Hefty Hedge Fund SAC Finds Winners in the Energy Sector
Elsewhere during Q1, SAC was adding to stakes in oilfield service provider National-Oilwell Varco (NYSE: NOV)
Elsewhere during Q1, SAC was adding to stakes in oilfield service provider National-Oilwell Varco (NYSE: NOV)
NEW 'PLAYERS' CAN CREATE NEW SOURCES OF OIL AND USE 'ALTERNATIVE' PRINCIPLES TO FIND PETROLEUM
ReplyDeleteIt's well known that monopolies tend to be satisfied with the status quo and tend to limit supplies of a product or service to a level that maintains a comfortable cash flow.
A monopoly doesn't readily give up this pre-eminent position for obvious reasons.
But when the huge profits of a successful monopoly are "eyed" by others outside the monopoly, there is an inevitable draw to attempt to enter that market, and in doing so break up the monopoly.
The only way to enter the market for a particular product or service is to produce that product or service for a lesser cost and offer it to the buyers in that particular market.
In the petroleum industry, a "true monopoly" doesn't exist. Anybody, who can find oil, can sell it. But "in effect" or de facto there is a relative monopoly among the nationalized oil companies of OPEC and others, that are enjoying the current premium price for petroleum and "see" no compelling reason to increase a supply level that guarantees easy profits.
Such is why there is no rush to increase supplies from OPEC countries in the face of the high price of oil.
But others want in on the action.
In an earlier post, McMoRan, Druckenmiller Seek To Break Well Record, Friday, June 13, 2008 it was reported that Stanley Druckenmiller had taken over where Exxon Mobil had left off, to drill deeper an existing abandoned dry hole, in the quest to discover gas or oil.
And this post highlights Steve Cohen's hedge fund's increasing investment in the oilfield services sector.
These 'new players' are not satisfied with the status quo.
They want in on the action and the only way to do that is discover new supplies of oil.
Oil is an expensive business to get into: You can't run a 'start up' out of your garage like in high tech. it takes money, and even more money to "call the shots" and "give the green light" on where and how deep to drill.
But the 'new players' have substantial capital resources to enter the 'game' and call the shots.
This is good for America -- it creates competition and potentially increases supply if these well endowed "wildcatters" are successful.
Mr. Druckenmiller, with his bid to find oil or gas where others failed and gave up, bids well that the "new blood" will pump vitality into the oilpatch.
Another aspect of this healthy development is that many times, the way to "knock off" the monopoly is to use new strategies or principles that the established enities fail or refuse to employ.
There are many reasons why established enities refuse to 'modernize', but in itself, this "opens a door" for the "new kid on the block" that is not restricted in his thinking, therefore, has the ability to use creative and imaginative efforts.
This is the opening that Abiotic Oil has needed (if Abiotic Principles haven't already been used in secret to find petroleum).
Clearly, Druckenmiller is taking a large risk, but success would be that much sweeter because an oil major would be the one that gave up, and not the other way around, which in the early days of the oil industry was what usually happened when a wildcatter didn't have the capital to "finish out" an oil well.
Abiotic Oil Theory is well placed to find "new oil" where fossil theory has given up, or never tried at all.
So 'New Players' have the potential to give "new life" to Abiotic Oil Theory.
Of the two rival theories, Abiotic Theory has the greater potential to discover new plays of oil.
"RIFTING" AND "SUBDUCTING" IN THE PERSIAN GULF: A CAUSE OF THE REGION'S MASSIVE OIL DEPOSITS?
ReplyDeleteReference,
Offshore magazine,
Middle East Geology
Why the Middle East Fields may Produce Oil forever, April 1995
(Available by direct link at left-hand column under Introduction To The Science of Abiotic Petroleum, listed as Infinite Oil)
This article is interesting because of the repeated reference to the geological processes of rifting and subducting.
The article attributes the region's oil to these two processes.
But where on Earth are other areas with large subducting zones?
The answer: Off the coast of the Americas. This region has not been referenced much on this website, either in scientific papers or in comments of this writer.
In its own way, the West coast of the Americas is the true "terra incognito" of potential oil exploration areas.
In America, with the ban on offshore oil exploration and production, nothing has been done to prospect this area, and seemingly, not much has been done offshore in South America.
But could this be a "holy grail" for oil production?
It seems, no one knows.
But after reviewing the above referenced article, with its repeated reference to "subduction" zones, one is left asking if oil deposits are a consistent feature of "subducting" zones?
If so, some of the greatest subducting zones are off the West coast of North America.
Tell tale earthquakes have been recorded off the Oregon coast recently, and hydrothermal vents are a common occurance.
Off the California coast, oil seeps have been noted for decades, with, of course, substantial oil deposits on shore.
These swarm of indicia of oil deposits would seem to warrant investigation.
Could far larger petroleum deposits exist around the subduction zone of America's West coast?
The time has come to find out.
CALIFORNIA "UPSIDE DOWN" CAN BE CALIFORNIA "RIGHTSIDE UP"
ReplyDeleteCalifornia has a budget deficit of epic proportions. It's not clear California will ever "clear decks" and avoid bankruptcy.
The finacial position of California is precarious to say the least.
But financial salvation is at California's fingertips. What is that deliverance from financial insovency?
Oil.
Offshore oil.
The royalties could be huge -- and already the talk is to increase the state's cut of royalties, as an inducement to get on board with offshore exploration and production.
And the reality of Abiotic Oil and Abiotic Principles in exploration and production mean the stakes could be huge.
What's not to like?
Balanced budgets.
Safe and evironmentally sound.
And "no visual blight" with all production activity beyond the visual horizon.
Also, increased onshore economic activity, and high wage jobs in all facets of the exploration and production process, from beginning to end.
And, conceivably, even "Califoria Oil for California use." With exports only when California demand for oil has been satisfied.
This last idea might be kind of a stretch, but it depends on how hard ball California plays.
But what is for sure, California would have the the prospect of oil income to solve its budgetary "hurdles."
Hopefully, that should make a few California mouths water at the prospect of offshore oil coming to their state.
ANACONDA'S RULE:
ReplyDeleteWhere there's money,
there's more money.
Haha...Anaconda's Law is a verifyable hypothesis...=)
ReplyDeleteThere is a finite amount of money in the world.
ReplyDeleteTo Quantum_Flux:
ReplyDeleteThen you don't know finance.
Money is created all the time.
No, no, no, the finiteness of money is what gives it value. Nobody would want a dollar bill if there was an infinite amount of them because they would then become worthless. Hell, if money were infinite, then why not adopt the standard of buying things with grains of sand or something!?
ReplyDeleteTo Quantum_Flux:
ReplyDeleteThere are beneficial increases to the money supply and detrimental increases.
Beneficial increases in the money supply reflect increased amounts of goods and services available.
In essence labor, whether expressed in increased goods or services, creates wealth, which when monetized means "creating money."
Detrimental increases in the money supply are when there is no coresponding increase in goods and services available causing inflationary pressures.
This writer hopes the distinctions made clarify the discussion.