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Guest Post: The Best Energy Investments In The World
An interview with Marin Katusa, Casey Research
In the past three years, Marin Katusa, senior energy analyst at Casey Research, has become one of the most respected and listened-to authorities in the investment advisory business. He spends the bulk of his time on airplanes and in far-off places studying the future of energy... and the best ways to make money from it.
Brian Hunt, editor in chief of Stansberry’s free online investment digest, The Daily Crux, interviewed Marin to get his take on where oil prices are headed for the long-term... the regions where investors and traders should focus their dollars... and some of his favorite energy companies with massive upside.
The Daily Crux: Marin... we noticed you guys at Casey Research are bullish on energy. Can you explain to us why?
Marin Katusa: Well, as we've mentioned in our Casey Energy letters, we're short-term bears but long-term bulls.
I think there's a very good chance oil will be knocked back down along with other markets in the short term, but I'd consider that a rare opportunity to buy the best companies at a steep discount. Long term, I'm very bullish on oil because I think the supply of cheap oil is running out.
The days of cheap and easy oil are over. Oil is getting harder and harder to extract because most of the easy-to-find deposits have already been found and extracted.
The best remaining deposits are deep underwater like in the Gulf of Mexico or offshore of Brazil, in state-controlled or politically unstable areas like Iran and Venezuela, or experiencing dramatically falling production like Mexico. There are also huge oil-sands deposits in Canada, but these are more expensive to extract – anywhere from $35-$40 per barrel for existing production, up to $65 or more for new production.
The simple fact is oil prices will eventually rise due to the increased costs involved in meeting existing demand.
On top of that, you've got developing countries beginning to significantly increase their own demand. Right now, you've got just 30 or so of the world's most developed countries, known as the OECD, that consume about half of all the oil produced.
As emerging countries like China and India begin to increase their standard of living, they'll start using a lot more oil. As you guys know, oil consumption per capita is tied very closely to GDP per capita of the country. So this means these emerging countries could be using multiples of the oil that they use now.
Today, China uses just under six barrels of oil per day for every thousand people. In India, it's about two and a half barrels for every thousand. In the U.S., it's just under 70 barrels for every thousand. Even if you figure just a 20% increase in China and India per person – those are huge, huge numbers. China alone has over a billion people. This is going to add tremendous upward pressure on prices.
And of course, I'm sure your readers are aware of the long-term threats to the U.S. dollar. Dollar depreciation will only make the problems I just mentioned that much worse.
That said, in the short term, I think oil is very vulnerable to pullbacks in the general stock market. So we've been telling our subscribers to be very cautious. In fact, a year ago, I decided to use $40 oil as the basis for all of our analyses for our newsletter. If a company we were looking at wouldn't be profitable at $40 oil, then we wouldn't go any further. The logic behind $40 was to provide a real margin of safety should we get the correction in oil I'm expecting.
But it also pushed me to look a lot deeper and be more selective, and it's really paid off in our results – over 90% of my recommendations over the last year have delivered significant profits for our subscribers.
The funny thing is that by not using $70 or $80 oil, I started getting hate mail from people, saying, "Don't you know oil's at $73 and you're using $40?" It was hilarious, but that's exactly my point. If a company cannot be profitable at $40 per barrel of oil, it will underperform its peers even when oil is higher. When I use $40 oil and I like the financials – it's gold.
A good example of this is what we did with Nexen. When I first wrote it up, it was trading at C$23 per share. After doing my analysis, I thought its intrinsic value was less. I said, "Buy under C$16 per share." Of course, I got people writing in saying I was out of my mind for setting the buy price so low. Just over a month later, it was trading down below C$16 per share, and my subscribers ended up making about 50% within four months on a low-risk company.
So by using $40 oil, I get my true value, rather than the market value. There's a difference between intrinsic value and the market value, and I go with intrinsic value. I don't care what people are paying in the market right now. You might not get it today, you might not get it next week. You have to be patient. It's what I call "stink bid investing."
Crux: What else do you look for?
Katusa: Another factor I like to look at is what I call game changers. An example of a game changer is what has recently happened to the natural gas sector in the United States. Companies were victims of their own success, because they were so successful in using new technologies to retrieve gas from the shales, they drove the natural gas price down.
Using advanced technologies to discover big offshore deposits is an example of a game changer in oil. But what you're going to see is a lot of the big finds are going to be drilled by the major oil companies – what I call the super majors – because it's just so expensive to drill these targets.
Crux: Nobody else has the money.
Katusa: That's right. So the only frontiers left for conventional oil production that can be extracted easily and cheaply, like I mentioned before, are in politically unstable countries like Iran, Iraq, Libya.
These countries are fully aware of the potential of their resources locked within their borders. They're increasing the royalties they charge, including the gradual increase in the use of service fee contracts.
We spent a whole issue talking about this in our Casey Energy Report, in the October issue. In countries where the governments hold the ownership of the oil – such as south central Iraq, Kuwait, even potentially Mexico – these are places that you want to watch out for, because they are constitutionally barred from giving foreign oil companies ownership of the oil in the ground. They're not as positive as people think they are.
A reliable and friendly oil source to the United States, such as the Alberta oil sands, is not cheap to produce. The oil sands require at least $35-$40 per barrel at the very minimum to extract, compared to less than $5 per barrel in places like Saudi Arabia, Iraq, and Kuwait.
Proven reserves in politically stable parts of the world unfortunately will cost the U.S. consumer a lot more money per barrel. We spent a lot of time in our latest issue of Casey's Energy Opportunities looking at all of the national oil companies. Of those, you've really only got three you can possibly invest in, if you dare.
Crux: How about your take on the likelihood of big takeovers and buyouts? Do you see oil-hungry nations like China coming in to buy up a lot of reserves?
Katusa: Absolutely, but it's not just going to be the Chinese, it's also going to be big oil companies who want to replace their production with proven reserves in the ground.
An advantage the Chinese companies will have over the Western oil companies is the Chinese ability to leverage their political and economic muscle in places such as Africa, Venezuela, and Bolivia.
These countries potentially hold world-class oil deposits, but it's much riskier for a Western company to explore these regions than the powerful Chinese oil companies.
Crux: China is already in a bidding war with ExxonMobil for African oil...
Katusa: Right. What our angle is, if you're looking to invest in Africa, you're looking for elephant-size deposits – what they call "world class deposits."
The company needs to go in with a crew able to maneuver in politically unstable parts of the world. We had a big and fast win on a company called Tanganyika Oil, using just that concept. They went in, they built up production, then sold the company to the Chinese.
We're doing it again right now on a company called Africa Oil – ticker symbol is AOI on the Toronto Venture Exchange – that's partnering with the Chinese.
The man behind AOI is the same person behind Tanganyika Oil, Lukas Lundin.
Lukas Lundin, like his father before him, has a long record of going into politically unstable parts of the world and succeeding in developing world-class deposits and selling them at huge gains for the investors. So you're going to see a lot of this type of partnering going on where the Chinese want the North American expertise, and in return, the Chinese add value by political clout and financial clout, helping to pay the costs of development.
We wrote up Africa Oil as a buy under C$1, and when it popped up to about C$1.50, we told our subscribers to take a Casey Free Ride [a profit-taking strategy] when the stock was trading above C$1.30, and it subsequently went as high as C$1.70. Currently we have AOI as a buy under C$1, and it's trading at C$0.87, which we view as a very cheap cost for this stock.
Crux: Are there any other countries you're interested in right now? Are you interested in Iraq?
Katusa: In northern Iraq in the Kurdistan region, there are some good onshore blocks with decent royalty rates.
A company called ShaMaran (ticker symbol is SNM on the Venture Exchange) we think has huge potential. It's totally cashed up. I wrote it up as a buy under C$0.20 and put two buy signals on it. It's trading at C$0.57 now. It went as high as C$0.80.
And they've got about C$0.25 in cash per share. This was a company that was trading less than cash – they had more cash than the market cap. Our shareholders bought millions of shares, because we were the only ones writing it up. And it had zero interest – there was nothing going on with it. And they're now in northern Iraq in the area of Kurdistan, which has huge, huge potential.
I've also been looking at Colombia. I think that's a country that people have to pay attention to. In the last month, a lot of the smart money, the big, big players in Vancouver – Frank Giustra and Sam Magid – have been putting huge money, their own personal money, into a bunch of oil plays in Colombia. I would recommend your readers take a look at some Colombia plays. One that I really like is Petroamerica, symbol PTA on the Venture Exchange.
Crux: Great. Any parting thoughts?
Katusa: I think what you have to emphasize to people is to buy at a discount to intrinsic value when it's unpopular, and sell at market value when it's popular.
That's not just being a contrarian. A contrarian is just buying something that's unpopular. Buy something unpopular that has a great discount to its intrinsic value, and when you sell, sell when it's popular and trading at the market value, not at its intrinsic value. So those are the two rules that I have.
Crux: Thanks for your time.
Katusa: My pleasure.
As mentioned above, Marin's track record for profiting in resources like crude oil, natural gas, and uranium is unmatched in the industry.
If you're interested in reading a monthly analysis on the trends and stocks Marin likes, you can get on board as a Casey Energy Opportunities subscriber for only $39 per year. It's an incredible deal and completely risk-free, with our 3-month, 100% money-back guarantee. You can learn more about a subscription here.
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On the flip side GOOGLE: "Gull Island Oil Reserves" and "abiotic oil"
I hope you're making a funny, energy trader.
Abiotic oil is complete pipe dream.
Anyone who trades on this simplistic drivel will get their head handed to them.
"Drivel" is exactly the word that came to (my) mind.
YFKM...Toronto Venture Exchange pump story...how much were you paid to place this story?
what gave it away - the 10 year options granted to employee's @ $.70 (concurrent to private placement done @ $.70 with a 5 year $1.25 warrant)?
Up next - Jim Dines on Gold, Rare Earths and Uranium...
Might as well give some stocks on the AX a push too...
Rare Earths it shall be....
http://www.rareelementresources.com/s/Home.asp
RARE ELEMENT RESOURCES LTD. ("RES")
BULLETIN TYPE: Property-Asset or Share Purchase Agreement
BULLETIN DATE: November 10, 2009
TSX Venture Tier 1 Company
TSX Venture Exchange has accepted for filing a purchase and sale
agreement dated October 30, 2009 between Rare Element Resources Ltd.
(the 'Company') and VMS Ventures Inc. (a TSX Venture listed company),
whereby the Company will acquire a 100% interest in the Eden Lake
claims located in Manitoba.
Total consideration consists of 300,000 shares of the Company to be
issued over an eighteen month period.
In addition, there is a 3% net smelter return in favour of the
underlying property owner (Strider Resources Limited) relating to the
acquisition. The Company may at any time purchase 1.5% of the net
smelter return for $1,500,000 in order to reduce the total net smelter
return to 1.5%.
A finder's fee of 10,000 shares will be paid Marin Katusa and a
finder's fee of 10,000 shares will be paid to Clint Cox.
TSX-X
Ah, the Vancouver Stock Exchange. They had such a f-i-i-ine reputation too.
Oh, I know it's called the TSX-V now but if you think it's vastly different I've got some Nortel stock to sell you.
And don't forget, Bre-X was on the TSE...
I used to know someone who used to work at the TSX who bragged about all the money he made on the inside info they get.
I actually swallowed the peak oil story for a while until I noticed that ALL the main promoters of that theory have an agenda - whether it be to keep prices inflated or a global warming alarmist. By the time we were to run out of the easy stuff the technology to get at shale oil will make it efficient enough to extract by the time we really need it. And there's trillions of barrels of that right in the good ole' US of A.
Yeah, you know, 1985 just called and it wants its scare-mongering-quotes back, cheers.
A must read is the "Deep Hot Biosphere" where oil is being generated
Oil -- carbon is a plentyful element in our solar system
Google "Methane on Titan", the moon orbiting Saturn. How come there are seas, oceans of methane -- did "they" have dinosaurs, too?
And so if oil becomes more expensive --- money is playing its role a a medium of exchange ---- always finding a cheaper or different source.
Just keep Algore and the climatologists away from price manipulation and the earth will do just fine
So, are you arguing that we just need to wait a couple of weeks and the oil will just be replaced? There's a thoughtful solution, why didn't Exxon just think of it!
You should Google "Oxygen on Titan" or "Saltwater Oceans on Jupiter" or "Idiots on Mars."
ZH--you have about a 50% hit rate when it comes to nutbags in the population of commentators.
I won't disagree with you that ZH commentators and some contributors are off base, but that's part of the appeal.
To your point, I don't think oil will be replaced, but I do think that the price is a function more of monetary policy than supply and demand fundamentals regardless of 'cheap oil' theory.
AKA Peak Oil, not the same as global warming. The net energy from oil is a fraction of what it used to be. This is a provable, observable fact. Every aspect of our consumer markets use some type of petroleum product. 10 hydrocarbon for every calorie consumed, like shipping vegetables halfway across the globe to be consumed where they could be easily grown in your backyard. If we can't send a man to mars we can extract oil from one of Saturn's moons.
Bottom line, all the complexity of our civilization is based on a finite resource that used to be cheap to extract. A lot of the US economic supremacy was built on the petro-dollar agreement Kissinger made. The hard reality of a money supply that has to expand indefinitely met with a finite planet is something that should be on the forefront of people's minds.
http://www.lionenergycorp.com/home.php
LION ENERGY CORP. ("LEO")
BULLETIN TYPE: Property-Asset or Share Disposition Agreement
BULLETIN DATE: October 9, 2009
TSX Venture Tier 2 Company
TSX Venture Exchange has accepted for filing the payment of a finder's fee in conjunction with the disposal of the company's Potash assets. Please see the company's news release dated June 16, 2009 and amended July 30, 2009 for more information regarding the disposition.
Finder's fee: $56,116.31 cash payable to Marin Katusa.
240,498 shares payable to Michael
Bogdanovich.
$56,116.31 cash and 240,498 shares payable
to Peninsula Merchant Syndication Corp.
(Sam Magid).
TSX-X
Lion Energy Corp. is a well financed Canadian exploration company based in Vancouver, BC, that is focused on acquiring, exploring and developing oil and gas reserves in Central & East Africa. Lion Energy initially partnered with Africa Oil Corp., a Canadian oil and gas exploration company with assets in Kenya, Somalia and Ethiopia, and a member of The Lundin Group of Companies. Lion Energy has agreements with African Oil for entry into the Production Sharing Agreements (PSAs) on blocks in Republic of Kenya and the State of Puntland, Somalia. The Company also holds several strategic investments in Potash, Sulphur Fertilizer and Uranium. Lion Energy's shares are listed on the TSX Venture Exchange under the symbol "LEO".
"The simple fact is oil prices will eventually rise due to the increased costs involved in meeting existing demand."
- that is one hell of a simple, linearly extrapolated assumption presented as fact.
... kinda like the difference between whatever Peter Schiff does and the masterful works of Dan Yergin.
The Sad Record of Daniel Yergin and Cambridge Energy Research Associates
http://home.entouch.net/dmd/cera.htm
WATER burns, geniuses.
http://www.youtube.com/watch?v=JiKa4nOkHLw
It also welds.
Amazing what a few hidden funky hydrogen atoms does.
http://www.youtube.com/watch?v=G6YYUOx6fBU
Please. What kind of analysis is this? I wonder what happens to his stock picks if crude gets down to sub-$50.
The comments are not worthy of this web site.
No offense but Daniel Yergin's book while informative to the masses was a bore to the oil trading community. Schiff's comments on the economy have a lot more meaning to the direction of oil prices then Yergins.
granted Anon, but the biggest knock you can lace on either Cambridge Research or Matt Simmons is that of Peak Oil propaganda ... their analytic work is priceless and certainly seminal within the field itself.
Schiff is beloved bc he screams "gold to $5000+" and 'speaks so well' while eliciting emotional outrage and appealing to base elements within us all; his columns are printed in Barron's etc. and he does deserve much praise for both his persuasive writing/ speaking abilities and willingness to put himself out there, and convincingly so.
Having said that (great frickin' Curb), when Schiff's managed returns are printed in similar publications they aren't nearly as hot as gold or as hyper-inflationistic as his almost singularly-focused 'analysis,' which is presented as being 'duh, factual,' to say the very least; apparently, this symptom is prevalent within goldbugs. Anal-ysis is one thing, trading is a whole 'nother ... and while not mutually exclusive the two certainly do not go hand in hand.
We never, ever knock someone for trying 'hard enough' and meaning well unless they 1) present wholly non-factual material, which could easily be construed (rather damagingly) by amateur traders/ retail investors, 2) are much, much bigger than us and 3) certainly 'know better,' irrespective of the extent of their admittedly extreme(ly emotional) personal opinion.
Read the home page of Lion Energy Corp. carefully:
http://www.lionenergycorp.com/home.php
Scroll down to Lion Energy Corp. in the list and review ALL the names of those who received finders fees:
http://finance.alphatrade.com/story/2009-10-09/CCN/200910091641CCNMATHWC...
Lion Energy Corp. is a well financed Canadian exploration company based in Vancouver, BC, that is focused on acquiring, exploring and developing oil and gas reserves in Central & East Africa. Lion Energy initially partnered with Africa Oil Corp., a Canadian oil and gas exploration company with assets in Kenya, Somalia and Ethiopia, and a member of The Lundin Group of Companies. Lion Energy has agreements with African Oil for entry into the Production Sharing Agreements (PSAs) on blocks in Republic of Kenya and the State of Puntland, Somalia. The Company also holds several strategic investments in Potash, Sulphur Fertilizer and Uranium. Lion Energy's shares are listed on the TSX Venture Exchange under the symbol "LEO".
http://www.lionenergycorp.com/home.php
LION ENERGY CORP. ("LEO")
BULLETIN TYPE: Property-Asset or Share Disposition Agreement
BULLETIN DATE: October 9, 2009
TSX Venture Tier 2 Company
TSX Venture Exchange has accepted for filing the payment of a finder's fee in conjunction with the disposal of the company's Potash assets. Please see the company's news release dated June 16, 2009 and amended July 30, 2009 for more information regarding the disposition.
Finder's fee: $56,116.31 cash payable to Marin Katusa.
240,498 shares payable to Michael
Bogdanovich.
$56,116.31 cash and 240,498 shares payable
to Peninsula Merchant Syndication Corp.
(Sam Magid).
TSX-X
get on board as a Casey Energy Opportunities subscriber for only $39 per year.
Oh no, not ZH...
Instead of paying the $39 per month, you might want to try searching the internet for TSX Venture Exchange announcements announcing fees paid to Marin and seeking out those companies associated with the payee?
Damm, Marin Katusa has great thing going. Get paid to shill stocks and sell saps newsletters with the recco. Nice. Is Katusa any better then the GS boys, or is he perhaps worse?
Where is Marla when you need her? Zerohedge should be outing these creeps, not promoting them.
http://www.istockanalyst.com/article/viewiStockNews/articleid/3570260
Finders' Fees: $72,000 cash payable to Raymond James Ltd.
$22,199.94 cash payable to Global
Securities Corp.
$100,000 cash payable to Vancouver Venture
Report (Marin Katusa)
[for promoting]
CBM ASIA DEVELOPMENT CORP. ("TCF")
BULLETIN TYPE: Private Placement-Non-Brokered
BULLETIN DATE: October 21, 2009
TSX Venture Tier 2 Company
TSX Venture Exchange has accepted for filing documentation with respect
to a Non-Brokered Private Placement announced September 16 and 28,
2009:
Number of Shares: 11,000,000 shares
Purchase Price: $0.30 per share
Warrants: 11,000,000 share purchase warrants
I suspect the math genius, energy expert and 300 day a year world traveler Marin Katusa kicks back some of the fees he collects to pump penny stocks to Zero Hedge and the other fine websites like the ones below that carried this same "interview".
http://www.investorideas.com/News/article/112309h.asp
http://www.firstenercastfinancial.com/e_commentary.php?cont=2889
http://www.kitcocasey.com/articles/3085/the-best-energy-investments-in-the-world/
http://www.bearmarketcentral.com/commentary/casey-research/422-112409-the-best-energy-investments-in-the-world
http://www.howestreet.com/articles/index.php?article_id=11620
http://www.themarketguardian.com/
http://www.marketoracle.co.uk/Article15280.html
You forgot to mention he also manages an international portfolio of real estate projects and that on weekends he can be found at childrens' parties wearing a clown suit.
Yawn. This is crap pure and simple.
energy is in my point of view a very bearish investment right now.
traveling is cust down, unemployed people cust back on heating/cooling and transportation, international trade is still imploding and green tech is still taking market share as we speak.
Fossil fuel usage is still in decline and is losing market share to green energy. I think oil will soon lose about 20$ to 30$.
One cannot go wrong with investing in energy. It is a necessity and there will always be customers willing to pay for it.
admn
http://invetrics.com
One can go wrong investing in anything that is priced to perfection, or excessively leveraged. And one can certainly go wrong investing in penny stocks based on paid promotion disguised as independent research.
I can't tell you how many times I've heard this same argument since 1973. If I would have collected a $ each time I'd be very rich by now.
I can't complain, I've done well with energy stocks, you just have to be on your game. this article however...eeeeesshhh!
No kidding....self-serving pump and dumpsters. Find the penny stock, get your shill customers to create the feeding frenzy and you magically levitate the stock. Mark the high and call it a day. Then you get to write "research" claiming how you "discovered" these hidden treasures and "made" all these great returns.
Ridiculous.