China Has Recognized The Importance of Unconventional Oil -- Meanwhile, The US Looks to Shut It Down

Link here.

In early January, China Petroleum Corp. struck a multi-billion dollar deal with Devon Energy for five major shale oil and gas plays.  This is the third billion-dollar-plus investment in U.S. oil fields by a foreign oil company in the last three weeks — Spain’s Repsol YPF (REP.MC) entered into a $1 billion pact with SandRidge Energy Inc. to jointly develop oil fields in Kansas and Oklahoma, and France’s Total SA paid $2.32 billion to Chesapeake Energy for a stake in its Utica shale discovery in Ohio.

These foreign firms are on a buying spree in a mission to hedge against volatile energy prices and uncertain supplies. The interest in the shale plays stems from an asset acquisition strategy, but also from a move to obtain the technology and the management expertise that must be in place for shale drilling.

In an effort to emphasize the importance of shale exploration, the Chinese government has categorized shale gas as a separate natural mineral resource, as opposed to including it in the general oil and gas category.  In June 2011, the government held its first auction for shale plays and a second one will soon follow.

In the U.S., we are dealing with a conundrum.  The origins of fracing technology and horizontal drilling are not new and the technology has finally come of age.  The data makes a powerful statement.

In July 2011 for instance, the Bakken shale produced 424,000 barrels of oil a day (b/d) compared to 453,000 b/d in Alaska.  The Eagle Ford play in Texas produced 190,000 b/d in August 2011, compared to 3,100 b/d two years ago, and this output is expected to quadruple in the next five years.

NOG -- Dollar-Cost Averaging Since Inception -- The Bakken, North Dakota, USA

NOG has a most unique business model. I first talked about NOG's business plan two or three years ago. 

For analysts who follow the oil industry very, very closely, this should be the easiest oil production company to project earnings and share price target; think of NOG as a trust but with some interesting twists. US oil trusts, once established, cannot add more wells. NOG, on the other hand is not constrained. A lot of wells are going to be drilled on NOG acreage over the next 20 years. 

Be advised of the disclaimer for this blog at the sidebar on the right. This is not an investment site.

This is just a bit of rambling that would rise to the level of a Saturday morning discussion at the Williston Economart. This is not a recommendation to invest in NOG or any other company mentioned. I have owned shares in NOG off and on but do not hold any shares now and have no intention of buying any time soon.

I am an investor, not a trader.

I am probably the only one who still recommends dollar-cost averaging investing: investing the same amount each month.

I was curious how this would have worked out for Northern Oil and Gas (NOG) which was founded in 2007.

Just for the fun of it, using Yahoo!Financial, I imagined investing $100 in NOG at the beginning of every month starting on May 1, 2007, and going through January 1, 2012.

The total amount invested would have been $5,700. The investment would have resulted in 727 shares of NOG which on January 23, 2012, would be worth about $19,000. That's more than tripling one's investment in less than five years. Okay. (This was done quickly; numbers not checked; your results may vary.)

One can also compare investment returns among various companies on Yahoo!Financial. I compared NOG's five years with the past five years of several different companies. Yahoo!Financial returned these numbers:

• NOG: 580%
• AAPL: 380%
• CLR: 400%
• MSFT: 0%
• CVX: 50%
• WLL: 150%
• T: -20%

Oasis has been around for less than two years; for two years:

• NOG: 120%
• OAS: 120%

An investor who watched the market closely and took advantage of the pullbacks could have done significantly better. Some pullbacks have been significant.

NOG's business model is unique in the Bakken. I discuss it elsewhere on this blog and there are numerous investment sites that have talked about NOG, and have recommended NOG, over the past few years.

I could have picked any company in the Bakken, but of those I checked, NOG was by far the best, barely beating CLR, and significantly beating WLL.

T and MSFT paid dividends which changes the parameters. NOG does not pay a dividend.

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I wrote the piece above yesterday.

Overnight I got to thinking about this again. Since 2007, had one put in $100/month (plus $9.95 commission/transaction), one would now have almost $20,000. Makes me wonder why I didn't do that. Smile.

Global Warming Hits Davos, Switzerland --

"....In the last 42 years, I have never seen so much snow....."

The rest is by paid subscription, but that says it all....

But most, if not all, of the story is here:

The snow is yards deep and continued to pile up Tuesday, despite a short afternoon respite. "In the last 42 years, I have never seen so much snow in Davos," the forum's founder, Klaus Schwab, tweeted on Sunday.

As I said earlier, in 2035, when I'm about 85 years old, they will be talking about a "new Ice Age" and Cher will be completing her umpteenth "Farewell Tour."

Ten (10) New Permits -- The Bakken, North Dakota, USA

Daily activity report, January 24, 2012 --

Operators: Petro-Hunt (4), Oasis (3), Hunt (2), XTO

Fields: Eagle Nest, North Fork, Crazy Man Creek, Parshall, Camp

Seven wells came off the confidential list; five were completed/fracked, reported elsewhere, including:

• 17636, 1,731, Oasis, Helling Trust 11-15H, Mountrail
• 20139, 1,122, MRO, Oren USA 31-6TFH, Mountrail

Four wells, previously on DRL status, reported IPs, none particularly remarkable.

Apple: Incredible Numbers

Update

Apple clearly ahead of XOM in market cap --- #1 now.

UP 6% today.

Original Post

Steve Jobs is smiling in iHeaven.

Crushes estimates.

37 million iPhones sold. The highest estimate I had seen was 30 million and that was raised in the last few days.

Apple computer sales up 60% in Asia.

Profit margins blow away estimates: 45%.

New York Times drools.

Stay stoked.