The oil industry has changed quite a bit over the years, and
recent technological advances have helped the sector to produce
even more efficiently and obtain more oil. Ever since the
U.S. field oil production peaked in the 1970's, we have been
increasingly dependent on finding (profitable) unconventional
methods of extracting oil and gas, and there has definitely been a
huge change in this regard over the past few years.
As you can see, production has been decreasing ever since the 70's
until the mid-2000's when production started to move higher once
again. In fact, during the last three years, domestic crude
output has jumped more than 1.6 million barrels per day, largely
due to the impact of one advance in particular; fracking.
Fracturing technology has been around for a very long time and is
more important than ever to companies today. Hydraulic
fracturing makes it possible for oil and gas to be extracted in
places where conventional technologies are ineffective or
Hydraulic fracturing involves the use of water pressure to create
fractures in rock that allow the oil and natural gas it contains to
escape and flow out of a well. Currently, about 65% of all
rigs operating in U.S. soil are drilling horizontally utilizing
hydraulic fracturing. Studies estimate that up to 80% of natural
gas wells drilled in the next decade will require horizontal
drilling and fracturing to properly complete the set up.
It is important for investors to know that hydraulic fracturing
will be a very significant contributor in creating energy stability
for the US. Investors should be looking at the components
that are heavily involved in hydraulic fracturing as these could
continue to be in focus.
Below, we have highlighted a few companies which should be on your
radar in this regard. Any of these should benefit from a continued
push towards more fracking, or are at the forefront of the
industry, and could see further gains as a result:
U.S Silica Holdings, Inc. (
U.S. Silica Holdings produces and sells commercial silica in the
U.S and operating in two segments, Oil and Gas proponents, and
Industrial & Specialty products. In other words, they
sell the sand that goes into fracture fluid to the oil and gas
industry. While it may sound like a boring business, the stock has
soared and would have nearly given you a 200% return in the past
This company has benefited as the U.S. saw a tight oil and gas boom
in the mid 2000's. During the last three years, domestic
crude output has jumped significantly, and SLCA has been a major
Reported revenues for the second quarter were up 59% to $205.8
million due to a 27% increase in sand volume, which resulted in a
45% increase in quarterly earnings per share. EPS was $0.55/share,
beating analyst estimates by 19.57%.
In the past 60 days, 100% of estimates have revised higher for the
current quarter and 92% of analysts have raised their earnings
estimates for the next year. We currently have U.S. Silica
Holdings as a Zacks Rank #1 (strong buy), and have U.S. Silica in
the top 20% of all industries.
Halliburton Company (
Halliburton Company provides a range of services and products for
the exploration, development, and production of oil and natural gas
to oil and gas companies worldwide. Halliburton is the
world's second-largest oil service provider and has had an
outstanding run with earnings in the past few quarters.
Halliburton reported that income from continuing operations for the
second quarter of 2014 was $776 million, or$0.91 per
diluted share dissapointing analyst expecations EPS of $0.92. This
compares to income from continuing operations for the first quarter
of 2014 of $623 million, or $0.73 per diluted share.
Halliburton's total revenue in the second quarter of 2014 was
a record $8.1 billion, compared to $7.3 billion in
the first quarter of 2014. Operating income was $1.2
billion in the second quarter of 2014, 23% higher than
operating income of $970 million in the first quarter of
2014 resulting from significant activity improvements in North
America and the Eastern Hemisphere.
In the past 60 days, all estimates have moved higher for the
current quarter and current year, while the trend has been
almost universily positive for the current year as well. Thus, the
outlook for Halliburton is very promising though we do currently
have it as a Zacks Rank #3 (hold), but investors should be watching
any day now for the rank to improve given the rising
estimates. However, it should be noted that right now,
ranked in the bottom 18% of all industries.
Encana Corp. (
Encana is engaged in exploration for, development, production, and
marketing of natural gas, oil, and natural gas liquids in Canada
and the United States. Encana's strong second quarter of 2014
saw the company continue to make faster than expected progress in
the execution of its strategy, with the reporting period
highlighted by the acquisition of Eagle Ford assets, the highly
successful initial public offering (IPO) of PrairieSky Royalty Ltd.
(PrairieSky) and impressive liquids production growth.
Encana generated cash flow of approximately $656 million or $0.89
per share in the second quarter of 2014; operating earnings of $171
million or $0.23 per share; and net earnings attributable to common
shareholders of $271 million or $0.37 per share.
Year-to-date, the company has reported cash flow of approximately
$1.8 billion for a 41 percent rise year-over-year, while $686
million in operating earnings and $387 million in net earnings
attributable to common shareholders are increases of 61 percent and
29 percent, respectively, from 2013 levels.
The company expects to invest $2.6-$2.7 billion in 2014 (for
upstream activities), higher than its previous forecast. The
increase is owing to the planned spending in Eagle Ford acreages,
which the company acquired recently.
Encana also increased its 2014 total production guidance to
86,000-91,000 bbls/d. Encana currently retains a Zacks Rank #3
(Hold), implying that it is expected to perform in line with the
broader U.S. equity market over the next one to three months.
The oil industry is currently on a bullish run dating back to the
mid 2000's and the concentration of hydraulic fracturing creates an
opportunity for more potential of these stocks to earn gains.
With these three stocks, your portfolio will have a strong portion
in the 'alternative' oil sector that should return positively as
hydraulic fracturing continues to drive American oil production in
the near term.
Want the latest recommendations from Zacks Investment Research?
Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
ENCANA CORP (ECA): Free Stock Analysis Report
HALLIBURTON CO (HAL): Free Stock Analysis
US SILICA HOLDI (SLCA): Free Stock Analysis
To read this article on Zacks.com click here.