Tag: streetwise

Enhanced Oil Recovery with Competitive Costs

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The Energy Report: On July 26, George Phydias Mitchell died at the age of 94. The late Texas oilman had pioneered the use of horizontal drilling and hydraulic fracturing. Can you speak about his achievements?

Jim Letourneau: Mitchell was the founder of the entire shale oil/shale gas revolution. For decades, the Texas wildcatters had known that there was gas in the Barnett Shale, but it was very difficult to get it out. Mitchell did not invent the fracking technologies. He just wanted to get the gas out of the shale. And as the owner of an oil company, he got to challenge the technical people. He basically said, "If you guys can't figure it out, I'll find someone who can." He had the power and the money and the persistence to make it work. Mitchell Energy Development Corp. began working on the problem in 1981, and it took until 1999 to figure it all out. The company sold for $3.5 billion ($3.5B) in 2001! It is inspiring.

TER: Were other companies trying to develop fracking? Continue reading "Enhanced Oil Recovery with Competitive Costs" →

As Argentina Backpedals, Will Oil and Gas Companies Step on the Gas?

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The Energy Report: How is the news that Argentina holds the fourth-largest shale oil reserve in the world affecting business plans for companies that operate there?

Bill Newman: The U.S. Energy Information Administration (EIA) report that was released in June 2013 showed that Argentina has a technically recoverable shale oil resource of 27 billion barrels, so it reaffirms the large potential of Argentina. Although the shales plays are in an early stage of appraisal, we don't believe the potential of the shale is the key issue for oil and gas companies investing in Argentina. The political risk is still the chief concern. However, this year the government started to move away from its nationalist policies, so we think the political climate is slowly improving.

TER: When we talked last year, Argentina had recently expropriated the assets of Yacimientos Petrolferos Fiscales (YPF:NYSE) (YPF) from Spain's Repsol (REP:MC) without compensation. And the government temporarily froze the Argentinean assets of Chevron Corp. (CVX:NYSE) in response to a $19 billion ($19B) judgment in Ecuador. Has the danger of nationalization of foreign owned oil and gas assets receded or increased? Continue reading "As Argentina Backpedals, Will Oil and Gas Companies Step on the Gas?" →

Finding Bargains Down Under

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The Gold Report: You recently said that this is your fourth cycle in a commodity sector in your 40-year career. Where are we in this current cycle, and how do you determine that?

Rick Rule: The bottom is usually marked by a two- or three-week period of capitulation selling followed by a standoff, where both the buyers and the sellers are exhausted. We haven't seen that yet. We've had two or three different periods with a couple of days of capitulation selling but not a two-week period as we saw in 2000.

I wouldn't be surprised if the downturn was four years, which suggests we have a year and a half to two years before we clean out the excesses. The junior sector is substantially overpopulated with companies, managers and agents. There needs to be a major cleansing over the next 18 months.

TGR: Will it be more cleansing or more mergers and acquisitions? Continue reading "Finding Bargains Down Under" →

Are Gold Equities on the Cusp of an Upswing?

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The Gold Report: Ron, the Federal Reserve has decided to continue quantitative easing (QE) for the foreseeable future. Gold has risen steadily since that news. Is that what you predicted the Fed would do?

Ron Struthers: It is not that hard to predict the Fed's behavior when you understand what it's trying to do and how it's trying to do it. I do not take what they say literally, except within the context of its goals. The Fed is trying to instill confidence in the economy because of massive U.S. debt and its future debt appetite. The economy needs to improve for there to be higher tax receipts. We need foreign investment to finance the debt. If the Fed can convince Americans and those abroad that its bonds are the safest/most attractive, its stock market will have the best returns and that debt machine keeps running.

But the truth is that the economy is very weak. Employment is weak. Foreign investment has been fleeing. The Fed has to purchase $85 billion of debt a month because nobody else will. The Fed can't do this forever, and it knows it. It has to talk as if the economy is improving so the Fed debt purchases can end in the near future.

If you dig into what's really going on in the economy and markets, you'll find the underlying weakness that guarantees that QE will be here for a long time, as least as long as the markets themselves will allow it or are tricked into allowing it.

TGR: Why are Americans so complicit in this? Continue reading "Are Gold Equities on the Cusp of an Upswing?" →

Something's Got to Give in the Precious Metals Market

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The Gold Report: Heiko, in late June gold had its biggest weekly drop in two years. What's your take on that?

Heiko Ihle: It was set off by far-reaching talk of a slowdown in quantitative easing. However, an awful lot of U.S. dollars are still floating around and the price of gold is pegged to the U.S. dollar. In the long run, companies can't sell gold for less than it costs to take it out of the ground. At some point something has to give.

TGR: So, what's going to give?

HI: Either the cost of mining or the price of gold. Quite frankly, the cost of mining has been reasonably sticky thus far.

TGR: Can miners profitably mine gold at $1,200/ounce ($1,200/oz) and silver sub-$20/oz? Continue reading "Something's Got to Give in the Precious Metals Market" →