truth is Texas generates more electricity from wind than California does.

However, instead of banning technology that unlocks new energy sources, Texas embraces them.

Instead of banning technology that unlocks new energy sources, Texas embraces them. Companies in the Lone Star State have greeted advanced drilling and completion technologies with open arms for decades. And let’s not forget that the shale revolution began in Texas’ Barnett Shale…

In line with taking full advantage of the current oil situation, a subsidiary of Kinder Morgan Energy Partners (NYSE: KMP) is planning to build a 1,025-mile pipeline to ship crude oil from the Permian Basin to California refineries.

I mentioned before that it’ll be unconventional plays like the Cline that will help drive U.S. production. They’ll be the reason Texas has a chance to double its production in a few years (plus it doesn’t hurt that a well in targeting the Cline Shale costs about half as much as one in North Dakota).

So all that’s left is for Texas drillers to do what they do best…

Until next time,

Keith Kohl Signature

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.

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