|Dow||+13.87 to 16,443.34|
|S&P 500||+0.03 to 1,920.24|
|Nasdaq||+2.22 to 4,355.05|
|10-YR Yield||-0.01 to 2.474%|
|Gold||+$22.70 to $1,308|
|Crude Oil||-$0.30 to $97.08|
Dallas, Texas. Along with Houston, it’s one of the beating hearts of energy country. And it’s where I’m writing to you from today.
I’m in town as part of my ongoing effort to bring you the latest news and developments in the domestic energy industry, which as you know, is absolutely booming. From the previously desolate North Dakota prairie — now alive with drilling, processing, and transportation activity — to the great oil fields of west Texas — once declining but now booming again thanks to new drilling technology — the telltale signs of this thriving American industry are everywhere.
Here in the Dallas-Ft. Worth metropolitan area, you have the headquarters of energy production, marketing, and refining giants like ExxonMobil (XOM, Weiss Ratings: B), energy services and construction firms like Flour Corp. (FLR, Weiss Ratings: B), and natural gas distribution firms like Atmos Energy (ATO, Weiss Ratings: A-).
You’ll also find the main offices of some of my favorite energy companies, the master limited partnerships involved in the transport, storage, and distribution of oil, gas, gas liquids, and related refined products. They include Energy Transfer Equity (ETE, Weiss Ratings: B) and Energy Transfer Partners (ETP, Weiss Ratings: C+).
Production regions in Texas like the Permian Basin, located in the western part of the state, are being revitalized by so-called horizontal drilling techniques. As the name suggests, that’s when companies drill horizontally rather than vertically to increase output from existing fields.
|“Production regions in Texas like the Permian Basin are being revitalized by so-called horizontal drilling techniques.”|
Oil production there previously topped out at around 2 million barrels per day in the 1970s. But it’s back up to 1.5 million BPD now, with more than a third of the U.S.’s active rigs drilling in the region. Analysts and oil executives believe that could rise to as high as 2.5 million BPD or even 3.5 million BPD over the next decade!
We’re also seeing companies use hydraulic fracturing, or “fracking,” to churn out new oil and gas from the Eagle Ford shale southwest of here. Virtually no one was even drilling there as recently as five or six years ago. But gas production has now skyrocketed to 6.5 billion cubic feet per day from less than 2 billion, while oil production just hit 1.45 million BPD, according to the Energy Information Administration.
Thanks in part to the growth in the domestic energy industry, Texas’ economy is doing very well. The state’s unemployment has fallen to just 5.1 percent, well below the national average of 6.2 percent. North Dakota’s rate is just 2.7 percent, by the way, the best in the country thanks to its own energy boom!
Bottom line: We have seen a recent correction in crude oil and natural gas prices over the past few weeks. That stems partially from worries over lackluster economic growth in Europe, and it’s one reason I’ve been so bearish — and right! — on the euro vis-à-vis the U.S. dollar. The euro just fell to its lowest level in nine months, and I wouldn’t be surprised to see it break 1.30 to the dollar before long.
|The energy sector is presenting one of the best buying opportunities in years.|
Fear over what Russian President Vladimir Putin will do next, including retaliatory economic sanctions, also have investors in all risk assets worried. That’s putting downward pressure on energy commodities along with stocks.
But rather than back away, I think this is presenting one of the greatest buying opportunities in energy in years! After all, the American energy industry is growing by leaps and bounds. Barring some global economic crash, this process should last for several years — allowing investors like you to capitalize if you know which companies to buy into, and when to do so.
To that end, I’ll have much more information in the weeks ahead right here in Money and Markets. But now I need to go get back to my research — and maybe dig in to some genuine Texas BBQ!
What are your thoughts on the American energy boom? In an economy that needs stronger growth, the increased jobs and economic activity associated with increased domestic production, transportation, and refining seem like a Godsend — do you agree? Have you invested in any Texas-based companies, and what has your experience been with them? Let me know at the Money and Markets comment section.
|OUR READERS SPEAK|
One of the more frightening stories for Americans has been the arrival of Ebola patients back in this country for treatment. Some people have raised worries about the potential for others here to be infected. But many readers expressed support for the move.
Reader Peter, for instance, said: “It is a good thing to bring the two missionaries back to the U. S. for treatment for several reasons. First, we have the capability to isolate them and the disease. Second, we can better study the disease here with the equipment and ability we have to take biological samples without contamination from the patients for study. That will help us find either a cure or a better ability to manage an outbreak. Third, since they are American missionaries we have an obligation to help them out.”
Reader Vicky D. echoed those comments. She said: “Just as our military does not leave one of their own wounded on the battlefield, we cannot leave our missionaries in a foreign country where there is not the proper sanitation or medical care.”
Not everyone agreed, of course. Reader JR was clearly opposed. “This is the most outrageous violation of our immigration and health laws that I have ever heard of. To bring a highly lethal disease with no known cure into the USA is a danger to the entire population. Outrageous at the least. Scandalous at the best.”
Strong opinions all around, no doubt. If you’d like to add your views to the mix, definitely hop on over to the comment section on the website.
|OTHER DEVELOPMENTS OF THE DAY|
More war-mongering from Putin and worrisome comments about the possibility of a Ukraine invasion combined to knock stocks for a loop yesterday and overnight.
Is the tax inversion craze running out of steam? Walgreen (WAG, Weiss Ratings: A-) said that it was going to go ahead and buy the shares that it doesn’t already own of the British drug store chain Alliance Boots. But rather than shift its corporate domicile there to reduce taxes, it’s going to stay put in the Chicago metro area. That knocked shares of WAG for a loop.
Meanwhile, Fox (FOX, Weiss Ratings: B) abandoned its plans for a mega-merger with competing media giant Time Warner (TWX, Weiss Ratings: A). CEO Rupert Murdoch blamed Time Warner execs for remaining steadfastly opposed to a deal. Fox shares surged, but TWX shares tanked, on the news.
Reminder: You can let me know what you think by putting your comments here.
Until next time,
P.S. In my FREE report, 6 Stocks Set to Soar In 2014 — and Beyond!, I give you six companies that are the “Best of the Best” across several key industries. Each one is a leader in their own sector … and all my signals are telling me to buy these with both hands.