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At first I thought it was too good to be true, but visiting San Antonio on my last trip opened my eyes to the boom South Texas is experiencing.? Back in 2006 when I was about to purchase my rental property in the north side of San Antonio to escape the west coast sub-prime crisis, I had one main goal in my mind - asset preservation and secondary, to bring in a positive monthly cash flow if possible.? After witnessing the transformation of San Antonio in the last two years with manufacturing job growth, falling unemployment rates, and a surging rental market, my ultimate goal has shifted to a possible sale within three to four years.? The seventh most populous city of U.S. is now benefiting from the state's bread and butter - oil.
With hydraulic fracturing and horizontal drilling, crude reserves are yielding at record levels.? But the new technology has not moved me as much as the recently discovered Eagle Ford Shale reserves, which is a rock formation underlying much of East and South Texas nearly 400 miles.? This area rich in oil deposits and natural gas fields is 50 miles wide and has an average thickness of 250 ft. with a depth of between 4000 and 12000 feet.? It contains high amounts of carbonate, which makes the area brittle and easier to use hydraulic fracturing to obtain oil and natural gas.? These reserves are estimated to be in the range of 3 billion barrels with a potential output of over 400,000 barrels per day.? This means one thing - jobs! How many you ask? Currently estimated over 60,000 if the following mega oil companies keep this pace of expansion.?
Halliburton (NYSE: HAL) was one of the first companies that opened its wallet in building a small operations base of $50 million in the heart of San Antonio.? It hired 1,500 workers for its operations center with average salaries of $70,000 a year.? Its competitor Schlumberger (NYSE: SLB) did not waste a minute and opened its doors to San Antonio with a $20 million compound with over 500 workers with salary ranges of $25,000 up to $85,000 a year.? And we cannot leave out the mega driller Baker Hughes (NYSE: BHI), which has been on a massive drilling spree with countless rigs that have already sprung up all across the shale.?
In the chart below you can see the number of rigs for crude oil (blue circles) and natural gas (red circles) Baker Hughes has established all along the 400 mile stretch landscape.
The job growth and low unemployment was also reiterated by my new tenant as we were having a couple of cold ones at a local bar while going over the lease terms.? My tenant works for Weatherford (NYSE: WFT), a mid-size equipment company that is paying for all of his relocation costs and is providing Baker Hughes and Halliburton with the tools they need to drill away.? The $10 billion market cap. company has been struggling with a large debt load and missed earnings in the last few quarters, but has finally broke its strong resistance of $13 in the last month.? Since February of 2011 it has lost nearly half of its value, but has recently saw increased interest from hedge fund manager Daniel Loeb of Third Point.? The company could see increased revenue benefiting and piggybacking from the major aforementioned drillers that are already in fierce competition.
Source: http://feeds.fool.com/~r/usmf/foolwatch/~3/27bmny8aXMU/story01.htm
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