Is the Next American Shale Play Right in Your Backyard?
The other day, we asked for you to send in your energy questions – and one has come up over and over again: what’s the next big American shale play?
Well, It’s happening in a place that I just visited last week in Colorado, north of Denver: the Niobrara shale, also referred to as the Wattenberg oil field. Though there are a lot of different names for it, all you need to know is that this is the next big American shale play.
It’s amazing to see up close and personal. There are drill rigs spinning, even when it’s 5 degrees outside.
The other cool part about this play is that drill rigs and oil pumping stations are somewhat mixed into a suburban landscape. And from what I can tell, the community is embracing this economic boost. Lots of high paying jobs, new construction, abundant energy… it’s beneficial for everyone.
And from an investing standpoint it’s even better…
The company I visited last week in chilly Colorado is a great example of the superb economics.
First off, it’s important to note that TECHNOLOGIES are improving – almost daily.
New drilling and completion techniques are starting to make a real difference.
You see, over the past few years, the well-run companies haven’t just been “drill, baby, drill’n.”
Instead, they’ve been testing new techniques to help increase efficiencies – new fracking techniques, longer well “laterals”, testing the use of more proppant and more.
Even if these terms sound like jibberish to you, the bottom line is: after 3 -5 years, those efficiencies for the well-run shale producers are paying off big time!
For example – a few years ago, not many U.S. drillers were utilizing what’s called multi-well pad drilling.
Without getting too technical, this is a fairly new technique that allows drillers to drill multiple wells at one location.
So, instead of drilling one well and then having to tear down the rig and move it several miles, which is time-consuming and expensive, shale producers are able to drill wells within feet of each other – using high-tech “walking rigs”. And I can tell you firsthand, these walking rigs are awesome to see in action.
From a cost standpoint, it’s very exciting, because these pad drill sites maximize efficiencies and reduce drilling time. After all, you’re drilling 6-8 wells all at once – so it’s much easier to manage manpower, supply costs, and so on.
Last week, I was onsite with a company that has great well-pad economics. The wells cost about $4 million dollars apiece, and have the potential to produce tens of millions of dollars in return.
In fact, one pad drilling site that’s been in production for just 5 months has already paid back 68% of its total costs. Not only is that impressive…it’s repeatable.
That’s great news for these up-and-coming shale producers.
Better yet, I’m told that if oil prices head lower (which I don’t think they will) there are more efficiencies to be achieved. My field contacts tell me there’s still a lot of profit to be had in today’s U.S. oil fields.
This is all great news for investors! If you’re looking for the next big play in American shale, keep an eye on Colorado.
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