Tag: the energy report

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

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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. Continue reading "Chris Berry: Energy-Metals Juniors with Derisked Projects Are Takeout Bait" →

Malcolm Shaw Likes Under-Covered, Unloved Energy Stocks

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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. Continue reading "Malcolm Shaw Likes Under-Covered, Unloved Energy Stocks" →

What the Narrowing WTI/Brent Price Gap Means for Investors

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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? Continue reading "What the Narrowing WTI/Brent Price Gap Means for Investors" →

Byron King's Shocking 2013 Predictions

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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. Continue reading "Byron King's Shocking 2013 Predictions" →

Porter Stansberry: End the Ban on US Oil Exports

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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? Continue reading "Porter Stansberry: End the Ban on US Oil Exports" →