2 Timely Shale Plays

Focus: INCOME

Peter Staas Image Peter Staas Managing Editor, Capitalist Times and Energy & Income Advisor

The way to go if you're looking to take advantage of the great shale plays in the US is to look to the natural gas liquids (NGLs) stocks and select midstream players in that sector observes Peter Staas of Energy and Income Advisor.

Gregg Early:  We're here with Peter Staas, managing editor of Energy and Income Advisor, and Peter, I wanted to ask you, there was just something that came out earlier this week regarding the fact that last year was the lowest amount of energy imports in the past 25 years for the country and I know some of that has been due to the economic quagmire that we've been in but part of it is also domestic energy production. And I know you're quite involved in this sector, so I was hoping we could discuss some of the more interesting opportunities that  might be available this year within the domestic energy sector.

Peter Staas:  Of course, Gregg, and that's what investors should be focusing on.  This trend has been in play now for about two years.  US oil production has ran for the first time in decades and the US overtook Russia a few years ago as the world's leading producer of natural gas.

Most of this production is coming from unconventional resource plays specifically shale oil and gas plays such as the Eagle Ford in South Texas, the Bakken Shale in North Dakota and a lot of this has come about because of two factors.

One, you've had elevated oil prices, which has incentivized higher cost production but the main thing is that you've had the development of two technologies: hydraulic fracturing, which is pumping huge volumes of water and chemicals and sand and so forth into shale formations, which are formations that have low permeability; and also horizontal drilling.

That's really changed the domestic energy picture and not only has production been growing but a lot of this has occurred in areas that traditionally haven't produced oil and gas, so there's been a huge infrastructure shortage, which is a big opportunity for the master limited partnership space, which traditionally has owned a great deal of mid-stream assets like pipelines, gas processing, and fractionation.

One of the big opportunities that we see in these states is, and again, most of the focus has been on production thus far and I think part of it has just been such a big story because the more you increase domestic production the lower imports.  Obviously, that's something that's going to play well on the news and people are going to focus on but I think that investors would, should, really be paying attention to gas at this point.

I say that because in the US, the demand side of things, especially one of the reasons that natural gas production has remained so robust is because of an associated product.