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2015/03/13

Here's what's worth buying

Because of the shale and tight  oil revolution, production in the U.S. and Canada is nearing all-time records, while the economy and jobs numbers recover...
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The "holy grail" for oil exploration?

A breakthrough technology is breathing new life into America's aging shale oil wells... and significantly extending their life spans.

The Bakken Magazine says it "can yield nearly identical results to initial production."

That means DOUBLING the amount of oil and gas you can get from each well.

And it could make some savvy investors a killing as it rejuvenates America's oil patch.

Get the full details here now.


Here's what's worth buying
By Keith Kohl | Friday, March 13th, 2015
Keith Kohl

“Never send to know for whom the bell tolls; it tolls for thee.”
— John Donne

In 2008, 9,500 train carloads of crude oil were shipped throughout North America. That's 9,500 carloads for the whole year — not per day or per month.

In 2014, 500,000 carloads of crude oil were shipped throughout North America. That's a 5,163% jump in six years.

As you've probably read in the news, this increase in rail shipments of oil comes at a delicate time for the industry in North America.

Because of the shale and tight oil revolution, production in the U.S. and Canada is nearing all-time records, while the economy and jobs numbers recover.

However, these benefits are now being overshadowed by another important growth spurt for the industry...

traincrashes

With oil reserves unlocked in new regions of the U.S., the only way to ship the oil to refineries has been via rail — and as the chart above and countless stories in the news show, that has been much more difficult than anticipated.

In fact, the oil industry seems cursed by logistical problems. The shipment of oil has at times turned out to be deadly, dangerous, and downright embarrassing.

The recent spate of incidents shows that all too well, and the funeral bells are tolling ever louder for the crude-by-rail industry.

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Self-Regulation Isn't Working

Now, you and I both know that mistakes in any industry are unavoidable.

So when the first major crude train derailments hit the news back in 2010 and 2011, the companies involved shrugged the critics off with ease.

Instead of going full bore, leaders in the industry like the Canadian Pacific Railway and Warren Buffett's own BNSF Railroad tried to impose self-regulation as a way to prevent any major incidents.

But then the big one came...

In July 2013, a train overloaded with crude oil lost control, ran off the rails, and crashed into a small town outside of Quebec. The accident killed 47 people and incinerated the town's center.

The accidents didn't stop there, either. As the industry proposed more weak regulations on itself, more trains crashed and burned, leaking oil into important bodies of water and leveling homes and businesses.

Five oil trains have derailed in the last five weeks, including a massive derailment in West Virginia that destroyed at least one home and burned for several days, making the town too dangerous for residents to stay.

Two of the latest accidents were the most telling...

gogama

This is an image of the smoke rising from a crash outside of Ontario, Canada on Saturday. The train was hauling 94 cars of crude oil, at least 38 of which derailed, many exploding into flames.

The flames stayed alight throughout the weekend and into the workweek, while officials reported that oil leaked into a nearby waterway.

And last Thursday, a BNSF train derailed and exploded outside of Galena, Illinois.

galena

This crash is considered a major incident because of its size and the scope of its effects.

For one, it took several days for the fires to be extinguished. Now, the EPA says oil from this crash leaked into the nearby Galena River, an important tributary of the Mississippi.

Nobody knows the exact amount of oil leaked into the water, but there was a total of 630,000 gallons of oil in the 21 cars that came off the tracks.

Of course, a lot of it burned, but some of it — perhaps a substantial amount — also found its way into the already at-risk Mississippi River watershed.

And here's the kicker: The BNSF train that crashed in Galena was in complete compliance with industry regulations. The train was traveling at 23 miles per hour when it derailed (well below the speed limit), and the tank cars were “newer and safer” CPC-1232 tankers.

These tankers and slower speeds were supposed to end the accidents, and yet these same tankers have failed in four derailments this year alone.

Now that accidents are back in the news, the industry is about to be replaced...

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The Bell Tolls for Thee

No matter what the oil-by-rail industry does, it's slowly but surely crashing itself into oblivion.

All of the lost oil revenue, water damage, and destruction have lawmakers breathing down the necks of train companies.

Canada is overhauling the standards on railcars that carry flammable materials, and the new requirements are going to make oil by rail too expensive for this low oil price environment.

Some of the proposed rules include thicker steel and full head shields for tank cars, mandatory thermal jacket protections, and new electronically controlled brake systems.

If train companies like the BNSF are forced to adopt these rules and overhaul their oil equipment, the costs will be extravagant and will surely force drillers to find alternatives.

Right now, the alternatives are twofold: trucks and pipelines.

Trucks are more expensive and probably as dangerous as trains.

But pipelines are safer, cheaper, and more efficient. The only problem with pipelines is that they aren't as common in places like the Bakken or the Niobrara.

That's all changing now, as pipelines are rapidly installed in areas where volatile shale oil is being drilled. And because they're cheaper, pipelines are ultimately the better choice for oil companies and investors.

If you're looking to profit from this emerging trend, this report on a stock that is taking full advantage of the shift will help you get there.

Good Investing, 

alex-martinelli-signature

Alex Martinelli

With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor's page.

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