Photo credit: Flickr/peddhapati.
Most of us work hard for our money. That's especially true in the energy industry, which comes with high pay but a heavy workload. While many Americans would love to cash in on the boom by landing an energy-sector job, there is an easier way to get paid by the industry. In fact, I've found a great way to collect a monthly paycheck courtesy of the energy boom, without any work involved.
The secret? Simply buy Enerplus (ERF +0.00%) stock and let it do all the heavy lifting. Then you can just sit back and relax as the company sends a dividend check each month.
Drilling down into Enerplus
Two things stand out when looking at Enerplus: first, it's actually a Canadian company; second, it is its using two key shale plays, the Bakken and Marcellus, to generate significant income for shareholders. In fact, the company's monthly dividend payments add up to about a 4.5% yield on an annual basis. That's in stark contrast to Bakken peers Magnum Hunter Resources (NYSE: MHR) and Halcon Resources (NYSE: HK), which don't pay their investors a dime despite heavy shale fueled production.
As the map below shows, about half of Enerplus' production comes from the U.S., with the Bakken and Marcellus shales being the two assets that fuel its American production.
Source: Enerplus Investor Presentation (Link opens a PDF).
Enerplus plans to invest about 40% of its 2014 drilling capital into the Bakken shale, while another 20% is to be spent in the Marcellus. The company has plenty of shale-fueled growth left after this year: Enerplus can drill about 145 more wells in the Bakken and 240 more wells in the Marcellus. Further growth opportunities in the Bakken come via the potential to space future wells closer together, as well as to drill wells into additional oil-producing zones such as the Three Forks formation. This means Enerplus should be fueling income from American shale plays for years to come.
The long wait
There is a simple difference between Enerplus and U.S. peers Magnum Hunter Resources and Halcon Resources. Enerplus pays its shareholders a steady income, while investors will need to wait a long, long time before seeing any dividend income from those other companies. That's despite operating in many of the same energy-producing basins.
Photo credit: Flickr/Images Money.
For example, about 65% of Magnum Hunter's capital will be spent in the Marcellus this year, while another 13% of its growth spending will be used to drill new wells in the Bakken. These two shale plays are critical to fueling the company's projected production surge from 14,831 barrels of oil equivalent per day in 2013 to 35,000 barrels of oil per day this year. However, what this capital won't fuel is any sort of dividend to Magnum Hunter Resources' investors.
It's a similar story at Halcon Resources. The company plans to spend half of its $950 million drilling budget in the Bakken shale next year. That capital, along with the money it's spending in two other shale plays, is expected to yield 61% production growth for the company. However, Halcon plans to reinvest all of its capital on more wells. While this growth plan could eventually make investors a lot of money, there is a risk that the plan fails and shareholders are left empty-handed.
Investor takeaway
There are a number of ways to invest in the American energy boom, with both Magnum Hunter Resources and Halcon Resources being solid candidates. However, neither company is likely to initiate dividends anytime soon. Meanwhile, investing in Enerplus is an easy way to collect a monthly income stream from the U.S. energy boom without having to do any work.
