US to be #1 Gas Producer by 2015; #1 Oil Producer by 2020

US to be #1 Gas Producer by 2015; #1 Oil Producer by 2020

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In the World Energy Outlook report released by the International Energy Agency (“IEA”) yesterday, the U.S. is expected to reverse years of being a net importer of energy to a net exporter of natural gas by 2020. It also boldly projects that the United States will be self-sufficient in its energy needs by 2035, overtake Saudi Arabia as the largest oil producer by 2020, and overtake Russia as the largest gas producer by 2015.

This comes on the back of new extraction techniques and the shale gas revolution that have yielded higher energy resources in domestic locations such as the Bakken Shale and Eagle Ford in the United States. Techniques such as hydraulic fracturing and horizontal drilling have elicited major environmental opposition, including upcoming Hollywood movie Promised Land featuring Matt Damon, John Krasinski and Frances McDormand, but is expected to revolutionize the geo-political landscape as the U.S. weans itself off Middle Eastern oil.

The IEA projects that U.S. oil production will peak at 11.1 million barrels a day by 2020 while domestic oil import will drop by more than half to four million barrels a day in the time frame. In contrary, the kingdom of Saudi Arabia is expected to produce only 10.6 million barrels a day in 2020.

However, as the U.S. weans off its addiction of Middle Eastern oil, Asia will soon see its dependence grow. The IEA projects that Asia will absorb up to 90% of all Middle Eastern oil export by 2035 as North America grows self-sufficient in its energy needs. This raises questions of America’s commitment to protect key energy shipping routes that its navy currently patrols. The change in energy dynamic should sound warning bells to countries that are dependent on America’s patrol of the South China Sea and the Persian Gulf due to its current strategic importance as major oil shipping lanes.

Nevertheless, the projected increase in supply in energy production will have a dramatic long-term effect on different industries. Energy exploration and production companies that are dependent on high oil prices will see its margin grow narrower as the influx of energy supply drive prices down.

Exploration and production

1. Chesapeake Energy Corporation (CHK, Earnings, Analysts, Financials): Engages in the acquisition, development, exploration, and production of natural gas and oil properties in the United States. Market cap at $11.47B, most recent closing price at $17.23.

 

2. Exxon Mobil Corporation (XOM, Earnings, Analysts, Financials): Engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. Market cap at $398.12B, most recent closing price at $87.32.

 

3. Marathon Oil Corporation (MRO, Earnings, Analysts, Financials): Operates as an international energy company with operations in the United States, Canada, Africa, the Middle East, and Europe. Market cap at $21.36B, most recent closing price at $30.23.

 

4. Chevron Corporation (CVX, Earnings, Analysts, Financials): Engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Market cap at $207.32B, most recent closing price at $105.93.

 

5. ConocoPhillips (COP, Earnings, Analysts, Financials): Operates as an integrated energy company worldwide. Market cap at $67.54B, most recent closing price at $55.64.

 

 

 

On the up side, companies that tend to have energy costs as major components of their total expenditure should be able to improve their margins as oil prices fall. Industries that can be major beneficiaries of this new trend include: Airlines, Trucking and Chemical Refining.

Airlines

1. United Continental Holdings, Inc. (UAL, Earnings, Analysts, Financials): Engages in the provision of passenger and cargo air transportation services. Market cap at $6.99B, most recent closing price at $21.04.

 

2. Delta Air Lines Inc. (DAL, Earnings, Analysts, Financials): Provides scheduled air transportation for passengers and cargo in the United States and internationally. Market cap at $8.71B, most recent closing price at $10.30.

 

3. JetBlue Airways Corporation (JBLU, Earnings, Analysts, Financials): Provides passenger air transportation services in the United States. Market cap at $1.52B, most recent closing price at $5.33.

 

Trucking

1. Werner Enterprises Inc. (WERN, Earnings, Analysts, Financials): Engages in hauling truckload shipments of general commodities in interstate and intrastate commerce primarily in the United States and Mexico. Market cap at $1.71B, most recent closing price at $23.52.

 

2. Swift Transportation Company (SWFT, Earnings, Analysts, Financials): Provides transportation services. Market cap at $1.33B, most recent closing price at $9.55.

 

 

3. Knight Transportation Inc. (KNX, Earnings, Analysts, Financials): Provides asset-based dry van truckload and temperature controlled carrier services primarily for short and medium haul. Market cap at $1.23B, most recent closing price at $15.37.

 

Chemicals

1. The Dow Chemical Company (DOW, Earnings, Analysts, Financials): Manufactures and supplies products used as raw materials in the production of customer products and services worldwide. Market cap at $34.53B, most recent closing price at $28.79.

 

2. Eastman Chemical Co. (EMN, Earnings, Analysts, Financials): Engages in the manufacture and sale of chemicals, plastics, and fibers in the United States and internationally. Market cap at $8.78B, most recent closing price at $57.22.

 

3. E. I. du Pont de Nemours and Company (DD, Earnings, Analysts, Financials): Market cap at $40.22B, most recent closing price at $43.13.

 

Written by SiHien Goh

 

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