With food and energy prices making climbs higher and higher nearly every day, somebody must be getting rich. But who? The gas stations claim they can barely get by. Farmers are protesting their own rising costs. And Exxon Mobil shareholders have little to smile about. Share price has barely risen over the last year.
Well, it looks like at least one small portion of the American population will be making money from this mess. Landowners in Pennsylvania, West Virginia, and even parts of New York have folks knocking at their doors almost daily. The checks they are willing to write are getting bigger by the day.
I want more, more, more
Just a few weeks ago, companies like Chesapeake Energy, Anadarko Petroleum, and Cabot Oil and Gas were offering landowners $125 per acre in exchange for the land's mineral rights. Today, those same companies are offering over $2,100. Some landowners are cashing in for hundreds of thousands of dollars.
But not everybody is signing over their mineral rights just yet. After all, experts merely "predict" there are huge quantities of natural gas buried beneath these areas. Once the findings are proven and companies are ready to begin drilling, landowners that hold out could be offered ten times the current offer. Even better, once gas begins to flow, the lucky landowners will receive monthly royalty checks from the sale of the gas removed from their land.
All of this action is happening because of new technology that allows drillers to more efficiently access the trillions of cubic feet of natural gas trapped inside the area's Marcellus shale formation. If tapped, this area could be producing 15% of the nation's natural gas by 2012. Best of all, thousands of landowners would be cashing huge checks.
Drilling companies are doing their best to secure huge tracts of land. Their lateral drilling technique allows them to access areas thousands of feet away from wellheads. They can tap reserves under churches, schools, and nearly anything else, but they must have the land's mineral rights. That is why they are buying all they can while the rights are still cheap. Once this becomes a proven reserve, the sky is the limit for lease prices.
What's good for the goose…
Unfortunately, the vast majority of the country does not own land in this three-state area. But that does not mean the entire country will not benefit from the drilling. These reserves, while located below many rural areas, are very close to some of the nation's most populated areas. Once tapped, they will provide a huge supply of natural gas without having to ship it across the continent. The more gas reserves we tap, the lower our energy costs.
This news, which is just starting to make headlines, proves the cyclical nature of the energy business. Right now prices are sky high and folks are willing to do whatever they must to get their hands on more gas. But soon, their ambition will flood the market and prices will drop.
In the meantime, smart investors will make some big money. Take a look at this region and the companies investing in it. If all goes well, they have high profit potential in the next few years.