The market in unconventional resource development has gone through a “euphoric” first half of 2008, according to UBS, but as share prices have corrected by 28% since then, the brokerage suggests now is a good time to invest in the market.

“[This makes] a very attractive entry point ... for investors looking for exposure to these long-life, low-risk assets,” UBS said in a report released Friday.

Waratah Coal Inc. [CVE:WCI] (WRTHF.PK) got absolutely hammered in trading Friday  on the announcement that its proposed Galillee Basin project in Australia has been quashed.

Shares in Waratah were down almost 70% to C60¢ at 11:15 a.m. on the Venture exchange.  At close, the stock was down 45.11% to C$1.01 on the Venture exchange and down 64.3% to 76 cents on the U.S. pink sheets.

Better than expected test results from Baytex Energy Trust's (BTE) [TSE:BTE.UN] Seal oil sands property in Northern Alberta have raised the interest of several industry analysts.

“Seal's long-term potential dwarfs Baytex today,” UBS analysts Grant Hofer said in a research note Thursday. “With low operating and F&D costs, this play generates exceptional recycle ratios that should drive significant value appreciation for Baytex.”

1. Geopolitical concerns (Iran, Russia, and Pakistan)
2. Speculation (in July, 11% of oil contracts were controlled by one trader)
3. The over-leveraged financial system.

These three items make forecasting oil prices virtually impossible. Fortunately, oil’s ugly cousin, natural gas, doesn’t suffer quite the same fate.

‘Tis the political season, and so we’re treated to scenes of one group happily chanting “Drill, baby, drill!” while another group pledges more support for solar and wind power, while clean coal industry lobbyists throw convention parties for delegates and an oil billionaire buys ads to promote wind and natural gas.

It’s generally great to see all of this attention on energy issues, which have been too long neglected.  But all the rhetoric about “Energy Independence” has been focused predominantly on finding new sources of supply, whether it be incumbent types (fossil fuels) or alternatives (solar, wind, etc.).

Part of Toyota’s (TM) annual “Sustainability Report” for 2008 contains an interesting look at how the company foresees the growth of vehicles and energy requirements globally.   It says,

“Approximately 800 to 900 million passenger vehicles exist worldwide, increasing by around 100 million vehicles every five years for the past two decades. Toyota projects that “this increase is expected to continue in the future, particularly in developing countries, meaning that ownership will likely exceed 1 billion vehicles in 2010 and reach 1.5 billion vehicles in 2020.”

It is ALL about oil.

Now the goons on CNBC are trying to tell you that declining oil prices signal some sort of problem in the global economy and that is true - for their parent company GE (GE), which makes Billions of dollars building energy infrastructure projects and lending money for infrastructure projects and has grown revenues 15% as oil doubled the past two years while profits are up 33% since 2005.  It seems selling $2Bn worth of windmills for TBoone to tilt at is a VERY profitable business!

We have seen a few warnings lately about the price drop of solar panel in 2009. The latest one is from Sunpower Corp. (SPWR). CEO Thomas Werner warned of a price drop of 10-20% in 2009. Citigroup analyst Arcuri also warned of a price drop averaging 15% in 2009. So how is this going to impact the profit margins of these solar companies?

If you do simple math, the result is scary. For example Sunpower Corp's profit margin may slip into single digits. SPWR reported second quarter net income of $28.6 million, or 34 cents a share. The company had revenue of $382.8 million with 22% profit margin. Assume we have a 15% price drop on solar panels, this drop cuts directly into profit margins, and we can easily see a single digit 7% profit margin in 2009. The same thing may happen to Solarfun Power (SOLF) as the company also predicted a 5-10% price drop on solar panels. However, the costs in 2009 may drop as well, but investors should not expect too much of a cost reduction because the wafer price in 2009 should be slight higher based on LDK solar's (LDK) prediction in its Q2 earnings call.

A new proposed SEC plan will overhaul oil and gas reporting rules that have existed since the 1970s. The new rules will boost the proven reserves reported by oil companies, and in the process boost their shares and potentially increase interest in takeovers (see Financial Week article).

The plan will essentially allow companies to book reserves from “unconventional” oil and gas sources, including oil sands and coal-bed methane. Some deep-water projects that to date have not been allowed to be described as “proven” will also now be included. Furthermore, firms will be able to publish data on what are called “probable” and “possible” reserves, where recovery is not as certain.

As companies search for riches in unconventional resource plays such as the Monteny, Bakken and Horn River, oilfield service companies will be in demand. These hot plays should “result in operators directing additional capital to their development.”

Calgary’s Peters & Co. Ltd. recently detailed who could be the big winners: pressure pumpers and directional drillers should come out on top, with drilling contractors and drilling fluids companies also riding the coattails of excitement in these resource plays.

Look what the commodities basket trade unwind is doing to these odd bed fellows:

DBA - PowerShares DB Agriculture
DBP - PowerShares DB Precious Metals
DBE - PowerShares DB Energy

Master Limited Partnerships (MLPs) are a new type of investment with an excellent record of high rates of stable growth & mostly tax-free (until the ultimate sale) high yields. Despite this performance, they are still little appreciated & understood partially due to poor investor relations by the companies.

Emerging Asset Class

Their business typically involves building pipelines & terminals for transporting oil & gas. Capital additions are their form of addiction. They have to keep investing in more assets to build more pipelines & terminals, a national priority. Spectacular growth for MLPs is forecasted to grow many fold going forward because of a growing demand for energy needing more infrastructure investment.

By Brad Zigler

The EIA says domestic crude oil inventories fell by a whopping 1.9 million barrels from the previous week, blowing away oil patch experts' forecast for a 300,000-arrel decline.

Canada is blessed with many natural resources, most of which it exports to other countries, including the U.S. (its largest trading partner). Some of the natural resources are minerals such as gold, uranium, or crude oil (from tar sand); timber is another example.  Since Canada is heavily dependent on commodities, we can say that the Canadian economy is commodity-based. Unlike commodity-driven economies like Russia or Brazil, Canada has a stable political system, a western-style democracy, and is geographically closer to the U.S.

Recently, as the price of crude oil rose, Canadian tar sands became even more valuable. In addition to Calgary, the demand for Canadian crude oil has created a few boomtowns like Fort McMurray in Northern Alberta. Sure, the price of oil fell the past few days, but I believe that this is only temporary. In the next few months, it may start to go back up again. An investor looking to add some stocks from the energy sector can look into the Canadian energy sector stocks that are listed below.

Now that our oil troubles are over (I am being ironic) we can start looking at stocks that are likely to see the most immediate bottom line benefit from lower energy prices. In order to do this I will typically start by doing an internet search on a good finance portal to find a stock that has blamed lower net income on higher energy prices. Generally, a reduction in relative strength results.

The list is pretty large but it starts to deliver some interesting candidates the closer I dig. Many of these are automatically going to come from the transportation sector. This makes sense because what I am looking for are those stocks that are likely to see a direct benefit to the bottom line from falling oil prices. That is most likely to be the case when energy prices are a significant portion of total operating expenses.

In a new Industry Report Audit Integrity takes a look at how responsibly and transparently oil and gas companies are dealing with volatility and risk.

With profits being driven primarily by rising oil prices, a sustained and significant fall in oil prices would hurt most exploration and production companies, the report says. 

Today's release of weekly inventories for energy related commodities showed that stockpiles were either inline with or lower than analysts were forecasting.  As shown in the table below, natural gas stockpiles were inline with expectations, crude oil and distillates were lower than expected, and gasoline was slightly higher than forecasted.

As the lower charts illustrate, natural gas and distillate inventories remain above average, while crude oil and gasoline inventories are still below average.  While distillate inventories are above average, this year the build plateaued several weeks ahead of schedule.  While these reports are generally bullish for energy commodities, this morning's article in the WSJ may cause traders to view the numbers with a more skeptical eye.

Only four months ago (May ’08), oil cleared $120 a barrel on its way to $145. Within a month, analysts were calling for $150, even $200 oil. Countless graphs and charts surfaced showing how demand was outpacing supplies. Pundit after pundit commented that emerging markets like China and India were fueling an unstoppable mega-boom for black gold.

The amount of wind power that the United States can generate has doubled to more than 20 gigawatts in the last two years, the American Wind Energy Association said Wednesday.

Renewable-energy policies, such as state mandates that require utilities to get a certain amount of their energy from renewable sources, have helped drive the growth of U.S. wind from 10 gigawatts in 2006.

We've compared the rallies of the tech and homebuilder bubbles with the rally in oil plenty of times here.  Below we highlight the returns from trough to peak of the three asset classes during their respective bubbles. 

As shown, the Nasdaq went up 640% during its 1990s bubble, while the homebuilder stocks went up 839% during their 2000s bubble.  From oil's bottom of $16.70 in November 2001 to its recent peak of $145.29 on July 3rd, the commodity rallied 770% -- right in between the rallies of the Nasdaq and homebuilder bubbles.