“Let me get this straight. You paid $200 per acre for the land… and then sold it for $10,000 per acre?”

I was sitting in a deep leather chair in the best hotel in Zurich, Switzerland, speaking to my friend Cactus. Cactus is a “wildcatter” – an independent oil explorer. His group had just closed a land deal worth more than $1.3 billion – land that is located in the most exciting new oil district in America. I wanted details…

That’s why, when Cactus started talking about this oil district at my publisher’s recent conference in Zurich, I was all ears. The presentation concerned the Eagle Ford shale, the largest new oil discovery since Prudhoe Bay, Alaska.

If Cactus is right, investors in the right stocks will make many times their money from this find. And he provided several easy ways to take a position.

[ad#Google Adsense]The Eagle Ford shale is an “unconventional” oil field. Thin layers of rock trap the oil and gas. Successful wells drill down to the depth of the shale, then turn horizontally for up to a mile. The drillers use high-pressure fluid to crack the rock layers around the well (a technique called fraccing), giving them access to the oil and gas inside. The process is nothing like conventional drilling… where you basically stick a straw in the ground and oil gushes out of it.

The Eagle Ford boom means companies that specialize in drilling unconventional fields are enjoying amazing demand right now. One oil company in the Eagle Ford has already identified 22,000 well locations. And it’s going to need drilling services for those wells. Every company needs at least a hundred wells drilled…

Cactus recommended two drilling companies that are getting a huge piece of the Eagle Ford drilling business.

First is Patterson-UTI Energy (PTEN), a $3.2 billion drilling company with 44 rigs operating in the Eagle Ford. Companies are locking these rigs down with contracts up to two years. When I visited the region this summer, one of these rigs nearly ran me off a dirt county road. It was a huge rig, rolling by on a series of tractor-trailers.

Cactus also mentioned Nabors Industries (NBR), a $6.6 billion drilling company with 55 rigs operating in the Eagle Ford. Both Patterson and Nabors will enjoy a big tailwind of demand from the Eagle Ford over the coming years.

And to provide you with a bigger picture of the drilling situation, I put together this table of the public companies responsible for over 60% of the drilling in the Eagle Ford.

The “rigs active” column is the number of drill rigs operating in the Eagle Ford right now. The next column (“% of drilling”) is the volume of Eagle Ford drilling the company controls. The final column shows the percent of the company’s fleet committed to the Eagle Ford.

While Nabors has the most rigs in the play, it’s interesting to note that Helmerich & Payne has a quarter of its fleet in the Eagle Ford. It’s clear the company is betting big on this field.

As many DailyWealth readers know, I’m a big fan of the “picks and shovels” approach to investing in big commodity trends (make sure to read this essay for how it has produced huge gains for us this year). By owning some of the drilling companies I’ve mentioned here, you can take this approach to the most exciting American oil field of this generation.

Good investing,

— Matt Badiali

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Source:  Daily Wealth