Energy Investors: 2 New Ways to Profit From the Middle East Uprising

 |  Includes: CEO, SU
by: Investment Underground

By Gerry Greer, Guest Editor

Demonstrations continue in Middle Eastern countries including Libya and Yemen. Both have followed different courses to arrive at where they are today.

Libya, a former colony of Italy, was made an independent country by the United Nations in December 1951. The form of government put in place was a hereditary monarchy, a feudal state. Major oil reserves were discovered in 1959 and wealth started to concentrate in the hands of an elite few.

In 1969 a young 28-year old army officer led a bloodless coup; the king was exiled to Egypt and a young Qadhafi pledged to put in place a fairer form of government with social justice and a redistribution of wealth. What has occurred is a state of authoritarian rule. Protests by youth are now spreading against the no longer young Qadhafi. The goal of social justice remains the same, and the path to that goal is seen in free elections. Hopefully the transition in Egypt will not last 40 years and elections will occur in Libya in a transition that is as bloodless as the 1969 overthrow of the former king.

Yemen’s path has been different. The current President, Ali Abdulla Saleh, was a former corporal who was elected president of North Yemen at the young age of 32, in 1978. This occurred after the then president was assassinated by an envoy from South Yemen, at that time a separate state.

In 1990 the North and South united and formed one country: a united Yemen. Saleh has run for office and won elections since. There is no reason to believe the elections have not been fair, Saleh has run against and defeated the former socialist president of the south. Saleh is also the head of the military and has waged war against insurgents in the north. He has encouraged younger men to run as the head of his party as early as 2002 and has stated that he will not run for reelection in 2013. Demonstrations in Yemen appear to be centered on the basic social concerns of unemployment and hunger.

As the transition to democracy occurs, the solutions to the basic social concerns of employment, hunger -- I will add education -- and healthcare remain the main issue. It is these basic needs that interconnect the world. A young American president, a young Qadhafi and young demonstrators around the globe have a lot in common. Is it age or greed that gets in the way? Possibly one breeds the other, and it starts as just a little greed.

So how can you play it?

Suncor Energy (NYSE:SU) was up a dollar yesterday and the technicals indicate it is overbought.

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Suncor has had an excellent run and is probably due for a correction. Suncor merged with Petro-Canada in 2009. One of Suncor’s growth areas is a sharing agreement on the Libyan oil fields. The agreement was previously a Petro-Canada asset. Suncor expects to double its production in Libya. Suncor is currently trading at about 19X earnings and 10x cash flow.

The comparative buy is Nexen Inc (NXY). Nexen operates Yemen’s largest oil project. The technicals for NXY are not overbought or oversold. NXY is currently trading at 11X earnings and 6X cash flow.

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Both NXY and SU have good long term futures. Both operate global companies with both having operations in the Alberta oil sands, offshore oil projects, SU off Newfoundland and Labrador, NXY in the North Sea, off West Africa and in the Gulf of Mexico.

Both are mainly oil plays but do have natural gas operations. SU also operates refineries in Canada and the U.S. as well as 95 wind turbines at various Canadian locations.

If you're looking for some other overseas investing ideas, check out recent article on 13 emerging dividend stocks here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.