Chancels, I have often thought about the concept of being "market neutral", within just the energy space. I even tried that to a small degree last year, buying some OIH puts plus shorting some stocks of what I viewed as the "weaker" E&P's, such as TMR, GSX, IFNY, QRCP, etc. This strategy produced only modest success, so I've largely abandoned it. I have ruled out trading the actual commodity futures contracts (in either direction) due to the extreme volatility (as witnessed by today's move in natty!
Most investors see the US-traded energy stocks as being one-dimensional, driven solely by what the price of North American natty happens to be (or more accurately, where it's expected to go). While this may be the case for the large bulk of the stocks that trade here, I humbly but emphatically submit that it is not the case for all of them.
Thus, the way I have coped with this uncertainty regarding US natty prices is to search out that small subset of US (and, to a lesser degree, Canadian), energy companies whose chances of success have little to do with what North American natty prices are. BPZ Energy (BPZI), my largest position, will be selling most of its gas in the form of electricity, probably via a "take or pay" contract, at the regulated price of $35/mwh. No pain no strain re: commodity price risk there. There are plenty of risks regarding investing in BPZ stock right now, but commodity price risk is not among them. |
