logo
  Join        Login             Stock Quote

Three Companies 'Cracking' In The Marcellus Shale

 February 21, 2012 10:52 AM
 


As millions of Americans brace for a slew of new potential taxes next year, Shell – the U.S. subsidiary of Royal Dutch Shell (NYSE: RDS-A) – is contemplating which state it wants its next big tax break from.

West Virginia passed legislation in January that would give Shell a 25-year property tax break if it sets up a new $2-billion operation there.

And according to the Associated Press, "Pennsylvania offered 15 years, and Ohio has reportedly offered major incentives."

It should be no surprise these states are competing to win Shell over.

After all, they're located in the heart of the Marcellus Shale region, the largest shale gas deposit in the world. And as CBS News reports, Shell "would create 12,000 jobs, both direct and indirect" and "provide $600 million in wages annually."

[Related -Calculating A Stock's Fair Value Based On Future Growth Expectations: Part 2A]

But you may be surprised to know that Shell isn't preparing to start fracking for more natural gas in this region. Instead, it's going to start "cracking" it.

Shell Gets Cracking

Last month, I wrote about how cheap natural gas is creating a number of opportunities to profit in the plastics industry.

As I explained, ethane is a natural component of natural gas. And through various cooling and heating procedures, can be turned into ethylene, one of the primary building blocks for producing plastics.

[Related -Floyd Mayweather, Jr. Helps CBS Corporation (CBS) Make That Money]

Facilities that specialize in turning ethane into ethylene are called cracking plants.

For Shell, its newest cracking facility will be the fifth plant it will have set up in the United States. And the best part…. it's just one of many plants about to be built.

Cracking Plants Going Viral

The Associated Press says several other companies are interested in building cracking facilities in the Marcellus Shale region.

But there are also several plans in the works to build cracking plants all around the nation.

Bloomberg reports, "Chevron Phillips Chemical Co. plans to spend about $5 billion to build an ethane cracker in Texas, while Dow Chemical Co. (NYSE: DOW) and Sasol Ltd. (NYSE: SSL) each plan to spend as much as $4.5 billion on crackers in Louisiana."

And those are just a few examples.

The Road Ahead

It's bigger companies like Shell, Dow and Sasol that stand to benefit mostly from building cracking plants over the coming years.

That's because most state tax breaks are only for companies prepared to invest at least $1 billion in building these already expensive facilities.

But with natural gas prices so low, the cost to turn ethane into ethylene is much cheaper than it was just a few years ago. And companies that specialize in this are set to boost profit margins a great deal as more cracking plants get built around the United States.

Good Investing,

Michael Kapsch

iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageInitial Jobless Claims Rose Unexpectedly

Claims unexpectedly rose in the latest report through last weekend to breach 300,000 for the first time read on...

article imageAll Quiet on the Record High Front

What can we glean from the media’s lack of attention to the market’s recent record read on...

article imageThe Chip Maker Short Sellers Should Be Watching

Investing in semiconductor stocks is always tricky. Industry cycles can lead to bumps in the road for the read on...

article imageChicago Fed: US Economic Growth Slowed In October

The pace of US growth slowed more than expected in October, according to this morning’s update of the read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.