The Zacks Analyst Blog Highlights: Anadarko Petroleum, Chesapeake Energy, Statoil ASA, CNOOC and TOTAL SA

News provided by

Dec 09, 2011, 11:00 ET

CHICAGO, Dec. 9, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Anadarko Petroleum Corporation (NYSE: APC), Chesapeake Energy (NYSE: CHK), Statoil ASA (NYSE: STO), CNOOC Ltd. (NYSE: CEO) and TOTAL SA (NYSE: TOT).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday's Analyst Blog:

Shale Gas: Boon or Bubble?

Over the last few years, a quiet revolution has been reshaping the energy business in the U.S. Known as 'shale gas' – natural gas trapped within dense sedimentary rock formations, or shale formations – it is being seen as a game changer, set to usher in an era of energy independence for the country. This unconventional fuel source is expected to transform domestic energy supply in the future decades by providing a potentially inexpensive and abundant new source of fuel for the world's largest energy consumer.

Huge Geographic Potential

According to the Annual Energy Outlook 2011 published by the Energy Information Administration (EIA), the U.S. possesses 2,543 trillion cubic feet (Tcf) of potential natural gas resources. Of this, natural gas from shale resources accounts for 862 Tcf. In fact, more than 19 geographic basins across the country, from the West Coast to the Northeast, are recognized sources of shale gas.

The Game-Changing Technology

Shale has long been known to contain gas, but is tight (not porous) and therefore generally with poor flows. Hence, without an effective means of production, shale gas was historically viewed as worthless and uneconomic. But not anymore.

With the advent of hydraulic fracturing (or fracking) a decade ago – a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals – shale gas production is now booming in the U.S. The new technology, together with the sophisticated horizontal drilling equipments that can drill and extract gas from shale formations, are hailed as breakthroughs for U.S. energy supplies and play a major role in boosting domestic natural gas reserves.

Once considered too expensive to produce, the share of shale gas in the U.S. gas production has shot up at a stunning pace during the last decade. In 2009, the U.S. went past Russia as the world's largest producer of natural gas, thanks to shale gas production. That year, shale gas comprised 14% of total U.S. natural gas supply. As per EIA, production of shale gas is expected to continue growing, and by 2035, it is estimated that gas extracted from shale rock will constitute 46% of the total natural gas supplied by the U.S.

The success of shale gas development has pushed natural gas prices down more than 70%; from a peak of about $13.60 per million British thermal units (MMBtu) in 2008 to the current level of around $3.50, sinking in between to a low of $2.50 in September 2009.

The Economic Promise of Shale Gas

Even some four-five years back, domestic firms thought that a price of at least $6 per MMBtu was required for the profitable extraction of shale gas. But the introduction of fracking has transformed the economics of shale gas, which has become viable in some cases at just $3 per MMBtu. Taking a step ahead, The Woodlands, Texas-based independent energy producer Anadarko Petroleum Corporation (NYSE: APC) thinks it can churn out gas from the Marcellus Shale deposits – a massive deep shale formation extending from New York to West Virginia – at as low as $2.50 per MMBtu.

Jumping on the Bandwagon

Lured by the promise, abundance and the economic attractiveness of shale gas, some of the biggest energy firms in the U.S. have joined the roster of operators in the Marcellus and other shale gas fields. For example, Chesapeake Energy (NYSE: CHK) – the second-largest natural gas producer in the country – and Anadarko have been sinking dollars to pull out all the stops in acquiring Marcellus Shale acreage. In fact, Chesapeake has roped in Norwegian major Statoil ASA (NYSE: STO) into the Marcellus, China's CNOOC Ltd. (NYSE: CEO) into the Eagle Ford shale formation in South Texas, and French oil and gas giant TOTAL SA (NYSE: TOT) into the Barnett Shale in north-central Texas.

What the Critics Say

As with all advances in hydrocarbon exploration and production, shale gas also has its share of critics. Anti-fracking advocates, who believe that the drilling practice is far too loosely regulated, have long argued that the technique has fouled the underground water table, public health and the environment, citing evidences of possible water contamination.

Others remain apprehensive and feel that the recent push to expand shale gas development in basins across the U.S. could be overly optimistic and may not live up to the hype that producers such as Chesapeake and other industry proponents have created. They insist that while the initial production volumes remain impressive, shale gas wells typically experience high decline rates, raising questions over the long-term economic health of the plays.

To Conclude

Despite what the naysayers believe, there is little doubt that the growth of shale gas has the power to change the way we use energy. The revolution is not a bubble and will prove to be long-lived, reflected by the growing acknowledgment by the major energy firms that domestic natural gas in the U.S. will represent an increasingly key source of energy production. Most importantly, it's found in plentiful quantities here in the U.S., is less polluting than other fossil fuels and persistently cheap.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

SOURCE Zacks Investment Research, Inc.