Stealth Energy (SLH) Offers Alternative to Shale Plays
Traditional natural gas plays like Stealth Energy, Inc. (SLH) may be a better alternative to shale plays like Ultra Petroleum Corp. (UPL) and Exxon Mobil (XOM) as it boasts both higher margins and significant reserves, as natural gas continues to rapidly grow in popularity as an alternative source for domestic energy.
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The enormous natural gas reserves held within shale rock formations has led many analysts and politicians to see clean-burning natural gas as a way to reach energy independence. The increased focus has helped natural gas prices rise off of their all-time lows to around $4.35 per MMBtu, but prices remain under pressure until bullish policies are actually implemented.
The combination of lower-than-normal demand and a lack of policies implemented has created an opportunity for investors to get involved in natural gas ahead of a potential rise. Some analysts, like Sanford C. Bernstein & Co.’s Ben Dell, project prices to hit $8.50 by 2011 as companies need gas to rise to at least $7.50 to profit from new wells.
While shale rock formations may hold a lot of natural gas, extracting the natural gas is no easy task. The development of new technologies, like hydraulic fracturing (known as “fracking” in the industry), has somewhat lowered cost, but many shale operations remain economically unviable. As a result, investors may be better off with traditional producers like Stealth Energy, Inc.
Stealth Energy, Inc. (SLH) is a Canadian-listed oil and gas exploration company with properties located in the U.S. In addition to its promising oil fields, the company sits atop 40,000 acres of property (approximately 62 sections) with potential natural gas reserves of 3 Bcf per section. And without difficult shale formations, the gas is much cheaper to extract.
As a result, Stealth Energy is poised to benefit from the policy changes and pricing effects of shale gas exploration while maintaining a higher profit margin and significant reserves. The massive reserves held in shale formations will likely encourage energy independence policies, while the expensive process of drilling these shale formations may force a rise in prices.
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