Friday, May 11, 2012

Unconventional Oil Plays - The Gift That Keeps on Giving

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We have made no secret that we have built up and continue to add to a portfolio of unconventional light oil producers.

This Seeking Alpha article explains why:

How many good investment ideas does a person need to have in a lifetime to become wealthy? The answer is easy: one.
If you are willing to concentrate a sensible amount of your investment dollars in one exceptional idea, the results from that one investment can change your lifestyle. Of course, the extremely hard part is finding that one good idea.
I think I've got one.
This idea isn't a specific company; it is a specific type of company. I think pure play unconventional oil producers represent an incredible long-term investment opportunity today.
Here is why:
1. Reasonably high oil prices (as in $70-plus) are here to stay. The world isn't running out of oil, but it is getting to the point where we can't get it out of the ground fast enough to keep up with the global daily demand for the stuff. Daily demand for oil continues to grow relentlessly because of China, India, and the rest of the emerging world, while daily oil production appears to be flattening.
Combine that with the fact that the marginal cost of supply continues to rise (deepwater, oil sands) and I think our future is one of high oil prices.
2. I think Mr. Market is greatly underestimating the growth that these unconventional oil players have in front of them. Many of these pure-play unconventional names have drilling inventories in unconventional plays that virtually assures they can grow production for the next decade or more, yet Mr. Market values many of them at four or five times EBITA.
Link to entire article:

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