The INVESTools Advisory, January 11-15, 1999
1. Profiting from an Upcoming US Energy Shortage (TPL)Friday, January
15, 1999
Frank Curzio says the US is heading for an oil and natural
gas shortage. He points out that today's low oil prices are
forcing companies to plug 2,000 oil stripper wells each
week. Oil stripper wells (which produce 10 barrels per day
or less) account for 70% of all US wells. Curzio says that
since it costs $2 to $4 million to drill a new well, energy
companies can not justify drilling new stripper wells at
current oil prices. Also, stripper wells produce roughly 1.4
million barrels daily, which is also the amount that the US
imports daily from Saudi Arabia. "Since the US imports over
50% of its oil from outside its borders, loss of the
stripper wells will increase our imports and energy
dependence from one of the most unstable regions in the world," Curzio
says.
The only way oil companies could justify redrilling stripper
wells would be if oil and gas prices rose significantly,
Curzio says. He assumes Asian economies will turn around in
nine to 12 months and the US economy will continue to
advance, and predicts that today's dead stop in both on- and
offshore drilling will result in a dramatic shortfall of oil and gas
this fall.
To capitalize, Curzio recommends four special situations
selling at significant discounts to net asset value. Topping
the list is Texas Pacific Land Trust (TPL), one of the
longest-listed stocks on the NYSE. TPL has been earning a
0.0078% royalty on over 85,000 acres of land that has long
been drilled for oil. But Curzio is excited about more than
380,000 acres of other land on which TPL owns a higher 6.25%
royalty. Rising oil and gas prices will behoove companies to
drill on this higher-royalty land, and Curzio predicts 12,000
wells on this land in three-to-five years. "For patient
investors, a small holding in TPL's shares could result
in an imponderable accrual of tremendous wealth," Curzio says.
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