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Better Than Big Oil: Infrastructure Investing at Its Best
My objection to the supermajor names you show is not the same as yours. My concern is: Do they reinvest capital and earn market clearing returns on it, given that they are "locked out" of most of the world's oil prospects?
Cynical me. I think the answer is NO. They don't really earn their keep on incremental investment. Which is why I'm attracted to BPT, SJT, and other royalty trusts. So much of what you buy when you buy an oil company (or Iron Ore company, etc.) is that they are a proxy for the commodity - you like to be long oil, coal, ore, whatever. I like the exposure. I love the yield. HATE the overinvestment. Frankly, the royalty trust route creates a situation where management can't screw it up by overinvesting.
Look, I'm not saying that the management of XOM are bad folk. They are a bureaucracy, and they seek to self perpetuate. They have spreadsheets, financial models, etc. saying that they are doing the right thing. Fish gotta swim. OilCo's gotta invest. An investor needs protection from that, unless you go smaller in the petro world and pick up a name that isn't anchored by it's huge PDP reserve base.
Sep 2, 2010. 12:26 PM
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