Wednesday, August 29, 2012
Keep ignoring the government...
Last year, I told you if you wanted to make money in oil stocks, you had to ignore what the government was telling you.
The problem I showed you then was silly SEC rules that massively underestimated the amount of oil that companies held in undeveloped shale reserves. (The company I told you about rose 56% in about four months.)
But the thing is, the whole country is facing a similar problem with government data... and it's of a much bigger scale.
According to Adam Sieminski, head of the Energy Information Administration (EIA), just five years ago, the U.S. was on track to become a major importer of natural gas.
Now, he says, we will likely be a net exporter of natural gas by 2022.
Longtime Growth Stock Wire readers are familiar with the major revolution behind that switch. New technology has "unlocked" huge supplies of energy in shale formations across the country. We've been tracking this story since 2008.
But the government is way behind. We showed you how bad its information has been with oil reserves. It's just as bad when it comes to natural gas.
Look at the "official" estimates for Pennsylvania's enormous Marcellus shale. This massive, gas-rich rock formation is booming. As it grows, it will create 160,000 new jobs by 2015. However, back in 2008, the U.S. Geological Survey's (USGS) mean estimate for recoverable gas was just 1.9 trillion cubic feet.
That was clearly wrong, since the Marcellus production from 2008 to 2010 (the latest data available) was over 1 trillion cubic feet. It produced nearly 600 billion cubic feet in 2010 alone.
So last year, the USGS published a new estimate. This time, it put out a more detailed version. It estimated that a typical Marcellus shale gas well would produce 930 million cubic feet of natural gas over its life. And came up with a total of 84.2 trillion cubic feet of recoverable natural gas in the entire Marcellus.
That was a huge increase from 2008... But it was still wrong.
The latest estimate – this one from the EIA – puts the estimated recovery per well at 1.56 billion cubic feet and 140.5 trillion cubic feet for the whole Marcellus. That is a giant leap... a 67% increase across the board from the 2011 estimate... and a 7,300% increase from the 2008 estimate.
The takeaway here is that, while they're likely getting closer to the actual figure, the government's policy wonks don't really have a handle on shale development. And you're going to lose out if you make your investing decisions based on government numbers.
For example, the industry is busy developing several promising shale plays right now. These shales aren't even on the government radar yet. And if you wait for government estimates to come out, the big opportunity might be gone.
I pointed out a few of these promising shales earlier this month...
These are the places I expect to find fantastic investments over the next few years.
Companies to watch are juniors like Gulfport Energy (GPOR) in the Utica shale in Ohio and Breitburn Energy Partners (BBEP) in the Sunniland shale of Florida.
You wouldn't know it if you waited around for Uncle Sam to tell you... But companies like these and their peers could easily grow 10-fold from shale development.
Earlier this month, Matt shared a chart that shatters the idea of "Peak Oil." He says, "if you're still trading with this outdated idea in mind, you better update your thinking."
"Food boom" is on... fresh 52-week highs for Kraft, Heinz, and Campbell Soup.
Huge iron ore miner Vale plunges... shares hit a three-year low as company depends on China for demand.
German industrial giant Siemens touches its highest level in over four months.
Health care uptrend is going strong... big sector fund XLV nears an all-time high.