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2014/10/31

Make Money Off of Oil Pirates With These 3 Stocks

It's Halloween, so I figured I'd  talk to you today about the ghosts of U.S. energy past...
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Make Money Off of Oil Pirates With These 3 Stocks
By Keith Kohl | Friday, October 31st, 2014
Keith Kohl

It's Halloween, so I figured I'd talk to you today about the ghosts of U.S. energy past.

Now, let me be clear — I'm not talking about deceased oil barons like Schlumberger, Rockefeller, Hunt, and Murchison.

I'm talking about the former Masters of the Universe...

The Organization of Petroleum Exporting Countries.

If you read my columns regularly, you know OPEC has been faltering since the start of the U.S. shale oil and gas boom. We just didn't realize how bad it all was for them until recently...

A story out of OPEC member Nigeria this week captures some of the cartel's issues perfectly.

A group of pirates attacked barges and boats in offshore oilfields near the Bayelsa province. The pirates were so strong that they even overpowered a police gunboat that was escorting oil workers. They abducted six of the oil workers and four policemen.

On the same day, another incident occurred in the same area. Pirates (perhaps the same ones — the government in Nigeria doesn't seem to know) abducted six more oil personnel.

These aren't the first attacks by pirates on oil assets and personnel in Nigeria, and we have a feeling they probably won't be the last.

Hopefully the abducted are returned safely...

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Who's Next?

Nigeria's energy industry has long been plagued by spats of theft, violence, and declines in production. And as we recently mentioned, the United States, one of Nigeria's biggest customers, no longer imports oil from the West African nation.

NigeriaProd

It's all because of our dramatic increase in production. According to the renowned energy analysts at Wood Mackenzie, the United States will be energy independent by 2025.

That means in 11 years, the United States will be in the same position in terms of energy as in 1952.

In fact, we will be exporting massive volumes of light, sweet crude, condensate, and liquefied natural gas by then, too.

Because of these revelations, we are prompted to ask which OPEC producer will be the next to fall as the U.S. stops buying its oil...

Saudi Arabia? Qatar? Venezuela? Libya?

Truth is, we aren't quite so sure yet. But it doesn't really matter either way.

It's happened once with Nigeria, and it will happen again...

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Here's Where We Are Exporting Our Energy

What's more, the U.S. isn't just ending its business with OPEC members — it's also stealing away some of their customers, too...

While oil producers in Nigeria have been searching for new buyers, their problems with violence and theft have escalated, making those potential customers wary of supply disruptions.

OilPirates

Asian consumers such as Korea, China, and India are especially wary of supply disruptions that could hurt the steady flow of growth they so crave.

Instead, those nations are looking to the United States and elsewhere for their energy.

We've already started shipping Eagle Ford condensate to South Korea every month, and we will continue to do so for a while. By the end of next year, we will be shipping liquefied natural gas to Japan, China, and India.

Perhaps after the midterm elections or the 2016 presidential elections, we will even start exporting crude oil.

And when that happens, expect China and India — where demand is skyrocketing amid low oil prices — to soak up much of our light, sweet WTI blends.

According to Platts, China's demand alone has jumped 7.4% over this time last year, and yet pundits all over the financial press can't talk enough about China's economic woes.

To me, it sounds like the country's doing just fine — and it is going to need cheap oil, natural gas, and condensate for many years to come.

How to Play the Trend

Unfortunately, we will have to wait some time for the exports of natural gas and crude oil, but condensate exports are already happening thanks to Enterprise Products Partners (NYSE: EPD) and Pioneer Natural Resources (NYSE: PXD).

Soon enough, everybody who harvests condensate will have a shot at exports, and when they do, expect profits and stock prices to rise.

The best stocks for condensate come out of the prolific Eagle Ford shale formation in South Texas.

The shale there spits out 70% of the condensate produced in the United States and is conveniently located right next to the oil ports of the Texas Gulf Coast.

In the long term, these stocks will be in a prime position to export the oil and gas they produce to countries all over the world.

They key for investing in these trends will be to get in early and hold on for the ride. If you'd like to start building your position now, I suggest you take a look at these three Eagle Ford stocks.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

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