Category

Oil

Finally, TransCanada Corp. (NYSE: TRP) Will Build the Keystone Oil Pipeline – Sort of

Turns out the Keystone oil pipeline will be built – at least, part of it.

TransCanada Corp. (NYSE: TRP), the Calgary-based energy company trying to get the project approved, said yesterday (Monday) it would seek immediate approval to start building the southern half of the pipeline that runs from Oklahoma to Texas. That segment doesn't need a presidential permit because it doesn't cross a U.S. border.

TransCanada said the southern portion of the Keystone oil pipeline will allow Midwest oil to reach Gulf Coast refineries. There is currently a glut of oil produced in that region.

"Gulf Coast refineries can then access lower-cost domestic production and avoid paying a premium to foreign oil producers," TransCanada CEO Russ Girling said Monday.

The pipeline will carry light crude oil produced in North Dakota, Montana, Kansas, Oklahoma, and Texas. It will cost $2.3 billion and be completed in 2013. It will also create about 4,000 construction and support jobs.

TransCanada also said it would reapply for the full Keystone oil pipeline construction – a hot button issue in this election year.

Why President Obama Rejected the Keystone Oil Pipeline

To continue reading, please click here...

Iran is Now a Full-Blown Crisis, Stage Set for $200 Oil

Just when it looked like we could take a breather from the Strait of Hormuz, all attention is back on Iran.

There are three reasons for this – all happening within the last week:

  1. First was Tehran's successful launch of a satellite, viewed by all in the region as being for military intelligence.
  2. Second, in his toughest talk to date, Iranian Supreme Leader Ayatollah Ali Khamenei voiced defiance to Western sanctions and pledged open retaliation if they are instituted.
  3. Finally, last Thursday, U.S. Secretary of Defense Leon Panetta expressed concern that, if matters continue, Israel could attempt an air-strike takeout of Iranian nuclear facilities within a month. Iran has been frantically moving essential components of its nuclear program underground to withstand such an attack.

All of this is, once again, leading to a rise in crude oil prices.

What's more, the EU decision to stop importing Iranian crude starting July 1 will cripple any chance Tehran has to combat escalating economic and political turmoil at home.

Yet Khamenei's defiant tone during his Friday prayer meeting speech indicates that Iran's religious leadership will not wait for the system to unravel.

And that is what makes this both a full-blown and an intensifying crisis.

Brinksmanship in the Straits of Hormuz

So what's being done?

Washington has little – leverage, save its ability to temper an immediate escalation by Israel (leverage the U.S. can still apply, at least for the moment). It also has some indirect influence on what the E.U. does.

Meanwhile, Saudi Arabia also is a wild card. It will not tolerate a nuclear Iran.

And yes, there are ample indications that American and Israeli intelligence have concluded Iran will achieve the ability to develop nuclear weapons in the next 18 to 24 months.

Some elements of that process will be available earlier, but remember: A weapon is of little value unless it can be controlled and delivered. The logistical and infrastructure considerations need to be in place first.

Yet with such an inevitable conclusion staring them in the face, the West has decided to embark on a risky path…

The target here is not the nuclear project at all (over which there is less and less outside control). Instead, it has become about creating massive domestic instability to bring down a regime.

Now, this is not about ending the theocracy. With or without Mahmoud Ahmadinejad as president or Ali Khamenei as supreme leader, Iran will remain a Shiite-dominated country. Religion decisively controls politics, and the clergy oversees the society.

The West is seeking a more moderate application of what will remain the Iranian cultural reality.

However, as the brinksmanship intensifies, so will the price of crude oil. Tehran, in this dangerous game of international chicken, really only has one card to play – the Strait of Hormuz.

There has been much misinformation circulated about the strait. Here are the facts.

On any given day, 18% to 20% of the world's crude oil passes through it.

According to the Energy Information Administration, the Strait's narrowest point is 21 miles wide; however, the width of the shipping lane in either direction is just two miles, cushioned by another two-mile buffer zone.

Of greater significance, though, is the fact that most of the world's current excess capacity is Saudi. (This is the oil that can be brought to market quickly to offset unusual demand spikes or cuts in supply elsewhere.) And, unfortunately, Saudi volume must find its way through the same little strait.

If we're unable to access the Saudi excess, that loss guarantees the global market will be out of balance. That will intensify the price upsurge – an upsurge that is already happening.

Now for the question I'm being asked several times a day in media interviews…

Just how bad can it get?

To continue reading, please click here...

Congress' Next Bad Idea Would Destroy the Shale Boom

Last week, six Members of Congress, led by Rep. Dennis Kucinich (D-Ohio), introduced the "Gas Price Spike Act."

With concerns over the likelihood of higher gas prices this summer, the bill and its sponsors propose the creation of a "Reasonable Profits Board" that would control the profits of oil and gas companies.

Under the bill, this board – made up of unelected bureaucrats – could apply a "windfall profit tax" on the sale of oil and gas at rates of 50% to 100%. These taxes would take aim at corporate profits that the board feels are "unreasonable" or "unfair."

Congress would then appropriate the money raised to subsidize electric vehicles and mass transit.

Now you may want to take a second and breathe, because this is no satire.

Oh, and the proposed bill offers no specific guidance on how the board would determine what represents a "reasonable profit." How do we even begin to define this term? Are some profits more unreasonable than others? And who decides what is "reasonable?"

Apple Inc. (Nasdaq: AAPL) last week shattered earnings expectations. The electronics company has a profit margin north of 20%; meanwhile, the oil and gas industry has a sector-wide margin a little less than 10%.

And though the price of oil and gas will rise in the future – and despite the name of the bill – a reasonable profits board would do nothing to improve consumers' plights at the pump.

In fact, it would only make things worse for people like you and me.

To continue reading, please click here...

Four Natural Gas Companies Investors Can Buy Right Now

Natural gas companies are hurting – there's no doubt about it. But that doesn't mean natural gas companies are bad investments.

In fact, some of these companies are currently on the bargain rack. You just have to know where to look.

Take EOG Resources Inc. (NYSE: EOG), for instance.

Traditionally known as a natural gas producer, EOG has reinvented itself as a major oil producer.

It's still heavily involved in the natural gas market, but the company also has managed to increase its total liquid oil production by 49% to 130,000 barrels per day.

Chief Executive Officer Mark G. Papa said he expects to reach 200,000 barrels per day this year. That would make EOG the second- or third-largest oil producer in the United States.

The effects of this transformation are evident in the company's earnings.

After taking a third-quarter loss of $70.9 million in 2010, EOG reported net income of $541 million for the third quarter of 2011.

That's not all. EOG's potential for growth is outstanding, since it has huge oil shale reserves. The company is the largest oil producer in both North Dakota's Bakken Shale and the Eagle Ford Shale in South Texas.

These two shale oil fields have played a key role in ramping up U.S. oil production over the past few years. They each have an estimated 4 billion barrels of recoverable reserves.

Earlier this month, analysts from Goldman Sachs Group Inc. (NYSE: GS) raised their EOG share price target to $118, while RBC Capital Markets (NYSE: RY) analysts set their target at $119. Those targets estimates represent a 13% to 14% premium from yesterday's (Tuesday's) closing price of $104.55.

And that's just one natural gas company with a strong investment pedigree.

Here are three others…

To continue reading, please click here...

Obama's Rejection of the Keystone XL Oil Pipeline is Pure Politics

U.S. President Barack Obama's rejection of the Keystone XL oil pipeline on Wednesday had much more to do with political maneuvering than the construction of the pipeline. Most experts believe the Keystone oil pipeline will eventually get built, but in the meantime, President Obama's decision gives both Republicans and Democrats raw material for 2012 campaign […]

Read More…

How to Profit from the "Shale Oil Bubble"

It's true: French, Japanese, and Chinese energy companies cannot seem to get their hands on a big enough slice of U.S. shale oil deposits these days.

However, that doesn't mean this investment frenzy is evidence of a "shale oil bubble."

Instead, it's a classic sign of an investment trend – one that will continue throughout 2012 creating an opportunity for investors to profit.

Consider that in just the past two weeks:

  • French oil major Total S.A. (NYSE ADR: TOT) invested $2.3 billion in Chesapeake Energy Corp.'s (NYSE: CHK) Utica Shale operation in eastern Ohio.
  • China Petroleum & Chemical Corp. (NYSE ADR: SNP), spent $2.2 billion for a 30% stake in five Devon Energy Corp. (NYSE: DVN) shale projects.
  • And Japan's Marubeni Corp., a commodities trader, agreed to pay $1.3 billion for a stake in Hunt Oil Co.'s Eagle Ford shale property in Texas.

The Reality Behind the Shale Oil Bull Market

That's a clear sign to investors that interest in shale deposits among foreign energy companies is beginning to heat up.

And to hear the mainstream media tell it, these companies are overpaying for access to U.S. shale deposits.

In fact, they claim that has led to astronomical valuations and the formation of a "shale oil bubble."

But that that perception is actually only half right: While the value of shale deposits has skyrocketed, the reality is that the higher prices are fully justified based on the increasing demands for oil and gas.

What's more, the foreign companies that are paying top dollar for access to U.S. shale assets aren't just paying for access-they're also paying for expertise.

"Foreign majors needaccess to technology andexpertise, as well as being able to putsome portion of reserves on their books," said Money Morning Global Energy Strategist and Editor of the Oil & Energy Investor Dr. Kent Moors. "For that they are quite prepared to farm in for a minority position in development projects."

In return, U.S. energy companies get the investment dollars needed to develop costly and complex reserves.

These foreign investments also give U.S. companies the money they need to acquire more land leases and increase their odds of hitting an especially productive gas or oil reservoir known as a "sweet spot."

That, Dr. Moors says, is where the "bubble" talk comes from.

"U.S. operators cannot afford to under-commit and that has led to an inflation in land prices," Moors said. "Those prices are nowrather out of proportion toa NYMEX gas price of $2.60 per 1,000 cubic feet and hugestorage volume dueto amild winter."

Still, the demand curve for gas will eventually move up as a result of increased usage in electricity generation, replacement of crude oil in petrochemicals, and a renewed emphasis on liquefied natural gas (LNG).

These energy companies, therefore, are taking a medium-term view. In short, they believe that once demand and prices begin to rise, these higher land values will be justifiable.

So where do investors fit in?…

To continue reading, please click here…

Read More…

All You Need to Know About Iran, $200 Oil, and $6.00 Gas

If you're unsettled by the thought of gasoline at $4.00 a gallon, brace yourself.

With tensions between Iran and the West quickly escalating, we could see gas jump to $6.00 a gallon at the pump in a matter of months.

Make no mistake about it: If Iran were to follow through on its threats to close the Strait of Hormuz, oil prices would surge as high as $200 a barrel in matter of days.

But that's just the beginning…

A wider Iranian war could throw the entire region into chaos — making $100 oil seem like a bargain.

None of this is hyperbole. In fact, these dangers are likely according to of one of world's leading energy analysts, Dr. Kent Moors.

Dr. Moors is an advisor to six of the world's top 10 oil companies, including natural gas producers throughout Russia, the Caspian Basin, the Persian Gulf and North Africa. He also consults for high-level officials from the U.S., Russian, Kazakh, Bahamian, Iraqi and Kurdish governments on all things energy related.

In short, Kent's insights are invaluable.

That's why we've given Dr. Moors a chance to address all of the concerns swirling around the energy market today.

In the interview that follows you'll learn what you really need to know about Iran, the global oil market, and most importantly, what you can do to profit…

Dr. Kent Moors on the Brewing Crisis in the Gulf

Q) Dr. Moors, how serious are the recent developments in Iran?

Moors: This is the most serious U.S.-Iranian crisis since the fall of the Shah in 1979. There's a very dangerous situation inside Iran that is only being accentuated by the oil market problems that have resulted from Western sanctions.

First off, on the Strait of Hormuz: This is the most significant oil choke point in the world. Some 35% of the world's seaborne oil shipments and at least 18% of daily global crude shipments pass through this narrow channel in the Persian Gulf. And while the Iranian Revolutionary Guard Navy is not large enough to blockade the Strait of Hormuz for any length of time, it could disrupt traffic.

Q) What effect would closing the Straits of Hormuz have on oil and gas prices?

Moors: Closing the strait would result in a rise in crude oil prices of between $20 and $40 a barrel in a matter of hours. Any interruption beyond 72 hours would push prices to between $150 and $200 a barrel.

As far as gas prices are concerned, the basic rule of thumb is that each $1.00 rise in a barrel of oil results in a 3.2-cent rise in a gallon of gasoline. So $200 oil would equal $6.00-plus gasoline.

Q) Why is this crisis unfolding right now?

Moors: Three major elements are causing Iran to become belligerent:

To continue reading, please click here...

Small Shale Oil Companies Make Prime Take Over Targets

Cash-rich oil majors are set to go on an epic buying spree. In the process, they are going to create a huge investment opportunity.

Small oil companies have become attractive takeover targets because they have something that oil majors like Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) want – expertise in the hydraulic fracking and horizontal drilling methods that are used to extract oil from North America's vast shale reserves.

And many of these takeover targets are companies based in North America.

"The main opportunities to profit from M&A (mergers and acquisitions) will be in the U.S. and Canadian markets," said Money Morning Global Energy Strategist Editor of theOil & Energy Investor Dr. Kent Moors.

Ironically, many of these small companies developed their expertise after buying assets the majors sold as soon as easy-to-reach deposits were tapped. Many of those assets contained shale oil, which is much harder and more expensive to extract.

But since the global price of oil is high enough to make shale oil drilling profitable, the oil majors have been seeking out smaller players to retrieve their assets and expertise.

"These shale prospects are exploration frontiers and the big international players see them as a runway to growth," Mark Hanson, an analyst at Morningstar Inc. told Bloomberg News.

Shale oil becomes profitable when global oil prices are in the $70 a barrel range. The higher the price of oil goes, the more attractive shale oil formations become.

The price of West Texas Intermediate (WTI) averaged about $95 a barrel in 2011, but will keep rising. Moors believes oil will reach $150 a barrel as early as this summer.

So the big oil companies, with billions of dollars of profits burning a hole in their deep pockets, have plenty of motivation to shop around.

For investors that means they need to stake out their positions before all the buying starts.

That's the only way to take advantage of the sudden jump in the stock price that occurs when a takeover deal is announced. Luckily, several oil sector analysts have already identified the most likely takeover targets.

According to Subash Chandra, an analyst specializing in energy stocks for Jeffries Group Inc., the stocks to watch are

To continue reading, please click here...

© 2015 Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201, Email: customerservice@MoneyMorning.com