The shale-gas revolution attracts all the headlines today, but in 2011 the United States became a net exporter of refined oil products for the first time since World War II. That helps explain why miners like Freeport-McMoRan Copper & Gold (FCX 2.40%), BHP Billiton (ADR) (BHP -3.43%), and Teck Resources (TECK 9.02%) are all building a presence in the the U.S. oil market.
Big oil
The volume of exported refined-oil products has more than tripled since around the turn of the decade, going from about 1 million barrels a day to 3 million. Gasoline is a big part of that. On the surface, you might look to an ExxonMobil (XOM 0.23%) to benefit from this trend. However, in its annual report ExxonMobil states pretty simply that it has operations in the "United States and most other countries of the world."
While owning ExxonMobil will definitely provide exposure to the export of U.S. gasoline, it won't be a huge part of the company's business, which also includes such things as chemicals and natural gas. That's why focusing on smaller companies drilling, or mining, for oil in the Americas is likely to be a better option than an integrated, international oil giant. Although they won't benefit directly from exporting gasoline, the oil they produce is the foundation on which this energy transformation has been built.
Buying the drill bit
BHP Billiton was one of the first miners to step firmly into the U.S. market when it purchased Petrohawk Energy for around $15 billion. Ironically, that transaction took place in 2011, the same year the U.S. became a net exporter of refined oil products. Coincidence? Maybe or maybe not.
BHP drills for oil and natural gas, giving it exposure to two changing markets. And, like ExxonMobil, it offers a globally diversified footprint. That said, it materially bulked up its U.S. energy business via the Petrohawk buy -- making it a more direct beneficiary than ExxonMobil on the energy front. And, unlike ExxonMobil, BHP's other businesses aren't directly related to oil and natural gas -- including such varied resource plays as iron ore, copper, and coal. So you get broader diversification with BHP.
Freeport-McMoRan followed BHP's model earlier this year when it bought Plains Exploration & Production and McMoRan Exploration for around $19 billion. At BHP, oil and natural gas now account for about one-quarter of the company's business. Freeport made a similar leap virtually overnight, with about 25% of its business now tied to black gold and natural gas. Freeport's other big businesses include namesakes copper and gold. Although it isn't nearly as big or diversified as BHP, its business is also broader than ExxonMobil's.
Sticking to mining
Both Freeport and BHP, however, have shifted gears with their purchases because drilling for oil and gas is very different from mining for iron ore or copper. That's where Canadian-based Teck has taken a different route. It plans to mine for oil, and only oil, in the Canadian oil sands.
That's a business almost identical to Teck's big coal-mining operations. Although it doesn't expect to see any oil for a few years, it also doesn't need to learn anything new to make this happen. And it's partnered with big oil-industry names like Total SA. So all the key players are bringing something important to the table. And, like BHP and Freeport, Teck provides you with diversification away from the oil patch.
The world's gas pump
The United States increasingly looks like it could become the world's gas station. If that trend continues, domestic oil demand will remain robust. BHP, Freeport, and Teck all provide you a way to access oil production in the Americas. And, since they each have exposure to currently out-of-favor commodities outside the oil patch, there's diversification and upside potential as other commodity markets recover. ExxonMobil, while a great company, doesn't offer that combination and neither would smaller, oil-only drillers.
