2 Pictures to Explain a Tiny Company's Enormous Opportunity
One of the biggest economic stories of the next decade will likely be the fact that America will be producing more oil and natural gas that any country in the world by 2020.
The country is now dotted with large swaths of energy deposits that are being developed.
Source: SEC filing.
Much of this boom has been made possible through new fracking techniques. But these techniques are at the center of a firestorm regarding the environmental safety and the impact it can have on local ecosystems.
Furthermore, fracking requires enormous amounts of water. Chesapeake Energy recently estimated that every new well it drilled would require 5 million gallons of water - and because of that, energy prices would likely be staying high for the foreseeable future.
Even if our appetite for fossil fuels levels off, these wells are likely going to be drilled to meet demand over the years. In addition, safety regulations imposed by the government will likely tighten, and the amount of water used will remain high.
That's where Heckmann - with its tiny market cap below $1 billion - comes in. Over the past couple years, through a combination of capital spending and strategic acquisitions, Heckmann has positioned itself as the company that will help meet the environmental and water needs of the energy industry.
Just as the real winners of the gold rush were those selling axes and blue jeans, Heckmann could profit not by extracting energy, but by being the only player equipped to handle water from start to finish.
To understand what the company does, check out this slide from a recent presentation.
The company has quietly built out an infrastructure of trucks, tanks, railcars and pipelines to deliver and collect the massive amounts of water energy extracting companies need.
And to help meet government regulations and lessen the environmental impact, Heckmann will be able to utilize its Appalachian Water Services plant to treat fracking water from the Marcellus Shale. In cases where water can't be treated, Heckmann has rights to 46 waste wells.
And in a periphery endeavor, Heckmann will also take waste to one of 34 Thermo Fluids treatment facilities to process used motor oil into reprocessed fuel, which can be used as a feedstock for the production of lubricants.
A Foolish approach to the company
This isn't yet the type of company you'd want to go all-in on. The diagram above should give you a better idea of what you're buying into if you purchase Heckmann stock. But its important to note that there's a lot outside of Heckmann's control - like commodity prices and drilling habits - that can effect its business.
Instead of heavily investing in Heckmann, there's one energy company that now accounts for 6% of my real-life holdings. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report - it's totally free.
The article 2 Pictures to Explain a Tiny Company's Enormous Opportunity originally appeared on Fool.com.Motley Fool contributor Brian Stoffel owns shares of Heckmann. The Motley Fool owns shares of Heckmann and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, Short Jan 2014 $15 Puts on Chesapeake Energy, Long Jan 2014 $4 Calls on Heckmann, and Short Jan 2014 $3 Puts on Heckmann. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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