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The 80% Secret Hidden Inside the U.S. Oil Industry

Keith Kohl

Written By Keith Kohl

Posted September 13, 2013

“Do you know the 80% secret?” he asked me.

We were barely four hours into our 24-hour trek from Baltimore to Midland, Texas, skirting our way past Roanoke, Virginia, when my passenger posed the question.

At first, I ignored him, preferring to keep my attention on the road ahead, while contemplating the meaning of life and the vastness of the universe — you know, the usual road trip ponderings.

But soon, the question started to gnaw at me.

The anxiety compounded with every mile we put behind us… and by the time we were passing Knoxville several hours later, I’d reached my boiling point.

“Okay, I’ll bite. Tell me the 80% secret,” I begged.

His reply didn’t help ease my angst.

“Not yet. But I’ll do you one better. I’ll show you in little bit.”

Much to my frustration, the answer to this “secret” didn’t come for another ten hours, long after we’d raced by Texarkana, finally entering Texas territory.

“Pull over up ahead,” he told me.

Once we parked on the side of the road and got out, he pointed to a familiar sight: a pump jack.

Better known in Texas dive bars as a nodding donkey, a horsehead pump, and a thirsty bird (believe me, there are more names for these things than I can count… or care to admit to knowing), this one was a little different from the ones I’ve seen littering North Dakota’s western landscape on my trips to the Bakken.

Unlike those, this particular pump jack was covered in rust.

Even though it was moving at a painfully slow pace, this archaic remnant of the Texas oil industry had more in common with Texas’ first oil well than the newer shale wells that now dot the horizon.

In fact, it looked a lot like this:

rusted stripper well

“This is it, Keith. THIS is the 80% secret that oil companies are desperate to keep from getting out.”

That’s when it hit me that I was looking at a stripper well.

A Vital Role

In simple terms, a stripper well is an oil or gas well that is at the end of its life.

It’s a well that produces ten barrels of oil or less per day over the course of a given year.

And despite the lascivious name given to this set of wells, they do play a vital role in the United States’ domestic oil production…

After torturing me with his riddle for the better part of 18 hours, my colleague had made a crucial observation about the U.S. oil industry — that 80% of all oil wells in the U.S. are stripper wells.

At least, that was the count in 2009 (click chart to enlarge):

stripper 9-12

If you really want see the glass (or well, in this case) as half empty, notice that 35.1% of the 363,459 oil wells in the United States on record in 2009 produced at a rate of less than a single barrel of oil per day.

To add insult to injury is the fact that another 6% of the total number of oil wells this year produced less than 15 barrels per day.

Together these wells account for almost 20% of all U.S. oil production during 2009.

Things don’t get much better on the other side of the equation, either: Only 1.5% of U.S. oil wells produced more than 100 barrels per day.

Big Oil, Big Promises

Scanning today’s news, you’re likely to see a batch of promising headlines regarding oil production.

Don’t get me wrong; there are a lot of reasons to stay optimistic about domestic production…

But the gross amount of stripper wells representing U.S. output should give you an idea of just how fragile this output really is.

Think about it this way: Losing those stripper wells producing less than 15 barrels per day means the U.S. will have to find an extra million barrels of oil per day!

Mind you, this is no small feat — especially considering the energy independence hype making the rounds. (A good place to start might be in eliminating that nasty addiction to OPEC oil, which in June amounted to 3.8 million barrels per day.)

Fortunately, U.S. oil companies are in luck…

There’s a new breed of oil wells coming online that threaten to upset the balance.

Today, that means economically tapping into the oil resources beneath U.S. soil that, until recently, companies were previously unable to produce…

And these are the wells that will drive U.S. oil production for the next 30 years.

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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