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The Shale Oil and Gas Boom and Its Discontents

By Elliott H. Gue on Jul. 31, 2013

The shale oil and gas revolution under way in the US hasn’t occurred in an orderly fashion, with midstream (pipelines and processing) and downstream (refining and marketing) struggling to keep pace with the upsurge in domestic hydrocarbon production. 

Given the magnitude of the structural changes taking place in the US energy patch, markets throughout the value chain are slowly working their way to equilibrium and prone to bouts of extreme volatility. In this issue, we check in on the oil-field services space, an industry that’s gone through a period of feast and famine in the US market for pressure pumping.

From 2011 to early 2012, oil-field services firms with outsized exposure to this business line were flying high and posting impressive margin growth, as capacity shortages enabled operators to push through significant price increases. However, developments in the commodities market, coupled with an influx of new capacity, conspired to send the market into an oversupply. 

We check in with the industry to see how close the North American onshore market is to a bottom and whether the supply-demand balance overseas has reached an inflection point.

In addition, we revisit our outlook for regional crude oil prices in the US and update our strategy in light of the recent challenges faced by US independent refiners.

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In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

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