3 Companies Making Sure America Doesn’t Run Out of Energy

How oil and gas producers have helped boost US oil and gas proved reserves to multidecade highs.

Jun 28, 2014 at 12:06PM

It's now well known that technological improvements in drilling techniques have helped propel U.S. oil production to levels unseen since the late 1980s and U.S. gas production to an all-time record high.

But fewer people recognize how technological progress in the oil and gas industry has also provided a major and unexpected uplift to U.S. oil reserves, which are now at the highest level since the late 1970s. Let's take a closer look at some of the key factors and companies helping drive this growth.


Big increase in US oil and gas reserves
According to Ernst & Young's recently released annual U.S. oil and gas reserves study, U.S. oil and gas reserves jumped by 9% last year. U.S. oil reserves grew by 2.1 billion barrels last year to almost 25.4 billion, while gas reserves increased by about 9% to roughly 178.7 trillion cubic feet (Tcf), the report found.

The Ernst & Young study, which examined upstream performance and spending data for the 50 largest U.S. upstream companies based on their year-end 2013 oil and gas reserves, found that the growth is U.S. hydrocarbon reserves was led primarily by smaller independent producers, instead of the large integrated companies.

Companies driving reserve growth
Much of the growth in oil reserves came from extensions, higher recovery rates, and new discoveries in key oil-rich plays like west Texas' Permian Basin, south Texas' Eagle Ford, and Bakken's North Dakota shale. In the Permian Basin, for example, the presence of stacked-pay formations in emerging plays like the Spraberry/Wolfcamp was a key source of reserve growth.

Indeed, Pioneer Natural Resources (NYSE:PXD) credited its reserve growth mainly to continued success with its horizontal drilling programs in West Texas' Spraberry/Wolfcamp shale and south Texas' Eagle Ford shale plays. The company added proved reserves of 141 million barrels of oil equivalent (boe) last year thanks to a combination of new discoveries, extensions, improved recovery, and technical revisions of previous estimates.

Meanwhile, in the Eagle Ford shale, EOG Resources (NYSE:EOG) has seen its reserve estimates more than triple in the four years since it began drilling there. In 2010, the company estimated its Eagle Ford proved reserves to be 1 billion boe. But thanks to new discoveries and continued improvements in drilling techniques, the company now reckons it's sitting on 3.2 billion boe in the Eagle Ford.

It wasn't just oil-rich plays that saw a sharp increase in reserves. U.S. gas reserves also grew markedly due to a combination of two factors: strong reserve growth in the Marcellus shale, the nation's largest and fastest-growing shale gas play; and higher natural gas prices, which improved the economics of natural gas recovery and allowed additional reserves to be classified as recoverable.

Southwestern Energy (NYSE:SWN), for instance, reported a whopping 74% year-over-year increase in its total proved reserves, which totaled 7 Tcf as of year-end 2013. The growth was led primarily by the company's successful development drilling program in the Marcellus, where proved reserves more than doubled, and higher gas prices.

Investor takeaway
The fact that U.S. oil and gas reserves have increased so sharply over the past few years, despite rapid depletion through production growth over the same period, is a testament to the power of technology. Radical technological advances have allowed energy companies to boost recovery rates from existing plays and discover entirely new plays within existing formations. If technological progress continues at a strong pace, domestic reserves could keep growing in the foreseeable future.

OPEC is absolutely terrified of this game-changer

As the sharp growth in reserves highlights, America's domestic energy landscape is changing radically. US oil and gas production continues to surge as our country moves closer to energy independence. And there is one company front and center that is poised to make its investors rich. Warren Buffett has already committed to it, and you can too. Click here to learn about this company in the Motley Fool's special report: OPEC's Worst Nightmare.

Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool owns shares of EOG Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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