Author: Mark Holder, Stone Fox Capital
Covestor model: Opportunistic Arbitrage
Disclosure: Long CRZO and CJES
Many investors have probably already heard about the new oil potential in Ohio via the Utica Shale. There’s a great article in Forbes about the potential for this oil to create thousands of jobs in this struggling manufacturing state. I would imagine that many a laid off employee in the manufacturing sector could potentially shift to the oil services sector. Sure, it would take training, but the skill set would appear similar.
Now, if Obama’s job ideas would just include money for retraining unemployed workers, instead of short term tax breaks. Why does the government always come up with short term ideas?
Or maybe Obama could just come up with an energy plan to take advantage of the new, abundant oil and natural gas resources in the U.S.His green energy plan is a long term – for 2020 or 2030. What this country needs is a plan to make it to the 2020s living off the fuels already available.
On a cautionary note, the more I read about the oil shale plays, including information on our recent investments in Eagle Ford Shale plays Carizzo Oil & Gas (CRZO) and C&J Energy Services (CJES), the more I get concerned that oil shale will do to the oil industry what natural gas shale has done to the natural gas industry in the U.S. Remember that the Bakken is just now swinging into full speed after three years of intensified effort, and the Eagle Ford is ramping up, so the Utica would be the third major play kicking up production in a major way. Don’t forget about the Niobara as well. Definitely something to keep on the radar for the future.
Oil is a international market, so maybe it won’t be impacted significantly until foreign locations kick up production as well. It’s possible that not enough exists – like in the domestically isolated natural gas markets – to crush it.
Read the Forbes article for more information on the Utica Shale and the potential for jobs in Ohio. Per a industry study cited there, the following economic impact is expected for the state by 2015:
- 200,000 jobs
- $12 billion growth in overall wages
- $22 billion increase in state economic output
Incredible, especially considering these investments could decrease the energy costs to U.S. consumers, make us more energy independent, and no longer so reliant on Middle East dictators who are not that friendly to the U.S. One has to wonder why the government isn’t full speed forward on plans that would speed up productions.
For now, Stone Fox Capital hasn’t come across any compelling stock ideas from this shale, other than the normal companies involved in the other areas. CJES would probably benefit from the expanded demand for its fracturing services. In fact, it wouldn’t be a surprise to see them deploy new fleets 6, 7, or 8 in the Utica or Marcellus areas to expand from the current focus on mainly TX, OK, and LA.
