Over the last three years the oil and gas industry has been churning out millionaires.
No. I'm not talking about company CEOs or Saudi oil sheiks. Instead I'm referring to everyday Americans that found themselves in the right place at the right time.
Today I want to show you a few of those "right places" – where surprisingly there's still time for you to join in on the money-making action. With volatility set to hit the market, there couldn't be a better time to rundown a few of our favorite ideas and cover the best ways to protect your wealth…
Let's get back to those new-money millionaires. The folks I'm talking about are getting paid royalties to lease their land to oil and gas producers.
We've covered this topic before, but now more than ever the millionaires are coming out of the woodwork.
You see, the average shale oil well costs anywhere from $5-10 million to drill, complete and put into production. Once put in to production, though, the estimated ultimate recovery (EUR) for a productive well could payout to the tune of $30-40 million (hence the reason producers are scrambling to drill!) These are ballpark figures, but you get the idea – there's a lot of money to be made here.
An average land-leaser could expect to get anywhere from 10-25% of the payout on oil production. With a little back of the envelope math, it's not out of the question to think that some of these local farmers and land-owners are cashing in 6-digit checks every quarter. If they have multiple wells on their property the payout could grow even higher.
Makes you want to be a land-owner right? Sadly, it's too late to make the easy money in land-ownership. But there are still ways to play this trend for some reliable cash. Which brings us to the topic for today…
The Five Best Long-Term Ways To Protect And Grow Your Wealth
Much of this millionaire money is coming from two locations in the U.S.
Take a look:
Over the past few years these two states have bucked the long-term downtrend for U.S. oil production. And we're not talking a small blip on the radar either. As you can see from the chart above, production gains from these states have added more than 1.5 million barrels of oil per day.
The added oil flowing from those two states alone, today, accounts for 23% of U.S. oil production (add in the legacy production and TX along with ND account for 42% of U.S. crude production.)
That's huge! It's great news for America. Plus, it's also an unstoppable, home-grown trend that you can count on to help protect and grow your wealth.
Sure, you can't be a landowner cashing in 6-figure checks, but you surely can invest in the efficient companies that are optimizing and harvesting this oil bounty.
Natural Gas Is Booming Too!
Much like the shale oil boom that's creating millionaires in Texas and North Dakota, there's still plenty of wealth coming from the natural gas shale plays too. Think: Marcellus, Utica, Barnett, and even the dry-gas section of the Eagle Ford.
For starters, don't forget that the U.S. is now producing more natural gas than it ever has…ever. And we haven't even begun to scratch the surface. Heck, Pennsylvania, home of the Marcellus, wasn't even in the nat gas discussion five years ago. Today it's close to being a top-5 producing state.
This bountiful natural gas trend has several long-lasting impacts. First is the cheap energy that you've likely been seeing on your home energy bill.
As power plants switch to cheap, efficient natural gas, the price across the board has dropped. Add in residential use for heating and cooking and you'll likely notice your bill year over year (even with the same amount of energy use) is down a solid 10%, maybe more.
Cheap energy is the same as an unsolicited stimulus plan. When consumers like you and me save money on our energy bill we've got more money to save or spend – both of which can help the U.S. economy thrive.
And cheap residential energy is just the tip of the iceberg. The gas boom is also making a positive impact on the U.S. trade balance.
Take our exchange with Canada for example. Over the past 10 years, imports from Canada have dropped nearly 2 billion cubic feet per day (Bcfd) – plus, at the same time exports to Canada have increased nearly the same amount. Add it all up and "net" imports from Canada have dropped significantly.
"Net imports of natural gas from Canada have been falling for years" reports the U.S. Energy information Administration (EIA), "Rising shale gas production in the United States, especially in the Northeast, is key among several factors affecting this trend. For the first eight months in 2012, net imports from Canada fell by about 7%, to 5.7 billion cubic feet per day (Bcfd), from the same period in 2011."
Over the past decade, net imports have dropped nearly 40% — that's huge. Add in the potential for even more exports with liquefied natural gas (LNG) shipments to Asia and Europe and you'll see the trade balance for the U.S. is set to drastically improve.
Inside America's borders there's even more opportunity from moving and processing this natural gas (and oil.) Processing factories are under construction. Build outs of pipe, rail, and trucking are also underway – creating a boom in the transportation sector.
So you see, this shale trend is just getting underway. Gas, combined with oil shale, is set to create a "new world" of energy realities here in the U.S. – it should be an exciting decade for investors, too. Even in the wake of the fiscal crisis looming for the U.S. government. Heck, maybe this long-term energy boom can pull our nation's proverbial ass from the burner. We'll see!
And remember, the above-listed oil and gas trends aren't happening world over. For a solid reminder, we can look at the front page of today's Wall Street Journal – a subhead reads: "Firms Hit Hurdles Trying to Replicate U.S. Success Abroad."
According to the WSJ article, "Exporting the U.S. shale energy revolution overseas turns out to be far tougher than anyone expected – giving the U.S. a significant competitive advantage."
So if there's ever been a time to re-emphasize our theme for U.S. investment – it's right now.
Here's the caveat. Although I like American energy plays, and the dividends that we could reap for the years to come, right now I'm more inclined to keep some powder dry and wait for a good buying opportunity. As the volatility of the next month (or two) plays out, I'm sure we'll see a good spot to buy in to our favorites.
There's more to this wealth-preserving discussion, but we'll cut it off here for today. Tune in tomorrow for a few more budding opportunities, wealth-preserving insight and more!
Keep your boots muddy,