Hi Frank - I'm long term bullish on gas and drilling, but recognize that I couild be right in the long run and severly hurt in the short run. I have the T-shirts for that, by the way.
I would not bet everything on drilling rigs - there are UTEs that have refinaced, Royalty trusts, bond funds, and other ways to win that spread the risk out.
I have to make one negative comment- There are about 138,000 active oil wells and 58, 000 active gas wells in Texas. In Iraq, there are only 2,000 oil wells...what happens when about 50 rigs move to Iraq and start drilling ...won't take long to seriously increase prodcution. This is the standard TV pundit sceanario, but it may have some degree of truth, especially on the oil side.
That could limit oil driling in North America, and we would have to see if increased gas drilling could absorb all the rigs. One nasty limiting factor - the industry has not developed enough good prospects.
The other cloud on the horizon is a nasty double dip recession, which could drag all energy prices a little lower, and make E&Ps hesitate before increasing drilling budgets. SARS is a big wild card here, of course.
In either case, having some money in bonds, cash, Royalty trusts, and other places coudl be very useful, since it would allow you to buy more energy stocks at the prices of the second bottom.
On the bullish side, we have high decline rates, and more commitment to NG as the fuel of the future for pollution reasons. I think the Royalty trust will do better and better, then the E&Ps, and later the drillers. I think this will happen by this time next year, but if we get mild weather and other event, might take as long as three years. |
