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There’s a buying frenzy underway in the energy market right now… And I believe it represents one of the best opportunities you’ll ever have to get rich in natural resources.
It all comes down to a huge problem facing ExxonMobil and its fellow Big Oil companies…
And just last month, he discussed his bearish stance on ExxonMobil: “ExxonMobil will not be able to replace its reserves.”
That’s a bold statement. After all, ExxonMobil is one of the most respected, most successful companies in the world… and it’s excellent at finding oil. ExxonMobil was able to replace more than 100% of its reserves for 17 straight years. (At a 100% reserve replacement ratio, a company is replacing one barrel of oil for each one produced.)
ExxonMobil’s reserve replacement ratio for 2010 was 209%. That’s a huge number. But Chanos believes ExxonMobil would have fallen short of 100% without its $41 billion acquisition of unconventional natural gas giant XTO Energy.
That move was part of a megatrend taking place right now that few people are talking about. I believe investing in this trend today could lead to triple-digit gains over the next 12-24 months.
[More from Frank Curzio: "It’s Time to Sell These Popular Stocks"]
You see, ExxonMobil isn’t the only one having trouble replacing reserves. Almost every large-cap integrated oil company from Royal Dutch Shell to Chevron is in the same boat. After all, it’s getting more difficult to find large amounts of oil these days.
That’s why these oil companies are spending billions of dollars on natural gas assets in some of the most prominent shale areas across the U.S. Here’s a list of several billion-dollar deals that have taken place over the past 14 months:
To put these deals in perspective, imagine Google, Microsoft, Apple, Cisco, and IBM invested billions of dollars in companies producing a particular technology within an 18-month period. Chances are, every stock within that sector would skyrocket.
But that’s not the case for natural gas stocks… yet.
There are a ton of small-cap, unconventional natural gas producers that have properties in the same shale areas where most of the acquisitions from Big Oil are taking place. Some have solid balance sheets to weather weaker natural gas prices. Also, several have exposure to oil – which is trading near $100 a barrel.
If these stocks decline from current levels, they could easily be bought out. If natural gas prices move higher – or we see an ease in supply – these companies could jump hundreds of percent.
Big Oil companies are not done buying natural gas assets. Expect to see this trend continue as long as oil prices remain high, and natural gas prices remain depressed. It’s the only affordable way for these large oil companies to meet their reserve requirement goals.
That’s great news for small-cap natural gas stocks… and investors who get in on the ground floor.