By Devon Shire
Over the past five years, Iâ€™ve gotten very long North American light oil producers, and particularly Canadian ones that own big land bases in horizontal light oil plays.
My reasoning for doing so is pretty simple:
1) Iâ€™m long term bullish on oil prices.
2) I believe the energy patch is just getting started when it comes to figuring out how to profitably produce oil from these tight oil plays. That makes me think that over the longer term, the companies that are sitting on the most oil in place are going to be the biggest winners.
3) Today, these companies have reserves that are based on recovery factors of the oil in place of 5 to 10 percent, while over time the amount of oil that can be produced might be three to five times that [emphasis added]. . . .
The recent actions by American horizontal oil producer, Continental Resources (NYSE:CLR), and its CEO, Harold Hamm, provide an interesting view from someone else who is long term bullish on oil. . . .
[Continental] monetized (cashed in) all of its oil hedges which brought in proceeds of $433 million. . . .
Personally, I donâ€™t believe that oil prices can stay down for long because virtually everyone currently drilling oil wells today needs prices higher than where they are today. North American horizontal oil drillers need higher prices to make money and virtually every OPEC country needs higher prices to fund their domestic spending.
But making short-term directional bets on the price of oil is dangerous.
Read the full articleÂ here.
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