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This Is Going to Become One of the Greatest Oil Fields in America

Wednesday, September 18, 2013 5:38

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Greetings from the Horseshoe Atoll…

You’ve probably never heard of the Horseshoe Atoll. That’s because this area is more popularly known as the Permian Basin of West Texas.

While a lot of oil has been produced here over the years, a lot more production is on the way.

And chances are good that the companies operating in this area are going to enjoy much higher share prices in the coming years…

The giant, 175-mile-long Horseshoe Atoll is one of the largest buried limestone reefs in the world. Petroleum geologists know these rocks well because of all the wells drilled here. You see, inside the Horseshoe Atoll is a formation that holds one of the world’s largest oil fields ever discovered.

One major oil field located here (commonly known as the “Sacroc”) went into production in the 1920s. The field produced nearly 1.3 billion barrels of oil over the next 70-odd years. It still produces oil today, with some help. What’s key about the Sacroc isn’t the oil field itself, but its source.

You see, the best oilfields usually have the richest shales as their source.

For example, the giant oil fields of East Texas are sourced from the now-famous Eagle Ford Shale. The East Texas field produced over 5.4 billion barrels of oil in its productive life. Wells drilled in the Eagle Ford since 2008 now produce over half a million barrels of oil per day.

The Cline Shale, which is a large shale formation in the Permian Basin, is on its way to similar production levels. Here’s a map of this play:

Mid-cap oil producer Concho Resources (CXO) dropped $1 billion on acreage in the Permian Basin in 2012. And oil producers Devon Energy (DVN) and Range Resources (RRC) are drilling in the Cline Shale today.

In July and August, Devon Energy drilled four new wells. As you can see in the table below, these wells added almost 700 barrels of oil production per day and 577 thousand cubic feet (mcf) of natural gas production. It’s a huge increase for Devon. The oil production alone is worth $2.6 billion per year at the current oil price.

Well Name	Oil Production (barrels per day)	Natural Gas Production (mcf per day)
#1 Wulfjen	264	111
#1H Wallace M	54	N/A
#1H Scharlach	195	213
#1H Harris	184	253

It’s still early days for the Cline, but I expect to see this play develop like the Eagle Ford. For the first couple years, the Eagle Ford’s production grew slowly… only to explode in its third and fourth years.

The Cline is absolutely going to explode over the next few years. That’s why it makes sense to own companies like Devon Energy. Its Permian Basin production represented 9% of the company’s total production in 2012. But as the Cline becomes a world-class field, that percentage will grow.

Good investing,

Matt Badiali

P.S. There’s a simple way for “ordinary” folks to profit on the incredible potential of these new shale fields. This strategy allows you to collect big, double-digit income… even if oil and natural gas prices drop. I just showed readers of my S&A Resource Report how to get started. You can learn more right here.

Source: http://www.stansberryresearch.com/dailywealth/2518/this-is-going-to-become-one-of-the-greatest-oil-fields-in-america

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