Oil Drilling and Gas Extraction Industry in the US Analysis
DATE: September 16, 2012
TO: Patricia Bennett, Supervising Principal
FROM: Connor Sims, Associate
SUBJECT: Oil Drilling & Gas Extraction Industry in the US Analysis (21111)
This report presents information regarding the industry, the primary operator of oil and gas field properties. The industry fuels its key buyers, the Natural Gas Distribution (22121) and the Petroleum Refining (32411) industries, with crude oil and natural gas. The industry continuously battles a shortage of available oil. In addition, many major oil fields have been in use for decades, slowly waning. Currently, the industry grosses among the most profitable in the US despite these and similar obstacles. The benefits of investing here potentially outweigh concerning risks. Because of the esteemed value of the industry’s products, consistent demand for its products, and its positive near-future outlook, diversification into this industry may produce rewarding profitability in the short-term.
High Product Value
Crude Oil Prices
The key economic driver for the Oil Drilling & Gas Extraction Industry, crude oil prices, determines much of its profitability according to supply and demand. Price trends in West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, display the growth of its value in the past 3 years and past decade. An average barrel of crude oil grew from $26.18 in 2002 to $61.95 in 2009, $79.48 in 2010, and $94.87 in 2011 (Airlines, 2012). JP Morgan analysts project average annual prices above $99 in upcoming years (Sethuraman, 2012). Such upward growth points to lucrative profits.
Natural Gas Outlook
Natural gas production accounts for 41.6% of industry revenue in 2012. Prices in natural gas reached a 10-year low in April this year, but have erupted by more than 70% since (Hargreaves, 2012). Natural gas has seen an abundantly large output due to recent discoveries of natural gas in the Appalachian Basin;
TO: Patricia Bennett, Supervising Principal
FROM: Connor Sims, Associate
SUBJECT: Oil Drilling & Gas Extraction Industry in the US Analysis (21111)
This report presents information regarding the industry, the primary operator of oil and gas field properties. The industry fuels its key buyers, the Natural Gas Distribution (22121) and the Petroleum Refining (32411) industries, with crude oil and natural gas. The industry continuously battles a shortage of available oil. In addition, many major oil fields have been in use for decades, slowly waning. Currently, the industry grosses among the most profitable in the US despite these and similar obstacles. The benefits of investing here potentially outweigh concerning risks. Because of the esteemed value of the industry’s products, consistent demand for its products, and its positive near-future outlook, diversification into this industry may produce rewarding profitability in the short-term.
High Product Value
Crude Oil Prices
The key economic driver for the Oil Drilling & Gas Extraction Industry, crude oil prices, determines much of its profitability according to supply and demand. Price trends in West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, display the growth of its value in the past 3 years and past decade. An average barrel of crude oil grew from $26.18 in 2002 to $61.95 in 2009, $79.48 in 2010, and $94.87 in 2011 (Airlines, 2012). JP Morgan analysts project average annual prices above $99 in upcoming years (Sethuraman, 2012). Such upward growth points to lucrative profits.
Natural Gas Outlook
Natural gas production accounts for 41.6% of industry revenue in 2012. Prices in natural gas reached a 10-year low in April this year, but have erupted by more than 70% since (Hargreaves, 2012). Natural gas has seen an abundantly large output due to recent discoveries of natural gas in the Appalachian Basin;
References: Airlines For America (2012). Annual Crude Oil and Jet Fuel Prices. http://www.airlines.org/Pages/Annual-Crude-Oil-and- Jet-Fuel-Prices.aspx.. Retrieved September 16, 2012. Energy Information Administration (2012). Project Alaska North Slope oil production at risk beyond 2025 if oil prices drop sharply. Today In Energy. http://www.eia.gov/todayinenergy/detail.cfm?id=7970 Retrieved September 16, 2012. Prudhoe Bay Fact Sheet (2012). British Petroleum. www.bp.com/assets/bp...us.../A03_prudhoe_bay_fact_sheet.pdf Retrieved September 16, 2012. Hargreaves, Steve (2012). Natural gas prices surge 70%. CNN Money. http://money.cnn.com/2012/07/24/investing/natural-gas- - prices/index.htm. Retrieved September 16, 2012. Hersch, Laura How the US Uses Oil (2012). Alternative Energy. Retrieved September 16, 2012. http://alternativeenergy.procon.org/view.resource.php?resourceID=001797 Index Mundi (2012). http://www.indexmundi.com/g/r.aspx?c=us&v=91. Retrieved September 16, 2012. Sethuraman, Nathan (2012). Poll: Increasing numbers see oil below $100 in 2013, 2014 Winter, Michael (2012). U.S. Exported more gasoline than imported last year. USA Today. http://content.usatoday.com/communities/ondeadline/post/2012/0