If you've been paying attention to the oil and gas sector for
very long, then you've no doubt heard all about the famed Bakken
and Eagle Ford shales.
The Bakken has transformed rural North Dakota into an energy
Mecca, with staggering daily production that would be the envy of
many OPEC nations. Producers are already pumping out 700,000
barrels of crude per day, making North Dakota second only to
Texas in the U.S. oil producing game.
That success is part of the reason why I once referred to this
site as the "Next Great Oil Bonanza."
But North Dakota doesn't have amonopoly on game-changing
In the fields of south Texas, the Eagle Ford Shale has spawned
a boom. Five years ago, the Eagle Ford yielded just 358 barrels
per day. Now, the shale is gushing about 352,000 barrels per day,
a thousand-fold increase.
Between them, the government estimates the Bakken and Eagle
Ford hold 7.0 billion barrels of available oil.
And they've been good as gold for many investors.
That's why I'm so excited about
another great oil bonanza
There is an up-and-coming formation that dwarfs both the
Bakken and the Eagle Ford. In fact, you could
take all the oil in North Dakota and south Texas
combined, double that figure, and throw in another billion
barrels -- and it still wouldn't measure up.
This formation, which easily ranks among the world's largest
oildeposits , is right in our own backyard. Believe it or not,
it's sitting about 10,000 feet below the surface of Bakersfield,
The Monterey Shale isn't a household name yet, but I strongly
suspect thatwill change in the next few years.
California itself is no stranger to crude oil. The Golden
State currently yields about 500,000 barrels per day. Most of
this oil comes from shallow pools that have collected near the
surface (thanks in part to seismic activity in the region).
But all that oil has leaked from a source. And that source is
the Monterey Shale. If you think of the many productive oil
basins in southern California as alien vessels, then the Monterey
Shale is the mothership.
According to the EIA,
there are as many as 15.4 billion barrels trapped
To understand the sheer magnitude of this opportunity,
let'sput that figure in context. The U.S. Dept. of Energy
estimates that there are 23.9 billion barrels of recoverable
shale oil in the lower-48 states.
That means the Monterey Shale by itself holds nearly
two-thirds of the total.
There is some justifiable concern that the state's vocal and
well-organized environmental groups could lobby to ban (or at
least severely restrict) hydraulic fracturing. Without this
breakthrough technology though, there's no way to feasibly
extract hydrocarbons from the tight rock -- so millions spent to
acquire acreage could potentially be lost.
That's a worst-case scenario.
Politicians in state and local government know that estimates
say drilling the Monterey Shale could deliver 3 million jobs and
$25 billion in taxrevenue over the next few years.
My take: there will be fracking regulations, sure, but no
In time, I think the Monterey Shale has the potential to
re-draw the nation's energy picture. And when that day comes, the
biggest winner will be a farsighted producer that already knows
about California's vast oil potential...
Occidental Petroleum (
Occidental has planted its flag in more than 800,000
prospective acres in the Monterey Shale. And who else would be
better suited to work in this particular terrain? Occidental
already holds 2.1 million acres in California where it drilled
760 new wells lastyear . It's hands-down the largest producer in
the state, pulling out 148,000 barrels per day --accounting for
one in every four barrels statewide.
Let's be clear, though. This is not a pure play. Occidental is
a $70 billion company with operations that span the globe. But
that diversity will help protect stockholders should the Monterey
Shale not pan out. And if it does -- well, nobody has more togain
Action to Take -->
The Monterey Shale represents an asymmetrical risk/reward
proposition for Occidental. If production and reserves are even a
fraction of what is predicted, then theupside potential is
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