iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,473 Blog Posts

The Next Mega-Trend is Here

The US oil production boon will lay waste of foreign exporters of oil, eventually. But until we can lay waste, we need to get the oil, via horizontal drilling.

Very simply, I am going to provide you with a few names, touching upon a theme. Feel free to add in a little expertise to assist our fellow self-directed gamblers scalp a few trades or two, to feed his son–Tinied Tim.

Fracking is the boom. These companies provide the drillers with the sand that they need to drill.

SLCA
EMES
HCLP

An old favorite, FTK, provides parts of drilling rigs. I am sure there are a slew of well-to-do companies that will benefit from this explosion in domestic production. As of now, SLCA is my favorite–despite what JESSE LIVERMORE has to say.

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60 comments

  1. clegger_2000

    Trying to get that oil! http://www.youtube.com/watch?v=cFERPDn3i0o

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  2. youknowitsme

    Jesse Livermore should shoot himself.

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  3. Herd Mentality

    Working as a chemical engineer there are some derivative plays off of this. Mainly water treatment technology companies such as Veolia et al. Fracking/drilling creates very dirty water and require a lot of treatment before discharge (thank the EPA).

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    • Dr. Fly

      I agree 100%. However, name names.

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      • Jennifer

        I think he did. Veolia VE is a solid one

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        • Dr. Fly

          VE is not a good play for fracking–not even close.

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          • Herd Mentality

            Ya that is the problem. All of the best companies for solutions for water treatment capabilities are private companies. I would take a look at ENR’s top 100 list of engineering companies then backtest on which ones have good water treatment sectors inside the main business.

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          • halfbloodpope

            $PLL is a name that comes to mind which specializes in filtration and separation.

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    • Mr. Cain Thaler
      Mr. Cain Thaler

      At one point, I was attempting to play that angle (which was how I found BAS). It’s hard to find equity that can give you good exposure. What was out there was stuff like PSN.TO (feel free to check my archives to see how that worked out).

      Many of the field services have internal lines of business that handle the water treatment side.

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  4. Forgetalpha

    Sounds like Fly was at the RBC energy conference

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  5. I Am Jesse Livermore

    You still got your panties in a bunch Fly?

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  6. Roach

    CRR has been a favorite. Essentially synthetic sand that keeps more gas/oil in the ground compared to regular sand. Provides a solid ROI on the cost savings (need to believe the company though).
    Problem is cheap Chinese competitors. Large short interest so could be a boon or someone knows something.

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    • Dr. Fly

      CRR has some serious competition, no?

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      • Roach

        Definitely competition is heating up and they rely heavily on HAL and SLB. Haven’t owned it for a few years but might be worth keeping on the radar. (although all the sand guys are going to have stiff competition).

        CJES might be another if they can start getting pricing power from more demand.

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        • Dr. Fly

          FTI, CLB and TTI too

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          • Roach

            Friend was researching CLB the other day- loved what I saw. Crazy return on capital if they can keep it up in the medium term

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          • Dr. Fly

            Stock is down huge too. FTI looks like the easy play.

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          • Roach

            I’ll check it out- looks like a more reasonable valuation and better growth than CLB.

            Difficult to get comfortable with the tech on either though

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  7. matt_bear

    Only thing I know is that I wish I had listened to Mr. Cain about HCLP as he was pouring himself an evening drink while working late on the famed 9th floor last year.

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  8. Jennifer

    Back to your point about the overbought argument. Standard “technical” analysis suggests that RSI’s of 70 are sell signals. Well, SLCA had a 70 at $33 on 3/4/14.

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  9. C. Montgomery Burns
    C. Montgomery Burns

    I like $DVN

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  10. Marc David

    Frack Attack

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  11. northwestdr

    Off Topic: Has The Fly ever tried stevia with his Earl Grey? I like Trader Joe’s Liquid Stevia…

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  12. crazyfasteddy

    CPG. Balken play that includes a 6% divvy paid monthly.

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  13. jersey whale

    Fly, you may have out done yourself with Tinied Tim, brilliant sir.

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  14. Dr Fly

    I do not like stevia and never use sugar

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  15. Martin

    EXH

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  16. Martin

    And Sanchez Energy SN

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    • THEY WILL KNOW ME BY THE TRAIL OF BLOOD
      THEY WILL KNOW ME BY THE TRAIL OF BLOOD

      I endorse this pick. SN is the tits.

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  17. buying the top
    buying the top

    Aren’t you a little late to this party? Fracking boom has been in play for several years now. Companies like $WNR $SLCA etc are up 5-10X in the past 12-24 months. Seems like you’re trying to make up for low conviction on these names when they were a good buy 1-3 years ago…

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  18. Djmarcus

    Buying the top,

    I believe we aren’t at the beginning too, but I still think we are in the early innings or middle innings at latest. Think we have many years before the trend changes. Fwiw, WNR is a refiner and has little to do with the current energy revolution on the US outside of their benefit from crude differentials (which backs up my case as they were able to do so well due to lack of proper infrastructure).

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  19. Frog

    Yeah, in 1990, people told everyone they were too late to the stock market party too, and that it was too late to buy. They also said “Look how much these stocks have gone up during the last 12-24 months.”

    It’s easy to say that when the stock or commodity market has done quite well in the recent past. But that doesn’t mean it won’t go further in the future.

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    • Jennifer

      Is that before or after the market dropped 20% in 1991?

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      • Frog

        Doesn’t matter to long term investors who held until 1999.

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        • Frog

          The S&P came closed at the end of 1990 at 330.22. It closed the year 1991 at 417.09. I am checking back and I do not even see an intra-year correction of 20% anywhere. Perhaps your data is erroneous.

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        • Jennifer

          That’s such a lame response. Leverage crushes people in 20% drops. Additionally, everyone was saying that the market was overbought in 1996. Do you think average investors stayed the course the entire way?

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  20. Jennifer

    Another major trend, monsieur Fly: solar.

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  21. Romeo Fayette

    I am big staked in $WFT, so looking among the following for replacement(s):
    $DNOW
    $DO
    $FET
    $FTI

    Some other interesting ideas that touch the space:
    $HELI
    $ROW

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  22. Spooky

    Why not just go for the actual E&P companies directly? The tailwinds for higher gas prices are in place.

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    • Romeo Fayette

      More than meets the eye: Depending on the company, their 2014 production is generally 80-100% hedged, with 2015 production 50-70% hedged, so there’s not as much leverage to the commodity as you would think.

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  23. boyaj

    WTR both sells water to these companies and then cleans up the frack-mess through disposal. talk about a Costanza double dip.

    BAS provides various well site services (drilling, completion, but most importantly fluid services).

    Lastly, PYCO if you feel like you’re Cali Chrome.

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  24. Dr. Fly

    Late to the party? Are we going to stop drilling for oil? These convos are truly stupid.

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  25. muktuckchuck

    Here’s 2 that have been good to me (TSX):
    FRC – Canyon Services — 45%-6month return + 4% Div
    CEU – Cdn Energy Services (fluids) — 100% 12month return + 3% Div

    There’s some other very small caps that I own but they’re a risky bunch (no Poseidon), including one that’s got some innovative fluid disposal ideas.

    That said – this space has contributed greatly to my above avg returns this year.

    I won’t say that Horizontal drilling and Fracking were invented in the Alberta oil patch, but it’s not an overstatement to say Alberta likely led in the adoption, use and innovation in both horizontal drilling and fracking.

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  26. Dr. Fly

    There is way more upside to buying companies who sell sand to drillers than retarded mlps. Sorry, but I am not a fan of those high dividend time bombs

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    • Mike

      I agree to a certain extent, although some of them have performed pretty well total return wise: KMP, MMLP.

      Take a closer look at solar stocks. That’s a trend worth banking on. They are spinning off yieldcos which will give a major boost to them.

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    • EMES

      Agree, although EMES + HCLP are MLPs.

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  27. Cascadian

    EGN is my favorite oil play lately. Highest production/market cap in the Permian. And selling their Alabama pipelines to focus on drilling.

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  28. I Am Jesse Livermore

    “Next” mega trend? Seems like the trend has been here for a while Fly.

    And to Jennifer, I said *weekly* RSI.

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    • rahagar

      It has been here a while, but the trend continues and has grown. I was part of “the trend” back beginning in 1989 with horizontal drilling in So TX, whilst Geo Mitchell was pulling the US’s fat from the energy fire by tinkering with the Barnett Shale in Wise County, TX. The fracking programs (amount of proppants and frac fluids, the rate and pressures of injection) have been altered and changed many times.

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  29. Djmarcus

    And of course Jesse Livermore adding tons of value w his comments.

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  30. rahagar

    Le Fly, the derivative play is $WAG. As the fracking and profiting continue, I Am Jesse Livermore ( and tree huggies Nation wide) will require the tissues, sedatives and Get Well cards that will drive their revenues through the roof.

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  31. Mr. Cain Thaler
    Mr. Cain Thaler

    I just bought ETP today. They should benefit as end user demand continues to adopt natural gas.

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  32. Keith

    SZYM has come out with a special type of shaft lube that really speeds up drilling. It is made of algae-full of oil that burst like zits down in the hole when lube is needed. I am not making this up.

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  33. budh

    Fly cartoon—
    http://www.coldbacon.com/pics/kliban/bkfly.jpg

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