Small Eagle Ford Companies May Prove Good Investments

Companies with Eagle Ford exposure may prove to be good investments as the overall economy recovers. The economics of the play look promising, which in turn means companies will benefit from a better worldwide economy or in industry terms "better oil and gas demand". A few companies with Bakken and Eagle Ford assets are detailed below.

The world economy has come under pressure recently. The market has fallen as a result. Many of the small, high Beta, Bakken / Eagle Ford E & P oil companies have been hit hard. If the economy continues to go south, they could be hit some more. However, if they are, they will likely bounce back quickly as soon as the overall market begins to bounce. Small companies with good holdings in these prolific fields seem likely to be highly successful. How the EU credit crisis will resolve itself is anyone’s guess. It seems unlikely that everything will be allowed to fail. The European Commission President Jose Barroso is supposed to present options on Euro bonds soon. Perhaps that will help. The US equities markets have already taken into account a lot of the possible trouble. Yes, the situation could worsen to beyond even that, but it might also slowly resolve itself without a huge negative impact on the U.S. If you are a long-term investor, you can still make reasonable investments now. In fact you may make great ones.

Some of the stocks that have been unfairly beaten down during this time of crisis are the relatively young oil E & P companies. Their financial health is easily called into question in trying times. However, a number of the companies developing the prolific Bakken and Eagle Ford shale fields are almost certainly going to be successful. In the Bakken, 99% of the wells drilled find oil, and 90% are commercially viable. With good seismic and these odds, even small companies are going to eventually be highly successful. A few of the best looking candidates are Northern Oil and Gas Inc. (NOG), Goodrich Petroleum Corp. (GDP), Triangle Petroleum Corp. (TPLM), and Magnum Hunter Resources Corp. (MHR).

Read the full news release at seekingalpha.com

Ethanol Tax Credit at Risk by Senate

The ethanol tax credit so long maligned by many free market proponents is finally coming under the gun from politicians. Ethanol producers of course don't like it... but liquids producers in the Eagle Ford Shale play should be happy at the support this will add to crude oil and liquids pricing.

"Three senators reached a deal on Thursday to repeal the $6 billion per year ethanol tax credit by the end of July, an agreement that must still be passed by Congress.""The loss of the subsidy could add extra costs for ethanol blenders such as Valero Energy Corp and Marathon Oil Corp, but it is unlikely to reduce demand for corn."

" 'This agreement is the best chance to repeal the ethanol subsidy, and it's the best chance to achieve real deficit reduction,' said Senator Dianne Feinstein from California, who made the deal with senators John Thune from South Dakota, and Amy Klobuchar from Minnesota."

"The deal would reduce the federal deficit this year by $1.33 billion and direct $668 million to extend tax breaks for technologies to help alternative motor fuels including biofuels get to market, Feinstein said."

Read the full news release at reuters.com

Shale Oil Production to Lower U.S. Imports

The Eagle Ford Shale, Bakken Shale, and Niobrara Shale are all estimated to reduce U.S. oil imports by as much as 500,000 barrels a day over the next five years, according to an industry study.  Shale Oil production could rise to 900,000 barrels a day in the same time frame and could be as much as 1.3 million barrels a day by 2020. Oil pipeline expansions from Cushing, Oklahoma, down to Houston and the Gulf Coast are needed to help improve prices for WTI crude in comparison to other benchmark crude prices.  TransCanada Corp.'s planned Keystone XL will increase oil deliveries to refineries in Cushing and the Gulf Coast by 700,000 barrels a day starting in 2013. The Double E pipeline from Enterprise Products Partners and Energy Transfer Partners and the Longhorn pipeline reversal by Magellan Midstream Partners might add 650,000 barrels a day of capacity into Houston from West Texas and Oklahoma.

Refineries are also looking to benefit. Valero Energy Corp, Flint Hills Resources, and Frontier Oil Corp. area all looking for ways to increase the amount of U.S. crude they refine.  Growing U.S. oil production has created an exciting environment for every U.S. refinery.

Read the full article at Bloomberg.com