Hydraulic Fracturing: Down For The Count?

| May 8, 2015 | 0 Comments

Hydraulic Fracturing Industry Backed Against The Wall…

Did you hear this remarkable announcement?

According to an executive at Weatherford International $WFT, one of the largest oil services companies in the world, half of the 40 operating hydraulic fracturing service providers in the US will likely be bankrupt or sold by the end of this year!

I don’t know about you, but I find that to be an incredible statement!

As you’re likely aware, the dramatic downturn in the price of oil has hit the US oil industry hard. Exploration companies are leaving oil and gas wells uncompleted due to low prices.

What’s more, the oil producers that are choosing to complete wells are demanding greatly reduced rates from fracking (short for hydraulic fracturing) service providers.

It’s a gut punch for the entire fracking industry…

The announcement from $WFT has investors wondering which frackers will inevitably be swept into the dustbin of history. It should come at no surprise that the companies with the highest debt and least amount of liquidity will be the first to cry Uncle.

Before I reveal which companies will undoubtedly survive this vicious downturn and give patient investors sizeable profits, let me explain what fracking is…

Hydraulic fracturing is a well completion technique that’s unlocking vast quantities of energy from shale rock.

Wells are drilled thousands of feet below the earth’s surface before a mixture of water, proppant, and various proprietary chemicals are injected under extreme pressure. Once a well is fracked, oil and natural gas resources flow freely to the well bore on the surface.

While fracking is no doubt controversial, the process has increased US oil production to multi-decade highs and turned our country into the world’s top oil and natural gas producer.

However, the entire US oil industry now finds itself in a tough predicament…

US production increased so quickly that the price of crude oil sank to six-year lows earlier this year. With supply rising so dramatically, prices had nowhere to go but down.

With the entire industry stuck in a downturn, fracking companies find themselves in a fight for survival.

If you’re interested in investing in this industry, it’s best to stick with top-tier well completion companies that are virtually guaranteed to survive. 

Here are a few that should be at the top of your buy list…

Hydraulic Fracturing Providers Guaranteed To Survive- And Eventually Thrive!

No doubt about it, investing in the hydraulic fracking industry is a dicey proposition right now. That’s why I suggest buying companies with a strong industry presence and solid balance sheet.

Here’s are the companies you want at the top of your list…

Halliburton $HAL – Shares of this fracking industry leader are already being scooped up by aggressive value investors. While $HAL is still down 23% over the past twelve months, it’s up 22% from the start of 2015.

Baker Hughes $BHI – This Goliath company is so well respected that shares have nearly recovered all the losses seen in the latter half of 2014. But the best part is, this company has ample cash and low debt, making it a top choice for risk-averse investors.

C&J Energy Services $CJES – With a market cap of $1.7 billion, this is the smallest of the fracking companies listed here. However, $CJES recently merged with Nabors Industries $NBR. This transaction will make $CJES a force to be reckoned with in the fracking industry. And since shares are still trading near the recently set 52-week low, there’s still plenty of upside profit potential.

Bottom line… 

There’s no question the oil price downturn is sending shockwaves through the entire oil and gas industry. And due to its reliance on oil exploration companies completing wells, the fracking industry will be one of the hardest hit.

However, once the price of oil normalizes (which I see happening later this year), the companies above will be perfectly positioned to capitalize on a fracking industry rebound.

Until Next Time,

Justin Bennett
Commodity Trading Research

BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at http://commoditytradingresearch.com/free-sign-up.

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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