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  • Africa: New Land Of Opportunity? Ashley Kelty Points To The Positives

    Oil and gas plays in Africa are no day at the beach, but they are more promising than the press would suggest, says Ashley Kelty, oil and gas equities analyst at Cenkos Securities Plc. Africa has locals with oil patch skills, abundant, accessible reservoirs and less volatile fiscal regimes than investors might think. In a wide-ranging interview with The Energy Report, Kelty riffs on shale in the U.S., basement reservoirs throughout the world and the news out of Africa. The investment opportunities are many.

    The Energy Report: You have described market sentiment toward the exploration and production [E&P] sector as "bearish." What would turn that sentiment around?

    Ashley Kelty: It would be better to say that, more specifically, sentiment toward oil and gas in the London market is bearish at the moment. However, I would say the opposite for the U.S. market. If you look at the indexes for U.S. independents comprising the Standard & Poor's North American Exploration and Production [E&P] Index, versus the U.K.'s Financial Times and London Stock Exchange [FTSE] Alternative Investment Market [AIM], you would see that they're diverging at a rapid rate. In Q1/14, the U.S. independent sector went up around 28%, whereas in the U.K. it fell 18%. For some investors in the London market, sentiment remains very negative and very bearish against the sector. This is not the case in the U.S., which I think is largely buoyed by success of both majors and independents in onshore unconventional [shale] plays.

    To reverse negative sentiment in the U.K., it will come down to macroeconomic factors, particularly the ongoing quantitative easing across Europe and the U.S. Simply, savers are being penalized. People are looking for yield, which has driven them out of equities. It certainly has hampered the resources sector.

    In the U.K., I believe what the market is looking for is consolidation through mergers and acquisitions [M&A], with a consequent recycling of capital into new and earlier-stage companies. Unfortunately, a lot of pretty poor offerings have come to market in recent years, which haven't performed particularly well. There haven't been enough success stories in the last few years to convince people that the fundamental resource plays are worthwhile. That's certainly the case for mining and oil and gas.

    TER: What are your forecasts for oil prices?

    AK: For my models I'm using $105/barrel [$105/bbl] flat for Brent and $100/bbl flat for West Texas Intermediate. I think, to be honest, that we're going to bounce. Certainly in Brent, I think price will move around the $100-110/bbl range for the next few years.

    A lot people are talking about whether a U.S. move into export mode will have an impact on global oil prices. I don't believe it will. My feeling is that the key factor will be the levels in production within OPEC. As it stands now, the likes of Nigeria and Venezuela are not in a position to increase production. But Saudi Arabia still has the swing capacity to manage levels of production. It believes the world is comfortable with $100/bbl oil. If the U.S. were to become a major exporter, it would be more likely to impact disruptive production from the likes of Libya and other countries in North Africa. Saudi Arabia would rather choke back production to maintain those levels than have the price decrease, or see oil prices rising materially. It would prefer for oil to stay within a manageable range rather than see large levels of volatility.

    TER: Africa appears to be the new frontier for oil and gas development. What do you see going on there?

    AK: It has changed over recent years. Five years ago, nobody wanted to look at East Africa. It was seen as just a gassy province, with no way of monetizing it. Then a couple of years ago, everyone got very excited about East Africa and the potential for large-scale liquefied natural gas [LNG] production. But in many respects, the industry has been caught out with the sheer scale of gas reserves found there. We are seeing huge discoveries in Mozambique and Tanzania, and people are comfortable that there is enough to justify large-scale LNG developments. The issue now is the level of scalability. Key issues will be funding these developments and the logistics of building them in remote areas, with little existing infrastructure. These successes have led to most of the acreage being held by the majors, with smaller scraps remaining for the independents.

    Over the last couple of years, the industry has focused its attention back on West Africa. It is looking at different plays, such as the Atlantic Transform Margin along the most westerly part of Africa, around Mauritania all the way up to Morocco, looking for the next Jubilee field, as well as investigating Brazil analogs, such as the pre-salt play in Angola, and exploring the southern edges of the Transform Margin all the way down to Namibia.

    The key is that Africa is still largely unexplored. Aside from a few areas, the level of well density is still very low, relative to the likes of the Gulf of Mexico or North Sea, so there's enough for both the majors and independents to go after-and to attract investment.

    Some African countries are opening up toward foreign investment and becoming more politically stable, and people are looking to invest in that. But African E&P activity is also skewed somewhat, even in established areas, by the moves of U.S. majors and independents, who have been retrenching back toward the U.S. to focus on domestic onshore production. Opportunities have opened up in Nigeria, Ghana, Angola, Egypt and other countries as U.S. companies have focused efforts on the likes of the Permian Basin and Bakken Shale, as they see huge returns there without the political risk.

    TER: Why has it taken so long for African oil and gas to develop? Why is growth only now occurring?

    AK: Growth actually has been occurring for years and years. When you look at the African continent, the wealth of opportunities, even in specific countries, is huge-and there are both on- and offshore opportunities. In southern Kenya, I saw a company that had a number of blocks that would be equivalent to half the Norwegian North Sea in terms of actual acreage. The scale is far more vast than any other established basin. In that sense there's been so much more to go for. Explorers have been going for the lower-hanging fruit in some of the established basins, but much in Africa is relatively unexplored.

    TER: What countries or regions of Africa are the hottest prospects today?

    AK: At the moment industry focus has shifted away from East Africa. Most of the perceived quality acreage in East Africa offshore has been acquired by the majors. They're busy drilling that up. The issue there is monetization of the resource, and the scale of the multitrain LNG developments that will be required. Both investors and management are concerned about funding these. They're wondering about the billions that will be required, and whether long-term LNG prices in Asia will be strong enough to justify these developments, particularly as you have Australian LNG projects coming on stream. The Fukushima earthquake and the disruption to Japanese nuclear power have helped LNG prices, as I think they will for a long time. The question is whether large companies are willing to press the button in East Africa without some guarantee those prices will hold up.

    The focus is going back to West Africa. Companies are now looking at the pre-salt in Angola and at Ghana, which prospectively looks very good. You could say that about a number of countries. The ongoing unrest in northern Africa-Egypt, Libya, Algeria-has made people somewhat jittery about going for more conventional plays there.

    TER: Where do you expect to see growth in Africa five years or more from now?

    AK: Growth will come from the development of LNG. Once LNG facilities are built, I think a number of companies would look to monetize their discoveries and resources, which at the moment are arguably stranded. The majors would encourage that development, as it would lower the marginal cost for them.

    I think there will also be a movement toward greater onshore exploration and development in Africa, which has been seen as difficult largely due to political stability issues. Now, both E&P companies and investors are more comfortable with looking at onshore exploration as domestic infrastructure and end markets are improving. Plus the fact that vast, underexplored basins could offer better returns, particularly as offshore acreage and the low-lying fruit is disappearing.

    TER: The news out of Africa is full of war and insurrection, terrorism, corruption and repressive government. But the continent is also home to some of the fastest growing economies in the world. What's the investment climate there really like?

    AK: It's still hard, to be honest. You really have to know where you are operating. But given the supernormal returns oil and gas can offer-particularly given that export of oil/gas can be to a global market-the market is not particularly sensitive to whether you get your gas from Ghana or Egypt or Mauritania. It's more about quality, and whether you can deliver the product. Because you're selling into a global market, and also because petroleum revenue is one of the main sources of foreign income for these countries, oil and gas investment is seen as comparatively stable. Countries don't want to discourage investment from these huge companies.

    Companies are also finding that there are locals who actually have the needed skill sets. Given the wider industry problem of a lack of experienced personnel, I think companies are seeing Africa as a great opportunity to train up locals for the future. It also satisfies local content laws, and the investment in that is worthwhile.

    Issues of corruption and unrest have certainly hampered onshore development in Africa. I think companies have felt the onshore security risks are too high, whereas offshore it is less of an issue, since local insurgents don't have boats that can take them 30-40 miles out to sea. Plus, governments are very protective of offshore developments. I think insurgents recognize that even if they do initiate a coup, they will need investment from oil and gas companies to generate the revenue that they require. In that sense, I think oil and gas is one of the more attractive sectors to be in, because locals identify it as a primary revenue driver.

    It's because of the overall investment and security of supply that African countries, particularly countries such as Mozambique, Tanzania and Kenya, support the oil and gas industries. I think they've recognized that the service sector is a need they can fill pretty quickly. The service sector does not need as much expertise as the upstream element, and there's a far greater opportunity for local content. Recognition of these industries as being primary revenue sources for African nations has made the investment climate easier.

    There's also been far less volatility in the fiscal regimes in Africa. In fact, there have been more changes in the fiscal regime in the North Sea in the last 10 years than in most African countries. People still commonly believe that Africa is always chopping and changing. Those nations have now recognized that it doesn't help to keep changing things for the sake of an extra few percent, which in the short term looks good, but in the long term does not.

    The investment climate in Africa is particularly attractive for E&P. I think services companies are now seeing an opportunity to grow their businesses on the continent, and are looking at Africa as a place to which they can export their technologies, so they will have the early-mover advantage. If you look at the U.S. onshore, you've got the likes of Schlumberger Ltd. (NYSE:SLB), Halliburton Co. (NYSE:HAL) and so on, all with large positions. But across Africa, Schlumberger will not have the same position. In some countries in Africa, that would allow Halliburton to gain a greater position. I think companies see greater opportunities to build positions in a relatively low-competition market.

    TER: The Chinese seem to have been doing their best to lock up Africa's oil and gas resources and make it their own oil patch. How are the companies you cover meeting that competitive challenge?

    AK: Perhaps three years ago, the Chinese were very aggressive. The Chinese economy was growing fast, and some of the U.S. majors and independents were retrenching back home. Their exit strategy was largely to sell to the Chinese. The Chinese were acquiring development and production; they weren't generally acquiring exploration acreage. They were also targeting countries that were generally seen by the western powers as being very difficult-politically corrupt, dangerous, unstable-which the Chinese seem to be far more comfortable dealing with as opposed to the western nations. They've managed to build a big position in Africa.

    In terms of opportunity, smaller companies and independents-the likes of Ophir Energy Plc (OTC:OPHRY) [OPHR:LSE] and Tullow Oil Plc (TLWO) [TLW:LSE]-are still exploring, which is something the Chinese haven't been actively doing. After the initial land grab, the level of activity has not been sustained.

    In addition, in the last couple of years the level of Chinese M&A has dramatically fallen off. For example, a U.K.-listed company in Chad, Caracal Energy Inc. (OTCPK:CCAXF) [CRCL:LSE], is being bought by Glencore International Plc (OTCPK:GLCNF) [GLEN:LSE], a large commodity business-not by the Chinese, who were seen by the market as the most likely takeout partner, given the fact that the Chinese had the acreage adjacent to Caracal's.

    I also get the feeling, having been on the ground, that the way the Chinese operate does not always sit easily with some African governments. The Chinese do not, on an anecdotal basis, appear to be very keen on local content, and are far less willing to negotiate and work with local governments than some of the Western powers. But that's anecdotal and hearsay.

    TER: Can you give us more detail on the companies you cover that are operating in Africa-their prospects for M&A, their prospects for further growth? What are their recent successes?

    AK: Ophir Energy focuses largely offshore. It's had some great success in East Africa, partnering with the likes of BG Group Plc (OTCQX:BRGYY) and Statoil ASA (NYSE:STO). However, it was taking large working interests and looking to farm down. It stated it was planning on farming out some of its acreage, which has not happened to the extent anticipated. That has upset the market somewhat.

    However, today Ophir's interest seems to be more on proving up its positions in both Tanzania and Equatorial Guinea. It's focused on offshore. The company has made bids for other companies that didn't come off. It looked to a deal with Premier Oil Plc (OTC:PMOIF) [PMO:LSE], but the Premier board rejected that. It was particularly disappointing given that Premier is an established developer and producer, but has a poor record with the drill bit, and generally has only managed to grow its business through acquisition, rather than through organic exploration success.

    Tullow has long been a darling of the stock market. It's a very good company, and has expanded into many jurisdictions in Africa that other companies wouldn't touch-and has been very successful doing so. It had a fantastic run of exploration success a number of years ago-15 or 20 successful wells in a row. However, in the last couple of years the company has had a comparatively poor success rate. It's had a few dry holes.

    The problem for Tullow is that the market expected continued success. If you look at Tullow on a five-year basis, it has above-average, or above-sector-average, success rates. It also had tax issues in Uganda, which caused a few problems. However, fundamentally, Tullow has among the best understandings of Africa in terms of personnel and culture. Tullow is certainly the go-to guy for operations in Africa.

    TER: Many jurisdictions in Africa come with high risks, and high risks can earn high rewards. But some companies you cover operate in politically safer jurisdictions. Is their profit potential less for taking the safer path?

    AK: No, not at all. Their profit potential is still fantastic. I think oil and gas can [and does] offer supernormal returns. The issue comes down to an investor base not willing to go for high-risk/high-reward. I think the only reason people are investing in Iraq is because the volumes are so huge as to make a difference. In terms of the actual revenue the company gets relative to the government tax take, it is minuscule.

    Operating in a stable environment, such as in the North Sea or onshore U.S., is very attractive. A large amount of the market will follow that. You're looking for profit, and these companies will grow, but the main driver is that you're not looking for discoveries to be transformational. Those companies make accretive discoveries or accretive transactions, but don't need to be transformational to get the market excited. There is certainly an appetite for more traditional, stable environments and production, rather than for huge, elephant-hunting exploration in Africa. Also, for companies operating outside Africa, such as in the U.K. and U.S., it's easier to attract capital. They have an advantage in that they are able to secure comparatively low-cost financing to develop their asset bases, which companies in Africa would not be able to do.

    TER: What companies do you cover that operate outside of Africa?

    AK: Ithaca is focused on development and production, and has grown massively in the last couple of years. It has a large development called Stella that should come on stream the middle of next year. Stella will more than double the company's production and will lift output from around 15 thousand barrels a day [15 Mbbl/d] to over 30 Mbbl/d. That will move Ithaca up to the next tier in terms of production companies in the U.K.

    Given that the company is not concentrating on exploration, the level of cash flow it will generate will be significant. The company is thinking about returning cash to shareholders once Stella is on stream. Now that it's moving into a phase where it may pay a dividend, as well as offer capital growth from its development activities, Ithaca has strongly piqued the attention of investors.

    Hurricane is particularly interesting in that it's targeting the basement reservoirs in the West of Shetland Basin. It has two discoveries, each of which is more than 200 million barrels [200 MMbbl] in size, which is particularly significant given that the average size of discoveries in the U.K. over the last four years has only been 25 MMbbl. Hurricane's discoveries are sufficiently big to attract the majors.

    The basement play has been largely ignored in the U.K. It is potentially a game changer for companies, particularly West of Shetland. BP's massive Clair Ridge development, sits at the other end of the Rona ridge from where Hurricane is active. BP is looking at the third phase of the Clair development and says the field could have 8 Bbbl of oil in place. Given that BP has produced oil from basement with earlier Clair well tests, the potential offered by productive basement reservoirs could add a significant amount to that. In fact, BP has invested in Hurricane. The U.K. government is very keen to see the basement reservoirs developed, and is making noises about offering tax losses for the basement play, which could certainly improve the economics.

    TER: How are basement reservoirs different from shale or other unconventional reservoirs?

    AK: The main difference is that a reservoir is essentially an impermeable rock, such as granite, so the oil is not actually held within the rock, but within the fractures. The key to developing basement reservoirs is being able to intersect the fractures within the reservoir.

    Hurricane's chief executive, Robert Trice, is arguably a world expert on fractured reservoirs. Hurricane has identified and built a very extensive model that understands these fracture networks. It recently drilled an appraisal well on its Lancaster discovery West of Shetland to assess the commerciality of its discovery. The initial well produced about 2.5 Mbbl/d from a well that had intersected one to two fracture zones. This time, the company drilled a well with a 1-kilometer horizontal section that intersected nine fracture zones, to see whether this would flow at commercial rates, deemed to be 4 Mbbl/d-and it flowed under natural pressure over 5.3 Mbbl/d. When the company used artificial lift, the well flowed at a capacity-constrained 9.8 Mbbl/d, which was far in excess of the 4 Mbbl/d needed.

    TER: The well maintained that level over time?

    AK: Yes. Hurricane tested the well over a three-week period; the result was fantastic. A lot of people in the industry were interested. I think the opportunity for the company to attract a farm-in partner is going to be tremendous.

    Hurricane is very close to infrastructure too. It also has several potential options for early production-one is via tie-back to a nearby field called Solan, which is operated by Premier Oil. This could deliver production, by 2016, of about 4 Mbbl/d, which would help fund the wider Lancaster development. Other options include the use of a VPU [versatile production unit].

    The scale of Hurricane's resource is such that the majors should be interested because of the impact on their reserve replacements. Hurricane's two discoveries are 440-470 MMbbl, depending on whether one of them is purely oil or a mix of oil and condensate, but there's certainly plenty that the company could give up to attract the interest of the majors. At 25 MMbbl, majors aren't interested; at 100-200 MMbbl, they're very interested.

    This development doesn't actually require unconventional technology. It doesn't require fracking. It's not high pressure. The only thing different is that it's a different kind of reservoir. Basement reservoirs are very prolific in Vietnam and can be found in Egypt, Yemen and Venezuela. In fact, there are fields onshore U.S. that have been producing since the 1960s from basement, but it's certainly not a play that has been actively targeted.

    TER: Ashley, thank you for your time.

    This interview was conducted by Tom Armistead of The Energy Report and can be read in its entirety here.

    Oil and gas equities analyst Ashley Kelty has more than 14 years experience in the oil and gas sector. Kelty joined Cenkos Securities Plc from the Lloyds Banking Group [formerly Bank of Scotland] oil and gas team, where he was responsible for the management of a portfolio of debt clients. He both led and assisted in raising debt for numerous oil and gas companies, including Dana Petroleum, Faroe Petroleum, Serica Energy, Valiant Petroleum and PA Resources. He has also worked for Enterprise Oil and Andersen Consulting [now Accenture].

    Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) Tom Armistead conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services.
    3) Ashley Kelty: I own, or my family owns, 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. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

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    Tags: IACAF, OPHRY, Energy, Oil
    Jul 31 6:04 PM | Link | 1 Comment
  • Steve Palmer Buys The Summer Sleepers

    Steve Palmer, founder of AlphaNorth Asset Management, has a "buy cheap, sell dear" investment strategy that wins, as the outperforming return on one of his investment funds demonstrates. In this interview with The Energy Report, Palmer unveils a handful of resource stocks that are slumbering through the summer doldrums, gathering strength for the Fall Revival, when undervalued stocks soar.

    The Energy Report: AlphaNorth Partners Fund's Class F Shares was recently ranked No. 1 in the Globefund database, with 43.4% return over five years. How have you been able to beat Standard & Poor's [S&P], the Toronto Stock Exchange Venture Index [TSX.V] and the S&P/TSX Total Return Composite? What's your secret?

    Steve Palmer: We strive to be ahead of the curve on our calls. We do a lot of bottom-up stock picking-we look to identify promising situations before everyone else does. We typically invest in companies before there is analyst coverage or significant institutional ownership. We've had some decent wins with this strategy, I must say.

    TER: What do you look for in under-the-radar firms?

    SP: We are growth-oriented. We look at firms with a lot of upside potential and minimal downside. We like to invest in private placements, where we typically get the additional leverage of a warrant.

    TER: How deeply do you investigate a company before you buy its shares?

    SP: We usually meet with management before we buy shares. We do a technical analysis overlay on the stock to determine if it is a good entry point.

    TER: You recently remarked that energy stocks were the best performing sector in 2014. Is that mainly due to oil and gas performance?

    SP: The energy sector in Canada is dominated by oil and gas. When I made that reference, I was referring to the BMO Small Cap Index. The energy sector in that index has performed quite well year to date.

    TER: What's driving that performance?

    SP: Resources have been generally weak during the last three years. The energy sector is the first sector to rebound from the downturn. We are starting to see strength in the precious and base metals sectors, but energy was first to regain momentum. The price of oil has been quite strong, at over $100/barrel. In North America, natural gas inventories dropped to very low levels last winter. That caused a rebound in the price of natural gas, which has certainly helped the related energy stocks.

    TER: Is that rebound also due to growth in the manufacturing base in North America?

    SP: The primary driver was the inventory decline due to a very cold winter. But manufacturing is picking up with the general improvement in the economy, and that is an excellent development for energy stocks.

    TER: Are the ongoing global conflicts affecting fossil fuel prices in North America?

    SP: Conflicts around the world are impacting the oil price a little bit, motivating a premium. But this is not the case with natural gas.

    TER: Why not?

    SP: Our natural gas resources are largely sold directly into the North American market. Elsewhere in the world, natural gas can be significantly more expensive. In China and Japan, for instance, natural gas consumers are paying approximately $12/thousand cubic feet [$12/Mcf], which is three times the amount that North American consumers are paying.

    TER: How will exporting natural gas from Canada and the U.S. affect global prices?

    SP: Over the longer term, we will see a convergence in the price if liquified natural gas [LNG] becomes pervasive. It will be arbitraged out, just like oil. You can transport oil anywhere; the price is generally the same throughout the world. It will be the same with gas.

    TER: You have been consistently bullish on graphite. Why?

    SP: The markets for graphite are growing tremendously. One of the major areas of growth in graphite demand is for use in batteries, and the electric car is experiencing an upsurge of growth.

    TER: Why will the junior markets heat up in the fall?

    SP: Simply put: Summer is normally a slow period for the stock markets. A lot of people are away, so many companies hold back news until people are back at their desks in September. Volumes are light.

    TER: What's your outlook for base and precious metals?

    SP: The short story is that the junior metals market in Canada has been in a significant downtrend since the spring of 2011. Since then, the TSX.V has lost almost two-thirds of its value. The performance rebound started first with technology and life sciences companies, followed by the energy sector. Base and precious metals are the last two sectors to rebound from the historic downturn, and they are set to explode going forward, in our opinion.

    TER: During the long downturn in gold, have you held on to junior gold stocks, or are you in and out of the market with the juniors?

    SP: We sold a lot of our junior precious metal holdings awhile back. For several years, we have not played much in the gold space. It got very overheated, with the consensus view that gold was going to multi-thousands of dollars an ounce. We disagreed and focused on other areas. This was the right call and turned out well for us.

    TER: The AlphaNorth funds have performed extraordinarily well. Are there certain sectors that you concentrated on?

    SP: Our success is due to a combination of factors. We try to sell at the right time to maximize our gains. During the downturn, we minimized damage in sectors like precious metals and the resource commodity space. We were among the first to invest in sectors that have performed great, like the life sciences and technology. We have had good success in bottom-up stock-picking. We have been fortunate to have picked some well-positioned, cheap stocks and sell them at the right time.

    TER: For H2/14, do you have any advice for investors in terms of portfolio investments?

    SP: This summer lull that we are currently experiencing is a great time to invest, because the stock markets will likely reenergize in the fall. There is going to be a rotation into resource juniors that have not performed. Positive returns follow well-measured risk.

    TER: Good talking to you, Steve.

    SP: Thanks for your interest.

    This interview was conducted by Peter Byrne of The Energy Report and can be read in its entirety here.

    Steve Palmer is a founding partner, president and chief investment officer of AlphaNorth Asset Management, and currently manages the AlphaNorth Partners Fund, AlphaNorth Growth Fund and AlphaNorth Flow-Through LPs. Prior to founding AlphaNorth in 2007, Palmer was employed as vice president at one of the world's largest financial institutions, where he managed equity assets of approximately CA$350M. Palmer managed a pooled fund, which focused on Canadian small-capitalization companies, from its inception to August 2007, achieving returns that were ranked No. 1 in performance by a major fund-ranking service in its small-cap, pooled-fund category. He also managed a large-cap fund, which ranked in the first quartile of performance among other Canadian equity-pooled funds. Palmer earned a bachelor's degree in economics from the University of Western Ontario and is a Chartered Financial Analyst.

    Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) Peter Byrne conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor.

    2) Streetwise Reports does not accept stock in exchange for its services.
    3) Steve Palmer: 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. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Energy Report is Copyright © 2014 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
    Petaluma, CA 94952

    Tel.: (707) 981-8204
    Fax: (707) 981-8998
    Email: jluther@streetwisereports.com

    Jul 24 5:41 PM | Link | Comment!
  • Catalyst Check: Updating The Progress Of Energy Stocks On The Natural Resources Watchlist

    At the beginning of June, The Gold Report assembled an all-star expert team to create a Natural Resources Watchlist, a promising portfolio of mining and energy companies with upcoming catalysts such as a maiden NI 43-101, funding from a strategic partner, a permitting milestone or a feasibility study. Keith Schaefer, editor and publisher of the Oil & Gas Investments Bulletin, and Rick Rule, CEO of Sprott US Holdings Inc., proposed five energy companies with many resources at play. A lot has happened since that discussion in Vancouver. The total portfolio is up 14% as of today. Let's check in to see how the individual energy stocks are faring.

    TER: As of today, NXT Energy Solutions Inc. (NSFDF) and its reservoir discovery technology is up since June. Did one of the big contracts you were expecting come in?

    KS: The stock has been up 50%, but that may be because the company has found a buyer, rather than because of a contract deal. This is one I am still watching.

    TER: Your producer pick was Chinook Energy Inc. (OTC:CNKEF) [CKE:TSX.V]. As you predicted, Chinook announced that it sold its Tunisian assets for $127.7M to Medco Tunisia Petroleum Ltd. [a subsidiary of MedcoEnergi Internasional] [ID:MEDC]. The deal effectively makes Chinook a domestic Canadian oil and natural gas company. What is your outlook now for this company?

    KS: When the market didn't respond as positively as we expected, we realized the deal had already been priced in, and we sold. We have been selling oil and gas like mad in the last week and getting into service and cash. We are waiting for capitulation-for a spike down on big volume-to buy back in.

    When the energy market changes, it changes fast. The market turned on a dime when the Weekly Natural Gas Storage Report came out on July 10. Some people are thinking we have enough storage. Combined with the realization that Iraqi insurgents are not going to impact the oil fields, both oil and gas prices are down. I think prices could go even lower.

    TER: Rick, you named Devon Energy Corp. (NYSE:DVN) as your sensible pick. It has turned out to be a profitable pick, up nearly $5. The company recently announced a $2.3 billion sale of U.S. non-core assets as part of a portfolio shift. Was that the catalyst you were watching, and is there more to come?

    Rick Rule: Devon will be able to redeploy those assets, and that will look good for a while. But I was more interested in the company as a play based on the continued strength in natural gas prices.

    TER: Does the news of decreased net injections worry you?

    RR: While micro-cap stocks can gain or lose 10% by inhaling or exhaling, a company like Devon, which has high liquidity and can continue to move forward, is not as impacted. I would put trailing stops in place, however.

    TER: The other catalyst you said you anticipated was the return of normal insanity around mining stocks-at least halfway. Any signs that turnaround is on the way?

    RR: Companies are getting financed and the market is improving, but there is no insanity in the market-yet.

    TER: Sprott Global Resource Investments Ltd. is hosting a Natural Resource Symposium in Vancouver July 22-25, where you will be a featured speaker. Are attendees at events like this impacted by daily swings in the markets, or are they looking for longer-term insights? Do daily events affect what you will say from the stage later this month?

    RR: Unlike most investor conferences, the attendees pay to attend, so our loyalty is to the 500 people in the audience. The 45 exhibitors were all qualified by the major speakers, and are there to share information. But wisdom is not exclusively delivered from on high. I know a lot of the people who will be attending, and these are seasoned investors. There is a lot to be learned from fellow attendees. These are people who are in it for the long term.

    TER: Thank you both for your time.

    This interview was conducted by JT Long of The Energy Report and can be read in its entirety here.

    Rick Rule, CEO of Sprott US Holdings Inc., began his career in the securities business in 1974. He is a leading American retail broker specializing in mining, energy, water utilities, forest products and agriculture. His company has built a national reputation on taking advantage of global opportunities in the oil and gas, mining, alternative energy, agriculture, forestry and water industries. Rule writes a free, thrice-weekly e-letter, Sprott's Thoughts.

    Keith Schaefer is editor and publisher of the Oil & Gas Investments Bulletin, which finds, researches and profiles growing oil and gas companies that Schaefer buys himself, so Bulletin subscribers know he has his own money on the line. He identifies oil and gas companies that have high or potentially high growth rates and that are covered by several research analysts. He has a degree in journalism and has worked for several Canadian dailies but has spent over 15 years assisting public resource companies in raising exploration and expansion capital.

    Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

    DISCLOSURE:
    1) JT Long conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an employee. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
    2) The following companies mentioned in the interview are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services.
    3) Keith Schaefer: I own, or my family owns, shares of the following companies mentioned in this interview: NXT Energy Solutions and Chinook Energy Inc. 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.
    4) Rick Rule: I own, or my family owns, 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. Sprott Funds owns shares of Devon Energy Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions.
    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. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

    Streetwise - The Energy Report is Copyright © 2014 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.

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    Jul 17 6:22 PM | Link | Comment!
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