In last Tuesday’s Energy and Capital, editor Keith Kohl talked about the surge of drill rigs in the United States.
Here’s exactly what Keith said:
“…there are more rigs drilling for oil in the U.S. now than when Baker Hughes Inc. began counting them 27 years ago!
Although the count is still far from the 4,530 rigs that were running in 1981, current production around 8 million barrels per day is only slightly off of the 8.5 million barrels per day the U.S. was producing back then.”
What Keith failed to mention was that the U.S. oil field that saw the biggest jump in drill rigs was the Petroplex in West Texas. Rigs drilling horizontally in the Petroplex formation rose by 10 to 265, the highest level since February 2011.
This is huge.
This is a game changer. You see, the Petroplex is already producing over 1.3 million barrels of oil per day, making it one of the most prolific oil fields in the world. And Keith estimates that the “stacked pay zone” of the Petroplex will be spitting out over 2 million barrels per day in the next few years.
And that’s why his microcap Petroplex driller hit a 52-week high yesterday. Take a look at the stock chart:
And it keeps going higher and higher.
The company recently announced a blockbuster quarter and end of the year results. And this has Keith upping his price target.
Last month, the company announced that it expects to increase production from the Petroplex 120%, going from 2,228 boepd last year to a forecast of 4,700 to 5,100 boepd this year. Their proven reserves increased 50% as well.
It gets even better.
The company trades at a paltry market cap of $300 million (a true microcap) on gross revenue of $105 million. So as it continues to add production from its Petroplex wells, the company’s stock should rise too. And quite dramatically.
But even that doesn’t tell the whole story.
A few days ago, the British rag The Independent ran a story with this glowing headline: “Fracking is Turning the US into a Bigger Oil Producer than Saudi Arabia.”
According to The Independent’s report:
Thanks to the success of engineers in pushing the frontiers of hydraulic fracturing, or “fracking”, to access reserves of oil trapped in shale formations, notably in Texas and North Dakota, America is poised to displace Saudi Arabia as the world’s top producer. With that could come a hobbling of OPEC and unforeseen shifts in US foreign policy.
So rapid has been the change in its energy fortunes that even some experts, as well as policy-makers in Washington, are struggling to keep up. Nor are we just talking oil. So much natural gas is being released by the shale also that for now outlandish quantities of it are simply being burned off into the atmosphere.
Even predicting future oil output isn’t the precise science you’d expect. “We keep raising our forecasts, and we keep underestimating production,” Lejla Alic, an analyst with the International Energy Agency noted recently. Last year US production reached 7.4 million barrels a day, an increase over 2012 of 15.3%. A jump that large hasn’t been seen since 1951. This year the US should produce 8.3 million barrels a day.
Take another indicator – the volumes of crude being moved by trains, often a mile long, from the shale fields to refineries and terminals. In all of 2008, train companies moved 9,500 wagons of the black stuff. Last year, 400,000 of them rumbled across America.
Read that quote again from the IEA: “We keep raising our forecasts, and we keep underestimating production.”
The sweet spot of this story is that production just began in the Petroplex. It’s a young play that has many years of production left in it.
Why is this the sweet spot?
Well, as Keith told me recently, he’s perfected a successful trading strategy throughout his years investing in oil stocks.
Keith explained that the time to buy an oil or gas company drilling in a new shale formation is when:
- Production is just starting
- Initial wells are showing great results
- The mainstream investing public knows very little about it
We have all three in the Petroplex. And we have all three with his microcap Petroplex driller.
Keith is showing investors exactly how to play it for tremendous profits right here.
Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy and Capital. For more on Brian, take a look at his editor’s page.