Tags: Drilling | Energy | Boom

New Oil, Gas Drilling Techniques Fuel Energy Boom, WSJ Reports

By    |   Tuesday, 07 February 2012 12:41 PM

New oil-and-gas drilling techniques like fracking and horizontal drilling are creating a U.S. energy boom. Investors and innovators have gained billions in profits, and investors can still earn strong returns despite potential risks, according to The Wall Street Journal.

"America stands on the verge of a major change that puts it on a course to near self-sufficiency" in energy, says Tobias Levkovich, Citigroup's chief U.S. equity strategist, according to The Wall Street Journal.

Extracting oil and gas from shale and other rock formations is now easier with the help of new drilling techniques like drilling down, then sideways and shooting a mix of water, sand and chemicals between rock formations. Companies double or even triple production.

The energy boom helps account for recent optimism in the stock market, say experts quoted by The Wall Street Journal. The S&P Energy Index is up 4.25 percent so far this year, and the S&P 500 is up 6 percent.

The main risk may be that the easy money has already been made, according to the Journal. The increase in production combined with a warm winter has pushed down natural gas prices and the stocks of natural gas companies like Chesapeake Energy and Cabot Oil & Gas. Plus, tougher environmental regulations are another risk.

Many experts recommend investing in firms involved with new oil, rather than gas, extraction, such as EOG Resources and Continental Resources, the Journal states. Experts also recommend chemical companies and others firms that gain from lower natural gas prices, such as CF Industries Holdings and LyondellBasell Industries.

Natural gas does seem like a lucrative opportunity, agrees financial expert Isaac Pino in his article for The Motley Fool. But investors should look beyond traditional exploration and production companies and look for lesser-known companies, he warns.

Pino cites Helmerich & Payne, which operates rigs, and Westport Innovations, which designs natural gas engines.

"The natural gas industry currently offers something for everyone," Pino writes. "My suggestion is to find the companies with minimal exposure to the huge price swings of the underlying commodity. Thorough research will reveal the undervalued suppliers and cutting-edge companies that could prosper for decades to come."

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Tuesday, 07 February 2012 12:41 PM
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