It wasn't all that long ago that we were worried about peak oil. Those fears have largely vanished thanks to booming American oil production. It's a stunning reversal that's perfectly captured in the following chart detailing the change in America's proved oil reserves over the past 30 years.
America began turning around its reserve picture about five years ago. This is when energy companies like EOG Resources (NYSE:EOG) and Continental Resources (NYSE:CLR) discovered that we actually could economically produce oil out of the Eagle Ford and Bakken Shale plays. The ensuing boom now has America's proved oil reserves at the highest level since 1976.
Drilling down into our proved reserves
Last week the U.S. Energy Information Agency released its latest proved reserve data for 2012. Proved reserves are the energy resources that the industry is reasonably certain can be produced with current technology and economics. While the data is a bit behind, it still shows the remarkable growth experienced by America's energy industry over the past few years. What it shows is that 2012 was simply a remarkable year for the energy industry. Overall, energy companies boosted in proved oil reserves by 4.5 billion barrels to a total of 33 billion barrels of oil. It was the largest reserve boost since 1970 and represented a 15% surge in proved oil reserves.
Texas led the way with nearly 3 billion barrels of reserve additions as companies like EOG Resources and Pioneer Natural Resources (NYSE:PXD) fueled capital into developing and exploring the oil-rich Eagle Ford Shale and Permian Basin. Texas was followed by North Dakota, which added more than a billion barrels of oil thanks to the hard work of companies like Continental Resources. As the following map shows, those two states really stood alone in driving oil reserve growth in America.
New data is actually pretty dated
As remarkable as these numbers are it still represents the very beginning of the oil boom. Last year saw energy companies focus on spacing wells closer together, testing new hydrocarbon producing zones and improving overall efficiencies. That suggests that there's a lot more reserve additions to come as the industry becomes more certain that it can produce the energy found in the rocks underneath our nation. In fact, most energy producers believe that shale plays like the Bakken, Eagle Ford, and Permian Basin each hold more oil potential than our nation's total current proved reserves.
For example, Continental Resources CEO Harold Hamm believes that new technology will ultimately enable producers to unlock more than 45 billion barrels of oil from the Bakken Shale. That's still a small fraction of the estimated 900 billion barrels of oil trapped within the rocks below North Dakota. Meanwhile, we're seeing companies like EOG Resources continue to revise Eagle Ford Shale oil recovery estimates higher. EOG Resources has revised its Eagle Ford estimate upward by 250% over the past few years and now believes it will ultimately recovery 3.2 billion barrels of oil equivalent from this Texas shale play.
Meanwhile, producers are using the combination of horizontal drilling and hydraulic fracturing that was the key to these two shale plays in new areas all across the country. In the Permian Basin, for example, Pioneer Natural Resources sees this combination being the key to unlocking upward of 75 billion barrels of oil equivalent, which is 25 billion barrels of oil equivalent more than the company thought the industry would recover just last year. As the following slide shows, Pioneer Natural Resources believes that it's sitting atop the second largest oilfield in the world.
Needless to say, as big as 2012's proved reserve additions were, it's likely only the beginning of surging reserve additions in America.
We're still in the very early innings of America's energy boom. The energy industry is just beginning to hit its stride, while continuing to find additional qualities of oil resources. Not only is that changing the game for our nation but it is opening the door for investors to enjoy potentially game-changing returns.
Matt DiLallo 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.