The Next Exxon
Matt Insley

Recently I told you about a new technology sweeping America’s shale fields.

It’s the next game changer — in a long line of game-changers — that will help boost U.S. oil for decades.

While mainstream analysts and folks on Main Street overlook these game changers and the sheer size of American energy, you and I will have a font row seat to some once in a lifetime profit opportunities.

With the production forecasts I’m seeing, a handful of pin-pointed companies have the potential to become America’s next “Exxon.” Let’s have a look!

Last week I shared with you a new technology that’s hitting America’s shale plays, called “down spacing.”

By fitting more production wells into the same area (without hindering output per well) down spacing could lead to a new swath of oil opportunities. Indeed, it’s another round of American oil headed our way.

That said, there are massive investment opportunities right here in the states. As these companies gear up production and start lowering costs with efficiencies we’re in for a few Exxon-like run-ups.

Just as Exxon got its start back in the U.S. oil patch, a few companies are set to ramp up production and grow larger than most Wall Street analysts would ever believe.

It’s THESE companies I urge you to focus on today, not the big oil companies, like Exxon.

You see, by some merits a company like Exxon has become too big for its own good. Sure, the scope of a big oil candidate like Exxon offers a “safer”, more diversified investment. But if you’re looking for a growth story you won’t find it in Exxon.

Just think about it, Exxon is working all around the world, offshore, onshore, Middle East, non-Middle East, some harsh conditions, some not, basically anywhere they can find oil — almost at any cost. Plus the company is also working on alternative energy solutions like biofuel. I have no clue how much the company spent last year on biofuel or other alternative technologies, but I bet it’s a large number.

The companies that I want to share with you today don’t have a biofuel budget. For the most part they don’t have much international exposure or offshore activity. Simply put, these companies are focused on producing as much American oil as they can, as cheap as they can. That’s exactly how Exxon got its start. And it’s a winning strategy in today’s domestic energy boom.

The Next Exxon(s)

The following list won’t be long. But the companies I’m about to list hold immense growth potential.

They all have lots of acreage in America’s shale plays — particularly in the Eagle Ford. As production ramps up and more oil gets discovered (or “technology’d” out of the ground) these companies will grow well beyond Wall Street’s modest expectations.

Remember, the value of any company’s share hinges on its future revenue stream. The companies you’ll find below are about to tap rivers of cash…

EOG Resources (EOG) – market cap: $46 billion. EOG is a huge player in America’s shale game. In particular the company holds some prime acreage in the Eagle Ford shale (as well as the Bakken and Permian shale plays.) The company expects to be a “best in class” crude oil growth story through (at least) 2017.

To give you an example of how well the company has grown in the past four years (using an estimate for 2013), production has grown an average of 40% a year. The company currently produces 214,000 barrels per day (bpd) up from just 55,000 bpd in 2009.

Plus, according to company data, at current drilling rates the EOG will have another 12 years of drilling in the Eagle Ford, same goes for the Bakken — that’s likely to be 12 years of growing production! If growth continues as I expect in the three formations that EOG holds acreage, production numbers should just continue to leap higher.

Marathon Oil (MRO) – market cap: $25 billion. As a caveat to adding Marathon Oil to this list of Exxon-like growth potential, it’s important to note that this company is much less of a pure-play than the others on the list. But, with an activist investor or two, we could quickly see Marathon leverage their position in the Eagle Ford and other domestic plays to take advantage of its massive shale acreage.

Of note, 120-day initial production rates are up for the past three years for Marathon’s Eagle Ford wells. Simply put, that means the company is getting better (not to mention more efficient) at putting these shale wells on production. Speaking of production, it’s up — from 60,000 bpd in 2011 to around 90,000 bpd this year. Plus, according to Lance Robertson, Vice President for Marathon’s Eagle Ford operations. “They are going to get a lot better next year.”

Again, Marathon is less of a pure play here. But there’s certainly some long-term Exxon-like potential. There’s still mucho growth left in the company’s South Texas fields.

Pioneer Natural Resources (PXD) – market cap: $25 billion. In 2009 Pioneer was a $4 billion company. Today the company is over six times that size and I don’t see an end to their growth. This company is truly on pace to be the next Exxon-like growth story. And remember, Exxon’s market cap is around $390 billion, so there’s plenty of room for Pioneer to grow (that represents a 15-bagger, if you’re wondering.)

With production in the Eagle Ford ramping up, through more drilling, down-spacing and cost savings this company could start throwing off loads of cash. But that’s not where their resource run ends.

According to CEO Scott Sheffield in the Permian Basin of West Texas is like “12 Eagle Fords stacked on top of each other.” Pioneer is a huge acreage holder in the Permian — the sky is the limit here.

On top of that (and looking years out) Pioneer also holds prime acreage in the dry gas section of the Eagle Ford. So a decade from now when U.S. shale oil production is commonplace, natural gas may be back in vogue. If that’s the case, watch out because Pioneer will be a huge producer.

And here’s a funny one…

I was at the Developing Unconventionals conference in San Antonio last week and it hit me. There I was watching the Q&A for Pioneer Natural Resources. About halfway through the questions, a man stood up and asked how, in the next decade or so, Pioneer expects to spend all of its money… exploring elsewhere? Maybe dividend payouts?

Frankly the response from the Pioneer’s Chairman & CEO, Scott Sheffield, wasn’t too memorable. He breezed over the cycle of shale plays and how eventually all plays become “cash cows” — so at some point the Eagle Ford and Permian will hit that stage of the cycle. But “it’s gonna grow for a long time” says Sheffield.

But here’s the funny part. It was amazing how nonchalant everyone in the room was. Pioneer is looking at so much growth potential people are worried about what they’re going to do with all of their cash for decades to come. Nice problem to have, eh?

For now, who cares what the company’s answer is. As the cash continues to roll in and production continues to ramp up. This company — and ones like it — are a big ole buy.

Oasis Petroleum OAS – market cap: $4 billion. This list wouldn’t be complete without mentioning our friend up north in the Bakken, Oasis Petroleum. Although the company holds most of its exposure in that one play, it has plenty of room for growth.

Much like the companies working in the Eagle Ford, Oasis is testing its ability to down space its Bakken wells. This company is the cheapest on the list too, with a market cap around $4 billion. So keep an eye on the future for this mini-Exxon.

The March To $100B Market Cap

Add it all up and I wouldn’t be surprised to see all of the companies listed above crack the $100 billion market cap level. Worst case scenario that means “double your money” for shareholders. But on the better side of the equation it would me a 4-bagger, or more.

Keep your boots muddy,

Matt Insley

dailyresourcehunter.com