Legendary investor Jim Rogers says that the oil price decline is ‘artificial’’. He said:
‘It looks like a lot of people are dumping. This is artificial. Though I would not be dumping oil myself.’
Jim Rogers isn’t selling his oil stocks. Herealises low oil prices simply won’t last. And so do I. This is short term noise in the middle of what could be the biggest bull market in crude oil that the world has ever seen. And a great buying opportunity too.
Right now, the Saudi’s are artificially holding prices down — they won’t do this forever. Don’t lose sight of the bigger picture.
The fact is that all the easy crude is gone. As legendary scholar of the oil patch, T. Boone Pickens, said, id, ‘There’s nowhere left to drill.’
T. Boone is right.
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There are far fewer onshore opportunities now than there used to be.
To access what’s remaining, companies are drilling deeper than ever before and searching new frontiers. It’s exciting stuff.
New oil and gas discoveries have been found in harsh environments everywhere — the Arctic, ultra-deep waters and even shale. Technology has made this possible.
Because of this tech, exploration risk in new frontiers is the lowest it’s ever been. As we’ve seen with a number of companies recently, successful wells have returned shareholders more than 100% gains almost overnight.
Far Ltd [ASX:FAR] climbed more than 300% after announcing a major deep water oil discovery in offshore Senegal. The market had sent the share price up over 200% before the announcement on the 7th of October 2014. The market made an educated guess that Far had discovered oil long before the announcement.
These days, tech even gives investors the upper hand.
And that’s DESPITE the fact the oil is down. It just goes to show. Strike oil…no matter what the oil price is…profits will follow for punters.
Another example of deep water success is Carnarvon Petroleum [ASX:CVN]. Carnarvon announced its deep water oil discovery on 13 August 2014. And the share price went up over 200% in a day. Its oil find was right outside our doorstep, in offshore Western Australia.
I call these deep water discoveries the ‘quiet boom’, because while the world focuses on shale and what the Saudi’s will do next, a few explorers are going about their business of wildcatting for oil.
Most people don’t realise it, but we’re entering an oil boom in new frontier drilling.
Some people think investing in Africa is risky. This may be true. But many, many companies have been successful drilling and working in Africa for years. I’ll talk more about this next week.
The fact is that less than 10 years ago, Africa, Asia and South America were really no go zones. But thanks to technology, they’ve been the home to some of the world’s largest recent oil finds. New frontiers are the place to be. Look at Woodside Petroleum [ASX:WPL]. It’s buying acreage all over Africa.
In the last few years, the discoveries by this new breed of oilmen include:
• 900 million barrels in Angola
• 775 million barrels in Nigeria
• 700 million barrels in the Congo
• 1.05 billion barrels in the Gulf of Mexico
• 2 billion barrels of light-sweet crude off the coast of Ghana
The Minerals Management Service estimates that there’s another 71 billion barrels of oil left in the deep waters of the Gulf of Mexico….
Another 85 billion barrels off the coast of West Africa…
And the waters that surround the Spratly Islands in the South China Sea could hold as many as 300 billion barrels.
At the start of the year Ghana announced it will spend at least $20 billion on offshore fields between now and 2019…
But that’s nothing compared to the $217 billion Brazil will spend developing its offshore resources over the next four years.
I could go on…
The point is huge profits are on the table. It doesn’t matter if oil sells for $120 a barrel…or $50 a barrel.
It just comes down to picking the right companies to invest in. As you know, investing in oil explorers is a risky game. But what if I told you that you can reduce your risk of losing money and, at the same time, increase your chance of making big gains??
You might not believe this, but it is possible.
You just have to find the right oilers to invest in. This means looking for oil companies with the right diversified asset mix, sufficient cash in the bank, limited debt, and an attractive strategy.
Well, it’s not. And it’s still risky, but this is precisely what I’ve been doing for Diggers and Drillers readers. I’m preparing them for the coming deep water and new frontier oil boom which has everything to do with geopolitical conflict. I talked about this in Money Morning yesterday — see the article here.
The Middle East is a serious conflict involving power, politics, religion and arrogance. When this conflict ‘explodes’ next, like it did in 2011 and again in late 2013, the price of oil will skyrocket. It’s just a matter of ‘when’ not ‘if’ this happens.
The conflict is escalating daily and is likely to erupt next year. When it explodes next year, this will just be the start of it. Buying in the early stages of the crude oil bull market is when you could make the biggest gains. This is because when the bull market truly takes off, your profits could compound at a quicker rate.
When this conflict erupts, the price of oil will head above US$150 per barrel. As such, I’ve never seen a better time to buy oil stocks than right now.
Adding to this, thanks to technology, exploration and wild cat drilling could see huge profits for investors in the future. US$150 oil will be icing on the cake…investing in oil stocks now is a once and a lifetime opportunity.
Jason Stevenson+
Resources Analyst, Diggers and Drillers
The post Huge Profits Exist in the Oil Exploration Game appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
