Saturday, August 23, 2008

Buffett: Oil Sands Visit for Info Only.

Warren Buffett is nothing if not a disciplined investor, and he explains that his visit to the Alberta region was for information gathering only, something that he will file away and may use a few years from now. As he explains near the end of the interview, he's now gained knowledge on cost aspects of the business, but the biggest wildcard remains the longer term price of oil.

Note that he already holds $1.5 billion worth of ConocoPhillips stock, which claims to have the "largest position in Canadian oil sands".

It's mentioned that they visited CNQ's new project as well as an unnamed SAGD (steam assisted gravity drainage) site. Since COP has a joint venture with Encana (ECA), and since Encana has SAGD sites in production, my guess would be that they visited an Encana site.

CNBC: Buffett/Gates Energy Tour.

Link:

http://www.cnbc.com/id/15840232?video=829077555
http://www.conocophillips.com/NR/rdonlyres/31989B77-23F9-40A7-BB42-3D56B4A01420/0/UBSAustinMay22wnotesupdatedfor1Q08BPReseg.pdf

Thursday, August 21, 2008

As the World Cools.

In spite of the hub-bub about greenhouse gas linked warming, there are a number of scientists who are convinced that solar activity is a much larger factor. [Some scientists even suggest carbon levels rise after the earth heats up as a consequence, not before/as a cause.] Sunspots are one measure of solar activity, and there is a roughly 11 year cycle in sunspots, as well as some longer ones that we have not nailed down exactly. The current sunspot cycle is delayed, and it's possible this is linked to the bout of cooler weather we are experiencing.

There are scientists who are raising questions about the longer term solar cycle, suggesting that perhaps we are in for a lull in sunspots, and a bout of long term cooler weather. Some have pointed to the example of the Maunder minimum, which was a long period with little sunspot activity where the earth cooled fairly dramatically for those living through it.

While it's too early to draw conclusions, I'm keeping an eye on this story and on the sun's sunspot activity at Spaceweather. According to NASA, it should be picking up this fall. Note that longer than average cycles (above 11 years) are apparently associated with short periods of cooling. I also note that today we have a sunspot appearing, after a lull.

If you really want to go out on a limb, there are some (I think Charles Nenner, though I could be mistaken) who link sunspots with general human activity, and further stock market performance, I'd assume due to some geo-magnetic connection. A new sunspot perks up and it looks like the primary bull market in the investing world (commodities) might be pulling out of it's tailspin. A connection? Who knows.

Link:

http://en.wikipedia.org/wiki/Maunder_minimum
http://www.spaceweather.com/

Yahoo: This year so far coolest for at least 5 years: WMO.

Link:

http://uk.news.yahoo.com/rtrs/20080820/twl-environment-climate-2008-dc-1202b49.html

Maine Today: Brrr! Farmers' Almanac says cold winter ahead.

Link:

http://news.mainetoday.com/updates/031815.html


Milenio: Auguring brief era of ice in 2010.

Quotes:

An expert from the National Autonomous University of Mexico predicted that in about ten years the Earth will enter a "little ice age" which will last from 60 to 80 years and may be caused by the decrease in solar activity.

Link:

http://translate.google.com/translate?u=http%3A%2F%2Fwww.milenio.com%2Fmexico%2Fmilenio%2Fnota.asp%3Fid%3D651680&hl=en&ie=UTF8&sl=es&tl=en

I have more on this topic here, here, and here.

Link:

http://lobg2.blogspot.com/2008/06/theres-little-black-spot-on-sun-today.html
http://lobg2.blogspot.com/2008/04/prisoners-of-sun-ii.html
http://lobg2.blogspot.com/2008/04/prisoners-of-sun.html


Note: This blog is distributed through some media that doesn't handle links properly, therefore I will list the link address also for people to cut and paste if they wish.

MAN BITES DOG - er, POLITICIAN.

Perhaps I should say "Man bites pandering politicians."

This is great, and amazing. A new poll showing that Americans are smart enough to figure out that windfall profits taxes on oil companies, SPR releases, and gas tax holidays are not going to fix the energy problem. Who'd have thunk it?

Coming soon: Obama on an offshore drilling platform, and Pelosi air kissing Rex Tillerson. (Maybe she ought to kiss-kiss the guy from Devon, he's actually better at finding resources.)

The Wall Street Journal: Voters Want Everything on Energy.

Quotes:

"Voters are telling us they want everything," said Neil Newhouse, a Republican who conducts the poll with Democrat Peter D. Hart. Mr. Hart said the results indicate that the current energy debate between Republican presidential candidate John McCain and his Democratic rival, Barack Obama, "is not the fight that the American public cares about."

The poll found greater levels of skepticism among voters about releasing oil from the Strategic Petroleum Reserve -- an idea advocated by Sen. Obama and many congressional Democrats -- and suspending the federal gas tax, an idea championed by Sen. McCain. Less than half of those polled thought those ideas were a step in the right direction.

"What these voters are saying is that there needs to be a whole new way of looking at our problems, and that they don't want the same old fights and the same old divisions," Mr. Hart said.

After weeks of criticizing expanded drilling, Sen. Obama has said he could support an expansion of offshore drilling, as long as it is part of a "genuine bipartisan compromise" that includes other measures to reduce the country's oil dependence.

Similarly, House Speaker Nancy Pelosi (D., Calif.) announced last week that her party is drafting legislation that "will consider opening portions of the Outer Continental Shelf for drilling, with appropriate safeguards, and without taxpayer subsidies to Big Oil."

Bill and Warren's Excellent Alberta Adventure.

It's been a long time since I've done an Canadian oil sands post. These stocks have been clobbered along with everything else, but these are huge resources that will be producing for a long time. These projects aren't without issues, as it's carbon intensive, needs natural gas input as well as a large amount of water, and makes apparently one hell of a mess, so they need to get the environmental stuff done right.

The classic oil sands stock is Suncor, SU, but Bill Gates and Warren Buffett took a tour of the latest oil sands project, the Horizon project by Canadian Natural Resources, CNQ.

Other oil sands names include:

Canadian Oil Sands COSWF
Imperial Oil IMO
Nexen NXY
Encana ECA
ConocoPhillips COP
Husky HUSKF
ExxonMobil XOM
Shell RDSA
Devon DVN
Marathon MRO
Opti-Canada OPCDF

Because of the size and longevity of these resources, combined with the long term questions about reliable oil supply and peak oil, I have seen Suncor referred to as the "Microsoft of oil", with potentially 50 years of earnings growth ahead of it, as well as comments about oil sands stocks being "stocks to pass on to your grandchildren".

I'm looking forward to see what Warren Buffett has to say in his CNBC interview on Friday.

Financial Post: Buffett and Gates tour Alberta oil sands.

CNBC: Oilsands Stock Soars After Warren Buffett and Bill Gates Visit Alberta Project.

Tuesday, August 19, 2008

Insider buying in energy stocks.

I started looking at this yesterday. Among names that are seeing some buying:

MMR
HK
GDP
CLR
HERO

It's nice to see insiders jumping in here, though sometimes they are a bit early. It looks like energy stocks may finally be finding a floor, after a solid month+ of a thorough thrashing.

Wall Street Journal: Oil, Gas Insiders Bet Energy-Stock Bull Is Primed to Resume Run.

Quotes:

Oil and gas insiders are betting big that the historic run-up in energy stocks isn't over.

Since energy stocks crested and retreated in early July, an unusually large number of directors, officers and large stakeholders have pumped money back into their own companies -- a sign, analysts say, that the boom is primed to resume.

Pickens: Not too long under $100.

Using wind for electrical energy generation, shifting natural gas to a transportation fuel, reducing oil imports 50% in 10 years, yada yada yada. Ok, kidding about the yada yada yada, I've just featured Mr Picken's ideas a number of times now.

It's an extremely important issue, this is one guy with a decently sized plan that seems worth shooting for, so I'm personally for it.

Without any kind of plan (say, like the situation we find ourselves in right now..), we're liable to be as *&^%$# as the peak oil doomsters think.

On the oil price prediction of a roughly $100 floor for oil prices, he believes OPEC will actively try to support a floor around that price, which sounds correct to me.

Bloomberg: Pickens Says Crude Oil Isn't Likely to Drop Below $100.

Monday, August 18, 2008

Where is the oil price floor?

I think Tom Petrie might be right - a natural floor might be around $80 to $90 for oil. But I think we don't get there because of the winter (which I suspect will be cold) and because the market is still going to leave a bit of a premium in the mix for the vagaries of the world.

Note the interesting headline flashed, but not discussed:

"Practical peak oil becoming broadly recognized as looming issue"

CNBC: Crude Heading Down to $80 a Barrel: Merrill Executive.

Quotes:

"I think it's pretty clear demand elasticities have been triggered in a way that will take prices lower," Petrie said. "I do think $80 to $90 is probably where the floor is."

Sunday, August 03, 2008

Got shale?

Alternative title: Taking the edge off peak oil.

Oil is unlikely to go back to $30, even with this potential boom in shale gas production in the US, but it's looking like we actually have something workable here, mid-term.

The peak oil doomsters are really not going to be happy about this development.

The answer, as always, was somewhere in the middle.

CNBC: Nat Gas Plays.

Star Telegram: Natural gas stocks take big drops since July 1.

Quotes:

XTO Chairman Bob Simpson told the paper that the shale-gas fields popping up across the country are proving to be "discoveries the size of which you haven’t seen for 50 years in our business."

He called the Barnett Shale "one of the greatest gas fields ever found" and suggested that the huge natural gas finds could boost demand because they suggest that there will be ample supply.

The actual reserves from the nation’s shale-gas fields are mostly speculative because the formations are relatively new and haven’t been fully explored.

The Barnett, discovered in 1981, is relatively mature, but others, like Louisiana’s Haynesville Shale and Appalachia’s Marcellus, are sparsely drilled.

That didn’t stop Friedman, Billings Ramsey analyst Rehan Rashid from working up his own estimates of the fields’ reserves, which he presented Wednesday in Houston. Rashid told Oil and Gas Investor magazine that he figures that the Barnett Shale holds 55 trillion cubic feet of recoverable gas.

But he pegs the Haynesville at more than twice that, or 120 trillion cubic feet, and the Marcellus at 68 trillion. Arkansas’ Fayetteville Shale follows the Barnett at 25 trillion, and Oklahoma’s Woodford Shale weighs in at 14 trillion.

He said he expects those fields to greatly boost the values of the companies that have staked holdings there.


CNBC: Peak Oil Theory.

CNBC: Drilling for Profit.

CNBC: Peak Performance?

Pickens Plan.