Energy exploration companies
are shifting drilling toward resources with greater potential for oil and
natural-gas liquids. Nonetheless, investors willing to stick with more junior,
natural gas plays could be handsomely rewarded in coming years, as drilling
efficiency improvements are dramatically lowering breakeven prices – leading to
improvements in operating margins.
The cost of capital
required to break-even on drilling varies from one project to another,
depending on shale geology, subsurface pressures, and infrastructure status
(access to pipeline and gathering services). For example, prices currently
average about $215 per drilled foot in the San Juan Basin of New Mexico,
compared with $287 per drilled foot in the nearby Permian Basin section of West
Texas. Against this backdrop, some U.S. natural gas companies, such as EQT Corp. (EQT-$68.58) and Range Resources (RRC-$75.19), are
favorably positioned to outperform their peers and show improvements in Return on Invested Capital due to prudent investments in promising onshore
assets and drill-bit technologies.
Continue Reading at YCharts:
Drillers: Productivity Boom Transcends Gas Prices
Editor David J
Phillips does not hold a financial interest in any stocks mentioned in this
article. The 10Q Detective has a Full Disclosure Policy.
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