Deepwater drilling remains steeped in hot water as oil continues to spew into the Gulf. U.S. coal supplies are feeling the heat of growing pan-Asian demand that is altering the very structure of the global coal market.
The unavoidable outcome of these paired circumstances is a heightened focus upon onshore oil and natural gas supplies; and in the vast, celebrated North American shales lie untold fortunes in nonrenewable energy. If you thought the race was on a few years ago to tap into these supplies, have a look at the foreign capital that is now entering this market ... turning the jog into more of a sprint.
India's largest publicly traded company, Reliance Industries, signed a $1.36 billion joint venture agreement last week with Pioneer Natural Resources (NYSE: PXD ) for a 45% stake in the driller's Eagle Ford shale assets. Atop a $263 million initial cash payment, Reliance will cover more than $1 billion in total drilling costs over the next four years.
According to Pioneer, this will enable at least a 15-fold increase in the company's Eagle Ford production from just 2,000 boepd (barrels of oil-equivalent per day) in 2010 to 32,000 boepd or beyond by 2013. As my Foolish colleague Toby Shute has pointed out, some Pioneer acreage is in a "dry gas window" within the Eagle Ford play, while the more characteristic liquid-heavy acreage has attracted major producers including ConocoPhillips (NYSE: COP ) and Chesapeake Energy (NYSE: CHK ) .
Rather than a mere reminder of the emerging significance of the Eagle Ford, this deal underscores a growing tide of foreign development capital supporting North American shale production more broadly.
- Reliance Industries itself, back in April, inked a $1.7 billion deal with Atlas Energy (Nasdaq: ATLS ) for a 40% stake in that driller's operations in the Marcellus shale.
- Encana (NYSE: ECA ) revealed last week an intent to form a joint venture with China National Petroleum -- the state-run parent company of PetroChina (NYSE: PTR ) -- to develop assets in northeast British Columbia. Encana proudly declared: "Given the depth of our enormous unconventional natural gas resource portfolio, we are accelerating our organic growth rate and targeting a doubling of our production per share over the next five years."
Investors shunned Pioneer's deal, with a swift sell-off since word of a deal was leaked earlier last week, but I am watching for signs of returning interest in the shares. How are you playing the shale plays? I recently added Devon Energy (NYSE: DVN ) to my silverminer CAPS portfolio, but I'm weighing additional moves.
Please share your insights with your fellow readers by discussing (in the comments section below) your favorite companies with stakes in the North American shale plays. If you are confident of your picks, add them to your CAPS portfolio and start collecting points in the most enjoyable investment simulator ever devised.
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