Penny oil stocks provide one of the most explosive investment opportunities in the financial world. This is all the more true when oil prices are steadily above $100 per barrel. While companies like Exxon Mobil, Chevron and Shell will continue to post record profits in the billions and billions of dollars, the simple fact of the matter is that the efficient market hypothesis proves correct in these instances as the investing public tends to “price in” new levels of profitability in advance. Further, the bottom line is that these companies can only gain at so great a rate. By contrast, penny oil stocks well poised to exploit market trends can multiply like rabbits, making them some of the best stocks to buy now. Here are some factors to keep in mind when picking the next great winner, among all available stocks to buy.
Penny Oil Stocks Chasing Oil That’s Playing Hard To Get
The oil supply question can be answered depending on how you ask it. On the one hand, California is witnessing a double-digit drop in oil production each year. The state is putting out not even half of what it produced just a matter of years ago. Those are those numbers. Yet, the fact of the matter is that California also has an estimated massive oil and gas reserve that equates to about half a trillion barrels. These tens of trillions of dollars in petro could handle United States consumption for literally decades. The reserves are bound up in a stretch called the Monterey Shale, which is unique from other shale deposits in that it is primarily oil, as opposed to gas.
With the massive amounts of oil, many wonder why we’re still so heavily dependent on imports. The problem is that the wells have traditionally had very poor recovery rates. It’s estimated that 90% of the available oil remains in the ground whenever a well is drilled and extraction commences. However, this may be changing thanks to new technologies and the penny oil stocks that seek to deploy them.
Penny Oil Stocks Centered On New Technology
One of the new technologies with promise is known as MPD (Managed Pressure Drilling). MPD makes use of injected air and a myriad of other acidic substances that help pull greater amounts of oil. MPD can actually make a cumulative contribution, as it can be used with other advances, such as more effective drilling approaches. The magic of MPD rests in the fact that it does not cost much to implement. Since the forecast for oil prices is so strong, the opportunity for such techniques to profitably exploit the Monterey Shale is tremendous. The degree to which such widespread production could alleviate a huge amount of foreign dependence is enormous. Early investors in some of the best companies can make a killing as things unfold.
Penny Oil Stocks Include Far More Than Those Pumping Oil
In sleuthing out the right penny oil stocks to take advantage of the shift to domestic mass production, it’s important to retain a broad perspective. In other words, it’s easy to think of the companies out there in the field drilling wells. But the companies that benefit from such enterprises are numerous. For instance, there are the oil field service providers. The oil has to be stored, and there are the refiners and companies involved in the pipelines. Branching out, you can even think about not only the equipment production companies that make it all possible, but also the eventual retail establishments that take the final product to market.
Penny Oil Stocks That Can Piggy-Back Off Chevron Will Prosper
There’s a similar story down in Texas. The Permian Basin of the Midland/Odessa area may be thought of as a sleepy little town where a few old wells on timers periodically turn and pump a few barrels from time to time. That’s certainly the impression I’ve gotten each of the times I’ve driven through there. The truth of the matter is that there are big players snooping around out there. Turns out that there may be much more life left under the surface that most realize.
While the Permian Basin has been a prolific oil field in times past, the reality is that the many, many wells that have been drilled have primarily just grabbed the low-hanging fruit. This is actually great news. See, the bottom line is that the vast majority of the known oil reserves around the world are practically off limits for all intents and purposes. The ground is owned or under the control of foreign nations or the national oil companies. So, residual oil, and lots of it, is great if it’s able to be extracted.
The reason that there is a lot of oil left stems from the nature of the geology. The first wells in the area were able to get into permeable ground with high levels of porosity. Easy oil poured in. More restricted oil stayed put. Nobody knows for sure, but guesstimates assume that 80% or more of the oil is still there! The great thing about this is that an oil rich area carries a certain familiarity that eases the business model. So much of the infrastructure is in place. Just as with the coal miners of West Virginia, such an environment comes with its own trained employment force that is intimately familiar with the oil business.
Of course, none of this matters unless we can get the oil. While many companies have come and gone now that the easy oil is history, new technology is at the heart of efforts to get the motherlode. Chevron is a key player in these endeavors, though this is hardly one of the penny oil stocks that can make you rich.. Talented personnel are able to computer mapping and analysis to develop 3-D models. The science behind the whole process can be quite complex for the laymen, but the bottom line is that they can detect previously overlooked or missed formations and get at the goods.
And detection is just part of the process that penny oil stocks would engage in. Smart technologies allow companies to get into oil that was previously inaccessible through using new drill bits, fluids, and methods that cause less damage to the formations yielding the goods. Talented drillers are literally able to steer the bit to a precise area within a few inches of their goal several miles beneath the earth. And modern fracking allows companies to break up rock so far down that it was once thought inaccessible, and therein lies the opportunity for penny oil stocks to hand over quadruple digit returns.
