The Energy Report's  Instablog

Source: Tom Armistead of The Energy Report (6/18/13)

http://www.theenergyreport.com/pub/na/15378

Shifting commodity prices are a given in the oil and gas industry, but sometimes the industry landscape changes in unexpected ways. In this interview with The Energy Report, Oppenheimer & Co. Managing Director and Senior Energy Analyst Fadel Gheit discusses the effect of Middle Eastern geopolitical issues on oil production, dissects the changing oil and gas production situation in the U.S. and explains how the shift in natural gas prices has turned the refinery business from the industry's perennial ugly duckling into a beautiful swan.

The Energy Report: During your last interview in March, you said that oil prices were inflated by about 30% based on replacement costs of about $70/barrel ($70/bbl). Do you still believe that or are prices more realistic today?

Fadel Gheit: Nothing really changed over the course of the year. Oil prices are still inflated. I still stand by my estimate that oil should be trading between $70 and $80/bbl, not $90 or $100/bbl.

TER: What are your top picks among the large-cap exploration and production (E&P) companies in the oil and gas space?

FG: There are three or four categories of companies. The large, integrated oil companies are Chevron Corp. (CVX:NYSE), Exxon Mobil Corp. (XOM:NYSE), Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE), Total S.A. (TOT:NYSE) and the like. This is a shrinking universe because most of these companies are breaking up. ConocoPhillips (COP:NYSE) used to be a major integrated company and it split into two separate companies. But of all the major integrated companies, Chevron has been the best-performing stock. It's highly leveraged to oil prices. It has a strong balance sheet and has really outperformed its peers and the S&P 500 in the last 10 years, so Chevron would be our top pick among the large-cap companies.

The large independent E&P companies are Anadarko Petroleum Corp. (APC:NYSE), Apache Corp. (APA:NYSE), ConocoPhillips and Occidental Petroleum Corp. (OXY:NYSE), and of all these companies, we like Occidental a lot because of its restructuring potential.

We like to pick stocks for investors, not make bets on oil and gas prices, because I've been in this business 30 years and I believe no one can accurately forecast oil and gas prices. We're trying to pick stocks that have a catalyst, or for which we expect a catalyst, that will increase valuations. Occidental is a good example. It had massive changes on the board; the chairman was not reelected and the lead member did not stand for reelection. Now the CEO is trying to break up the company and create much higher value for shareholders.

TER: You have suggested that Apache exit Egypt because of growing instability. What should the company do instead with the funds?

FG: Egypt is a problem that Apache or any other company cannot solve. The International Monetary Fund is trying to help Egypt, and Egypt's problems are daunting. The political, economic and civil situation in Egypt is likely to deteriorate even further. The main problem in Egypt probably is economic. It is a poor country with high unemployment, and it has lost the biggest revenue generator-the tourism industry.

Apache has the highest earnings exposure to Egypt; a big percentage of its profit is generated from the country. Although its operations have not been interrupted and Apache is getting paid its share of profit regularly with no delays, the market has concluded that Egypt is a big risk for Apache and therefore it is better for Apache to leave Egypt.

Apache would be better off selling its Egyptian assets to another company that has the appetite for this political risk and using the proceeds to buy back its stock. That will do two things: remove the risk, which means the shares will receive higher multiples of earnings and cash flow, and shrink the number of shares outstanding, thus improving earnings and cash flow per share and ultimately boosting the valuation. It's a win-win situation for Apache and for its shareholders.

TER: What other large caps and majors are in areas they should exit?

FG: No one wants to be in Libya because of the security situation. I have a dim view of the Middle East in general. The situation in Syria could drag the world into war, and that's the last thing we need. The troubles have spilled over into Lebanon and Iraq. Now Turkey, Russia and Iran are getting involved. This is really a very messy situation, which is going to get worse. Investing in North America is preferable because it's safer.

That's good for U.S. oil production. The U.S. is importing less and is producing more, keeping capital at home. Unfortunately, because of what is happening in the Middle East and uncertainty about supply and the expectation that we have, disruption could send oil prices back to $150/bbl, which we had five years ago.

TER: Your latest research on Hess Corp. (HES:NYSE), which is also a global producer and refiner, expresses concern that a threatened proxy fight is contrary to investors' best interests, but your rating for the company is Outperform. Why are you feeling ambiguous about Hess?

FG: Hess has lagged its peers in the market for many years because of bad decisions. That prompted activist hedge fund Elliott Group to take a large stake in Hess and to present investors with an alternative strategy to create shareholder value. It estimated that the stock should be worth no less than $97/share and as high as $123/share. The stock at the time was trading at $50/share, so the huge upside potential attracted a lot of attention and resulted in a proxy fight.

"For American industries and the American consumer, lower natural gas prices will open up a second industrial renaissance."

The Elliott Group won the proxy fight 60% to 40%, and it had nominated five board members; Hess had nominated five new board members. The Elliott Group won, but settled for three board seats. Since then-that was a few weeks ago-a news blackout remains and the stock is going sideways because of the uncertainty. Under pressure from Elliott, Hess accelerated the restructuring plan. It is planning to sell $7.5 billion ($7.5B) of assets, mostly exiting the downstream operation, which is refining, marketing and transportation, and become a pure oil-and-gas producer with a big position in the Bakken in North Dakota. Of the proceeds from restructuring, $4B would be used to buy back stock, which is 15% or more of the shares outstanding, $2B to pay down debt and $1.5B to beef up liquidity on the balance sheet.

So far, the restructuring plan is more than 50% complete, and it is expected to be completed by the end of this year. The cash received exceeded the original estimate. We do not know whether the Elliott Group will be satisfied with that. I contacted Hess and urged the company to come up with a unified statement from the board, including those members representing Elliott, outlining the new strategy of the company. Until then, I think investors will take a wait-and-see attitude.

TER: Has this outcome affected your Outperform rating for the company?

FG: No. We had an Outperform on Hess for more than two years. At the end of the day, stocks are cheap for a reason. If this reason is removed, or at least dealt with, stocks usually seek their equilibrium and relative valuation. In the case of Hess, the company needed a catalyst and the catalyst came from Elliott. Shareholders are thankful for that, but it is only phase one of what I consider a multiphase strategy. The stock is up almost 30% since Elliott got involved, but that's a far cry from the bottom of the range of $97-123/share. I still believe that Hess has a lot of upside. We have a price target of $85/share, which is conservative, given the low valuation of the stock.

TER: Why do you think it is time for an American CEO at Royal Dutch Shell?

FG: Shell has tried the British side of the family and the Dutch side of the family. The retiring CEO is Swiss. Shell has $28B of investment in North America, and the most profitable growth for Shell and for the industry is deepwater Gulf of Mexico, so I think it's time for an American CEO to run Shell.

TER: Natural gas has now gone over $4 per thousand cubic feet ($4/Mcf). That's a price that you and many others have cited as a threshold for increased capital spending by producers. What is the Goldilocks price bracket for natural gas?

FG: Is the glass half empty or half full? We still have $90+/bbl oil or $100/bbl, if you look at the benchmark, and we have $4/Mcf gas. Natural gas prices in North America are still severely depressed. Unfortunately, they will remain depressed relative to crude oil and to gas elsewhere around the world. The reason, which is good news, is that the U.S. discovered a lot more gas than thought possible. Technology continues to uncover more and more of this gas.

Now the question is what do we do with this gas? I am not in favor of exporting LNG, although it might be necessary and it will probably bring some benefit to the market. But for American industries and the American consumer, lower natural gas prices will open up a second industrial renaissance. Any heavy industry that is a large consumer of energy would use natural gas-petrochemical facilities, manufacturing facilities, etc. It will give the consumer a break because it impacts the price of electricity and heat.

A lot of good things could happen, but the key here is whether the U.S. can harness natural gas as transportation fuel. This would reduce reliance on imported oil. It's much cleaner and cheaper than oil. Also, moving into transportation through the gas-to-liquid technology would create a lot of jobs in this country-millions of jobs and very high-paying jobs. It would give U.S. industries a tremendous competitive advantage because they would be using a cheaper source of energy than Europe, Japan or elsewhere.

"If we have a very big international crisis, oil prices are the barometer of how hot the situation is."

For domestic producers, $4/Mcf gas is better than gas at $3/Mcf. The industry continues to cut costs and improve operating efficiency to make money assuming that $4/Mcf or even $5/Mcf gas would be an average price that investors would be happy with. I don't think we are going to see any time soon the prices of natural gas in the double digits that we had five or six years ago. I also do not believe that gas prices can go back to where they were in April of last year, which was about $2/Mcf. Somewhere between $4-6/Mcf natural gas would be a good equilibrium. It will encourage spending by the industry and would generate a good return, but it's not going to be inflationary.

The U.S. needs a national energy policy. It needs direction. Instead of chasing renewable energy, ethanol, solar energy and whatever else-I'm not saying that they are bad or should not be addressed, but a U.S. energy policy needs to be more practical, to get people back to work and to reduce the budget deficit. If the U.S. can create incentives to open the door for investment in natural gas, natural gas pipelines and natural gas-driven industries, I think it would be very positive.

TER: How are the companies you cover responding to this price signal? What changes will it bring in exploration and production?

FG: They are doing a lot better than they were last year. Last year gas prices averaged close to $3/Mcf; now gas prices are above $4/Mcf, a significant percentage increase. The companies that lived through $2/Mcf gas are obviously a lot better off today. More important, it became a necessity for the companies to cut costs. The industry is a lot more efficient today than it was a year ago and a lot more than it was five years ago as technology continues to improve.

The industry currently favors oil or liquids. We are not going to see an appreciable change in investment that will be linked to crude oil prices because the valuation gap is so wide-the $4/Mcf gas is the equivalent of $24/bbl oil. When oil prices are $90-100/bbl, no one would allocate more capital to pure natural gas plays if the same capital could be deployed to drill for oil or natural gas liquids, which are discounted to crude oil but significantly more valuable than natural gas. I don't see any significant shift in capital allocation by the industry.

Most of the companies that are successful today drilling for natural gas are drilling for what we call wet gas or gas that has very high liquid content. That makes the net realized gas price close to $6/Mcf, rather than $4/Mcf because the liquid content lifts the value of the basket of products. That is attractive because these companies can replace gas in the ground for all-in costs of less than $2/Mcf. If total costs are less than $2/Mcf and the gas sells for $6/Mcf, margins are pretty good so there is a high return on the investment.

TER: You have identified natural gas prices at the current level as a factor holding back Devon Energy Corp. (DVN:NYSE). What could this company accomplish with higher gas prices?

FG: The best use for natural gas is to put it in higher value-added products, for instance, to make it into fertilizers, to turn it into better chemicals, to turn it into a competing transportation fuel. We should leave LNG exports to developing countries. Industrialized countries, generally speaking, should not be exporting LNG. The U.S. should be selling manufactured products and value-added products, and that's how we could create jobs at home.

I don't think that the best thing for a company like Chevron is to put up a liquefied natural gas (LNG) facility at the cost of $10-20B and ship U.S. gas to Japan or Europe. I'd rather see the same gas converted in the U.S. into plastics and chemicals because it creates a lot more value and high paying jobs. That creates better economic returns than selling LNG.

TER: What is most exciting in your coverage universe?

FG: That has really changed. Right now, believe it or not, it is the refining and marketing side of the business, which has been in the doghouse for almost my entire career in this business. Changes around the world have created a unique cost advantage for the refiners in the U.S. because they have access to discounted crude relative to the global benchmark, Brent crude.

Most of the crude that comes from North America, whether oil sands in Canada or oil shale in the U.S., is landlocked. That makes it very attractive for the refiners in the midcontinent to take advantage of the abundance of a variety of crude oils and convert them into refined products. Refined product prices are based on Brent crude, so the manufacturing cost of the products is much lower in the U.S. than in any other part of the world. This, coupled with declining domestic petroleum demand, turned the U.S. from a net importer of gasoline to a net exporter of gasoline.

Two years ago, the U.S. was importing 1 million barrels/day (1 MMbbl/d) of gasoline on average. Now it is exporting 0.5 MMbbl/d of gasoline because of a combination of factors: People are driving more fuel-efficient cars and using mass transit, and economic recovery has been slow. Plus, the U.S. is substituting more and more gasoline with ethanol. That gives refiners in the U.S. an export window, which didn't exist before.

Refineries are using cheaper crude oil, which is a big cost advantage. Also, the refining industry is a very big user of natural gas. Lower crude and natural gas costs are a huge competitive advantage for the refiners in the U.S. In addition, turning from a net gasoline importer to an exporter has opened a window for these refiners to export their products to alleviate the oversupply in the U.S. market. They don't have to depress the price or the margin to sell the product.

Finally, the refining industry for the last 20 years or so has been spending an enormous amount of capital to meet environmental regulations. This is tapering off now, although it will always be there. Maintenance and environmental regulation spending will continue, albeit at much lesser rate than in the last 20 years. Refineries were spending 80% of their money to meet the regulation and to make sure that the facilities are maintained. The percentage now is less than 50%. They have 50% of their investment dollars in discretionary spending, so they allocate the cash to the project with the best return.

In addition, because of the free cash flow generation, these companies are spending less and are making more, so they have extra cash. They know that this won't last too long and therefore they are returning most of this cash back to the shareholders. That's why the stocks of the refining companies have significantly outperformed the market in the last two years. We're talking four to five times the average return in the market. Refining stocks gained 80% on average last year and about 30% so far this year, even with the recent correction. The refining industry has been a very bright spot in the energy sector in the last two years and that's a reversal from being the weakest link in the energy sector over the last 20 years.

TER: What are the benchmark oil price trends that investors should be watching?

FG: For the global market, it's Brent crude. Unfortunately, like all crude, global events affect Brent by concern over supply from the Middle East. This is not going to change. The world and most investors are worried that the increased ferocity in Syria and Iraq and the whole region could get wider and involve countries like Saudi Arabia, Iran and Egypt.

If we have a very big international crisis, oil prices are the barometer of how hot the situation is. Oil prices are likely to go higher regardless of economic activity or what happens to demand.

TER: Thank you for sharing your thoughts.

Fadel Gheit, an energy analyst since 1986, is a managing director and senior analyst covering the oil and gas sector for Oppenheimer & Co. He has been named to The Wall Street Journal All-Star Annual Analyst Survey four times and was the top-ranked energy analyst on the Bloomberg Annual Analyst Survey for four years. He is frequently quoted on energy issues and has testified before Congress about oil price speculation.

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DISCLOSURE:
1) Tom Armistead 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: Royal Dutch Shell Plc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Fadel Gheit: I or my family own shares of the following companies mentioned in this interview: Chevron Corp. 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.
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Source: George S. Mack of The Energy Report (6/13/13)

http://www.theenergyreport.com/pub/na/15368

The synergy of temperament and intellect has fostered much success for the father-son team of Michael Berry, editor ofMorning Notes, and Chris Berry, founder of House Mountain Partners LLC. In this Father's Day interview with The Energy Report, the Berrys reveal what they've learned from each other's investment strategies over the years, and mull energy metals and emerging green technologies that could be "compelling investment opportunities." They also reveal that, for all the familial camaraderie, there are energy issues about which they strongly disagree.

The Energy Report: Mike and Chris, it's always a pleasure to talk with you. Thank you for joining us for this Father's Day edition of The Energy Report. I want to start with that theme. Chris, what's the single most useful thing your father has taught you about investing?

Chris Berry: That's a difficult question to answer because so many things come to mind. I've been privileged to have learned about investing by following my father's career as a professor at a top-tier business school and then as a portfolio manager for a mid-market cap value fund. I have been able to see both the "theoretical" and "practical" sides of investment analysis. The opportunity to hone my analytical skills through these two differing viewpoints has been invaluable.

I think the most valuable lesson I have learned thus far is in the approach to evaluating markets and publicly traded companies. There is no substitute for intellectual rigor and intellectual honesty. The ability to recognize and eliminate biases is crucial. Emotion is definitely your enemy in this business. It's also vital to have a solid vetting process and to stick to it regardless of the volatility in the macro environment.

TER: Mike, today Chris is a standout analyst doing terrific diligence on his coverage, and I know that makes you proud. What has Chris taught you about investing?

Michael Berry: Chris is always on top of the issues. He has helped me develop and refine the 10-point grid we use in our Discovery Investing discipline. Chris gets down to the fine points and assesses each problem in very granular detail. In this respect we complement each other quite well. What I have also learned from Chris is that he has a very sharp memory and can keep several companies-say in the graphite or rare earth space-in close analysis. He is really good at differentiating the "wheat from the chaff," and this just seemed to come naturally to him.

Chris also is very good at assessing detail, listening carefully and dissecting companies when he is in the field. I am always surprised by the next step he takes in his analytical career. It's been a lot of fun working together. It is evident that Chris loves what he does and is good with people. I am learning from him!

TER: Chris, you just spoke at the Cambridge House Resource Investment Conference in Vancouver. Your focus seemed to be deflation. You presented a barrage of 10-year bond charts that showed consistent declining yields over the last two decades. What was your point? What will be the effect of this deflationary environment?

CB: A large part of the research I do is focused on the macro economy and where we are cyclically in the market. In the wake of the financial crisis and the central banks' response to it, there has been a great deal of ink spilled surrounding the debate over the aftereffects of policies such as quantitative easing-specifically the implications for inflation or deflation in the economy.

"In investment research, there is no substitute for intellectual rigor and intellectual honesty."-Chris Berry

While I think the U.S. economy is headed for inflation at some point in the future, based on expansion of the Federal Reserve's balance sheet, I do not see enough evidence to lead me to believe that an inflationary episode is imminent. In fact, when I look at a broad array of data, I think deflation is the more pressing issue. Government bond yields are at historically low levels, inflation is "in check" (I know this can be manipulated), unemployment is at a structurally and historically high level, and various metrics like gross domestic product, industrial production and capacity utilization are all operating at levels below the historical trend. In my Cambridge House presentation, I said that the global economy is "treading water." There is growth out there, but it is mostly sluggish-and in the case of the Eurozone, contracting.

This paints an ominous picture for many commodities in the near term. Slowing demand in countries like China, which has been the engine of the commodity supercycle, has put the prices of any number of commodities under pressure since mid-2011, when the commodity complex began its downward trend. With substantial slack in aggregate demand, it's deflation that is the worry, and not inflation.

TER: Chris, you seem to lament the lack of investment in green energy. Is it your contention that we will not turn to alternative sources until there is a price crisis (oil at $250-300/barrel) or a climate crisis?

CB: I wouldn't say I "lament the lack of investment," as billions of dollars are being spent in research institutes, university laboratories and in the private sector globally on advancing green or sustainable technologies. I think it is unfortunate that people view a few poor investments in the space as a proxy for the success or failure rate of the entire burgeoning industry. It is undeniable the companies like A123 Systems LLC (manufacturer of lithium-ion batteries), Fisker Automotive Inc. (manufacturer of premium hybrid electric vehicles), and Solyndra LLC (maker of solar products) have proven to be taxpayer-funded disappointments.

However, are we really going to assume that all greentech research efforts are failures based on the results from these three? That is a very naïve and narrow-minded approach.

"The new energy metals boom will be fostered and catalyzed by research and development and supply chain development."-Mike Berry

With population increasing globally, becoming more interconnected, and set to live a more commodity-intensive lifestyle, sustainability and efficiency in our progress as a society will be of paramount importance. I just do not believe that you can have as much intellectual capital and financial capital all working toward next-generation technologies and not have breakthroughs that provide compelling investment opportunities and also leave our children a lasting legacy.

An example of a recent success is Tesla Motors Inc. (TSLA:NASDAQ). This company was actually initially funded by private money. The company has just paid back a U.S. Department of Energy loan-nine years early, at a $20 million ($20M) profit to tax payers. This is not a failure. This is a success. It remains to be seen how Tesla performs going forward, but I view the company as a proxy for the commercial viability of next-generation technologies. I recently test-drove a Model S and I am more convinced than ever that vehicle electrification has a place in society, however small it may currently be.

TER: Mike and Chris, you have both addressed this question outside this forum: What is concealing the investment potential of energy metals? What are the factors obscuring demand for these vital elements-scandium, cobalt, tungsten and lithium? What are the drivers?

CB: I have already mentioned two-deflationary headwinds and the credibility problem with green technology. Obviously the challenging financing environment for junior mining companies is another huge issue. A final issue is the perceived "death" of the commodity supercycle. The good news is that I view each of these issues as temporary, which should give investors the opportunity to look for undervalued companies that can demonstrate financial sustainability and execute their business plans.

The real driver is that the commodity supercycle is not dead. I do think that it is changing, however-becoming somewhat less infrastructure-focused and more consumer-focused. But by no means has the emerging world stopped yearning for a higher quality of life. Furthering that idea, we here in the developed world haven't given up trying to improve our lives either. As the consumer in the West deleverages his or her personal balance sheet, and countries like China shift development models from one that is export-led to one that is driven by internal demand, there will be renewed focus on many of the energy metals we are following.

MB: These metals, in my view, are very research intensive. They are also, in general, quite small markets, which tends to obscure them. Many companies just don't want to get involved in small markets. The graphite market, for example, is totally different from the copper market on many dimensions. Yet when graphite became the discovery play of the day, dozens of companies "became" graphite companies. The market in graphite simply cannot sustain the attention.

Many of these energy metals must belong to a "supply chain." It is not enough anymore to say you have a resource with a certain grade, you must show how the metal impacts the energy system. It is a fact that China controls the supply chains for many of these metals. There is more to energy metals than exploration and development. . .much more.

TER: Chris, what companies fit into this growth story?

CB: I'm focusing on just a few energy metals right now: uranium, scandium and cobalt. I like scandium, as it is one of those metals for which China doesn't dominate production. Global production, such that it exists, is miniscule and there are a number of future uses-specifically solid oxide fuel cells-that could absolutely take off if a reliable and secure supply of scandium could be found. I have been watching EMC Metals Corp. (EMC:TSX) and Metallica Minerals Ltd. (MLM:ASX) in particular, as they are among the most advanced scandium exploration plays. The lack of scandium availability is a great example of industry being held back by a lack of secure supply. Let's also not forget the potential military applications.

TER: Mike, you have been making a bullish case for energy based on the phenomenon of urbanization. Can you talk about that?

MB: Yes. I just finished presenting at a biotech symposium in Hong Kong. Even there, the participants speak of the healthcare tsunami we are now in. Urbanization is proceeding everywhere. According to Bloomberg, China must spend $8.1 trillion on urbanization in the next three decades. About 60% of her massive population will urbanize and live in cities not yet built, and they will consume.

A vast new middle class is emerging. Just take a trip to Hong Kong and you will see it. These new city dwellers must have better nutrition and cheaper energy. The food chain is tied to energy, so energy metals and the advancement of cheaper energy modalities will be key.

"I see uranium as the one contrarian opportunity among energy metals."-Chris Berry

With 440 new cities to be built in "Emergica" (a term we coined to represent the cities identified in a McKinsey Global Institute report), the commodity supercycle has barely even begun. But the new energy metals boom, in particular, will be fostered and catalyzed by research and development (R&D) and supply chain development; quite a different world from what we have seen in previous industrializations in history.

But get ready, because the new consumer in Emergica is evolving and will demand a higher quality of life. They will be meat eaters. Energy metals, water, arable land and fertilizers will all be part of that onslaught. This why we believe so fervently in Discovery Investing as a critical platform.

TER: Mike, you have been talking to investors about the impact of urbanization on commodity prices. I take it you believe natural gas and oil are about to turn upward? Kindly explain your thesis and, if possible, tell me when we could expect the upturn?

MB: I am not sure about prices turning upward. But a transformative technology has revolutionized the supply-demand equation for oil and gas, particularly in favor of U.S. domestic production. Canada is likely to be hurt most by this "fracking" revolution.

Domestic natural gas and oil production is the one really bright spot in the U.S. economy today. The Eagle Ford shale in Texas will produce 3 to 5 million barrels of oil per day within a very few years. Domestic supplies will turn upward, no doubt. I may disagree with Chris here, but I think that transformative technology like fracking is the death knell for domestic nuclear power. Gas for combined-cycle gas turbine power plants is cheaper, cleaner and much less risky for the environment. Much will come from this oil and gas domestic revolution.

TER: Mike, Chris tweeted out a June 1 column in Project Syndicate written by New York University economist Nouriel Roubini entitled "After the Gold Rush." Roubini listed and commented on several factors favoring a bearish scenario for gold. To be fair, he did say that all investors should have a "very modest" exposure to gold as a hedge against extreme tail risks. But the gold rush is over, he said. What is your impression of Roubini's thesis? Chris, do you and your father agree?

CB: With more evidence pointing toward deflation as opposed to inflation, I can see gold trading sideways until these dynamics change. That said, if you're a believer in inflation getting out of control, perhaps sooner than many think, this is an ideal time to acquire both gold and silver bullion, as well as select junior mining equities involved in precious metal exploration.

MB: Roubini is wrong. Gold has stood the test of millennia. Since we discarded it in 1971, our economy has loaded up with debt and is now sick. I am not suggesting a gold standard or even a currency backed by gold, simply that gold will always hold its value in deflations (which I believe we are in now) and inflations (which is where we are likely going). I want gold in my portfolio under these circumstances.

TER: I'd like to ask about uranium. Its fate rests solidly on the nuclear power industry, which seems to be out of favor. I'll ask you both, what is your case for uranium? What companies are interesting?

CB: I see uranium as the one contrarian opportunity among energy metals. The spot price of uranium has been hammered, excess supply has been dumped on the market and nuclear power is experiencing a crisis of confidence in the mainstream media in the wake of Fukushima.

That said, there are a number of reasons to be optimistic about nuclear power going forward and, by extension, demand for uranium. We are all aware of the fundamental reasons for this thesis, including the looming end of the Megatons to Megawatts Program, reactors in Japan coming back online over the next few years and the build-out of nuclear reactors in the emerging world.

"It is unfortunate that people view a few poor investments in the green energy space as a proxy for the success or failure rate of the entire burgeoning industry."-Chris Berry

In addition, we can't forget that the nuclear power infrastructure in place today would be extraordinarily expensive to dismantle, and that process could last for years. I have seen estimates of anywhere from $500M to $1 billion to shut down and decommission a nuclear reactor. Who pays for this? Additionally, what will fill in for the base load power that a given nuclear reactor was generating? Wind and solar, with their intermittency challenges? What about the cost to build out a new infrastructure and integrate it into the existing electricity grid? Will governments pay for this? Utilities? Tax payers? The path of least resistance is to relicense existing reactors as a more cost-effective strategy for all involved.

Additionally, though this is debatable, the energy return on investment (EROI) is much more advantageous with nuclear than with most other forms of power generation. EROI essentially tells us what we "get" in energy returned for what we "put in" in investment. If economics come into question, nuclear power is, and will likely remain, a very compelling option despite some of the challenges that the industry faces.

Given this backdrop, we have seen a number of deals completed. Most recently, Energy Fuels Inc. (EFR:TSX) signed a letter of intent to acquire Strathmore Minerals Corp. (STM:TSX; STHJF:OTCQX). I have followed Strathmore Minerals Corp. for some time and always thought that the location of its deposits, plus the relationships it has with Sumitomo Corp. and Korea Electric Power Corp. (KEPCO) would make the company an ideal take-out candidate. Congratulations are in order for the Strathmore management team on its accomplishments.

"I do not believe you can have as much intellectual capital and financial capital working toward next-generation technologies and not have breakthroughs that provide compelling investment opportunities."-Chris Berry

Another company I am following and own shares in isUranerz Energy Corp. (URZ:TSX; URZ:NYSE.MKT). This company is a near-term uranium producer in Wyoming, and is particularly attractive due the fact that it is essentially derisked. Uranerz is exceptionally well managed and could be generating cash flow within a year. The company is fully permitted, has offtake agreements in place and should be receiving a $20M loan from the Wyoming Industrial Development Revenue Bond Program. The tolling agreement in place withCameco Corp. (CCO:TSX; CCJ:NYSE) is another positive attribute for Uranerz. Given that the Russians (JSC Atomredmetzoloto or ARMZ) have taken Uranium One Inc. private, Cameco may look to consolidate the Powder River Basin in Wyoming and integrate Uranerz into its operations there.

Finally, European Uranium Resources Ltd. (EUU:TSX.V; TGP:FSE; EUUNF:OTCQX), another company I own shares in, continues to develop the Kuriskova deposit in Slovakia. This is a high-grade resource and its European location is ideal given the number of reactors in Europe and the fact that there is only one operating uranium mine in Europe. AREVA is a shareholder of the company, which is something we want to see-majors with "skin in the game."

MB: No! I am against uranium-powered reactors. Uranium produces plutonium, which is toxic for thousands of years. It cannot be stored reliably. The Canadians had the correct idea with their CANDU reactor, in which the water is enriched and not the uranium. Uranium-powered reactor technology is old and dangerous. We must move to thorium technology in the next few decades if we plan to stay with nuclear energy as a prime source of power. There are more Fukushimas coming!

TER: Thank you, Mike and Chris.

CB: My pleasure.

MB: Thank you.

From 1982-1990, Michael Berry served as a professor of investments at the Colgate Darden Graduate School of Business Administration at the University of Virginia, during which time he published his book, "Managing Investments: A Case Approach." He has managed small- and mid-cap value portfolios for Heartland Advisors and Kemper Scudder. His publication, Morning Notes, analyzes emerging geopolitical, technological and economic trends. He travels the world with his son, Chris, looking for discovery opportunities for his readers.

Chris Berry, with a lifelong interest in geopolitics and the financial issues that emerge from these relationships, founded House Mountain Partners in 2010. The firm focuses on the evolving geopolitical relationship between emerging and developed economies, the commodity space and junior mining and resource stocks positioned to benefit from this phenomenon. Chris holds a master's degree in business administration (finance) with an international focus from Fordham University, and a bachelor's degree in international studies from the Virginia Military Institute.

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DISCLOSURE:
1) George S. Mack of The Energy Report conducted this interview 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: Strathmore Minerals Corp., Uranerz Energy Corp., European Uranium Resources Ltd., Energy Fuels Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Michael Berry: 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) Chris Berry: I or my family own shares of the following companies mentioned in this interview: Uranerz Energy Corp., European Uranium Resources Ltd. 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.
5) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
6) 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.
7) 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.

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Source: JT Long of The Energy Report (6/11/13)

http://www.theenergyreport.com/pub/na/15358

Looking for profits in the oil and natural gas space? Look no further than shale plays, energy service companies and offshore oil drilling opportunities in the U.S., says Byron King of Agora Financial LLC. In this interview with The Energy Report, King discusses how dwindling exports to the U.S. from Latin America, Africa and the Middle East are shifting the supply and demand equation across the world. King also names companies in the service space with solid prospects for investors.

The Energy Report: Byron, welcome. You recently attended the Platts Conference in London, which addressed shifting energy trade patterns in light of growing U.S. export prospects and dwindling exports from South America and Africa. Has OPEC's role diminished?

Byron King: The short answer is yes. OPEC is struggling right now. The Middle East, the West African producers and Venezuela are struggling. The West African players and Venezuela have seen exports to the U.S. decline dramatically. In countries like Algeria, oil exports to the U.S. are essentially zero, while Nigeria's exports to the U.S. are way down. The oil these countries export tends to be the lighter, sweeter crude, which happens to be the product that is increasing in production in the U.S. through fracking.

The east-to-west trade pattern for oil imports to the U.S. has essentially gone away. This does not mean that the oil goes away. It means these countries have to find new markets for their oil-which they are doing, in India and the Far East. But that disrupts trade patterns as well. Imports from the Middle East to the U.S. are falling as well. These barrels tend to be the heavier, sourer crude that U.S. refineries are geared to process.

As the U.S. imports less oil, our balance of trade gets better. The recent strengthening of the dollar has a lot to do with importing less oil. Strengthening the dollar decreases gold and silver prices, so there is some monetary blowback from the good news out of the oil patch. Strengthening the dollar increases the broad stock market for the non-resource, non-commodity and non-energy plays. There's an astonishing dynamic at work.

TER: When it comes to countries like Venezuela, part of the reason for the decrease in exports is because it has not invested its profits in infrastructure.

BK: Good point. In Venezuela, the government has taken so much money out of the oil industry to use for social spending, military spending and government overhead that the sustaining capital is not there. Even with Hugo Chavez's death and new leadership in Venezuela, it will require years of sustained and increased investment to get Venezuela's output up. After 10 years of dramatically bad underinvestment, the infrastructure is worn out. It will take a lot of time, money and some seriously hard political decisions to redeploy capital inside a country like Venezuela.

TER: If OPEC can no longer control the price of oil through supply because it does not have as much control of supply, what is keeping it from flooding the market with oil to get more revenue?

BK: That would work both ways. If OPEC floods the market with more oil, it will drive the price of oil down. Then OPEC nations would get fewer dollars for each barrel. All of that extra output, if sold at a lower price, might still yield less money, which is not a good thing if you are an oil exporter and need the funds.

"The east-to-west trade pattern for oil imports to the U.S. has essentially gone away."

The big swing producer is still Saudi Arabia. Saudi has spare capacity, but I suspect not as much as it wants people to believe. It gets back to that idea of peak oil. We've discussed it before, and yes, I know-fracking is changing the game to some extent. But you still need to keep all the books about peak oil on your shelf. Fracking is what happens on the back side of the peak oil curve, when you need barrels, are willing to pay high prices and throw lots of capital and labor at the problem.

A country like Saudi Arabia could increase its output, but not for long and not in a heavily sustainable way. It would damage its oil fields. Beyond that, the trick for OPEC is going to be getting several countries to agree to cut output to make up for the extra output from North America, in the hope of keeping prices where they are right now.

Brent crude-which is what the posting is for much of the OPEC contracts-is about $103/barrel ($103/bbl). If OPEC wants to keep that number-or not let it fall too much further-it has to cut output, not increase output. That is a very difficult and politically charged issue within OPEC. The Middle Eastern countries can afford a minor amount of financial turmoil right now. The other OPEC countries absolutely cannot afford financial problems stemming from low oil prices.

TER: Is there informal price control going on in the shale oil fields? As the price of natural gas has dropped, the oil rig count has dropped-and once the price goes up, those oil rigs could start up again. Could there be an OPEC of North America?

BK: I do not see an organized North American OPEC because there are too many companies in the mix. Too many people have a bite at the apple for anybody to control things. It is more like a tangle of accidental circumstances driving production levels. We are seeing a slight drop in the oil rig count in the U.S. right now. Part of that has to do with the natural gas cutback, but part also has to do with the efficiency of the fracking model. Fracking can be energy inefficient, but also can be industrially efficient.

Five years ago and earlier, the idea of drilling wells was to look for oil fields. You were drilling into specific regions enriched with hydrocarbons that could flow into a well under reservoir energy or with just modest amounts of pumping or pressurization.

Today, with fracking, you are not really looking at oil fields. You are drilling into an entire formation. You are drilling into a large-scale resource and introducing energy into a formation to break up the rock and get the oil or natural gas out. To do that successfully is much more a manufacturing model than the traditional oil drilling model. This is why you see drilling pads that have room for 10 or 12 wells. You drill the wells directionally outward.

In western Pennsylvania I have seen some of the drilling maps for companies like Range Resources Corp. (RRC:NYSE). These companies have very efficient ways of corkscrewing pipe into the sweet spots of the formations with multistage fracks. They are draining the formations very efficiently. You see fewer rigs because each rig is being used in a manufacturing-type of process, as opposed to the olden days when drilling was similar to craftwork.

Modern drilling and fracking, at least in North America, is much more of an assembly line process. Companies are using the same drill pits over and over again. They are using the same drilling mud and the same fracking water. Much of the same equipment gets used multiple times on several different wells. In the olden days, each well was its own special unique construction. Of course, every oil or gas well is different, and the results depend on how you drill it.

TER: Which companies are doing this the best and are they actually making money?

BK: Five years ago, people would talk about how this well made money or how that well does not make money anymore. That's harder to do today. The economics of the current fracking world are still up in the air.

The jury is out on many of these fracking plays. Companies are drilling a lot of wells and they are expensive. They are fracking the wells and that is very expensive. At a recent conference, a gentleman fromHalliburton Co. (HAL:NYSE) said up to 50% of the different fracking stages on wells do not work. They either fail at the beginning or soon after they go into production due to many reasons-geotechnical failure; equipment failure; blockages in the holes, in the pipe, in the perforations; things like that. Once a company has put the steel in the ground, done its fracking and inserted its equipment, it is very difficult to get down there and fix what is broken.

"North American shale oil plays have had an extensive ripple effect through the U.S. economy."

Right now natural gas prices are so low that if a company is drilling for dry gas, it is almost a given that it is not making any money. If the company is drilling for wet gas and is producing, the gas helps pay for the investment. When you get into some of the oil plays in the Bakken formation in North Dakota, or the Eagle Ford down in Texas, you are starting to get a midcontinent price-or even better-for the gas plus associated oil or liquids. When I say midcontinent, I mean West Texas Intermediate; the WTI price as opposed to the Brent price.

Regarding the pricing structure within North America, the oil sands coming out of Alberta are selling at the low end of the market scale. If West Texas Intermediate is about $90/bbl, the Canadian sand oil might be $60/bbl. That is a one-third differential. Is that because the quality is so different? Not necessarily. The oil sand product quality is slightly lower than the WTI, but it is not a one-third difference in terms of molecules or energy content or refinability. The difference is in stranded infrastructure. The cheaper oil is geographically stranded up in the frozen north of Canada, and you have to get it out through pipelines and railcars. You cannot get it over the Rocky Mountains to the Pacific Coast. There are only a few places for that oil to go, so it comes south. In its first stop across the U.S. border, in North Dakota, it competes with the Bakken plays.

The great mover of midcontinent oil today is the North American rail system-the tanker cars. Back in the days of John D. Rockefeller, he could control oil markets with access to rails, rail shipping and tankers cars. Now you have to look at the cost of moving oil from midcontinent to another destination. If you are in North Dakota, you can move oil west to Washington or California, where there are refineries. Or you could move it to Chicago or farther east, to the refineries there. Or you could move it south, where you compete with imported oil at the Houston refineries. It is a very complex arrangement. And you must deal with the usual suspects-BNSF Railway Company and Union Pacific-the two biggies of hauling oil.

"The jury is out on many of these fracking plays."

We're seeing some truly astonishing developments here. Look at Delta Air Lines Inc. (DAL:NYSE), which spent $300 million buying the old Trainer refinery in Philadelphia. Actually, less than that when you take in the subsidy from the state of Pennsylvania. So now, Delta is importing oil from the Bakken to Trainer on railroad cars. Delta feeds its East Coast operations with jet fuel coming out of the Trainer refinery, including planes flying out of John F. Kennedy International Airport, which gives it a price advantage in the North Atlantic market. The price differential of just a few pennies a gallon on jet fuel is the difference between making or losing money on the North Atlantic routes.

Then, Delta can go to other airports where it operates, and beat up on the fuel supplier by threatening to bring in its own fuel. So Delta is extracting price concessions from vendors. It's sort of an old-fashioned "gas war," like when service stations used to see who could sell fuel the cheapest.

Midcontinent oil, midcontinent economics and transport by rail have completely altered the economics of other industries, including the rail and airline industries. North American shale oil plays have had an extensive ripple effect through the U.S. economy.

TER: Could building more pipelines to export facilities in the U.S. shrink those differentials?

BK: More pipelines will shrink the differential, but pipelines take time. In the environmentalist political world we live in today, it takes years to do all the permitting, and pretty much nobody wants to have a pipeline running through the backyard. Existing pipelines are golden because they are already there. Maybe they can be expanded, the pumps improved; we can tweak them or put additives in the fluid to make the product move faster. There are all sorts of possibilities with existing pipelines.

For the pipelines that are not built yet, you have the whole NIMBY (Not In My Backyard) issue. The railroad lobby and the lobbies of companies that build railroad cars also do not want to see new pipelines because these companies are more than happy to ship oil on railcars, even though in terms of energy efficiency safety and spillage, rail is less efficient overall.

TER: Based on this reality, how are you investing in shale space-or are you?

BK: Right now, I am investing in the shale space at the very fundamentals. It is a pick-and-shovel approach to investing. I focus on what I call the big three of the services companies-Halliburton, Schlumberger Ltd. (SLB:NYSE) and Baker Hughes Inc. (BHI:NYSE)-because these companies have people are out there in the fields with the trucks and equipment, doing the work and getting paid for it. Another company that I really like is Tenaris (TS:NYSE), one of the best makers of steel drill pipe. You could buy U.S. Steel Corp. (X:NYSE), for example, which is doing very well in tubular goods, but it is a big, integrated steel company with iron mines and coal mines. It owns railroads, and sells steel to the auto industry, the appliance industry and the construction industry. Tubular and oilfield goods are just a part of U.S. Steel. With a company like Tenaris, it is more of a pure play on the oilfield development.

TER: Are you are a fan of oil services companies at this point in time?

BK: Yes. In terms of a company that is actually out there doing the work, I have great admiration for Range Resources. Its share price seems bid up pretty high. In terms of the large caps, I am looking at global integrated players: BP Plc (BP:NYSE; BP:LSE), Royal Dutch Shell Plc (RDS.A:NYSE; RDS.B:NYSE),Statoil ASA (STO:NYSE; STL:OSE) and Total S.A. (TOT:NYSE), the French company. They are big, global and pay nice dividends. Even BP, for all of its troubles, is still paying a respectable dividend.

TER: Those are companies that also have exposure to the offshore oil area. Is that a growth area?

BK: Offshore is booming. Some companies are very good at what they do, and when you look at the pick-and-shovel plays, that would be companies like Halliburton, Schlumberger and Baker Hughes, among others. Transocean Ltd. (RIG:NYSE; RIGN:SIX), the big offshore drilling company, is making a nice comeback, as is Cameron International Corp. (CAM:NYSE), which is in wellhead machinery, blowout preventers and things like that. FMC Technologies (FTI:NYSE) is a fabulous subsea equipment builder, and Oceaneering International (OII:NYSE), which makes remote operating vehicles (ROVs), has done great the last couple of years and is still growing.

"Fracking is changing the game to some extent. But you still need to keep all of the books about peak oil on your shelf."

A couple of points about offshore. In the U.S. offshore space, in March and April 2010, right after the BP blowout, the U.S. government basically shut it down. The offshore space was utter road kill. By the second half of 2010, it was dead. It went from being a $20 billion ($20B)/year industry to about a $3B/year industry. Here we are, three years later, and the offshore industry in the U.S. is recovering. There is still growth.

If you look at the rest of the world's coastlines, you see an increasing amount of concessions, leasing and acreage-whether it is in the Russian Arctic or the North Sea or off the coast of Africa. There are booming areas offshore of West Africa and East African plays, with companies like Anadarko Petroleum Corp. (APC:NYSE) and its huge natural gas discovery off of Mozambique. In the Far East, off of Australia, there is a whole liquefied natural gas (LNG) boom. Much of the Australia hydrocarbon story is in offshore LNG. These are huge plays involving great big companies, a lot of money, steel in the ground and lots of equipment that either floats on the water or sits on the seafloor. It is all good for the offshore space.

TER: Are there any particular projects that a BP or Shell is doing right now that you are excited about?

BK: Shell has a big play onshore in the U.S., part of the whole shale gale. Shell is a big global integrated explorer, but is backing away from the offshore East African plays because they are a little too expensive for the company's taste. Shell has made investments in West Africa, off of Gabon, and also in South Africa, in the Orange Basin. I think Shell envisions itself as a future key player in South Africa, which is good because South Africa is a big, industrially developed country with a large population and big markets. South Africa has ongoing social problems, but it needs energy. So if Shell is successful in offshore South Africa, there's a built-in market. Shell doesn't have to tanker oil in or pipe it in or somehow move it halfway across the world.

TER: In light of what happened with BP, are these offshore oil plays riskier, since one accident can shut everything down. Or are large companies like Shell diversified enough that it doesn't matter?

BK: I will never say that accidents do not matter. As we learned from the Gulf of Mexico, an offshore accident can be a company killer. BP literally went through a near-death experience. In the minds of some people, BP is still not out of the woods. The company has made settlement after settlement and it is still not done paying. It has divested itself of many attractive assets over the past couple of years to raise enough cash to pay settlements, fees and fines.

The good news about the aftermath of the accident is that, globally, there is a heightened sense of safety awareness in the oil industry. Companies have watched the BP issues very closely and learned every lesson they possibly can. All of the solid operators are hypersensitive and hypercautious toward offshore operations.

It all comes back to benefit some of the service players I mentioned earlier. The fact that many offshore drilling platforms had to upgrade blowout preventers to a much higher specification benefited the likes of Cameron and FMC Technologies. In the new environment, your subsea equipment must be built to a higher specification. So say thank you to FMC Technologies-which will gladly build it to that higher spec and charge you a higher price.

The numbers of inspections that companies must do when they work at the surface of the ocean are enormous. If a company has to inspect every 48 hours, it needs more ROVs. Who makes ROVs? That would be Oceaneering. There are other opportunities in other spaces, such as dealing with existing offshore platforms, existing offshore pipelines and existing offshore rig populations. One company that has done very well in our portfolio in the last couple of years is Helix Energy Solutions Group Inc. (HLX:NYSE). It deals with offshore repairs and servicing issues, and offers decommissioning services.

Individuals who go into these kinds of investments want to become educated about them. We are in these investments with a long-term, multiyear horizon because that is the investment cycle. From prospect to producing platform, these kinds of investments can take 10-15 years to play out. It's like an oil company annuity for the well-run oil service guys.

The good news is that there is long-term reward, because large volumes of oil come from offshore. When looking at the shale gale, on the best day of the year in the Eagle Ford or the Bakken onshore, a really good well can produce 1,000 barrels per day (1 Mbbl/d). Six months from now that well could produce 400 (400 bbl/d), and a year from now it might produce 200 bbl/d. The decline rates are really steep. On some of the offshore wells, we are talking 15-20 Mbbl/d, which can be sustained for several years. The economics of a good well and a good play offshore are for the long term.

TER: It sounds like your advice is for people to do their homework and be in it for the long term.

BK: Yes. My newsletter, Outstanding Investments, talks about oil and oil investments all the time; subscribers receive my views over the long term. As an investor, you want to educate yourself about different companies in the space, what equipment is used in the space and what the processes are. You do not have to be a geologist or an engineer to invest, but you need to be willing to learn. There is an entire offshore vocabulary that you need to understand to appreciate the investment opportunities. You also need to be able to keep your sanity during times of tumult, when the rest of the market might be losing its grip. And you need to understand why you went into a certain investment in the first place and when it is time to get out.

TER: That is great advice. Thank you so much for taking the time to talk with me today.

BK: You are very welcome.

Byron King writes for Agora Financial's Daily Resource Hunter and also edits two newsletters: Energy & Scarcity Investor and Outstanding Investments. He studied geology and graduated with honors from Harvard University, and holds advanced degrees from the University of Pittsburgh School of Law and the U.S. Naval War College. He has advised the U.S. Department of Defense on national energy policy.

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DISCLOSURE:
1) JT Long conducted this interview for The Energy Report. She or her 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: Royal Dutch Shell Plc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Byron King: 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.

101 Second St., Suite 110
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Email: jluther@streetwisereports.com