Claude, Finally had a chance to listen to that interview of the guy that wrote "The Party's Over". Its 54 minutes long and the guy is an environmentalist so I at first passed on listening but did just now in response to your comment.
He did an excellent job at going through the history, IMO. Is he overstating the case for the upcoming peak in world oil production? He would have an incentive to since it would help sell more books.
So all the above is interesting, but the question is, what can we do with this info from an investment viewpoint? I believe the tar sands projects in Alberta are gonna go a long way toward mitigating the problems created by North America's thirst for oil in the next 10-20 years, and have made (and plan to continue to make) an investment in this regard, which I have mentioned previously, WTO.T . Except for the fact that they need so much natgas to work, these projects are slam dunks IMO.
If I were an oil sands company I would buy a small natgas producer in Canada, one which produces about the same amount of gas as my company consumes. Then that would creat a "natural hedge", where I'd then be indifferent as to where natgas prices go from there. There are all kinds of crappy little Canadian oil & gas companies that would gladly sell out for, say, C$1.40 per established mcfe. They are doing this left & right as we speak, selling out to the royalty trusts up there.
Alternatively, if I were a large consumer of natgas I would try to lock up a bunch of gas in the form of a volumetric production payment. That is where you make one huge payment today for the right to receive certain volumes of gas in the future. Win lose or draw, the price you paid at the closing is fixed and unchangeable. These are pretty rare in the E&P world and I'm surprised we're not seeing more of these now that natgas prices are so high and appear to be destined to remain high for quite awhile.
KCS Energy used this technique to pull itself out of bankruptcy a coupla years ago. They sold 40 BCFE of mostly gas to Enron for $160 M, in Feb. '01, damn near the top of the last cycle. At $4/mcfe, that is the highest amount of consideration I've ever seen anyone pay to buy an mcf of gas in the ground (maybe that's another reason why Enron went bankrupt? <g>).
Anyway, I digress. Would be interested in what your thoughts are about this whole energy thing at this point. |
