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GreenHunter Energy (GRH +4.2%), fresh off announcing an enhanced Eagle Ford presence through the...
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Friday, May 25, 2012, 11:21 AM ETGreenHunter Energy (GRH +4.2%), fresh off announcing an enhanced Eagle Ford presence through the development of seven new salt water disposal wells, says it has expanded its Appalachian equipment assets to service oil and gas operators active in the Marcellus and Utica shale plays.
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will play well in 2013.
GRH has wisely diversified into multiple resource plays, including the Bakken, Eagle Ford, Marcellus/Utica, and even a toe-hold in the Mississipian Lime in Oklahoma. They've wisely extended their service offerings to accomodate whatever kind of water management the customer needs. However, the basic money maker is so simple you just need a calculator: Every well drilled in any one of these plays must recycle or dispose of the water produced once it's put on line. Few producers have the time, expertise or incentive to manage their own water when a qualified alternative is knocking on their door. Check GHR's latest investor presentation - they're getting $7-10 per barrel to haul water in the Marcellus, and another $3/bbl to dispose of it. Holy crap! Even if gas prices force a minimum of gas drilling in those segments of the plays, you've still got $90 oil to support continued oil drilling, and the Marcellus, Utica, Eagle Ford, and Bakken all have substantial undrilled oil and/or wet gas potential.
This is really simple: if you believe in the future of oil and gas, then you can buy the producers, the services companies, or both. In this case a well-funded, well-conceived, well-run service company with huge upside is trading for less than $2/share and belongs in the $6-8 range. I'll take that risk.
[I am long GRH and intend to buy more when the impact of summer on natgas prices is known]