Oil
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How the Biggest Investors Are Playing the "New World Order" in Oil and Gas
Thanks to the fracking boom of the last few years North America is now on a path toward energy self-sufficiency.
In fact, the International Energy Agency (IEA) now believes that, thanks to astonishing growth in oil and natural gas output, the U.S. could even become a net exporter of natural gas by 2020, and even net-energy self-sufficient by 2035.
According to IEA estimates, the U.S. is already the world's No. 2 natural gas producer.
The IEA has also indicated that increasing production from Canadian oil sands means North America could become a net oil exporter. And by 2035, it's forecast that nearly 90% of Middle Eastern oil exports will find a home in Asia.
These tectonic energy shifts have not gone unnoticed by OPEC and large state-owned energy companies. Major Asian and Middle Eastern interests have already made major acquisitions in Canada and the U.S., with an eye towards many more.
Every day it seems the energy scene is changing at a lightning pace, creating a new world order in energy.
So to gain further insight into this rapidly changing climate, I recently sat down with energy consultant Peter Barker-Homek, a true energy insider.
Peter is the founder of Eta Draco, an advisory firm focused on building operations and capital structures to provide for enduring growth and to anticipate cyclical downturns for small- to medium-sized enterprises.
Mr. Barker-Homek knows more than a thing or two about the global energy sector.
As the previous CEO at TAQA, the Abu Dhabi national energy company, and a seasoned energy executive in a Fortune 20 company, Peter has completed $40 billion in energy-related transactions.
He has more than 20 years' experience in major markets worldwide, and even served in the U.S. Department of State and the U.S. Marine Corps as an Officer/Pilot. He has appeared on CNN, BNN, CNBC, Sky News, Bloomberg TV, BBC Radio, Al Jazeera, and CrossFire, and is regularly cited in industry journals and periodicals.
I think you'll enjoy what Peter had to say during our recent Q&A.
If I did my job right, some of it may even shock you.
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EPA Official Resigns over Crucifixion Comments
On Friday, we discussed the regulatory philosophy of certain Environmental Protection Agency officials in how they regulate the U.S. oil and gas sector.
Dr. Alfredo Armendariz, the EPA regional administrator for Region 6, was overly candid in a 2010 policy discussion in which he said that the agency's stance is to "crucify" a few oil and gas companies in order to set an example and force the rest of the industry to submit to new rules.
"You make examples out of people who are not complying with the law," he stated.
Now, it looks like those comments have cost him his job.
Morgan Little at the LA Times explains.
"Alfredo Armendariz, a regional administrator for theEnvironmental Protection Agency, has resigned in the wake of criticism for comments made in Texas two years ago comparing the methods of the EPA to those of Romans using crucifixions to conquer foreign lands."
The resignation is certainly a starting point in order to limit the political damage.
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The "Sweet Spot": Goldman Sachs Bullish on Oil and Gas Pipeline Companies
Nothing like having Goldman Sachs (NYSE: GS) confirm what we've already been saying for a year.
But last week, Goldman Sachs reminded us that they are bullish on the oil and gas pipeline sector by upgrading a number of portfolio stocks that have been prominent features of our portfolios and discussion on the sector.
Goldman analysts made headlines last week by adding a number of pipeline firms to their "Conviction Buy" list. The company added Williams Companies (NYSE: WMB) while dropping Buckeye Partners L.P. Nonetheless, Goldman still rates Buckeye as a "Buy."
Goldman also raised a number of additional stocks to the buy list, including Plains All American Pipeline LP (NYSE: PAA), and maintained its "Buy" ratings on Enterprise Products Partners (NYSE: EPD), and Enduro Royalty Trust (NYSE: NDRO), and Magellan Midstream Partners (NYSE: MMP).
The reason for these moves shouldn't be a surprise to anyone who follows us at Oil and Energy Investor.
The Sweet Spot in Oil and Gas Pipeline Companies
It's not surprising that Goldman Sachs is so bullish on the pipeline industry. After all, my colleague Dr. Kent Moors has been touting the best known secret on the markets for more than a year.
If you want to make money in energy investing, you want to park yourself right in the middle of the supply chain. By doing so, you're far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels.
Midstream companies, those that connect the upstream exploration and production companies to the downstream retail, refining and marketing channels, provide vital services in transportation, storage, and processing.
Simply put, this is the "Sweet Spot" of energy investing.
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Start Seizing Master Limited Partnership (MLP) Profits
Last week, Kent challenged me to offer you a way to make some money in energy.
I started scanning the energy and agricultural stocks I monitor, and began combing financials, looking for some undervalued little company about to pop.
Then I stopped.
I already knew a failsafe way to ace Kent's challenge. And so do you. We talk about it all the time.
It's the midstream sector of the energy supply chain, particularly in Master Limited Partnerships or MLPs
And it's the best and easiest way to make money in energy today.
I want you to understand the value of these companies that are involved in the gathering, transport, and storage of oil and gas. Not in terms of just how important they are to the industry, but also how important they can be to generating very strong returns for your wallet.
Because if you're ignoring them, you're missing out.
Big time.
That's why today I'm going to share with you one investment opportunity in Kent's Energy Advantage portfolio that is blowing the doors off and making investors a killing.
And you can join in.
MLPs: The Golden Age Continues
The United States is in the early stages of one of the greatest financial booms in its history.
Technological advances in horizontal drilling have allowed companies to access natural gas and oil resources once thought to be unattainable.
Upstream gas drillers continue to develop shale deposits in Pennsylvania, New York, Utah, and other states. So someone has to take care of all the gathering, feeder and transport pipelines, terminals, storage facilities, fractionating, and initial processing of these fuels.
This is what has made Master Limited Partnerships (MLPs) such attractive opportunities.
These midstream companies make their money by charging transport fees for the fuels they process. And over the past few years, these fees have remained almost constant, even though natural gas prices have dropped considerably.
MLPs offer investors the opportunity to make profits in two ways.
- The stock appreciates in value, due to growth in the sector and strong financial returns.
- The stock pays higher-than-average yields and quarter distributions to investors (otherwise known as dividends).
And when we identify MLP plays that do both at the same time, that's when we really start to see some profits.
A 139% Return in Under Three Years
MLPs are attractive investments. So are the indices that track their overall performance.
And for the last 18 months, Energy Advantage readers have benefited from growth of one fantastic index.
The JPMorgan Alerian MLP Index ETN (NYSE: AMJ) tracks the performance of the booming energy MLP sector. Created in 2009, the market cap-weighted index currently pays an attractive yield of 5%, while the underlying share price has doubled in a little less than three years.
The index offers many of the same benefits of investing in a traditional MLP. The two biggest benefits are those opportunities to acquire a strong yield and to reinvest those dividends into appreciating shares.
This two-step process unleashes the power of income investing.
Just how much potential are we talking about?
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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.
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Five Things Obama Didn't Want You to Hear in His State of the Union
Seeking to put the best possible spin on his message, President Barack Obama took some liberties with the truth in his State of the Union address.
Although the president never actually lied, he repeatedly left out facts that contradict his claims of success.
President Obama hadn't yet left the House chamber when the reality check started. And it didn't take long to find some pretty big the holes in the State of the Union address.
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