Shale Explorers Outperforming Large International Oil Companies

Oil explorers focused on high-margin shale drilling from Texas to North Dakota are set to outperform Big Oil this year, Bloomberg reports. According to the agency, EOG Resources Inc. (EOG), Pioneer Natural Resources Co. (PXD) and Continental Resources Inc. are poised to reap bigger returns for investors than energy titans 15 times their market values as they devote almost all their drilling capital to higher-margin, domestic crude wells, said Gianna Bern, founder of Brookshire Advisory and Research Inc. in Chicago. Houston-based EOG is estimated to more than triple profit in 2013 to $1.92 billion.

The domestic price rally “is bullish for U.S. shale development and benefits producers with a high U.S. production profile,” Bern, a former BP Plc (BP/) crude trader, said in a telephone interview. U.S. shale “is where the growth is.”

West Texas Intermediate, the benchmark crude for onshore U.S. oil, has risen 16 percent this year as new pipelines and rail links eroded a supply glut in the Great Plains. London-traded Brent, the basis for two-thirds of international prices, fell 1.9 percent, undermining major international producers and contributing to second-quarter earnings from Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) that disappointed investors last week.

Exxon and Shell already are lagging behind some of the dominant domestic shale explorers in delivering returns to investors. Pioneer has risen 70 percent this year, while Oklahoma City-based Continental has increased 33 percent. EOG, the biggest owner of drilling rights in the Eagle Ford Shale in southwest Texas, has risen 27 percent.

Copyright: Bloomberg, 2013.