InvestMacro Forex News

By Mitchell Clark, B.Comm. For Profit Confidential

So far this earnings season, there’s no big revelation among earnings results from brand-name companies yet. With reduced expectations, financial metrics are currently being met.

Earnings from The Charles Schwab Corporation (SCHW) came in solid. The company reported third-quarter earnings of $290 million, representing solid growth of 17% over the comparable quarter.

Sales grew 15% to $1.37 billion, with double-digit growth being experienced in all three of the company’s main revenue sources. Quarterly sales are at a record high, with the exception of the heights reached during the Internet bubble.

Company management sees its profit margins expanding into 2014. The stock jumped on this positive report, but it was already expensively priced.

Johnson & Johnson (JNJ) came in slightly ahead of consensus on both revenues and earnings. Third-quarter sales grew 3.1% to $17.6 billion. Domestic sales grew 1.7%, while international sales grew 4.2%. Diluted earnings per share grew to $1.36, representing another solid gain around 8.8%.

Investors have come to expect outperformance from Johnson & Johnson, and the position just consolidated on its earnings report. This company is worthy of a look for any long-term equity market portfolio, especially during a market correction or when the position is down on its own.

The Coca-Cola Company (KO) performed as expected, announcing a two-percent gain in global volume growth, but a three-percent decline in revenues. Diluted earnings per share grew eight percent to $0.54.

Dominos Pizza, Inc. (DPZ) has been a huge winner over the last three years. In its latest quarter, domestic same store sales grew 5.4%, with earnings coming in at $30.6 million compared to $26.0 million.

The company’s bottom line was lower than the Street expected, and the position sold off considerably. Given its current earnings, Domino’s is expensively priced on the stock market, but its recent track record is impressive.

So once again, current numbers are basically meeting expectations, but genuine economic growth is lethargic. Of course, we’ve only been talking about earnings from large corporations so far. Smaller companies are typically faster growing and don’t report until quite a bit later in the season.

In my mind, current earnings combined with current monetary policy justify the stock market’s current level, but that doesn’t make the case for buying it.

Once again, this plays into my investment theme of owning shares in existing winners that have very strong balance sheets and the prospect for increasing dividends over the next two quarters. (See “If You’re Looking for Rising Dividend Income…”)

At the speculative end, junior energy and energy services continue to be attractive. Select biotechnology and pure play technology stocks offer potential.

There’s value in precious metals, but this value might be present for quite a while longer, with spot prices continuing to drift.

All in all, given current earnings and sales growth, I don’t believe there’s enough justification for a rising stock market. But then again, it’s been like this for quite a while, and the key stock indices continue to climb on nothing.

By George Leong, B.Comm. For Profit Confidential

What the heck is with this stock market? The ability of the stock market to hold and avert a major correction over the past two weeks and then follow this with an upward move on the charts is a surprise—at least in my view it is, as it clearly shows the bullish bias controlling this stock market.

The NASDAQ and Russell 2000 are at new recent highs as the desire for growth by investors continues, which has largely been the story this year.

The S&P 500 is within striking range of its September record high.

The focus on the debt ceiling is important but also way overdone, in my opinion, given that we are in the midst of the third-quarter earnings season and, well, it has been subpar early on.

Yes, it’s still early in the earnings season, but I expect more subpar results. Of course, what I expect doesn’t matter—momentum and speculation are what drive this stock market.

So far, about six percent of S&P 500 companies have reported, and a dismal 55% of these companies have beaten estimates. That’s just not good. The results are also well below the historical average at just over 60%, and to make matters worse, the results were compared to estimates that were already lowered by Wall Street. Revenue growth is also lackluster, as I expected, which is not what we should be seeing with an upward-trending stock market.

The big banks reported decent results, but much of the easy money in this stock market sector has been made. The retail sector, which I view as critical due to its impact on gross domestic product (GDP) growth, has been lackluster. And with Black Friday and the key holiday shopping season fast approaching, things aren’t looking good for the retail sector; if consumer spending continues to fizzle, then it’s likely we’ll see another downward drive in fourth-quarter GDP.

In my view, I would be taking some profits or cutting losses. Recall what I said in my previous article regarding greed, risk management, and the need to have an investment strategy in place. (Read “Four Strategies to Protect Your Profits in a Falling Stock Market.”)

And don’t forget that there are still growth issues in Europe and China that will continue to have an impact on the U.S. economy. Europe is showing some signs of pulling out of its recession, but it’s going to take some time, especially as the jobs market there continues to be dismal.

My feeling is we are likely seeing the top to the stock market for this year (we may see a move of just a few percentage points higher in the best-case scenario), so I’d look at taking some money off the table.

By HY Markets Forex Blog

WTI crude futures traded lower during the early hours of the European trading session on Thursday, after the US Congress passed the US debt limit on Wednesday which avoided the government default.

West Texas Intermediate (WTI) declined 0.55% to $101.73 per barrel, while the European benchmark Brent dropped 0.71% to $110.07 a barrel, at the time of writing.

WTI Crude – US Shutdown Ends

After sixteen days of a partial government shutdown caused by the US Congress failure to finalize the US government’s debt ceiling and health care issues, the US Congress finally ended the shutdown on Wednesday and passed bipartisan legislation just hours before the October 17 deadline, when the US Treasury’s borrowing limit would end.

Congress passed the bill to raise a debit bill of $16.7 trillion and open funding for the government until early 2014. President Barack Obama signed the legislation into law early on Thursday morning.

Both sides of the Congress supported the legislation and left the healthcare reform, also known as Obamacare intact.

In the Senate, 81 legislators voted for the bill, while 18 voted against the bill. In the House of Representatives, 285 voted for the legislation while 144 voted opposed it. The law raised the debt ceiling until February 7 and funds for the US government until January 15. The proposal introduced a budget conference which is expected to present a long-term fiscal plan by December 13.

Federal employees in the US are expected to resume work today, the White House Office of Management and Budget confirmed.

WTI Crude- US Inventories

US crude stockpiles advanced by 5.94 million barrels last week, reports from the American Petroleum Institute confirmed on Wednesday.

The consultant firm PIRA suggested that the US has surpassed Saudi Arabia as the largest oil producer in the world and also predicted the US to maintain its position.

The US accounts for 21% of global demand last year, according to BP’s Statistical Review of World Energy and according to the International Energy Agency estimates, this year is expected to be the same.

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Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

The US congress have approved the nation’s debit bill, with just hours before the October 17 deadline, where the US Treasury will exhaust its borrowing limit.

After nearly three weeks of a partial government shutdown due to the spending and Obamacare issues, the US congress have finally ended the shutdown on Wednesday after member of Congress a bill to raise the debt bill of $16.7 trillion and open funding for the US government until early 2014, reopening the government, federal agencies and bringing federal employees back to work.

In the Senate, the bill was opposed by 18 votes, while 81 legislators voted for the bill. In the House of Representatives, the deal was passed by 285-144. Both sides of the Congress supported the legislation and left the healthcare reform, also known as Obamacare intact.

President Barack Obama signed the legislation into law early on Thursday morning.

The proposal was a result of several days of discussions between a group of Senate officials with Minority Leader Mitch McConnell (R-Ky) and Majority Leader Harry Reid (D-Nev).

The proposal is raising the treasury’s borrowing limit until February 7 and the funds for the US government until January 15. The proposal also introduces tougher income verification for funding under the healthcare reform, also known as Obamacare.

Government Shutdown – Economy Threat

The US lawmakers faced major pressure to end the government shutdown which was threatening to the economy recovery and the possibility of causing a global economic meltdown.

On Tuesday, Fitch joined the International Monetary Fund (IMF) and World Bank and warned the Congress could cause both a domestic recession and global economic disaster.

The US Treasury has $30 billion in cash reserves, without any borrowing authority, according to the Fitch Ratings agency.

“The US risks being forced to incur widespread delays of payments to suppliers and employees, as well as social security payments to citizens – all of which would damage the perception of US sovereign creditworthiness and the economy,” Fitch stated on Tuesday.

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Article provided by HY Markets Forex Blog

By www.CentralBankNews.info     Mozambique’s central bank cut its benchmark standing facility rate by 50 basis points to 8.25 percent, saying the current trajectory of economic growth and inflation is consistent with its plan.
    It is the third rate cut this year by the Bank of Mozambique, which has now cut its benchmark rate by 125 basis points following earlier cuts in June and August.
    The central bank also said it would intervene in interbank markets to ensure the monetary base does not exceed 44.729 billion by the end of October, up from its target of 43.817 by end-September.
    Mozambique’s inflation rate rose marginally to 4.52 percent in September from 4.34 percent in August, still below this year’s high of 4.9 percent in May when inflation accelerated due to higher food prices caused by extensive flooding at the start of the year.
    Mozambique’s net international reserves rose by about $US 5.33 million to $2.8775 by the end of September, about 256.5 million above the bank’s target.
    At the end of September, the metical was trading at 29.86 to the U.S. dollar, a monthly depreciation of 0.03 percent for a cumulative and annual depreciation of 1.19 percent and 3.90 percent, respectively.
    Mozambique’s Gross Domestic Product expanded by 6.2 percent in the second quarter from the first for annual growth of 8.7 percent, sharply above the first quarter’s rate of 4.3 percent.

    www.CentralBankNews.info

By MoneyMorning.com.au

The internet is becoming a control mechanism for nation states. You only need to reference leaked information from Wikileaks, Edward Snowden and Bradley Chelsea Manning to see it for yourself.

Of recent note are the leaks about the NSA’s international and domestic cyber surveillance from Edward Snowden. Some of the leaked documents are titled, ‘Tor Stinks’, ‘XKEYSCORE’ and ‘PRISM’.

But nonetheless this recent enlightenment of government spying leads to a simple question.
What does all this cyber espionage mean for the future of the internet?

On one hand there’s the internet you know and use on a daily basis. You can go about your business on different websites and pretty much do what you like.

But you still find restrictions on what you can do at every corner. From pay-walls and firewalls to blocked content and perceived fear, you can barely go a day without some kind of block.

What you might notice on your day-to-day internet browse is how the internet is now predicting your every move. Ads pop up showing things that are of interest to you. Emails appear in your inbox tailored to you from your favourite sites. In fact your browser predicts where you want to go before you even do.

Funny how that works isn’t it? Because on your typical web page there are hundreds of lines of code that log and track a whole range of information about you.

Here’s a list of things that are recorded when you visit a typical website:

• Your IP address and how long you spend on that site.
• Keystrokes from a form you began to fill in.
• Your email address, date of birth, name, location, gender, and income if you sign in with Facebook

All this information paints a picture of you, what you like and what might be of interest to you.

Now as you’re well aware, you don’t get a say in the matter, let alone any reward for it. I know I can’t remember the last time I saw a credit to my bank for the personal information unwillingly taken from me. Companies collect and on-sell your information and governments collect and keep it. But do you get anything out of it aside from some online ads? No, you don’t. How’s that fair?

Some people say they don’t care who has their information, and that’s OK, it’s their choice. And in the right circumstance sharing of data can be beneficial. It can benefit public health and safety, monitor spread of disease and enhance social interactions.

I’m happy to share some of my information, but of course anonymously. If anyone wants my personal data, I want to have a choice to give it. Should I chose to give my information out I would expect to be rewarded for it also.

Unfortunately that’s not the trend right now. The trend is for companies, organisations, and particularly the government to just take your personal information at will.

However, there is an alternative to the internet. And it’s something you should be familiar with, as it’s going to form the backbone of the internet we mainly use in the future.

Lavabit vs the FBI

First things first, there’s one more example of government control that you might not have heard of but that is important to know about.

To keep your emails private and secure you can encrypt them. For your intended recipient to read the message they need a private Secure Sockets Layer (SSL) Key to decrypt the information.

In short an SSL key is a cryptographic protocol which allows users to securely share information over the internet. This is one of the best ways to keep information locked down, secure, and out of the way of prying eyes.

However, not even encryption can get in the way of an angry government.

Let me tell you a story about Lavabit. Lavabit is an encrypted emailing service. It allowed users to securely and safely transmit emails between one another completely encrypted from the powers that be. Should someone be able to record the data anyway it’d be useless without the private SSL key.

Ladar Levison is the founder and operator of Lavabit. Since 2004 Lavabit has grown to over 400,000 members using their encrypted mail service. It just so happens one of Lavabit’s members is none other than Edward Snowden.

The FBI got wind of Snowden’s Lavabit account and went to Lavabit for some friendly assistance. But they didn’t get the reception they expected.

The FBI ‘came-a-knockin’ at Lavabit HQ in Texas on the afternoon of 28 June. As part of their arsenal were plans to install a pen/trap device on Lavabit’s servers then and there in order to record a bunch of information about Snowden’s email account.

Lavabit didn’t want a bar of it and refused the FBI’s request. Lavabit said they couldn’t provide the information as the user (Snowden) had enabled Lavabit’s encryption services. Lavabit also said they could decrypt the information but they didn’t want to ‘defeat their own system‘.

Therefore the FBI got the courts to issue an ‘Order Compelling Compliance Forthwith‘against Lavabit. This would let the FBI install the pen/trap device and record the information they were after. They also expected Lavabit to cough up the SSL keys and decrypt it for them. The following is an excerpt from that order.

Click to enlarge

You’ll also notice scribbled on the end, ‘including the possibility of criminal contempt of Court.‘ Meaning Levison and Lavabit would be on criminal charges if they failed to comply. In the tech world, that’s basically a dare. And Lavabit dug their heels in.

In one corner you’ve got the FBI trying to get access to an encrypted email account that uses Lavabit’s email encryption service. And in the other corner there’s Ladar Levison and Lavabit refusing to comply with the FBI’s orders.

Not only did the FBI issue orders against Levison and Lavabit but they also issued a subpoena to Levison to testify in front of a grand jury. And they also issued a search and seizure warrant for the premises of Lavabit to take the SSL key regardless.
To summarise the events:

• The initial order compelled Lavabit to let the FBI install the pen/trap device. This would record all the information from Snowden’s email account. The court sealed the orders, and put a gag order on Levison.
• Lavabit refused to install the device. The court threatened criminal contempt of court.
• Levison raised a motion to unseal the documents. The court denied his motion.
• He did however agree to let the FBI install the device and get the information they needed.
• What Levison wouldn’t do was give up the SSL keys that would decrypt the information. This rendered the information the FBI gathered completely useless. The FBI didn’t like this.
• The court gave Levison a chance to comply with all their orders and hand over the SSL key.
• Levison responded that in doing so would breach the privacy of the 400,000-plus other users of Lavabit. If the FBI has the Masterkey to everyone’s Lavabit accounts they could do what they liked with everyone’s information. He argued this was in breach of the Fourth Amendment. Also, keeping him under a gag order breached his First Amendment rights.
• The courts disagreed with him on both issues.
• As such Levison was compelled to hand over the encryption keys. What happened next is hilarious…
• Levison sent the FBI the encryption key…on a black and white print out. The SSL key was on 11 pages with nothing but alphanumeric characters, 2560 characters in total. The FBI claimed it was illegible. But they were just lazy, as they said to use the print out would be a ‘laborious process‘.
• This meant to decrypt the information the FBI would have to manually input the 2560 characters without a mistake.
• Not impressed with Levison’s assistance, the FBI again demanded the encryption key in an electronic format to make it easier for them. To date Levison has refused to abide by this order.

Knowing good and well he’s in the midst of a losing battle Levison has made the ultimate sacrifice and shut down the Lavabit operations.

He’s closed the business to circumvent the FBI from accessing the encrypted information of all Lavabit users. The only way to protect the privacy of the users was to not have the business operation at all.

Should Levison’s appeal against the court orders fail, it’s more than likely Lavabit will resurface outside US borders.

That’s a trend you’ll start to see more of. Why? Because online and digital businesses are getting tired of being poked and prodded by the US. so they’ll shift operations outside of US borders to avoid the pervasive methods implemented by US government branches.

Whether you like it or not the internet is basically a breeding ground for tracking and sequestering of information against your free will. That doesn’t mean it doesn’t have a purpose anymore. But it does mean that everything you do on the internet you should do with caution.

The Deep Web

There is an alternative to the internet. It’s the Deep Web. The Deep Web is the anonymous internet. You access it through The Onion Routing Network (Tor Network) and no one, not even the National Security Agency, can see where you go or what you do.

One of the NSA PowerPoint presentations Snowden leaked, ‘Tor Stinks’, says in the document, ‘We will never be able to de-anonymize all Tor users all the time.‘

Translated, that means the NSA doesn’t know what to do about the Deep Web.

The Deep Web is where hackers, whistleblowers, coders, programmers and hacktivists hang out and work. Those in the know realise by using the Deep Web they can make it harder for government to track them.

But for many people they don’t know what they don’t know, and the DEEP Web is a big unknown to many people. That’s why we’re here to introduce you to it.

The thing about the Deep Web is it’s just like the normal internet. It’s a bit more ‘bare bones’, but it allows you privacy and anonymity. You can visit the Tor Project Website to learn more. I also recommend the Tor Browser to surf the internet/Deep Web.

To make something clear, it’s 100% legal to use the Tor Network, so don’t be afraid of using it.

When you’re in the Deep Web be aware there are illegal websites and illegal operations. But there are also those kinds of sites on the internet too. Remember, if it looks like trouble it probably is.

What the Deep Web allows you to do, its real benefit, is you can do what you want where you want with anonymity. Be warned it’s not a 100% failsafe to hiding your identity. But it’s a very good start to making it harder for government to track your online movements and steal your information.

Use the Deep Web for what it’s designed to be, a protection of your privacy and data. Users are often advocates of freedom of speech, privacy and anti-censorship. All necessary values in preserving the integrity of our connected, digital world.

As more people come to realise the benefits of protecting their privacy online, more people will use the Deep Web. And the more people who use the Deep Web, the more effective it becomes.

What this all means is the future will spread across two types of internet. They will branch further apart and eventually separate.

One will consist of the internet you know today as it slowly evolves into a more controlled, surveyed government arm.

And the other will be the Deep Web which will grow and expand. It will allow people to carry on their digital lives, with the ability to choose when they want to part with private information.

The Deep Web is the best way to beat the NSA and it’s the best way for the non-tech savvy to protect their privacy and information. So go ahead, try it out and be a part of the future of the internet.

Sam Volkering+
Technology Analyst

Ed note: Sam has just recorded a video exclusively for Revolutionary Tech Investor subscribers where he takes viewers on a tour of the Deep Web. To get a taste for some of the things he covers you can tune in to a video Skype call between Sam and Kris from last week. Check it out here…

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By MoneyMorning.com.au

After weeks of drama, what do you know, everything seems to have worked out just fine…in terms of the impact on stock markets anyway.

As for the longer term impact on the US and world economies, well, who knows. As the phrase ‘longer term’ implies, it may not be for a long time before the full impact becomes apparent.

Thinking about the long term is fine. That’s why we recommend owning gold. Gold is your long term insurance policy against the ultimate destruction of the paper-based monetary system.

But as we’ve explained in recent weeks, don’t forget the short term. And right now the short term outlook tells us not to miss out on this opportunity to buy stocks as the torrent of money continues to flow into the market…

We’ve taken and we continue to take a lot of stick for our stand on the stock market.

From the start of this mess we’ve told you not to panic. We told you not to sell your stocks.

In fact we told you to buy stocks.

Why? Because we knew that what happened overnight would happen. That politicians on either side of the aisle wouldn’t have the guts to go through with their threats if that meant the US government defaulting on its obligation to pay bond holders.

So yes, we’ll say it; we told you so…

We Don’t Blame You for Fearing the Market

To be honest we found much of it amusing. Even up until last night the mainstream drones really thought there was a chance the US government would default.

Bloomberg ran a story effectively saying a default was almost certain: ‘Treasury Paying $120 Billion in Bills Doubted as Fitch Warns‘.

When we read that, even we wavered in our conviction…for about 10 seconds, until we realised that news story was a bunch of junk.

The story claimed:

‘Investors holding $120 billion of Treasury bills coming due tomorrow are increasingly worried that they won’t get paid.

‘Rates on the bills, maturing the same day that Treasury Secretary Jacob J. Lew has said the U.S. will exhaust its borrowing capacity, rose as high as 0.37 percent yesterday before dropping to 0.13 percent today, according to Bloomberg Bond Trader prices. The securities, issued a year earlier, traded at a rate of negative 0.01 percent as recently as Sept. 26.‘

We don’t doubt the notion that investors were worried. The bond yields clearly showed that. It shows you that many investors preferred the certainty of getting back less than the bond’s face value rather than waiting a couple of days and facing the risk of holding an asset the government may not honour.

So for all urging that you shouldn’t sell and that you should even consider buying, when faced with news stories like that we get it if you didn’t have the confidence to stick with the investing gameplan.

But now that it’s over – at least for now – we’ve got another question for you: Now what’s stopping you from investing?

Don’t Get Paralysis by Macro-Analysis

You may have seen us use the term ‘paralysis by macro-analysis’ before.

What we mean by that is some investors become so caught up in analysing the big picture that they become unable to make an investing decision.

No sooner with the debt ceiling drama be off their radar than they’ll find another drama to worry about. Another drama that will make them too petrified to invest.

As we’ve said before, we get it that the world economy is pretty hairy and volatile right now. Don’t for a second think we’ve got our head in the sand thinking everything is fine. If you’ve read Money Morning for long enough you’ll know that’s not our style.

We just worry that fear will paralyse some investors so much that in ten years they’ll wonder why their retirement nest egg is so tiny. Then look back at the hundreds if not thousands of missed opportunities.

And believe us, there are plenty of great investment opportunities on the stock markets today. Even as bullish as we are, we see missed opportunities all the time. There are stocks we know we should have spotted, but we didn’t.

But there are stocks we did catch. Such as the Aussie biotech stock that we recommended in Revolutionary Tech Investor in July this year. Already it’s up 41%…even though many investors fled the market for fear of a US government debt default.

Or there’s the groundbreaking US 3D printing company that’s gained 20% since we recommended it in June…again, despite the fears of a US debt default.

This is No Time to Sit on the Sidelines

You see, this is an important lesson.

Just because the wheels stop turning in Washington DC it doesn’t mean the wheels stop turning on the broader economy.

If anything the private sector wheels should turn faster. There are fewer inspectors and bureaucrats and ‘jobsworths’ interfering and messing things up.

Just to repeat, we’re not saying there’s a clear path ahead for stocks. The deal in the US is only a brief reprieve until early January for the budget and early February for the debt ceiling.

But with Dr Janet L Yellen set to squeeze into the hotseat at US Federal Reserve chairman next year we’re certain of one thing. The last thing the doctor will do when she takes over is anything that will add more instability to the market.

That means more money printing and a higher market. It looks as though we’re on track for our year-end target of 6,000 points for the Australian market and 7,000 points in 2015.

This is no time for investors to sit on the sidelines as this bull market rally gathers pace.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years

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Source: Kevin Michael Grace of The Gold Report (10/16/13)

http://www.theaureport.com/pub/na/thibaut-lepouttre-juniors-that-can-deliver-the-goods

Now more than ever, investors simply can’t afford to wish upon a star and hope the drill bits will deliver something; they need to focus on miners that have what it takes to get through the down times, says Thibaut Lepouttre, editor of Belgium-based Caesars Report mining newsletter. In this interview with The Gold Report, Lepouttre reveals the results of his search over five continents to find those juniors in gold, iron ore and tungsten that offer superior value.

The Gold Report: German Finance Minister Wolfgang Schäuble said last month, “The Eurozone is clearly on the mend both structurally and cyclically.” How do we square this statement with the record high unemployment, economic contraction and soaring debt of the southern Europe Eurozone members?

Thibaut Lepouttre: We must look at this statement in the light of the German elections in September. Schäuble belongs to the same political party as Angela Merkel, and he was giving us a pep talk to help his chancellor get re-elected. Based on what I see here in Europe, I don’t have the impression that things are getting much better, and I think many more structural reforms will be necessary before that happens. The high yield on sovereign debt and the undercapitalized banks have been dealt with on an if-needed basis, without tackling the underlying, chronic problems.

TGR: In Spain, for example, there is 27% unemployment. What kind of political pressure does this put on the Eurozone? Do you think that Spain, Greece and Italy can be kept in the Eurozone?

TL: I don’t think the Eurozone will split up because for most of its countries the advantages of staying in the Eurozone outweigh the negatives. If any country were to leave the Eurozone and depreciate its new currency, it would be beneficial in the short term but harmful in the longer term because it would be tougher getting its debt financed on the international markets. And having depreciated once, most investors won’t trust it again, fearing further deprecations. Now, because of the single currency, Greece can easily find an investor in, for instance, Germany or Belgium, while it would mainly be limited to domestic investors if it were to get out of the Eurozone.

That said, I think the European Union is largely responsible for the crisis in southern Europe. Not only did it allow dubious countries to join, it also supported dubious spending. In a specific area in Spain, there are four parallel roads and two railroads in an area just three kilometers wide. Lots of Spaniards bought second houses or apartments, and thanks to the availability of cheap mortgages, people could actually pay them over 40, 50 or even 70 years. The last example would take three generations to pay off. It is painfully clear now that there was an urgent need for a banking regulator that could have scrutinized the lending of money to people who couldn’t afford it.

TGR: Could natural resources help regenerate the European economy?

TL: No question. Italy has oil and gas. Greece has gold. Cyprus has gold, copper and even gas. Spain has gold, copper and silver, and Portugal has tungsten, gold and copper. In Spain, it would make sense to recentralize the mining permitting process because every decision now is made by a local government. This way, mining could be encouraged on a national level and several thousand or even tens of thousands of jobs could be created.

If this recentralization were to occur, it might then be possible for Spain to institute a 5% gross production royalty on gold mining so it would receive gold that’s being mined in the country as bullion for its vault. This could strengthen the balance sheets of its national banks. By contributing increased labor and tax flows and increased gold holdings on the balance sheets of the national banks, mining could be a huge boost to Spain and to any other country in southern Europe that would take such measures. To clarify, this potential 5% royalty is my personal thought and not an official law.

TGR: Aren’t large-scale environmental protests against mining in Europe a serious problem?

TL: There are always protesters. I agree that every modern mine should be as environmentally friendly as possible, but in the end governments need to balance potential environmental problems against job creation and increased tax revenues.

TGR: You predicted in May that gold would trade between $1,250–1,500/ounce ($1,250–1,500/oz). You have been proven correct. Where does gold go from here?

TL: We’ve had very strong resistance at $1,410/oz, and when gold tried to break through just a few weeks ago, it dropped right back to the $1,300/oz level. I believe that gold will continue to trade sideways from here: between, let’s say, $1,200–1,410/oz. I’m not sure what kind of major economic catalyst could result in a push strong enough to break through this resistance.

TGR: The Federal Reserve has backed off from tapering quantitative easing (QE). Will this raise the price of gold over the long term?

TL: We’ve seen QE over the past three years, including the past two years when gold fell in price. The continuous printing of money by the U.S. will definitely be beneficial to the price of gold, but the problem is that this new money will cause inflation only when the velocity of money rises again. In a normal economic cycle, this happens between 24 and 36 months, but now the velocity of money is much lower than normal. I think we’ll see inflation rising 48–60 months after the printing started, that is, within two years from now. And that will indeed benefit the price of gold.

TGR: Times are tough, and there’s little margin of error for successful investors. What qualities must mining companies demonstrate for investors to favor them?

TL: I like to see a management team with a track record. The era of inexperienced managers is over. Further, a company must present to investors and potential investors a clear path and timeline toward production because now all anybody cares about is adding cash flow. In addition, the project must be financeable. I don’t think any company would now be able to find financing for a $2–3 billion low-grade copper project in Chile. Finally, in this downturn, effective transparency is more important than ever because investors always want to know what the company is doing behind the curtain.

TGR: You have spoken in the past of the importance of jurisdiction in resource investment. In this regard, what do you like about Australia?

TL: Australia, like Canada, is a real mining country with many skilled and experienced people who are subject to very clear mining code. The jurisdictional risk is close to zero, as Australia realizes it needs its mining sector to support its entire economy. It’s a great place to work. A few years ago, Australia instituted a new levy called the Minerals Resource Rent Tax (MRRT) to garner a larger share of mining profits. There was a huge protest against this tax, and last year, the first year it was implemented, it generated only $200 million ($200M), instead of the expected $3 billion. So I think Australia will abolish this tax within the next few years as the negatives outweigh the benefits.

TGR: Could you name some Australian companies you like?

TL: There are three I like. Iron Ore Holdings Ltd. (IOH:ASX ) is a prospect generator that identifies and advances iron ore projects, then sells or joint ventures them, including with big names like Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCP). It has a joint venture on its Iron Valley project (that should go into production in 2014) whereby Mineral Resources Ltd. (MIN:ASX) pays 100% of the capital expenditures, and Iron Ore Holdings receives a royalty sales, which could bring in about $20–30M per year at current prices. So the company has about $70M in cash and continues to work on two other advanced-stage projects.

TGR: What’s your prediction for the price of iron ore?

TL: It’s currently trading around $135–140/metric ton ($135-140/mt) of 62% iron content. This will drift down to maybe $110/mt because a lot of new projects are coming on-line and onstream, and even though the Chinese economy is still growing, it’s growing at a slower rate. I think we should expect a long-term price of about $100/mt.

TGR: How much does iron ore depend on the Chinese economy?

TL: About 60–70% of Australia’s iron ore is being shipped to China.

TGR: Where do you stand on the future of the Chinese economy?

TL: That’s a difficult question because we just can’t rely on any numbers the Chinese produce. There’s not a lot of transparency. Without trying to sound like a conspiracy theorist, it is possible China is trying to hide things from the rest of the world. I do believe its economy is still growing, but I also believe the world will have to accept single-digit growth instead of the 10-12% we’ve become used to.

TGR: What’s your second Australia-listed pick?

TL: Beadell Resources Ltd. (BDR:ASX) is a great operation. It operates the Tucano project in Brazil, a 5 million ounce (5 Moz) gold and iron ore deposit with underground potential. It will produce about 200,000–225,000 oz (200–225 Koz) next year with a steady rate of production of about 150 Koz per year, and this should generate about $90–100M per year in operational cash flow. Beadell will be debt free by the end of next year and will be in a really strong position to acquire new assets and continue to grow.

When the company struck its financing deal for the Tucano project, it hedged about 150 Koz of gold at $1,600/oz. In hindsight, that was a great move that enables the sale of gold at $300/oz above the current spot price. Beadell will also start to ship iron ore, starting probably early next year, and this could add another $15–20M to its bottom line.

TGR: What’s Beadell’s production price for gold?

TL: At this point, the company is mixing ore with a high-grade part of the deposit, and the production costs should be around $450/oz. This should increase toward $650–700/oz when it reaches steady-state output. Long term, I’m looking at a 150 Koz per year output at $700–750/oz.

TGR: And your third Australia-listed pick?

TL: Papillon Resources Inc. (PIR:ASX), which owns the 5.2 Moz Fekola gold project in Mali. The company’s recently released prefeasibility study outlines 300 Koz/year gold at an all-in cost of $725/oz. Because the capital expenditure (capex) is only $300M, the payback period will be only 1.5 years. Because the company operates in Mali, there are some political risks. As we know, there was a coup d’état 18 months ago, but things seemed to have quieted down since then. Lately, however, there has been some chatter about the Mali government increasing its taxes on gold and mining.

TGR: What’s your assessment of the jurisdictional risk of West Africa in general?

TL: Ghana and Burkina Faso are the most reliable countries because they know their economies are based on gold mining, and they have been making tremendous progress attracting foreign investment in mining. I’d like to highlight two companies in Burkina Faso. The first is True Gold Mining Inc. (TGM:TSX.V), formerly called Riverstone Resources. Its Karma project is amazing. It’s already environmentally permitted, and a feasibility study is expected this quarter.

According to its 2012 preliminary economic analysis, Karma could produce between 70–90 Koz gold annually at a cash cost of $525/oz. The capex is only $125M, and this could be reduced to about $100M if True Gold uses contract mining. The company has about $35M in working capital, so financing should not be a problem, and production could begin in the first half of 2016.

TGR: What’s the second Burkina Faso company?

TL: Sarama Resources Ltd. (SWA:TSX.V). The company’s South Houndé project is earlier stage, but it has about $7M in cash, which is something I really like to see in these uncertain times. The recently released initial resource estimate is 1.5 Moz gold at 1.6 grams/tonne (1.6 g/t). The company has explored only about 20% of its strike length, so there is a lot of potential, in excess of 3 Moz within 2–3 years, in my opinion. And as South Houndé is just 80 kilometers south of Endeavour Mining Corp’s. (EDV:TSX; EVR:ASX) Houndé project, I think Sarama could be a possible takeout candidate.

TGR: What high spots do you see in South America?

TL: Columbus Gold Corp. (CGT:TSX.V), which operates in French Guiana. This is an overseas department of France, so the political risk is close to zero. And since my last interview with The Gold Report, Columbus has entered a joint venture with Nord Gold N.V. (NORD:LSE), the subsidiary of Severstal, for its Paul Isnard gold project. Under the agreement, Nord Gold must spend $30M in exploration over three years, plus it has to finish a feasibility study. As a standalone, Columbus could never have done these things. I believe Paul Isnard could ultimately contain in excess of 10 Moz gold.

A second project I like is on the other side of South America: Red Eagle Mining Corp.’s (RD:TSX.V) Santa Rosa gold project in Colombia. The company released a preliminary economic assessment (PEA) in September, and if you look at the underground San Ramon zone, its net present value with an 8% discount rate is $92M. This is a 5.6 multiple over Red Eagle’s current market cap of $16.4M. The company has $8.5M in cash, but it will have to make a $4.5M property payment in November. So let’s say it has about $4M in unrestricted cash, which it could use to further advance the San Ramon zone and get it environmentally permitted.

TGR: What’s your assessment of Colombia’s jurisdictional risk?

TL: Much better than five or six years ago. I think Colombia could very well be the next Peru, whereby mining will be encouraged as long as the companies color between the lines and don’t do anything they aren’t supposed to do.

TGR: Any other companies you would like to talk about in the Americas?

TL: In Mexico, Silver Bull Resources Inc. (SVB:TSX; SVBL:NYSE.MKT) has recently released a positive PEA. The study outlined a production scenario of approximately 5.5 Moz per year at a C1 cash cost of $6.58/oz. This is much lower than I anticipated because the company will be able to recycle the cyanide it uses in its plant, which will obviously lower the cyanide consumption and the total cash cost. If one would compare Silver Bull’s Sierra Mojada project with Coeur Mining Inc.’s (CDM:TSX; CDE:NYSE) La Preciosa project, it becomes quite clear that Coeur bought the wrong early-stage Mexican silver project.

The PEA uses a zinc price of $1.15/pound ($1.15/lb) and a silver price of $23.5/oz as a base case scenario, but even at a lower silver price of $20/oz for silver and 0.90/lb for zinc, the Sierra Mojada project yields positive returns and a positive NPV at 8% discount (I think the company’s base case of 5% is a bit too low).

TGR: Let’s talk about Canada. Do you think that the mining industry in Canada is in decline? There are problems with both provincial and federal permitting, with relations with First Nations people, who are claiming oversight over developments, and with the TSX Venture Exchange. Recently, many British Columbia juniors seem to prefer working in Mexico, rather than in their home province. What do you think?

TL: I believe that Canada is a top mining destination and will continue to be so. Most projects will get permitted, but maybe not with best case scenarios. Mexico is very attractive because of its gold and silver history and its much lower labor costs. But since Mexico has announced plans to increase its mining tax, I do think a lot of companies will return to Canada because this makes Mexico less attractive than before.

TGR: Which companies do you like in Canada?

TL: It’s very important to follow the companies that can raise money. For instance, Integra Gold Corp. (ICG:TSX.V) raised $4.4M for exploration at its Lamaque gold project in Quebec.

If investors are looking for a near-term commercial producer, I visited Metanor Resources Inc. (MTO:TSX.V) earlier this year, and although the company has had its fair share of bad luck, it is currently ramping up production at the Bachelor Lake gold mine in Quebec. This is an underground operation, and the company is opening up more and more stopes. But investors should be aware that this isn’t really a linear process.

TGR: What grade is it getting?

TL: Between 5 and 7 g/t.

TGR: When will Metanor go into commercial production and what will the production costs be?

TL: At this point, Metanor is still offsetting the gold revenue against the underground development costs. I hope to see declared commercial production in December of this year or early next year. Metanor is aiming for a cash cost of less than $1,000/oz, but proof of the pudding will be in the eating.

TGR: What do you like about tungsten?

TL: Tungsten has some irreplaceable uses and thus scores very high on the list of governmental strategic minerals, about the third highest in the E.U. and U.S. I’m pretty sure that the Department of Defense has a tungsten stockpile. China dominates world production; it has also been the predominant world exporter for decades, but has now started to stockpile tungsten. China has become a net importer. So it has become essential to develop tungsten projects outside China in order to guarantee continued supply to the West.

TGR: Can we expect tungsten prices to increase?

TL: I think so. I’m perfectly comfortable with the current price: $400–410/mt. Most mining companies will make a lot of money at those prices. If China continues its new stance, I believe we will see a price increase.

TGR: Is there a tungsten play you like?

TL: I went to Portugal, a mining-friendly country, in June to visit Blackheath Resources Inc. (BHR:TSX.V). Under its agreement with Avrupa Minerals Ltd. (AVU:TSX.V), Blackheath will have 70% this year and the option to acquire 85% of Covas, one of the highest grade, if not the highest grade, projects in Europe. So, while a competitor, such as Wolf Minerals Ltd. (WLF:ASX), will produce tungsten at an average grade of 0.19%, Covas has an average grade of 0.78%. This translates into a rough value of $310 per tonne of ore. The most recent Covas drill program has hit intercepts up to 1% and even 2% tungsten. Grade is king everywhere, be it in gold or tungsten.

Blackheath has a very good chance to develop its Covas and the Borralha project mainly because of its CEO, Jim Robertson. He was involved with Primary Metals, also a tungsten company operating in Portugal, which was floated at $0.15/share I think five or six years ago and was taken out by a Japanese metals trader at $3.65/share three years later. I trust this management team, and I’m pretty sure it will repeat the same trick.

TGR: Given all of the losses investors have suffered over the last couple of years, what are the factors that should keep them in the market?

TL: It all comes down to having a decent selection procedure. I can tell you that about 25–30% of the mining companies on the TSX Venture Exchange today won’t survive this downturn. Investors need to take a look at companies with cash in the bank, real value in the ground and management that can deliver the goods. This is not the time to wish upon a star and hope that the drill bits will deliver something.

TGR: Thibaut, thank you for your time and your insights.

Thibaut Lepouttre is the editor of the Caesars Report, a newsletter and mining portal based in Belgium that covers several junior mining companies with a special focus on precious metals and base metals. Lepouttre has a Bachelor of Law degree and two economics masters degrees that have forged his analytical approach to the mining sector. Considered a number cruncher, Lepouttre focuses on the valuations of companies and is consistently on the lookout for the next undervalued mining company.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE:

1) Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold Report as an employee. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Gold Report: True Gold Mining Inc., Sarama Resources Ltd., Silver Bull Resources Inc. and Red Eagle Mining Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Thibaut Lepouttre: I or my family own shares of the following companies mentioned in this interview: Blackheath Resources Inc., Columbus Gold Corp., Iron Ore Holdings Inc., Beadell Resources Ltd., True Gold Mining Inc. and Metanor Resources Inc. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Blackheath Resources Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

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Article by Investazor.com

As anticipated, the American Government was saved at the eleventh hour. Following an agreement between Republicans and Democrats, the nation’s borrowing limit will be raised until the 7^th of February and  the Government will reopen until the 15^th of January. As the top priority of the Republicans, it has been decided to maintain the sequesters’ constraints.

The American officials promised to come up with a long term debt plan by 15^th of December, in order to avoid this kind of situations for the future. Now that the promises have been made, nothing was left but to expect the Senate and the Congress to pass the agreement.

The relief of the markets was expressed by the intraday highs of the American Indices but still the reluctance of investors is visible, as this episode questions the confidence in the Unites States’ Government. The level of uncertainty also touched historical highs and seems to remain on an upward trend. Pessimistic voices already occurred, reinforcing the idea that each such chapter brings the American economy closer to a collapse that at some point in the future will be unavoidable. As the mistrust sprouts in the investors’ portfolios, the triple A rating of America looks now as an unfair vote of confidence. Investors expect now the rating agency to take in consideration the recent events.

A positive signal was send by the Bank of American Corp which posted higher than expected profits in the third quarter.  The increased was calculated at 32%, registering a very productive activity and strategic management of its assets during the financial crisis. The Bank’s officials are expecting for the next quarter the mortgage loan production to fall.

The post The Government Shutdown Will Be Avoided? appeared first on investazor.com.

Source: Peter Byrne of The Energy Report (10/15/13)

http://www.theenergyreport.com/pub/na/colorado-floods-highlight-opportunity-in-oil-and-gas-services

Flash flooding in Colorado took a considerable toll, but there is always opportunity in crisis—this time, that opportunity lies in service companies. In this interview with The Energy Report, Jason Wangler, analyst with SunTrust Robinson Humphrey, recounts how emergency service, information technology and small infrastructure-building companies have found a profitable niche in making oil and gas operations safer and more responsive in the event of disaster. He also tips us on some international plays with hidden values and a few firms with great risk/reward profiles in the domestic shale fields.

The Energy Report: Jason, how did the recent flash flooding in Colorado impact the Wattenberg oil field?

Jason Wangler: It was a very nasty flood and all the companies on the ground are working hard to assess the damage. There have been reports of tank leakages and other problems. But the wells were turned off during the flood, so drilling operations were not affected much. The questions that remain are how much work is necessary to fix the roads? And when can the drillers safely turn the wells back on?

TER: Given the ever-present possibility of natural disaster, what type of emergency preparations do oil and gas drillers typically take?

JW: In the past, production companies could not do much to avoid the impacts of major earthquakes and floods. But now, our cellular and software technologies can turn off, edit or suspend wells from remote locations. Noble Energy Inc. (NBL:NYSE) is one of the largest players in Colorado. It can remotely turn off wells without having to put boots on the ground. The world needs safer oil and gas operations and there is a clear demand for improved information technology (IT) in that arena. In addition to advancing IT response capability, most companies have a select group of firms on-call to respond to rig fires and explosions, such as Wild Well Control Inc. (private) and Halliburton Co. (HAL:NYSE).

TER: What are the main operational constraints for companies looking to ramp up exploration in the ever-expanding shale oil fields?

JW: Improving infrastructure and training workers are vital to developing the fields in North Dakota, West Texas, South Texas and in the Ohio-Pennsylvania fields, where the majority of growth is occurring right now. Getting the oil to the surface is one thing, but then it has to be transported to markets in Oklahoma, the Gulf Coast, the West Coast and the East Coast. Sourcing fresh water and sand for drilling is also an issue. The most successful exploration and production companies (E&Ps) have ample capital and liquidity to support growth without constraining themselves too much in case of a downturn.

TER: Are lenders interested in solving these types of infrastructure and transportation problems by shaking loose some capital?

JW: Absolutely. In particular, the private equity markets are stepping up in a big way to fund infrastructure and transportation start-ups. There is a lot of private money out there looking to capitalize on aspects of the shale opportunities that the public markets sometimes do not bother to look at. The public market likes to step in when the infrastructure is already built and earning revenue, with solid earnings before interest, taxes, depreciation and amortization (EBITDA). Often, the privately financed facilities are sold to publicly traded master limited partnerships (MLPs). But you do not see public capital building much in the way of infrastructure from scratch. Public companies are more interested in acquiring already-producing fields linked to accessible markets. After they see cash value pumping at the wellhead, they will jump in to capture returns from producing facilities and pipelines. That is why private equity is increasingly fundamental to early-stage development and where it goes, investors can follow.

TER: How does oil field infrastructure in the U.S. compare to the international E&P space?

JW: Stateside, we are still looking for oil and gas, even though prices are depressed. There is no telling exactly when that will turn positive. And although the infrastructure in the States is not perfect, it is ample and largely available. Internationally, the explorers are hunting for elephants. Again, one of the biggest constraints is understanding how much a company will have to spend to build out enough infrastructure to bring new energy to the market. Internationally, gas prices are much more robust, so finding gas in underdeveloped areas is not a bad thing, because there is such an upside to developing new sources. Companies are focused upon finding large, economic plays for oil, gas or even natural gas liquids (NGLs). There is risk in exploring and developing a region so that the cash can flow. But the rates of return can be phenomenal.

TER: What companies are you following internationally?

JW: One small firm that we like is called Harvest Natural Resources (HNR:NYSE). It has assets throughout the international space. In Venezuela, Harvest is attempting to monetize a major asset. It has a handshake agreement to that effect with a company called Pluspetrol in Argentina. It also has some assets in offshore Gabon, West Africa, and a shale play in Colombia, and several promising assets in Indonesia and China. If it sells the Venezuelan assets, it will be able to focus more on its Gabon wells, which have a lot of prospectivity. For instance, there was recently a Total S.A. (TOT:NYSE) well in the same area that had a very nice result. Harvest is looking to have the Gabon production online in the next 18–24 months, which would be a quick turnaround with potentially significant gains, and Harvest is looking for help to finance its Gabon growth.

International assets are generally a tough sell to investors because investors have a hard time valuing foreign assets. In the States, an investor can look at what firms are producing next door to a certain well, and have a degree of confidence, but it is more difficult to make that kind of assessment internationally. Of course, the international space has many great assets, and Harvest has the expertise to find and develop profitable wells.

TER: What is the shape of Harvest’s debt:equity ratio and cash flow?

JW: Its cash flow is effectively zero. Harvest has producing assets in Venezuela, which it is selling because the Venezuelan government has asked it very politely not to take any money out of the country. It does not get to repatriate the cash flow. The Gabon asset is close to generating cash flow, however.

Harvest’s debt:equity ratio is not bad. It carries $80 million ($80M) in debt. The equity value is $200M. So its debt:equity range is 25–30%. The company intends to pay off its debt with cash from the Venezuelan sale. But the current cash flow, in my opinion, is not the best way to value Harvest, because the true value is in it assets—either for development or for sale.

TER: How can investors make money off of Harvest?

JW: Right now, the stock is trading in the $5-and-low-change range. If the deal with Pluspetrol goes through, Pluspetrol will take over Harvest Natural Resources, and pay about $6/share in cash—and every other asset will be spun off into a new company. So $5.14/share means $6 in cash and a spun-off asset of everything but Venezuela, which has had its share of headaches, anyway. Again, $6/share in cash and about $3/share in new stock is a good return. Obviously, Harvest has to complete the deal in Venezuela, which is not necessarily a walk in the park, but there is ample upside to it.

TER: Why does Pluspetrol, an Argentinean company, want to buy a Venezuelan operation?

JW: In July 2012, Harvest tried to sell the asset to a company called PT Pertamina, the state-owned Indonesian company, for $715M. One of the contingencies of the agreement closing was that PT Pertamina and Indonesia and Venezuela sign off on the deal. But the Indonesians walked away and the stock fell from $10–11 to the $3–4 range, where it languished. It recently popped on the news of the $373M Pluspetrol deal, which is tax friendly because the ability for Pluspetrol to buy Harvest as a whole means that the entire $373M can enter the States. Harvest then can pays off its $80M debt. After fees, there will be $240M left for the equity holders, which, with 40M shares outstanding is $6/share in cash. At that point, the shareholder is responsible for the taxes. This allows the shareholder to get a much larger amount of capital or cash while still having all the other same assets in a more tax-friendly situation.

TER: What other acquisitions or sales are in play with companies that you follow?

JW: Gulfport Energy Corp. (GPOR:NASDAQ) is one of my favorite names. It has a sizable oil sands position through a 25% interest in a company called Grizzly Oil Sands ULC (private). It is expected to bring production online for its SAGD project in Canada before year-end. That will unlock a lot of value and allow Gulfport and its partners to monetize assets through an initial public offering or an outright sale of the company in a year or so.

Bill Barrett Corp. (BBG:NYSE) is taking competitive bids on three different properties—gas assets in the Piceance Basin and the Uintah Basin and oil assets in the Powder River Basin. It plans to monetize one of these three assets to pay down debt in order to keep its liquidity position strong and to reform its balance sheet. It started the year at a debt level of $1.1 billion ($1.1B), and it has vowed to not let that level move any higher from Dec. 31, 2012 to 2013 through utilizing an asset sale.

In the Denver area, Triangle Petroleum Corp. (TPO:TSX.V; TPLM:NYSE.MKT) is diversifying into services under the leadership of Peter Hill, who used to work at BP Plc (BP:NYSE; BP:LSE). Hill saw that hydraulic fracking services are tough to get, especially for a smaller company. Midstream fracking services are effectively nonexistent in the Bakken. Hill decided to expand production and acreage position in the Williston Basin while investing in building infrastructure to move oil to the market. Triangle runs a portfolio approach, which is a bit of a rarity within the industry. There are a few companies that do something similar, but usually they are larger than Triangle. Triangle itself is a self-contained company. It rents rigs and equipment while drilling its own acreage. It has midstream pipes for transporting water, gas, and oil. It fracks for itself and also for third parties.

TER: How is its stock performing?

JW: In the last six months, Triangle’s stock has doubled. It has grown its acreage position. It has continued to see better and better returns on both the fracking business and the midstream transport business. Investors get excited about an asset when it starts producing revenues, cash flow, EBITDA and earnings per share numbers. All of the Triangle segments now produce positive EBITDA. That is a huge win for the small conglomerate.

TER: Are there any other companies that investors should pay attention to?

JW: Resolute Energy (REN:NYSE) has a nice legacy asset in Southern Utah called the Aneth field. It has been producing for a very long time. It gets great oil production out of it. Resolute is free cash flow positive, which is a rarity in this day and age, and a high growth rate in the 5–10%/year range. The company is in the Permian basin and it has purchased 22,000 net acres in both the Delaware and Midland basins, where it is drilling horizontally under the radar of the boom. It should have results in the next couple of months.

TER: Thank you for spending time with us today, Jason.

JW: You are welcome, Peter.

Jason Wangler has over five years of equity research experience focused on the exploration and production and oilfield services sectors of the energy space. Jason previously worked at Wunderlich Securities Inc. and Dahlman Rose & Company before moving to SunTrust Robinson Humphrey. He also previously worked at Netherland, Sewell & Associates, Inc. as a petroleum analyst. He received his Masters in Business Administration from the University of Houston where he was also named the 2007 Finance Student of the Year. He received his Bachelor of Science degree in Business Administration with a focus on Finance from the University of Nevada where he was named the 2003 Silver Scholar award winner for the College of Business Administration. In 2010 he was highlighted as a “Best on the Street” analyst by The Wall Street Journal and has been a guest on CNBC.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

DISCLOSURE:

1) Peter Byrne conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.

2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Jason Wangler: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.

5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.

6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.

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Email: [email protected]