Oil-Rich Canada Inspires Investor Confidence

One of eight Canadian stocks, buy-recommended Canadian Oil Sands Trust (COSWF), has a McDep Ratio below the median of 34 stocks in Meter Reader coverage. The remaining seven have higher than median ratios that attest to the greater confidence oil and gas investors have in Canada than in the U.S., Europe or Russia.

The abundant resource potential of oil sands supports that confidence as we heard repeated at the Canadian Association of Petroleum Producers conference in Calgary on June 19. Also helping is the continuing upward trend in oil price as it reaches $72 a barrel, not for the next month, but for the next six years (see chart below).

As for one of the fundamental factors behind oil’s price rise, Mr. Jim Buckee, retiring Chief Executive of Talisman Energy (TLM), showed a hand-drawn graphic to a small group at the end of the day illustrating a recent accelerated decline in production of the world’s largest oil field,
Ghawar, despite a parabolic increase in oil field equipment and service spending by Saudi Arabia.

Though rising volume and rising price for oil denominate Canada’s opportunity, buy-recommended Encana (ECA) is also the second largest natural gas producer in North America.

Comments

[erniem:]

Another plus on the Canadian stocks is the dividends paid in loonies ( Canadian dollars) have appreciated along with the loonie from 10-15 % over the last six months.

2007 Jul 03 12:33 PM

[Mmarrkk:]

On the other hand, you have a government who has proven to not be trustworthy when it comes to tax law. They change their tax law kind of like our buddy Hugo down in the great Red state of VZ.

2007 Jul 03 02:53 PM

[Saildog:]

Tar sands (it's tar, not oil) use copius quantities of natural gas to "make" the oil in a process that has been described as turning gold (natural gas) into lead (syncrude). natural gas is in declien across North America and it is unlikely that it will continue to be burnt to make oil. That is why operators are talking about nukes to generate the heat needed to crack the tar into shorter chain compounds (oil).

The other unanswered question is environmental. Collosal contamination seems certain. Is there enough water? What about air pollution and the CO2 footprint?

I think the tar sands are a giant red herring built on the back of incorrectly priced natural gas. I wouldn't go near them.

2007 Jul 04 10:24 AM