I just got back from a couple weeks vacation at our Clearwater FL home and had a few minutes to post some ideas and review my old thoughts regarding the oil biz and other semi related topics. For those who remember my posting in 2004 that I felt that the easiest way to increased wealth in the energy business was to ' Keep the Reserves in the Ground' and I still reiterate this idea today. As the price of CL has more than doubled and the price of NG went to a quadruple and back to a mere 50% higher than those times, the price of drilling, service, completion, hookups etc has also doubled in the same time frame, at least in our areas of operation. One only has to look at the value of today's barrel in place vs that of 2004 and the resulting increase in net worth is staggering especially when there was no money spent to increase the numbers. One also only has to look at the buying power of the US$ that would have been traded for that BBl if it was brought out of the ground vs today's number and it is also an appalling thought not to mention the money spent to make the conversion and more importantly the time involved in the process and the headaches associated with such IMO. I'm sure that the idea is clear and the theory remains one of considerable debatability however should the price continue to escalate ( I'm a believer of $200 / BBl within 5 years) once again I would suggest to those fortunate producers, without additional CF needs for lifestyle maintenance, that keeping the BTU's in place will result in exponential appreciation in wealth, without any additional efforts. BWTFDIK.
It will also provide the necessary hedge against the inevitable continuation of the dollar value declines in the future IMO. As I see this senario playing out the only way for the US to get out of debt will be to make the amount of the debt in future dollars worthless, and I hope I'm wrong. My thinking is that at some point the US could revalue the currency or as others have done before, just start over and issue the new currency ( Ameros ???) for say two bucks to one Amero and keep on clicking. Crazy but anything is possible and Desperate situations make people do Deperate things... nuf of this..

On the energy subject, I had a long conversation with my best friend ( VP of BP Deepwater GOM ) and he enlightened me in the areas that he is currently overseeing from his Houston office. He told me that the largest project that he is now running is a deepwater exploration program in over 25000 feet of water in the GOM and that when they put this one on the books the estimated daily costs were about $400,000 / day. Currently the actual costs are running over $765,000 / day and rising all the time and by the time they actually find out IF there is commercial production potential he is expecting $1 mil / day. The most interesting fact that he told me was that even IF, a real big IF, there is oil and gas discovered the current technology does not exist to bring the product to the mainland due to various physical restraints operating at these depths and distances from shore. Kinda sounds like the hope for ultra deep projects being the saviour to the US energy problems are misplaced IMHO.

While fishing one day I was introduced to the recently retired president ( age 42) of Ryland Homes and his view was that the housing debacle in Florida is going to get much worse than the current state. He had conveyed the disturbing number of houses that would not be completed to a finished project currently being constructed and their internal projections of available buyers at higher interest rates and more importantly qualification standards. In his opinion the bottom is still years away there and most like the same in other areas of prviously high appreciation above the norm. They are renting unsold condo's on the beach for 1% per year of asking price in an attempt to at least generate some type of CF until a sale might take place in an unbelievably overbuilt and overpriced market. He also thought that a 30% decrease in value from today's number ( already discounted from the top) is probable and the most important idea is that most in his industry are still in the denile mode vs the desperation mode necessary to make a true bottom.

The one other person that I had the pleasure of spending a couple days with was Tom James of Raymond James while my wife and I spent a few nights at the Safety Harbor Spa. We discussed at length our ideas on the energy front and other area of mutual interest. I came away with the idea that he feels as strongly as I do about the impending world energy crisis based for the first time on S/D fundamentals and has positioned their clients appropriately. We discussed the base materials market of which he is becoming more bullish all the time and especially the idea of peak metals. His feelings were simply that once the China/India economies get going in earnest there will be no way to meet the needs for these people to bring their lifestyles to a similiar status as those of us who are fortunate to live in the US prosperity age. We both agreed that the US is much less important in the world and that we could become a secondary type economy such as England, Germany and France have become today. There is no way to post all the info that was transfered in this meeting but the general idea is simply one of 'Own Things not Paper'

Hope some of you find something of interest here or better yet make some money off the info somehow..

Gotta run and get the kids so tillsome time in the future its back to lurking for me again.

TRADE WELL and PROSPER...TODD