Gas and oil deposits found trapped within shale formations are becoming an increasingly important source of energy, especially in North America. The U.S. government’s Energy Information Administration has predicted that by 2035, 46% of the national gas supply will come from shale gas. Oil trapped deep underground these areas will represent up to 12% of the world’s total oil production by the same year according to a PricewaterhouseCoopers report. While there are several well established major players, let’s focus our attention on some overlooked small cap options in this promising field.
Halcon Resources Corp (NYSE:HK)
Halcon Resources is an independent energy company engaged in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States. The company has over 450,000 net acres distributed across three different formations:
• Bakken/Three Forks (North Dakota and Montana)
• Woodbine/Eagle Ford (Texas)
• Utica/Point Pleasant (Ohio and Pennsylvania)
Triangle Petroleum Corporation (NYSEAMEX:TPLM)
Triangle Petroleum is a growth-oriented oil and gas exploration and development company focused on the Bakken and Three Forks formations where it holds approximately 86,000 acres across Montana and North Dakota. The company has a current market cap of around $320 million, including $39 million in cash. The debt load is a rather manageable $148 million.
RockPile Energy Services is a wholly-owned subsidiary which provides hydraulic fracturing services not only to Triangle Petroleum Corporation (NYSEAMEX:TPLM), but also to third-parties exploiting fields in the Williston Basin. RockPile’s integration with Triangle’s plan is not clear at all, with senior management, including president and CEO Jonathan Samuels, failing to formulate a coherent strategy for the unit when requested to.
One final note of caution, a significant part of the acreage located in Montana is in a peripheral region of the basin, which is so far largely undeveloped so its actual value is a question mark for the time being.
Carrizo Oil & Gas, Inc. (NASDAQ:CRZO)
Carrizo Oil & Gas is a Houston-based energy company actively engaged in the exploration, development, exploitation, and production of oil and natural gas with over 200,000 acres divided across the following regions:
• Eagle Ford Shale in South Texas
• Barnett Shale in North Texas
• Marcellus Shale in Appalachia
• Utica Shale in Eastern Ohio,
The company has a current market cap of $1.07 billion (with $729 million in debt) and has archived record total production (26,600 Boe/d) as well as record adjusted revenue ($118.2 million) and EBITDA ($93.3 million) in its previous quarter.
The company has grown its production and reserves over the last 8 years by focusing on 3-D seismic controlled horizontal drilling, becoming an industry leader in the category. Billionaire Ken Griffin’s has also made a recently disclosed investment that amounts to a 4.65% stake in the company.
Bottom line
The shale oil & gas industry has a bright future ahead as long as energy prices remain high; which seems like a reasonable bet given that emerging economies are hungry for resources to propel their economies.
Of the reviewed small caps, Carrizo Oil & Gas, Inc. (NASDAQ:CRZO) seems like the better option currently. Halcon Resources Corp (NYSE:HK) needs to trim its debt load and Triangle Petroleum Corporation (NYSEAMEX:TPLM) should clarify its strategy looking forward (spinning out RockPile and focusing on drilling could be an interesting play).
Vanina Egea has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article High Growth Opportunities in Shale Oil/Gas originally appeared on Fool.com.
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