Could Be a Boon for Oilfield Services

Not only is Christmas in the air this time of year, but talk is also swirling about energy independence for the U.S. The revolution in economically exploiting unconventional plays has produced a glut of natural gas and steadily rising oil production. Even the sober International Energy Agency forecasts that U.S. production will overtake Saudi Arabia in seven years, and that North America will be independent in 10. Before we pop the champagne, however, let's listen to an independence "bear." Just as with any great stock thesis, you should study the bear case in order to ensure your research is thorough. 

Here is the challenge in North America: While there are far more reserves of hydrocarbons locked in the shales than there are in the depleting conventional plays, these reservoirs are smaller than the latter and begin declining far sooner than do large conventionals. That means the pace of drilling must accelerate in order to sustain production, let alone grow it. Industry consultant Arthur Berman, of Labyrinth Consulting Services, recently made the case that we won't be able to drill quite fast enough to offset rapid decline rates. He says that, while U.S. production will grow, independence is unlikely. His full presentation is here (PDF); I will share a few slides to illustrate his points....389 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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