The Shale Oil and Gas Tech Angle
by Justin Dove, Investment U Research
Tuesday, November 8, 2011
But eventually everyone knows about those players and there aren't many buy-low opportunities. Investors swoon, causing valuations to inflate as it becomes "the next big thing."
So investors have to dig deeper into unfolding trends to uncover hidden opportunities.
One such opportunity may present itself in the area of surveying software for shale drillers. As unconventional drilling continues to ramp up, the need to use geophysical surveying software should also increase.
As the easier wells become occupied, it's quite possible that many prospective drillers will lean more heavily on seismic data to try and avoid the costs of drilling unsuccessful wells.
One hint that an industry is on the up and up is when its leading companies get swallowed up by the big boys who are looking for better growth.
In August, a leading information technology firm, IHS Inc. (NYSE: IHS), acquired the top seismic data software company, Seismic Micro-Technology (SMT). Back in 1985, Chevron (NYSE: CVX) was the first energy company to license SMT's KINGDOM software. By 2000, 23 of the top 50 oil and gas operators were using SMT software.
Now it's used in 95 countries and has offices around the world.
In SMT's press release following the acquisition, IHS Chairman and CEO Jerre Stead said:
"KINGDOM brings a particular strength in geophysical interpretation and when combined with our IHS PETRA offering and its strength in geologic interpretation, it will offer our customers a geosciences workflow solution that is unmatched in the current marketplace."
IHS is a fairly big company though. It's certainly not a direct play on energy. In fact, energy is just one of four of it's main analytics domains - the other three being product lifecycle, security, and environmental.
Other Companies in Shale Oil and Gas Tech
For more direct plays, investors may want to look at publicly traded oil and gas tech companies, such as:
- Norway's Petroleum Geo-Services ASA (OTC: PGSVY.PK)
- Texas-based Global Geophysical Services, Inc. (NYSE: GGS)
- France's Compagnie Générale de Géophysique-Veritas S.A. (NYSE: CGV)
- Texas-based ION Geophysical Corporation (NYSE: IO)
While the two Texas-based companies are more likely to benefit from the U.S. shale oil and gas boom, ramped up offshore activity in the North Sea and elsewhere in the world is sure to help business for the European counterparts.
It's not too late to take advantage of companies involved in the shale oil and gas trend in North America. Investors will just have to get more creative and figure out other industries or sectors that will benefit from the ramped up shale activity.
Some of the companies listed aren't even profitable yet, and IHS has a P/E in the 30s, which isn't exactly cheap. So the oil and gas technology sector is no sure thing, but hopefully this helps steer investors into the kind of out-of-the-box thinking that can make lots of money.