Replies to This Discussion

Permalink Reply by Wilma Watts on January 8, 2011 at 3:22

Lots of attractive energy stocks to buy these days. $90 a barrel oil sure makes liquids look real attractive, and if nat gas can move up to $6 mcf lots of gassey stuff would start looking economic I expect (of course, then the rig count may jump and supplies will wash us back to $4 mcf). In any event exciting times to be a mineral owner, company, or investor

 

GeoResources (GEOI), player in the Eagle Ford and Bakken shales, was initiated as a buy yesterday - the stock has done very well lately. Some comments on energy investing and a couple of firms with a niche - Evolution Petroleum (EPM) domestic oil production (Louisiana) and FX Energy (Polish natural gas producer) (FXEN) - are in the January 6 Thursday commentary:

http://www.lsgifund.com/index_files/Page960.htm

Some neat slides from the companies on CO2 injection (EPM) and economics, and Polish structures that FXEN tends to drill (hopefully the structures will be packed with natural gas or oil). They also talk about GEOI a bit in the blog. These guys are also apparently high on the ag sector and farmland:

http://www.agnetwork.com/High-Prices-Fuel-Bullish-Ag-Sector-Outlook...

The sweetspot would be if you have a farm and lease the minerals for a horizontal test well that finds crude oil and liquids, ha ha.

.

Permalink Reply by Wilma Watts on January 18, 2011 at 13:05

A recent book with interesting implications for investors in the global energy and commodities sectors studies factors that have historically promoted social development and economic growth. Written by Stanford’s Ian Morris ‘Why the West Rules – For Now’ (2010), he traces per capita energy use over the centuries and how it contributed to social development.

For investors in the energy and mineral/basic material sectors the message of the book is clear:

(1) global energy resources will be invaluable to social development in the future,
(2) demand for these resources will increase substantially,
(3) the fact that many of these resources have been nationalized could lead to scarcity and conflict, and
(4) investors in the sector should do very well as global demand increases, producers struggle to grow output, and resource quality declines
*********************************************************************
Charts and commentary:

http://www.lsgifund.com/TVF/Energy_Dev.pdf

Permalink Reply by Wilma Watts on January 21, 2011 at 11:26

Financial manager Jim Puplava and SMU energy and finance professor Joe Dancy talk about what to expect in the energy sector in 2011. These guys were quite bullish on all the main energy plays, coal, oil, and natural gas. The only thing the really did not like was ethanol.

Interesting 16 minute interview. Was recorded yesterday.

Link is at the top of this page:

http://www.lsgifund.com/index_files/Page1214.htm

Permalink Reply by Wilma Watts on January 24, 2011 at 18:11

Seven Trends for 2011: SMU Adjunct Professor Optimistic On 2011 Outlook

LSGI Advisors Inc. issued a press release today on their 2011 investment outlook:

http://www.prnewswire.com/news-releases/seven-bullish-trends-seen-f...

Investment trends we see in 2011:

1. Higher energy prices (coal, oil, natural gas)
2. Higher agricultural prices and food riots in developing countries
3. Russell 2000 small cap index reaches record levels
4. Stock selection and active portfolio management add substantial excess returns (versus passive investments in tracking ETF's)
5. Real estate prices remain depressed
6. Investors slowly begin to return to the US stock market
7. Unemployment stays elevated and food stamp use reaches record levels

Our full report is at the following link:

http://www.lsgifund.com/TVF/SevenThemes.pdf

Joe Dancy

www.lsgifund.com

Permalink Reply by Wilma Watts on February 5, 2011 at 17:22

Natural gas markets. With regard to U.S. natural gas markets, we stand by our non-consensus forecast that the average price for natural gas in 2011 will be reasonably higher than the year earlier period. Several articles in the Dow Jones newswires and Wall Street Journal have indicated a few analysts are re-thinking their bearish position on the commodity.

With regard to natural gas The Wall Street Journal noted as follows:

Power generation, which accounts for 34% of U.S. gas demand, will be the sector to watch. Residential and commercial demand, 36%, and industrial use, 30%, are important but unlikely to grow that much.

Power companies, however, have good reason to use more gas. Burning it emits much less carbon dioxide than burning coal. Moreover, tightening emissions regulations, not just for carbon, should force older coal plants to shut: By 2015, 40% of them will have been in service for more than 50 years, according to Sanford C. Bernstein. Meanwhile, the estimated all-in cost of electricity from a new coal plant able to capture its own carbon emissions is 62% higher than that from a gas plant able to do the same, according to Bernstein.

Fortunately, there's a lot of spare gas-fired generation ready to be used. The confluence of utility deregulation and financial exuberance in the late 1990s led to a building boom in gas-fired generation, with installed capacity more than doubling between 1999 and 2005, according to Credit Suisse.

Yet utilities have favored running coal-fired plants over gas-fired ones: In 2009, gas-fired plants generated only 23% of their potential output, compared with 59% for coal.

A big reason for the utilities' antipathy toward gas is that prices have historically been volatile, especially when a lot of supply came from the hurricane-prone Gulf of Mexico. Now, with supply shifting toward onshore shale fields, gas prices look flat for as far as the eye can see: Gas futures don't get above $6 per million Btu until December 2015. Alongside the fitful trend toward a lower-carbon future, those flat prices should persuade more generators to abandon coal en masse. Paradoxically, gas's very weakness should underpin its eventual resurgence.

The Dow Jones Newswires noted that more capital is being re-allocated to oil prospects versus natural gas prospects:

U.S. energy producers are making a massive investment shift from natural-gas production to unconventional oil drilling as natural-gas prices stagnate, said Sylvia Barnes, managing director and head of banking at investment firm Madison Williams and Co.

With natural-gas prices remaining stuck at about $4 per million British thermal unit, more energy companies are taking the advanced drilling technologies that allowed them to unlock previously unattainable natural gas and moving to less developed, but potentially more profitable, unconventional oil fields.

The widening spread between oil and natural-gas prices is driving the investment shift, Barnes said. The oil-to-gas price ratio, which was traditionally 6-to-1, is expected to reach 18-to-1 by November. . . .

[more discussion at the following link] . .

http://www.lsgifund.com/index_files/Page960.htm

Permalink Reply by Wilma Watts on February 16, 2011 at 15:39

IEA Crude Oil Demand Estimates - Last week the International Energy Agency (IEA) issued their monthly report estimating global crude oil demand. For the fifth consecutive month the IEA revised the oil demand estimate upward. Final crude oil demand estimates for last year (2010) was estimated at 87.8 million barrels per day, an increase of 2.8 million barrels per day (3.3%) over 2009.

For 2011, the IEA forecasts continued growth in demand. They increased estimates upward to an average of 89.3 million barrels per day, an increase of 1.5 million barrels per day (1.7%) over 2010 levels – reaching a record level of global demand. Fourth quarter 2011 demand will be over 90 million barrels per day, or roughly 2 million barrels higher than current production rates according to some analysts.

The IEA uses International Monetary Fund (IMF) economic models to construct its oil demand forecast. The IMF recently revised its estimate of global economic growth, lifting 2011 growth estimates from 4.2 per cent to 4.4 per cent. The faster than expected economic growth translates into more oil demand.

The agency’s estimates reflect an assumption that the growth in China’s oil consumption in 2011 will slow markedly – something we would question in light of recent economic data from China and the current sub - $100 a barrel price of crude oil. The IEA estimates that China's 2011 oil demand will slow to a growth rate of 6% year-to-year, from the torrid growth rate of 12.2% for last year (2010). China’s growth in demand for 2011 will be roughly one-half the growth rate of 2010 according to the forecast.

Thermal coal imports to China for electrical generation have been adversely impacted by recent flooding in Australia. This fact, the fact that diesel generators are supplementing coal fired production for environmental reasons, the fact that China’s economy continues to expand at roughly 10%, and the fact auto sales will reach record levels this year, indicates to us that oil demand growth most likely will remain much more robust than expected.

The pace of demand growth is extraordinary. Oil consumption in the 2010-2011 period will increase by more than 4 million barrels per day if the IEA estimates are correct – roughly one-half of Saudi Arabia’s current production. At this rate of growth global supplies will have difficulty growing as fast as demand, which will lower the amount of spare productive capacity available to stabilize markets and reduce price volatility. The IEA warned in their report that sharply rising oil prices in 2011 could prove a drag on the global economic recovery.

Our favorite domestic crude oil producers remain GeoResources (GEOI) and Evolution Petroleum (EPM). We have a large position in both firms in the LSGI portfolio. Evolution Petroleum (EPM) also announced they will be presenting at the Houston luncheon of the Energy Prospectus Group on March 10th, 2011.

more . . .

http://www.lsgifund.com/index_files/Page960.htm

Permalink Reply by Wilma Watts on February 24, 2011 at 1:47

With oil at $100 bbl and gasoline prices going up Jim Puplava discusses the energy sector today - link to the 16 minute audio interview is at this page:

http://www.lsgifund.com/

Energy seems to have taken center stage.