First developed in 1947, hydraulic fracturing (fracking)
remained an unheard-of tactic for extraction until it was used in
the Barnett Shale Basin in 1998. The process works by pumping
fracturing fluids-like slickwater, gel or foam-into a wellbore at a
sufficient enough rate to fracture the rocks below. When these
fractures occur, the operator injects proppants into the well to
prevent the fractures from closing when the fluid pressure is
reduced. And finally, oil and gas leaks from the fractures into the
well for extraction. This overnight success has investors looking
for the best ways to play the newly abundant natural resource
The Fracking Rush
Just as in the 1849 California rush, there were some early pioneers
who found the first traces of this black gold mine.
) already had the resources to become early adopters to fracking
and ran the sector for a number of years. However, waves of
independent energy companies have entered the market, looking to
take a piece of this lucrative business for themselves. The
Wall Street Journal
"the big three companies' share of the North American
pressure-pumping market fell to 63% in 2012 from 85% a decade ago,"
as each small firm makes its own dent in the market share.
While big names in oil and gas still maintain a strong hold on the
market, there are a number of new firms asserting themselves into
this highly competitive field:
Nabors Industries Ltd.
): Currently headquartered in Bermuda with the majority of
operations are in Texas, this S&P 500 component drills for
oil and natural gas all around the world.
Patterson-UTI Energy Inc
): With over 300 marketable land-based oil and natural gas
drilling rigs within the U.S. and Canada, this growing firm
experienced a setback earlier this week after a number of
analysts downgraded the stock.
The Dangers of the Rush
Basic Energy Services
(BAS): Besides providing a range of drilling operations around
the central U.S., another key piece to BAS's business is contract
oil well construction.
Part of the allure driving investors towards natural gas is its low
price tag. Prices took a massive hit since the recession and are
currently very cheap, but they may not stay down for long. While
the increased supply from fracking has certainly had something to
do with curtailing the price of natural gas, if prices were to
jump, it could hurt a lot of companies.
If prices were to rise, consumers would likely cut back on their
intake, as they could switch to alternative sources for their
energy needs. If this were to happen, major companies like
Halliburton, may be able to shrug off the shift, but smaller firms
that have dedicated a significant amount of assets to fracking
could be in for a world of hurt.
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Editor's note: This article by Carolyn Pairitz was originally