This is a fun one to start off the week with — Christian DeHaemer, who writes the Crisis and Opportunity newsletter that got us all so gaga over Mongolia early this year has a new pick to tease for us that he calls “God’s Chosen Investment” (that Mongolian oil push continues, by the way, my latest note on it was here and I also shared some thoughts on Mongolia in my latest note to the Irregulars on Friday).
This time, as he has so often for similar teasers in the past, DeHaemer is looking at a war-torn or unstable area of the world to find a small cap resource company. That has sometimes worked quite well, as for his suggestion of Dragon Oil in Turkmenistan a couple years ago and, so far, of Mongolia’s Petro Matad, and sometimes it blows up in your face, as with his older Somali oil idea, Range Resources (the Australian one, not the Marcellus Shale gas company).
So what is it this time around? Here’s the gist, in his words from the teaser:
“The Bible predicts that Israel would discover oil…
“The Torah also proclaims that Israel would ‘suck honey out of the rock, and oil out of the flinty rock… ‘
“That Zebulun and Issachar ‘shall suck of the abundance of the seas, and of treasures hid in the sand… ‘ (Deut 33:19)
“And that Asher would ‘dip his foot in oil’ (Duet 33:24).
“And oil they found…
“The U.S. Geological Survey estimates 122 trillion cubic feet of undiscovered, recoverable natural gas located in the Levant Basin Province in the Eastern Mediterranean region.
“The oil lies in the coastal areas near Israel, Lebanon, and Syria, and can be recovered using modern technology.
“This bullish report is the first by the USGS to identify viable resources in this basin…”
So … oil in Israel. As if they don’t have enough to fight about in that little sliver of the world. To DeHaemer’s credit, he does note a couple of the risks involved with Israeli oil, in that they have territorial disputes, which everyone knows about, and that their oil and gas regulations may not exactly be firm just yet. Here’s how he puts it:
“There are two risks to profiting from this new energy mega-find…
“The first is that Israel is revisiting its oil and gas regulation last updated in 1952, an attempt to extract more money from the oil and gas companies.
“Oil and natural gas production is an expensive process that takes years to pay off. Companies don’t put billions down if they think the rules are going to change midstream…
“The second risk is the lack of official boundaries with Lebanon. Israel is still officially at war with that country; part of the Levant find is over the line, and Hezbollah doesn’t seem to need a reason to blow stuff up.”
He also goes on to talk about the leading company in Israeli oil exploration, Noble Energy (NBL), which is already producing gas offshore Israel and doing much of the offshore exploration in newer fields (most of the Levant Basin is offshore, in Israeli waters). But of course, Noble Energy is fairly well known and is a big, profitable company … which is to say, it’s boring, and it’s not going to go “to the moon” based on Israeli drilling results.
But DeHaemer teases a different stock, one that he gave a buy report on to his readers about a week ago — this one is onshore.
“One of the men who compiled the data in the USGS report used to be a researcher for the Geophysical Institute of Israel. Today, he owns a small company that just announced it has started drilling for undiscovered oil on land.”
So that’s probably enough of a clue for anyone who has looked into Israeli oil investments in the past, but there’s a bit more:
“This company has a $105 million market cap and has exploration rights within the Levant Basin. Part of the reason that this company it is so cheap is that the CEO believes and professes that the Torah says they are preordained to strike oil, and quotes the verses in the first paragraph.
“MBA/investment types don’t go in for that sort of stuff and dismiss this company with a smirk.