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U.S. Energy Self-Sufficiency Nothing But 'Feel-Good BS'

May 1, 2013 By

The Energy Report: In September 2012, you described $100/barrel (bbl) as the new normal. What market factors are behind today's price of $93/bbl?

Bob Moriarty: If the new normal is $100/bbl in any given market, the price should be as high as $115/bbl and as low as $85/bbl. The price will continue to swing around that. Even with the Bakken coming on-line and other domestic U.S. production occurring in the U.S., cheap oil is gone.

TER: So when you look at oil consumption, do you look just at the U.S. or do you look globally? For example, what role does China play?

BM: I am concerned with U.S. consumption as a measure of how the economy is doing. Oil use in the U.S. has been declining since 2008 because economic activity has been declining since then. I think oil consumption in the U.S. is the best indicator of economic activity because there is direct correlation between the two. [See first chart below]

China is an indicator of global consumption. I am not concerned with global consumption. But if you want to measure what is happening in China, look at the spot price of copper, which is hitting new lows. China is slowing down. [See second chart below] [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/6vhRqT6Zr2M/15210

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Bullish on Oil Prices? Two Reasons You Might Change Your Mind

April 4, 2013 By

The Energy Report: Marshall, before the Great Recession hit, we appeared to be on target for $150 per barrel ($150/bbl) Brent in mid-2008, and we were hearing forecasts of $200/bbl before the end of that year. But things have changed. I'd really like to get your fix on how you perceive energy markets have been altered over the past five years.

Marshall Adkins: For the oil market specifically, two massive structural changes have occurred since 2008. First, U.S. oil supply from horizontal drilling in tight shale formations has created a reversal of the four decade-long decline we've seen in U.S. oil production. When I say reversal, I'm not just talking a minor blip; I'm talking about erasing a 40-year decline within five years. This truly is a massive structural change to U.S. oil markets.

On top of that, in conjunction with the Great Recession, the world has figured out that there's too much debt, and most of the developed world is going through a deleveraging period. Historically, whenever you deleverage, you get subpar economic growth, and subpar oil demand growth. For the past five years, we've seen significantly lower demand growth for oil compared to the prior two decades. I expect that to continue, and I expect U.S. oil production to continue marching higher. [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/uAcXcbc8KrI/15121

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Chris Berry: Energy-Metals Juniors with Derisked Projects Are Takeout Bait

March 21, 2013 By

The Energy Report: In your Morning Notes in January, you defined much of the energy mining industry as an oligopoly. What do you mean by that?

Chris Berry: Industries like uranium, lithium, vanadium, rare earths or potash typically have a few players at the top that control production and hence pricing. This is a huge barrier to entry for juniors looking to join the ranks of producers.

TER: If the majors are producing enough material to meet today's demand, what are the prospects for the juniors in this market?

CB: It's challenging in the near term because I see supply and demand in balance in many of the metals markets. This is why companies with ample cash on their balance sheets should attract attentionthey can survive until demand recovers. Economic growth has slowed across the globe, which implies lower demand and less need for the many juniors out there. [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/jQ7AO3ypi6U/15089

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Malcolm Shaw Likes Under-Covered, Unloved Energy Stocks

March 13, 2013 By

The Energy Report: As a retired sell-side analyst and hedge fund VP, what do you look for in selecting and analyzing investment situations?

Malcolm Shaw: My background is actually geology, but over time I got pulled into finance. There was an advantage to having geological or technical knowledge, particularly in evaluating small- and mid-cap companies. Technical knowledge aside, the key for me is good management, and I've met hundreds of management teams over the years. Good management with sector expertise is always my first screening tool. After that I like companies that are under covered or generally unloved by the street because they tend to be where the market is less efficient. I'm not really going to add any value talking about names like Exxon Mobil Corp. (XOM:NYSE) or Encana Corp. (ECA:TSX; ECA:NYSE) simply because the information is so well distributed and the market is more efficient in larger caps, but not in smaller caps. [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/oeVuuEepVBk/15069

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What the Narrowing WTI/Brent Price Gap Means for Investors

January 30, 2013 By

The Energy Report: U.S. oil prices hit their third peak of 2012 soon after your last interview with us, then bottomed around $85 per barrel ($85/bbl) in early November. Now they're back in the mid-$90s. What's causing the recent strength?

Elliott Gue: New pipeline capacity is alleviating some of the supply crude glut in places like Cushing, Oklahoma. As a result, West Texas Intermediate (WTI) has gained ground against Brent, which is now trading just under $114/bbl and has been in that same $107115/bbl range since August. Over the next year or so, a number of other pipelines will open up to the Gulf Coast, which will help narrow the spread between Brent and WTI.

TER: Will the increased oil supply at the Gulf refineries be good for gasoline prices? [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/6F1qRP45boE/14959

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Byron King's Shocking 2013 Predictions

December 21, 2012 By

The Energy Report: Let's start with a recent takeover deal that's been getting a lot of criticism in recent weeks. Freeport-McMoRan Copper Gold Inc. (FCX:NYSE) made a $9 billion takeover offer for the oil and gas explorer McMoRan Exploration Co. (MMR:NYSE) and Houston-based Plains Exploration Production (PXP:NYSE). Are you happy with this deal?

Byron King: It came as a surprise. I've held McMoRan Exploration in Energy Scarcity for about two years. I like what McMoRan is working to do with deep gas in the Gulf of Mexico. Still, I recommended that readers take their money off the table with this deal. Sell the shares, take the cash and we'll find other opportunities.

McMoRan Exploration nearly doubled after the Freeport announcement, going from $8 to $15 per share. You can't walk away from that kind of potential gain. Take your money, pay your taxes at the lower 2012 rates and do something else with the money next year.

There's another angle to this takeover. Freeport and Plains together already own about 36% of McMoRan. There are a lot of ties here, between key individuals. I think this deal was driven by the impending tax changes next year. Freeport, the copper play, is borrowing a lot of money to fund this whole process. Fortunately, interest rates are very low, so it's borrowing cheap to do a big takeover, which will give a lot of people a really sweet payday, and they'll get to pay capital gains taxes at much lower rates this year than if they wait until January 2013.

TER: James "Jim Bob" Moffett, who founded McMoRan, is also paying himself. He was a significant shareholder in McMoRan Exploration. He's taking from his left pocket to put it in his right pocket. [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/rGWHmE6Jkrw/14869

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Porter Stansberry: End the Ban on US Oil Exports

December 17, 2012 By

The Energy Report: As a history enthusiast, Porter, to what extent do you believe technology has changed investing?

Porter Stansberry: The future will be unlike the past in every way related to technology, but it will be exactly like the past as it relates to people. Technology changes a great deal, but people don't. You can count on politicians to be scumbags and most people to be lazy. But as for investing, technology gives far more people access to information. Only one person in the world knew the actual price of a high-yield bond 25 years agoMichael Milkenand he made a fortune with that information advantage. Today, everybody has access to trading information. Everyone has access to price. In general, technology has made finance a smaller-margin business. It's led to enormous scale in our financial institutions, which is the only way they can really survive. But fear and greed are still the underlying forces that drive the markets, and investors are just as subject to irrational emotional decisions as they've ever been. I don't expect technology will ever change that.

TER: Getting specifically into energy, a few weeks ago the International Energy Agency World Energy Outlook (WEO) said the U.S. would become the world's largest oil producer, overtaking Russia and Saudi Arabia, before 2020. Then Goldman Sachs said it would happen by 2017.

PS: They stole my thunder. I've been saying 2017 for maybe a year now. If Goldman is saying 2017 and IEA is saying 2020 it will probably happen in 2016.

TER: How will the geopolitical and socioeconomic landscape change when the U.S. becomes the largest oil producer? [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/xg2gpCzaRZg/14851

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Weighing the Risks in International Oil Plays

December 8, 2012 By

The Energy Report: Amin, you started your career in the consumer credit industry, where you were involved in risk management at a major bank. How does that translate to the securities industry?

Amin Haque: The company I worked for was MasterCard International Inc., and as director of risk management, my focus was on macroeconomic risk management in international jurisdictions. That gave me a very good foundation for evaluating sovereign, political and currency risks. In my four-year career with MasterCard, I focused on countries in Africa, the Middle East, South America, the Caribbean and the Asia Pacific. These are the same regions where many of the exploration and production (EP) companies I'm interested in operate. My previous experience is proving quite useful as an oil and gas analyst.

TER: When you look at a company, do you consider the jurisdictional risk first?

AH: Jurisdictional risk differentiates a company focused in North America from one that operates internationally. For the latter, geology, exploration history and reserves matter as much as they do for a North American company, but equally important considerations are geopolitical or currency risks. These issues affect operations as well as profit repatriation.

TER: Do you focus on the downside? [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/XJfxuLo4sRc/14821

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What Every Investor Should Know About Income and Growth: Kenny Feng

November 23, 2012 By

The Energy Report: Kenny, you are a former MLP portfolio manager. You've also been an analyst at a bulge-bracket investment bank, Goldman Sachs Group Inc. (GS:NYSE), where you followed the energy and power sector, as well as MLPs. Is Alerian similar to Standard Poor's or Russell Investment's indices?

Kenny Feng: Yes, it's similar in that we are purely an indexing firm that maintains benchmarks for the MLP sector. But we are also an education provider for the asset class and aspire to be the Wikipedia of MLPsthe first-pass information source for an investor who comes across the sector through an article in Barron's, a commercial on CNBC, a conversation with a friend or financial advisor, or even through one of these interviews at The Energy Report. So besides the statistics we provide, we also speak at conferences and conduct free teach-ins to educate the investment community about MLPs.

TER: Do you manage any assets?

KF: No, and because we don't manage any assets, the investment community views Alerian as an unbiased source of information. We field questions for investors across the spectrumfrom individuals who have $100 to invest, to the multibillion-dollar institutions that are conducting due diligence on the sector prior to making a percentage allocation to the asset class.

TER: How does Alerian make money? [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/GIf6oyzrIBE/14759

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Oil and Gas Volatility Creates Winners and Losers: Robert Cooper

November 15, 2012 By

The Energy Report: It's been about one year since we last spoke, Robert. What do you think have been the most significant developments in the North American oil and gas industry since then?

Robert Cooper: It's a dynamic business, and a number of changes have occurred. First, the macroeconomic backdrop remains murky, resulting in persistent volatility in equity and commodity markets. Investors remain wary of putting on riskier trades because the visibility simply isn't there. The fear that some Monday morning we'll wake up with a negative surprise is inhibiting risk taking and impacting small-cap growth equities, particularly.

"The winners tend to be experienced managers with proven track records."

Second, the rapid increase in U.S. oil production has negatively impacted Canadian producer net-backs. The spread between Canadian light oil prices and the U.S. equivalent has been much more volatile than historical rates. The lack of pipeline capacity has exacerbated this trend and given rise to alternative methods of transportation, such as oil-by-rail. But overall, the "differential risk" has been added to the list of risk factors investors assume when investing in the oil and gas sector.

Finally, the natural gas market, after a period of massive oversupply, has, in our view, self-corrected and appears to have returned to balance. [Read more...]

Article source: http://feedproxy.google.com/~r/theenergyreport/caoK/~3/RpGPnOA7hUk/14729

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