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Methodological studies of exploration (Shale gas, natural gas, oil...) ✓ Industrial Engineering : New physical exploration techniques and production ✓ Fund manager / Fund partner

My company:
Us energy information administration
My book:
Securing Utility and Energy Infrastructures
  • Frack Tech – The Companies Behind The Revolution 0 comments
    Oct 7, 2013 11:28 AM

    Frack Tech - The Companies Behind the Revolution

    Published Tue, Sep 17th, 2013 Karim Rahemtulla, Investment Director

    You've no doubt heard about the technological advancements that have transformed the United States into one of the world's leading energy producers - things like fracking and horizontal drilling.

    But I doubt you've heard about the specifics…

    Yet that's exactly where the biggest profit opportunities lie. That is, it's not just the big producers and distributors that are making a killing here. There are literally thousands of smaller companies out there rushing to meet the soaring demand for niche products and services.

    Indeed, fracking is a dirty job - but it's also a highly technical one. It takes manpower, energy, effort and technology to get oil and gas out of the ground.

    But that's something that rarely crosses the mind of the average consumer when they pull up to the pump or turn on their gas stove.

    Well, today, we're going to look at a company that makes its bank down in the trenches…

    Paradigm Shift

    In the old days, oil and gas production was all about rigs and drill bits. But that's not the case now.

    Fracking needs are different. Valves, flow lines and pumping units require constant attention, as do the massive manifolds that stretch across multiple well pads in multiple fracking operations.

    There are some big players in this industry.

    General Electric (GE), for instance.

    The company's latest frack manifold system lets operators install the equipment in side-by-side modular fashion, reducing the footprint required and allowing multiple configurations to meet the particular needs of each site. Simply put, it's more versatile.

    Additionally, the units have been designed to reduce freight and wide-load trucking costs. That means more cost savings for the upstream producers going head-to-head in a very competitive industry.

    Of course, GE is such a large company that selling a few hundred units isn't going to significantly affect its share price. For that, we need to focus on smaller players that are in tune with the needs of drillers and explorers.

    One such company is FMC Technologies (FTI).

    A Land Invasion

    FMC has long been a player in the subsea arena as a provider of offshore drilling systems and services. That's a good business to be in, since the amount of money spent on deep-sea wells is expected to grow from $43 billion today to more than $114 billion by 2022.

    That's a 265% increase in less than 10 years.

    Furthermore, the number of deepwater wells will balloon more than 150% - from 500 to more than 1,250 over that same period.

    But that's not all.

    Thanks to a recent acquisition, FMC is well-positioned onshore, as well.

    You see, late last year, FMC took over Pure Energy Services - a Canadian company that functions as a backdoor play in the fracking business. Pure Energy provides flowback and wireline services for oilfields throughout the United States and Canada.

    Indeed, fracking operations use a lot of water and chemicals, which are shot through the rock to free the gas. The chemical-laden water then needs to be disposed of. These wells also need to be constantly monitored.

    Pure offers these services and uses its newest technology, Purelight, which helps operators accurately assess what's happening in the fracking process. This is critical in increasing efficiency, as well as safety.

    Bottom line: The fracking revolution is a boon for the U.S. energy sector. And one that isn't solely confined to the consumer, or the industry's biggest players. There's money to be made from the smaller, bit players in the industry.

    And "the chase" continues,

    Karim Rahemtulla

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