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Sunday, September 1, 2013

For Investors Only

A reader asked what companies, off the top of my head, interest me with regard to investing, vis a vis, the Bakken, of course.

Before proceeding, folks should read/re-read my "welcome site/disclaimer." I always say this is not an investment site and no one should make any investment decisions based on anything they read here or think they read here.

But there's even more. As I've written at the "welcome" I never intended to post articles about investing on the blog, but I quickly learned one cannot follow the Bakken without following the money. 

One cannot, by the way, follow the Bakken without following what is going on in the rest of the world, especially with regard to global warming and activist environmentalists, and thus the reason for all the posts on those subjects folks have asked me to quit writing about. 

The Bakken makes investors skittish. This is the analogy. Even when there is only talk of a bit less stimulus by Ben Bernanke, the market seems to fall one to five percent in a day/week; think what will happen if tapering is announced. Likewise, the Bakken is all about fracking. The Feds will soon announce new rules, and emotionally, the market will react. Even if the fracking rules don't change a thing, the headlines will make investors skittish, there will be an "I told you so" and some folks will get out of the Bakken. It might not be much of a pullback but it will occur. Now, imagine if the fracking rules actually make a material change in the Bakken. It will be a gut-wrenching moment. Right now there is a perception that there is glut of natural gas hitting the market, and that provides the opportunity for the federal government to slow things down; big money is involved here, and a glut of natural gas is not in everybody's interest. Anyone who ignores the Federal government and fracking rules is doing investors a disservice. One has to at least be aware of the risk. Again, before the end of 2014, there will be a headline somewhere: US government issues new rules on fracking.

I am fortunate enough that investing for me is simply a hobby. I don't take it particularly seriously. I have no formal training or education in financial management. Less than one percent of my total life portfolio (pension, social security, annuities, equities, family) is invested in the Bakken. I am interested in the Bakken as a phenomenon, not for its investing possibilities.

I am an investor, not a trader, though occasionally I do some short-term investing (which usually gets me into trouble).

So, take the following as idle chatter one might hear over coffee at Williston's Economart. This idle chatter is not even worthy of an investment club.

1. Speculative: of the operators, I like those who have acreage outside the Bakken, like EOG. I only like companies focused on oil, not natural gas.
Chesapeake was a great opportunity a few weeks ago; it is changing its focus. Slower than EOG in going from natural gas to oil, but the change is there for CHK. If interested in operators, I strongly recommend following Mike Filloon over at SeekingAlpha. If I recall correctly, he suggested Triangle Petroleum and Halcon. Oasis is struggling right now (share price); I don't know if there is a fundamental problem with the company or if this is just a "2013 wet spring" thing. SandRidge is interesting. Actually, I'm so excited about what is going on in the oil and gas industry in the US it's easier to list operators I stay away from (in general) than operators I like. KOG is a trading stock; of all the Bakken operators, for me it is the most interesting to follow: I missed this one big time (my bad) but it carries significant baggage with all its assets in the Bakken, and much of that under BLM management.

With regard to operators, I think we are still in the first or second inning of the Bakken, and so I still warm up to companies who are still acquiring acreage, even at a premium: the most recent example: Whiting.  A much better investor than I reminds me at least once a month: DNR. Its niche: EOR.

At the end of the day, this is how I am investing in the Bakken: I don't own minerals, so I do the next best thing. I buy a few shares every month in at least one operator in the Bakken who appears to be accumulating acreage or accelerating activity. Even with discount brokers, it's a crazy way to invest: it would be better to accumulate more cash over three to six months and buy all at one time, but I'm willing to spend the $8.95 in commission, regardless of the size of the purchase (and some of them are pretty small), to add more shares to the portfolio. I have a twenty- or thirty-year horizon. I will never see the money; it will all be left to the granddaughters.
2. Conservative: pipelines and railroads. After Warren bought BNSF, I started adding UNP to my portfolio.
I have been thrilled with Enbridge and all the companies under the Enbridge umbrella. Like the ObamaCare bill, I bought Enbridge before I knew what it was all about. After buying shares in it, I started reading. I have learned more about the pipeline business than I ever expected. There have been a lot of articles on MLPs and pipelines the past few months. Great educational opportunities but one has to watch these closely. The government is watching them closely. I learned my lesson with Enerplus (ERF) which the company changed its business model because of the Canadian tax policy change some years ago. 
3. Very conservative: MDU was one of my two or three favorite companies back in the 1980s (the other was BNSF, and some utility in California).
MDU really took a beating during the recession and misplayed the Bakken boom, but it's one I would recommend -- yes, recommend -- that young investors with a very long horizon at least start following. They have some new folks on board and if the US economy ever does take off, they are nicely positioned. I don't hold any MDU and probably never will, but that's probably more emotional than rational.
4. So, what else? It's hard for me to find an operator I don't like in this US energy revolution; I like railroads and pipelines; I would want young investors to follow MDU for awhile. Be sure to scroll down my "snapshot" page to quickly see all the operators in the Bakken. 

5. I think the easy money has been made in the Bakken (example: at one time KOG sold for 60 cents and it quickly went to $6.00). I don't see the Bakken as a slam dunk any more. I think one needs to follow companies for awhile, and do lots of reading. It's hard to beat Mike Filloon. If I was going to attach my wagon to one horse, it would be Filloon. Of course, if one is interested in a rodeo bronco ride, jump on Jim Cramer's horse.

I might add to this post later, and I might change some of it later on. But this is my "off the top of my head" about the Bakken.

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Completely Off My Rocker
A Note To The Granddaughters
Very, very violent: not recommended

I don't know where to place this but I don't want to lose it in case YouTube deletes it. I have not recently watched the scene in its entirety and I probably won't.

As regular readers know, I'm in a Quentin Tarantino Kill Bill  phase which probably won't last long; it is for the music more than the video, although Kill Bill, Volume 2, is very, very good. 

This is taken from the Japanese Unrated Limited Edition DVD of Kill Bill. It contains extra scenes that were cut from the original and is completely in color. Reasons why the movie theater and regular dvd versions were in black and white: 
  • Tarantino was forced to censor the scene in some way to limit the visual of obscene gore. The MPAA did not specify how to do this so he decided to cut a few scenes and change it to black and white. 
  • He also chose black and white as an underlying obscure/random reference to the 70s and 80s. There are 88 keys on a standard piano, the Crazy 88's wear black and white (the colors of a piano). [Why Piano? Tarantino likes to use instrumental metaphors].
  • During production they under estimated the amount of blood needed to shoot the scene. They ran out of blood and thus made the scene B/W to hide some of the clear splatters and spray effects. 
  • There might be MORE than 88 members in The Crazy 88's. During this fight scene alone, I can count 81 gang members either killed or with sliced limbs (There are even more because some shots were too fast to count). Don't forget the others that were killed before GoGo and the others killed right after this scene before the final fight with O-Ren.
  • Officially there are about 40 actors listed in the credits of the film as Crazy 88 members. This is because in the movie industry, extras or background actors, have to have a minimum total of screen time (2-5 minutes total) in order to be officially listed in the credits of the film. Most of the actors in this scene had a screen time of less than a minute combined total, meaning that a lot of these people were not listed in the credits.
  • I apologize for not getting the entire scene, especially the spanking katana scene. I uploaded this video back when YouTube restricted normal users to 10 minutes only. 

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