Investing in Shale Gas: The New Kind of Shale Gas Millionaires

Sun, Jul 29, 2012

Last year your editor profiled Letha Webster from Valley Junction, Wisconsin.

She’s certainly not the type to be wildcatting shale gas deposits across the country.

Letha is retired and has lived in the same Wisconsin home for more than 55 years.

However, she has joined the new generation of shale gas millionaires. And there’s ample opportunity for you to join on the new trends which the shale gas boom will be creating.like how to invest in shale gas ?

Why Investing In Shale Gas Stocks  Now? Because these shale gas “echo booms” as we called them are finally starting to hit the mainstream and even more fortunes are sure to follow.

But let’s step back to last year when we first caught onto this trend.

Last year we wrote in Invest In Shale Gas: The “Echo Boom” Gains Momentum:

Letha is one of a number of landowners in the area.

She is part of a group that collectively holds 436 acres, estimated to be worth $1.1 million.

That land, however, was just sold for a total of $5.3 million — more than four times higher than the appraised value.

The reason? Sand.

This area of Wisconsin has the right kind of high-quality sand used in the fracking process. And the high-quality sand is growing right alongside shale gas exploration.

There are currently 16 sand mining operations producing high-demand sand that’s helping to unlock trapped gas across the country. According to the Wisconsin Center for Investigative Journalism, there are proposals to build another 25 sand mines in the area.

That kind of sand demand shows how much bigger the shale gas and fracking boom is going to get.

But it’s just the start of a major follow-on — or “echo” — boom resulting from the shale gas boom…

Now that the shale gas boom is in full swing, big-money investors are moving in aggressively to capitalize on it in every conceivable way.

Considering the billions of dollars they’re investing, you can bet they’ve done their due diligence on how big the shale gas boom is going to be… and it’s going to be big.

A few of the deep-pocketed companies cutting eight- and nine-figure checks include:

Nucor (NYSE: NU) is completing a $750 million plant in Louisiana due to the advantageous costs of operating in an area awash in shale gas. The facility could be expanded to include a total capital investment of $3.4 billion.

U.S. Steel (NYSE: X) has announced it’s investing $95 million into Ohio steel production assets to meet the specific needs of shale gas developers in the region.

Vallourec (Paris: VK) is investing $650 million in a new Ohio plant, and expanding another to make the tubes and pipes necessary for natural gas production, processing, and transportation.

Those are just three of the hundreds of companies seeing how they can use shale gas to improve their bottom lines. There are plenty more, and the opportunities are just as big.

The shale gas investment opportunities  continue to be opened up in the sectors benefiting from and providing support to the shale gas industry.

And more importantly they’re starting to reach the mainstream media.

Today the Chamber of Commerce revealed in Shale Boom Creates “Sand Millionaires”:

The benefits from shale energy development extend beyond where the natural gas and oil are being extracted. Beyond Pennsylvania, Texas, and North Dakota, jobs are being created. A Youngstown, Ohio steel plant is making pipe for natural gas rigs. Chemical companies have more natural gas feedstock and can pass savings to other industries that use their products. Low-cost natural gas is causing transportation companies and heavy vehicle makers to seriously consider it as a fuel.

Then there’s sand.

Hydraulic fracturing, the method used to extract shale gas, entails pumping sand, water, and additives thousands of feet into the ground to crack (fracture) the surrounding shale to release the gas or oil.

These wells need sand, lots of sand. In 2011, 28.7 million tons of sand was used in hydraulic fracturing according to PropTester Inc. and Kelrik LLC. And they need a type of sand that can handle tremendous pressure. That type is found along the Minnesota-Wisconsin border.

The Shale Gas Boom is massive and it’s producing a number of “Echo Booms” throughout many different industries.

The profits for early investors can be tremendous. Just look at the leading sand companies.

Carbo Ceramics (NYSE:CRR) is the best pure play on the fracking sand boom.

Its growth has exploded in recent years. And shareholders have reaped the rewards. Carbo shares bottomed out at about $35 each in 2009. Over the next two years they would reach highs of more than $170.

This is just one example of the type of profits in  investment in shale gas “Echo Boom.”

As shale gas investment changes the where goods are manufactured, drives down energy costs for consumers and producers, and reignites America’s growth, there will be a slew of opportunities to follow.

The more obvious direct plays on the picks and shovels of the shale gas investments  boom like sand companies and drilling services companies have already had their run. Now it’s time for the next leg.

Here at Contrarian Insights we’ll keep our eyes open as the profitable tentacles of the shale gas investment boom and low energy prices continue to reach throughout the U.S. economy. Plenty of gains will be had for investors watching this megaboom closely and catching the positive aftershocks later.

Good investing,

 

Andrew Mickey
Executive Editor, Contrarian Insights

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