There’s a “land rush” happening in West Texas right now.
It has already sent the share prices of some oil stocks soaring double digits. But it’s just getting started. These stocks are set to rocket much, much higher in the coming years.
And it’s not too late to invest in this trend…
In a March DailyWealth essay, my colleague Matt Badiali explained how a virtually unknown company was about to shock the energy world by revealing secret geological data. He said this would kick off a “land rush” in West Texas.
[ad#Google Adsense 336×280-IA]We’ve seen these land rushes before. For example, four years ago, we had a similar situation in the Eagle Ford Shale in southern Texas.
At the time, the “sweet spot” of the Eagle Ford was the Hawkville Field.
Leases in the area were expensive and popular, because the area was already proven to hold oil and gas reserves.
But oil company Enduring Resources started acquiring cheap land north of Hawkville.
The company’s geologists realized the shale trend would run directly through their land leases… and it did. Enduring produced 5,500 barrels of oil equivalent (BOE) per day there.
Oil company Talisman Energy (TLM) and partner Statoil (STO) bought Enduring’s Eagle Ford acreage for $1.33 billion in 2010. That works out to $13,600 per acre, a 36% increase over the price Talisman paid for other Eagle Ford acreage just a year earlier.
The Enduring deal became one of the benchmarks to value Eagle Ford land. After that, more and more companies moved into areas throughout the Eagle Ford… and they massively bid up land prices. Both public and private companies made a fortune during this “revaluation” process. Now, the Eagle Ford is one of the most prolific shales in America.
We saw similar land rushes in the Barnett Shale in Texas and the massive Bakken Shale of North Dakota. These land rushes produced share-price gains of 85% in eight months, 50% in 15 months, 111% in five months, and 65% in five months for investors in small oil stocks in these locations.
And now it’s happening again.
For the past few years, most oil companies have been focusing on the western or “prime” part of West Texas’ Permian Basin shale. But Enduring has been venturing into unknown areas of the Permian.
In February, a geologist friend of Matt’s told him that Enduring was quietly selling off its assets in the Permian Basin. As part of the sale, Enduring would reveal all its data from the region… and rumor was that the oil volumes would shock the energy industry – causing a revaluation of the area.
So in March, Matt recommended his S&A Resource Report readers buy four oil stocks with acreage in the Permian Basin.
On June 9, former Chesapeake Energy (CHK) CEO Aubrey McClendon’s new company, American Energy Partners, bought 63,000 net acres in the Permian Basin from Enduring for $2.5 billion. That works out to more than $39,000 per acre. This is at the high end of recent deals in the region.
Enduring has been producing around 16,000 BOE per day in the area with just four drilling rigs. American Energy Partners plans to have six to eight drilling rigs by the end of 2015 to increase production even more. And now that companies are seeing the potential throughout the Permian Basin, they’re starting to bid up land prices like they did in the Eagle Ford.
The four stocks Matt recommended in March are up an average of 24%. But it’s not too late to invest.
One of Matt’s recommendations, Approach Resources (AREX), is still in “buy” range. Approach is a little-known, $850 million oil producer with 149,000 net acres in the Permian Basin. The company’s focus is on the southeastern portion of the basin. As land in the area gets revalued, Approach’s shares will soar.
And Approach is posting huge oil-production increases. It has grown production 34% per year since 2004. Last year, the company produced 1.4 million BOE. That might not sound like much right now. For comparison, Occidental Petroleum, the largest producer in the basin, produced 212,000 BOE per day last year. But with 115 million BOE in proven reserves, Approach can grow production for a long time.
If you want to set yourself up to profit from the land rush in West Texas, I recommend investing in Approach Resources today.
Source: Growth Stock Wire