1 Simply Incredible Slide of America’s Oil Boom

A slide from a recent Tesoro's (NYSE: TSO  ) investor presentation really caught my attention. The slide notes the simply incredible growth of oil production from America's shale plays over the past few years as well as hinting at what's to come. Take a look:

Source: Tesoro Investor Presentation (link opens a PDF

Oil production from shale has gone from a basically flat start in 2008 to an average of more than 2.5 million barrels per day last year. But as that slide also points out, Tesoro and others estimate that by the end of the decade America's shale plays should be producing more than 4 million barrels of oil per day. This suggests that there is plenty of oil fueled growth left in America's tank.

Taking advantage of this advantage
With so much oil production coming online through the end of the decade, refiners like Tesoro, Phillips 66 (NYSE: PSX  ) , and Valero (NYSE: VLO  ) are all spending millions of dollars to take advantage of this cheaper crude oil. In Tesoro's case its refineries near the Bakken and Uinta/Niobrara are already taking full advantage of this cheaper crude oil as all of the oil processed at these facilities are price advantaged crudes. But not all of the company's refineries are on an all American oil diet, which is why Tesoro is exploring the potential of refining more Bakken crude oil at its West Coast refineries.

Meanwhile, Valero is investing to process more light crude oil as well. Currently, the company estimates that it can process 1.2 million barrels per day, which is 56% of its total capacity as the below slide notes.

Source: Valero Investor Presentation 

But as that slide points out, Valero is investing to push that up to 1.39 million barrels per day by early 2016. Currently, Valero is spending about $400 million to add 90,000 barrels of light crude oil capacity at its Houston refinery and another $350 million to add 70,000 barrels of capacity at its Corpus Christi refinery. The company estimates that it will see a 25% internal rate of return on these investments thanks to the savings from switching from Brent based crude oil to American crude.

Even Phillips 66, which is focusing most of its investments by taking advantage of natural gas in its midstream and chemicals subsidiaries, is investing to take advantage of cheaper crude oil. Most of the company's investments have been on simply gaining access to this cheaper crude oil via rail cars or by boat. As the following slide notes Phillips 66 has been enhancing its logistics options through adding ships and rail cars to its fleet to bring cheap oil to its refineries.

Source: Phillips 66 Investor Presentation 

Investor takeaway
America's oil boom is producing incredible production growth from shale. That's why we're seeing refiners like Phillips 66, Valero, and Tesoro all investing both to gain greater access to this cheaper crude oil at refineries as well as increasing the capacity to refine this lighter oil. Needless to say, with so much oil production growth still left in the tank, refiners will have plenty of opportunities to increase profits in the years to come. 

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. It's a tax loophole that all three refiners are profiting from, which is why you need to learn how to take advantage of this profitable opportunity. You can do so by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3003413, ~/Articles/ArticleHandler.aspx, 8/29/2015 10:01:12 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:02 PM
PSX $77.23 Up +2.21 +2.95%
Phillips 66 CAPS Rating: *****
TSO $93.46 Up +2.82 +3.11%
Tesoro Corp CAPS Rating: ****
VLO $59.00 Up +0.65 +1.11%
Valero Energy Corp CAPS Rating: ****