The Two Best Stocks to Profit from Tighter Fracking Laws

Todays top stocks to buyA controversial ruling in Illinois is causing a riff between economics and environment – but these two “best buy” stocks are set to bring the new regulations straight to the bank…

Fracking’s newest chapter just began in the state of Illinois.

On June 17th, 2013, Illinois Governor Pat Quinn signed into state law the Hydraulic Fracturing Regulatory Act, effective immediately.

It’s now the nation’s toughest set of regulations aimed at safeguarding the environment during oil and gas fracking activities. Some of the provisions include better protection of water quality, higher reporting transparency from companies, and greater public involvement.

On the political side, the Illinois government is confident that the new fracking laws will create thousands of new jobs while attracting more investment and ensuring the state’s resources are protected.

So out of the environmentalists fighting for stricter rules and the drillers defending their practices, who actually gained the upper hand?

Well, with the law now firmly in place, both groups have little choice but to compromise.  Drillers get to drill but the legislation gives the public the opportunity to appeal permits and launch lawsuits at anytime.

Indeed, the passing of the Illinois legislation sets a new standard for the industry.  It’s likely that other states will follow suit, taking a tougher stance against fracking.

And this is where I see opportunity for us investors…

You see, the use of hydraulic fracturing is the new normal for oil and gas exploration. It’s largely to thank for the resurgence in American oil production and has seen enormous growth over the past five years.  In fact, according to the Bureau of Land Management, approximately 90 percent of wells currently drilled on Federal and Indian lands use fracking.

As evidenced by the new Illinois regulations, governments are making a strong push towards a clean energy future, with a great deal of resources now aimed at better minimizing environmental damage caused by modern drilling techniques.

One major environmental concern is the wastewater after the completion of a fracking stage.

During fracking, a mixture of water, sand and chemicals is injected into a horizontal wellbore at extremely high pressure to create fractures in shale rock. Because the mixture can only be used once, millions of gallons of water are often required for each well over its lifetime.

That means a great deal of wastewater is left over – a product that is toxic if untreated, much to the anger and dismay of environmental groups.

But a revolutionary remedy is quietly gaining support from both sides.

In fact, one of today’s biggest beneficiaries to the wastewater issue has been companies whose business involves recycling and cleaning of post-frac water.  With new technology, these companies are able to help drillers repeat the mixture application multiple times – saving money and conserving water usage.

Talk about a win-win situation.

The introduction of tougher fracking standards in states like Illinois is just the catalyst these service companies have been waiting for.

So what do I think are the best stocks to buy now to take advantage of this?

Best Stocks to Buy Now:

My first best stock to buy is one of the larger companies in the environmental solutions space: Nuverra (NES:NYSE).

Formerly Heckman Corporation, Nuverra currently employs over 3,000 staff operating in more than 70 locations across 26 states.

They have operations strategically located in almost every major US shale regions, including: Marcellus/Utica, Eagle Ford, Bakken, Haynesville, Barnett, Permian, Mississippian Lime, and Tuscaloosa Marine Shale.

Their services range from fresh water acquisition to treatment and disposal of flowback from fracturing operations.

In Q1 2013, Nuverra saw their revenues triple to $160 million from a year ago. Not surprisingly, the bulk of the growth came from successfully expanding their operations into the prolific Bakken shale.

However, a cautionary note about Nuverra is that their two biggest customers in Shell and Chesapeake make up a third of their revenue stream. Being highly leveraged to just two clients could be risky should either of them decide to switch providers.

My second best stock to buy is: GreenHunter Resources (GRH:NYSE).

Though they have a much smaller operational footprint than Nuverra, they are well positioned in the highly productive Eagle Ford and Marcellus/Utica shale plays.

GreenHunter also recently began operations in the Oklahoma/Mississippian Lime and have acquired properties in the Bakken to set up operations beginning in Q2 2013.

Like Nuverra, they also offer total water management solutions.  But with their recent unveiling of a proprietary technology called Frac-Cycle, GreenHunter could soon corner a growing demand for water recycling services.

Frac-Cycle uses innovative processes such as vibration separation and nano-filtration, which are able to capture suspended solids content from post-fracking water that can’t normally be disposed of safely.

While most operators are targeting a clean brine output, Frac-Cycle’s flexible design allows the user to take in flowback or produced water and recycle to either clean brine or fresh water.

In turn, the recycled water can be used for subsequent frac activities, or in some cases, processed to the point where it can even be safe enough to be discharged into a stream.

The company commenced their first successful application of Frac-Cycle at an oilfield waste facility in southeastern Ohio in late June.

In Q1 2013, GreenHunter saw their revenues grow by 279% from the same time last year – and that’s without any Frac-Cycle contracts.

As the industry continues to move towards a more regulated system of fuel extraction, I believe Frac-Cycle could become a major profit generator for GreenHunter.

With two of my best stocks to buy now yours for consideration, I urge you to keep a close eye on fracking regulation in other states. If the legislation in Illinois sparks a flurry of action in other states, wastewater-processing stocks should take off.

 

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire
Follow me on Google+, Facebook, and Twitter

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