It’s not hard to pin down the biggest energy story of the past year.
U.S. shale—and the massive surge in oil and gas production it has created.
2013 will be remembered as the year when America once again began tops in petroleum. With surging output from unconventional wells making it clear the U.S. will become the largest producer of liquids in the world for the foreseeable future.
But despite all the excitement, shale stocks have stalled. Many firms that were seeing double or triple-digit percentage gains the last few years ended up treading water through the past 12 months.
Just look at the chart below of go-to Marcellus shale producer Range Resources (NYSE: RRC). The producer started 2013 with strong gains. But then fizzled—remaining largely range-bound since March.
This cooling of shale producers was to be expected. After all, most firms are today trading well above the value of their in-ground oil and gas reserves. Range Resources today is valued at nearly five times proved reserves.
That’s a very hefty premium to pay for such a stock. Implying that the company needs to grow its assets by 400% just to catch up to its current share price. Any hiccups, and there’s a very real risk the valuation could come crashing down.
Stats like these show why investors are perhaps starting to look away from the shale space—for greener pastures.
But what other corners of the energy world have this…