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Envestor First is a publication and investor network operating since 2008 sharing ideas from investors, managers, executives & analysts with real-time ideas, research, interviews, charts focused on commodity supercycles to the private, institutional and public investment community.
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  • Technology Has Its Downfalls $APA $CHK $DVN $EOG $EPD $RDS.A 0 comments
    Nov 7, 2012 7:21 PM | about stocks: APA, CHK, DVN, EOG, EPD, RDS.A

    Before you make that investment you might want to take a look at how your next target spends its money on technology and working to increase capacity. When talking about the newest technology it can be untested and not workout the way they were planning. Just because it is new doesn't mean its better.

    Dreams of return on equity can turn into nightmares when excessive capital expenditures or new technologies expand production capacity and compete away potential profits. Unfortunately, myriad new technologies and expanding capacity are cause for energy investors to lose sleep.

    Malinvestment and Overcapacity

    Remember the cries of "peak oil" from energy bulls? Speculation in the 2008 commodity bubble provided substantial funding for new drilling projects and investment in new energy technologies. This funding catalyzed the rise of natural gas fracturing, the long-term of threat of renewables, and unexpected new challengers.

    Seaborne liquefied natural gas plants are emerging as a new threat to energy sector profitability. The largest LNG producers in the world, led by Royal Dutch Shell (NYSE:RDS.A), have figured out how to move their processing plants to floating barges so they can tap into remote underwater fields. Shell has plans to build a floating LNG plant in South Korea by year end 2012. This will be the world's biggest floating LNG plant, and will weigh six times more than the largest aircraft carrier. About 5,000 workers are expected to build this vessel, and it is expected to cost about $13 billion.

    (click to enlarge)


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

    Stocks: APA, CHK, DVN, EOG, EPD, RDS.A
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