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The Monster Oil Find Nobody Is Talking AboutBy
Friday, April 30, 2010
In the past decade, the words "shale basin" have driven oilmen wild with greed.
For decades, geologists have known layers of certain kinds of shale rock contain huge amounts of natural gas... the vital hydrocarbon that heats our homes and powers electrical grids. But these rock layers are tightly packed... We simply couldn't access the gas "stranded" in the shale.
But in the past 10 years or so, advances in drilling technology have made shale basins – places with names like "Barnett" and "Haynesville" – legendary to oilmen and those who invest alongside them. They have also made a lot of people rich.
The Barnett Shale, for example, is a monstrous rock layer that sits thousands of feet below the surface of northern Texas. During the 2000s, this shale went from an interesting geologic formation to one of the largest natural gas fields in the United States. This sort of find produces incredible stock gains.
Consider Chesapeake Energy, one company that helped pioneer new drilling techniques in the Barnett. Shares in Chesapeake traded for around $2.50 in January 2000. Just eight years later, as this Barnett bonanza was being "proved," Chesapeake shares soared nearly 1,400%. Range Resources, another small pioneer in the Barnett, gained more than 2,500% in the same time.
Success in the Barnett kicked off a boom in "shale basin" exploration... huge new finds including the Haynesville, Bakken, Eagle Ford, and Marcellus fields helped propel gains of as much as 580% in Devon Energy... 1,600% in EOG Resources... 1,650% in Penn Virginia... and an astounding 4,300% in Southwestern Energy.
It also turned the U.S. from a country forced to import this vital fuel into "the Saudi Arabia of natural gas." Thanks to these new drilling tools, we have enough natural gas to meet our energy needs for 100 years... and our supplies keep growing.
This supply boom is creating a huge income opportunity for investors right now, which you can read about in this essay. But for huge capital gains opportunities, I think you have to look outside U.S. borders...
You see, now that the U.S. has made its extraordinary energy transformation, governments are wild to test the new drilling methods on shale fields around the world. As you read this, drill bits are turning in Europe, South America, and Asia.
And now geologists have found what might be the largest basin yet. Over the course of the next decade, it could put the Barnett, Bakken, and all the rest to shame.
While you never hear about it in general media, this basin – known by locals as "Junggar" – could be the largest in the world. Even more important...
It is in China.
Here in America, a number of huge fields have opened to exploration. The largest of these is the Piceance Creek Basin in Colorado. It contains about 700 billion barrels of oil shale resources. Piceance stretches across about 3,000 square miles. Junggar is 117,500 square miles – nearly 40 times larger than the largest prospective shale basin in America.
This is a monster find in its infant stage. We know there's potential, but it isn't fully explored or developed. In tomorrow's essay, I'll tell you more about this basin... and why it's so important to China's future.
Good investing,
Further Reading:
Matt mentions the Eagle Ford shale field, which is in Southwest Texas. Like the Junggar, this field is in the early stages... and a few stocks are just beginning to see big results. Get the full story on the Eagle Ford here: The Most Important U.S. Oil Discovery in 40 Years.
Market NotesCANADA... AUSTRALIA... NOW EUROPE! Our friend and master investor Rick Rule likes to say, "The U.S. dollar is the worst currency in the world, except for all the others." It's fashionable to point out the big problems with the paper U.S. dollar. But you should know most all countries are in the same boat... one overloaded with huge debts and unfunded liabilities... captained by smiling, well-educated pickpockets.
Case in point: the euro... the next stop on our "world currency tour."
In late December, we used Vic Sperandeo's classic 1-2-3 trend change method to nail the big decline in the euro. The euro is the paper of a tenuous currency union. Right now, it's being torn apart by the incompatible policies, work ethics, and savings rates of its members... who are as different as France is from Greece, Germany is from Italy.
Just after our December note, the euro suffered a guillotine chop from $1.50 to $1.43 (A). It then managed a flimsy relief rally into the $1.45 area (B). It suffered another value chop from $1.45 to $1.36 (C)... followed by another flimsy rally to the $1.37 level (D).
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