Super Shift: Breakthrough Opens $40 Trillion Oil Prize in Monterey Shale (Kent Moors)

By Travis Johnson, Stock Gumshoe, November 16, 2010

Most of you have probably seen the teasers rolling in from Dr. Kent Moors for The Energy Inner Circle, his new higher-priced and “more exclusive” service that provides weekly updates and buy and sell alerts about his “trigger list” of energy stocks.

Most of you have just forwarded me the email ads, which is fine and much appreciated, but I have had an unusual number of folks comment on the “swollen head” he seems to have as he touts his inside access to the “50 people in the world who control 90% of the world’s energy markets.”

Frankly, you have to dig to find newsletter writers who don’t sound like they have “swollen heads”, at least in the way they present themselves to us through their hype-filled teaser ads … the implication always being, why would I subscribe to someone’s letter if they’re not a lot smarter and wealthier than me? Though, to be fair, not many do this much status bragging in the first few paragraphs (visits to Windsor Palace, a second home in the Bahamas, etc.). And really, he’s a pretty new newsletter writer and seems to be trying to turn his academic and international energy consulting experience into wealth, so his status and connections are the key to what he’s offering.

I can’t tell you much about Dr. Moors’ credentials (if you want to see the less-hypey version, you can check out his site at Duquesne, where he’s got a day job as a political science professor), but I can at least look at some of the ideas and stocks he’s teasing in his ad letter.

Moors tells us that what he’s trying to do is prepare subscribers to profit from “super shifts” — like the Chinese push into shale gas technology, Venezuela’s expected move away from supplying US refineries. These “super shift” moves ripple through the markets and can cause profit-making catalysts for specific companies, which is what he’s looking for.

And there is one “super shift” that more of my readers have asked about than any other as they’ve forwarded this ad to me — they’ want to know what the “$40 trillion oil prize” is in the Monterey Shale, and which companies Moors is teasing that will be the beneficiaries.

Thankfully, Moors (or his copywriters, one assumes) throws a few clues on the pile for us to chew on. Here’s his brief description of the Monterey Shale as background:

“Super Shift #3: Breakthrough opens America’s $40 trillion oil prize

“Everybody knows California’s traditional oil production is declining at nearly double-digit rates every single year. In fact, current volume is less than half of what it was just a few years ago.

“Yet what most people don’t know is that California is sitting on untapped gas/oil reserves equivalent to 500 billion barrels of crude….

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“It’s called the Monterey Shale. And unlike other shale-based deposits in the U.S., this one is mostly crude oil.

“In fact, it’s the ‘source rock’ for most of the state’s oil production….

“What’s kept it from being a superstar oil field is the very poor ‘recovery rate’ of Monterey Shale wells.

“Only around 10% of the crude available from each well can typically be brought to the surface.”

So that’s the back story — this oil has been there and known for more than 100 years, but until now it was too hard to extract. That’s where, as you might imagine, his “inner circle” comes in:

“But according to my Inner Circle contacts, recent developments in oil markets and drilling technologies could soon turn this under-tapped reserve into one of the hottest oil properties on the planet…

“One of these is called Managed Pressure Drilling (MPD) … a system of high-tech air injection that combines with a special ‘California Cocktail’ of acidized drilling mud to lift much larger amounts of oil from Monterey Shale wells.”

And he says that this MPD and newer drilling methods (horizontal drilling, etc., I assume) are the “trigger” for this super shift. In his words:

“MPD and other new technologies make tapping this mammoth domestic reserve profitable at just $80 a barrel…”

That still makes it pretty marginal according to my understanding of production costs — I think deepwater oil and oil sands can often be produced for significantly less, but I imagine those costs are rising, too, and if you think oil is going higher and staying higher (as Moors and many others clearly believe — he wrote a “cheap oil is over” article just yesterday), then $80 means these might be highly leveraged plays that could see very volatile earnings — that’s because high cost extraction is always more heavily levered to commodity prices than low cost extraction. (To simplify: If you have a gold mine that can produce gold for $1,200 an ounce, for example, the move from $1,300 to $1,400 an ounce means they double their profit — instead of making $100 per ounce they make $200 per ounce. If a mine produces for $300 an ounce, then the same move would only increase their profit by 10%, from $1,000 to $1,100. Investors lust for growth, so big percentage gains almost always catch the most attention.)

And finally, we get to the brief “tease” for two stocks in the Monterey Shale:

“In fact, I know of two stocks you could use to pour yourself a cocktail of profits from this suddenly accessible Monterey crude RIGHT NOW…

“One of these has 10 billion barrels of oil ($814.5 billion worth) ready for drilling using MPD and other techniques on its 300,000 acres in the Monterey…

“The other holds 1.2 million Monterey acres – and is ready to pour $6.3 billion into new extraction efforts over the next 4 years.”

So … is that enough for the mighty, mighty Thinkolator to go on? Well, you might be worried, my friends, but have no fear. These must be:

Venoco (VQ)

and

Occidental Petroleum (OXY)

Venoco is active in several California energy fields — they have a big operation in the Sacramento basin to extract shale gas, and some offshore and legacy production in Southern California, but with low gas prices they are putting much of their capital investment into the Monterey Shale, and pinning their growth hopes on their large position in that area. And yes, they have claimed to have more than $10 billion of oil in place in their leaseholds, though I think that’s the “oil in place” number, of which even with advanced techniques they’ll presumably be able to extract only a small portion. You can see their latest quarterly report here, including updates on their drilling program and production.

The company is profitable and expects to remain so, but trades at a fairly hefty forward PE ratio (about 26), probably because of hedging losses and falling nat gas prices that analysts probably expect to hurt their revenue numbers, and they also trade at a negative book value per share thanks to debt and, I assume, probably a low carrying value of their Monterey Shale leases (yes, they do hold about 300,000 acres) since those resources are not yet fully defined and producing. Market cap is around $900 million, and they have about $700 million in debt and no cash to speak of.

As of a couple weeks ago there was a pretty big short position in VQ shares, roughly 15% of the float, so clearly some folks are betting that their position is a bit precarious, so it might be that some investors are more skeptical about the Monterey Shale — or just think that they’ll be hurt by low natural gas prices from their Sacramento production, or maybe there are other challenges for Venoco that I didn’t see in my ten minute tour of their filings.

And Occidental Petroleum you probably know, at least by name — they’re one of the “oil majors” with a market cap around $70 billion, though that makes them just a fifth the size of Exxon Mobil. Like most of the big oil companies right now, they have a “fortress” balance sheet, with no net debt, and they’re growing a bit more quickly (as would be expected) than the “even larger” giants like Exxon Mobil or Chevron — and with far higher profit margins, largely because they’re mostly a producer and don’t get into lower-margin refining and retailing.

OXY has made California one of their growth priorities, they’re drilling actively and added quite a bit of CA acreage this year (they’re already a huge producer in California and are active around the world — lots of US oil and gas production, but also oil production and exploration in Oman, Libya, South America … and soon Iraq, among other places). Like most exploration and production companies, they’ve been reacting to the low gas prices by looking for ways to allocate future capital to oil production at the expense of natural gas. And I have seen reports that they’re going to invest about $6 billion into increasing their California production, both conventional and shale, over the next four years, so that’s a good match (that’s about a quarter of their capital investment plan over the next four years, by the way).

OXY also looks reasonably inexpensive considering their diverse assets and their expected 10% annual growth rate (that’s the average analyst expectation), though they don’t carry the super-low PE ratio of an XOM or a CVX, both of which are actually expected to grow faster (or the higher dividend yield of those bigger players — OXY’s dividend yield is under 2%, though they have raised the dividend every year for almost a decade).

So there you have it — I have none of the connections touted by Dr. Moors, and I don’t know much about oil exploration or production, but from the hints and clues he throws out to us I can tell you that I’m pretty sure these are the two “plays” that he touts for the Monterey Shale. What do you think? Ready to plunk down some of your hard-earned money for a piece of Venoco or Occidental? Have a better oil idea? Let us know with a comment below.


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patrick
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patrick

This is like investing in Darth Vader's Death Star… massive profits if you don't really care what happens to the Earth. Extraction industries are slowly but surely destroying essential habitat for many endangered plants and animals, not to mention polluting water and air that we humans need to live… Come on people, there are other ways to make money investing…

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AlanJenkins2
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AlanJenkins2

The trouble with teasers is you have to make 'em sound really good in the first place – then how can you give an objective assessment when you reveal the name of the company? And if you don't state the cons as well as the pros,people will wind up overpaying for the stock. – after all,they just paid you to find out what it was.

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denny
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denny

Chill out Paul….Patrick has made a good point

herman
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herman

what impact do you guess from ls9

herman medow
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herman medow

What guesses about the impact of ls9 on energy and other petrochemical uses- not
available as a stock, altho contract with PG for microbial production of cleaning product-
produce microbial gasoline, diesel fuel, and oil with no need for refining facilities- they
have more than bank of patents- some vehicles in Brazil use their product – this sounds
like a really disruptive trechnology

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Henry
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Henry

I put my money on Paul. Drill baby, drill!!!!!!!!!!!!!!

gee
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gee

For a new oil extraction technology, the safe bet would be twice the estimated cost in double the time frame with half the projected yield

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Tom T
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Tom T

I agree Travis, The hype on this is too much, and it is likely the copywriters creating it. Moors does appear well connected on the inside of international oil dealings, but big payoffs from his reccomendations remain to be seen. He does in fact reco an oil services company regarding the Monterey Shale story. This reco also seems connected to the comments regarding China's desire to acquire our shale drilling technology. Bigger issues are at hand here- The Feds plan to devalue the dollar has been trumped by the problem in Ireland. As the EU tries to contain the Ireland… Read More »

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fred
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fred

I subscribe to his introductory service. I keep a screen of his stocks, and also separate screens of oil service companies, E&P companies, and drilling and equipment companies, along with one of things I own. So far, we own only CHK in common. Best I can tell – but just from daily visual looking on – haven't charted actual numbers – he seems to do no better or worse than the rest and I believe my own picks out perform his. I always wonder why someone so fabulously rich and famous as he touts himself would waste time writing a… Read More »

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Eddy
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Eddy

Nice post, Tom T.^

I've subscribed to Dr. Moors letter for several months and found myself a bit dismayed when Dr Moors "glazed-over" the environmental damage which results from "hydro-fracking." Nonetheless, the shale gas industry is booming in the Marcellus Basin and elsewhere, the Planet be damned.

I have no plans to renew my subscription to Energy Advantage.

Thanks for the posts.

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Gravity Switch
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👍7

Thanks Brian. Haven't looked at TRGL in a while, that was a very active teaser pick about a year ago, if you bought in July you caught a nice dip. I haven't written about them since but that first "oil under the Eiffel tower" teaser was written up here: http://stockgumshoe.com/2009/09/profits-in-paris-

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shredder
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shredder

I subscribed to his first service, which was just a feeder to the higher cost one. I get so many freaking teaser ads…where's the beef I paid for?

Jack
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Jack

http://WWW.CLIENTSRFIRST.COM is a place to go for those that might get burned by rip off artist in the investment fields!

Ralph Hallock
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Ralph Hallock

Stupidly I signed on to try his recommendations and promptly lost two grand. STAY AWAY!!

newbie
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newbie

New subscriber to Dr Moors' newsletter and for once you are not close, gumshoe! I am quite surprised. Think Dr. Moors has some great picks here and plan to follow his lead. Seems to have connections with many people involved with many energy companies. Knows a lot more than I do, so I will take his advice on this one.

Lukester
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Lukester

I subscribed to his introductory service also – only a week after subscribing I had the intution that Dr. Kent Moors is indeed a very well connected oil industry analyst, and that he's also a ho-hum stock picker with just an average nose for where the livest part of the actionable trend will be strongest. I echo Fred's astute comments above exactly. I like Dr. Kent Moors well enough and I believe he is certainly knowledgeable in his field – he parlayed that long experience probably very quickly into initial subscriptions to the low cost service. Having said that, I… Read More »

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Lukester
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Lukester

Uhm, that was mistyped – meant to say: "NOT hugely better at weeding out good mainstream energy picks".

Roger
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Roger

LOL Except for maybe the fact that the fresh water they use for these wells never makes it back into the water table???

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boband
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boband

I am amazed at the comments on drilling and oil production technology…fracing, horizontal drilling, etc. Most of this has been done for years, almost as long as oil and gas have been produced…so why the sudden condemnation of ….hydrofracing for example. In the big picture of what harms the planet this comes very very low on the list. Use of toilet paper is a far far larger environmental issue.

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Optimistic2
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Optimistic2

I also joined, for same reasons as eaglefl – refundable, so what the heck. I watched several videos with Kent Moors in his professional capacity which added some credibility. I also keep in mind what our beloved Gumshoe just mentioned – teaser hype is most likely not written by the professional behind the stock selection. I will say, however, that this IS clearly Kent's voice on the audio presentation and I think he DOES have a large ego. I don't care if his picks are solid.

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Tom
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Tom

Investing through emotion will most certainly lead to fortunes.(NOT) The energy industry provides well paying jobs and a much needed resource that we will continue to use for the foreseeable future. If we stop all drilling and stop all transportation then what type of life would we have my Greenie friends? We lucky folks in New York have stopped the drilling of Marcellus shale only to find out it is progressing to the south of us in Pa. There have been 3 bank failures in New York so far this year and none in Pa. Wonder whats shielding the banks… Read More »

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Richard
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Richard

It seems that fire extinguishers for flaming ducks and water filters should be good investment opportunities according to our green friends. Any stock picks?

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roger036
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roger036

Further Natural Gas drilling here in Louisiana is put on hold. The drillers are now going after Petroleum as the profits are 3 times as much.

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eaglefl
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eaglefl

The video I watched that caused me to sign up for the inner circle focused on "shifts" and gave several examples. I don't recall him mentioning or hinting at service providers or a pipeline company that you alluded to. Was there in fact another video or was I dozing off?..which I have done on some….lol

mike
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mike

all comments have good points,,,but if this man is talking to the top 50 people he so said,,why is he giving info to other countries, instead of helping our own county,,and why isn't the gov watching him close,,,,giving secrets away??? just thinking out loud…

The Old Fashioned Way
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The Old Fashioned Way

Check out Northern Oil and Gas (NOG). They are basically a couple of rich, frat boys from Minnesota, with oil operations in the Williston Basin in North Dakota. The stock was at $2 per share, and then you look again, and it’s at $16 or $17 per share. A fluke? Or are they for real?

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Mikpo
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Mikpo

I've followed Moors emails and services since their appearance last Spring. First a free email service. Second a $49 dollar subscription service. I subscribed and bought some of his picks. Third, an inner circle service discounted at $695 (I think it's around there) with even better picks than the other two services. The price of this service will be $2000 when this special offer expires. Now there's something wrong with all this. Are we being led by the nose, teased into greater investments of our capital? Pooh! If Moors had real 'insider' info, it would be illegal to use it… Read More »

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GPC
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GPC

Mikpo,
Great advice. I've actually learned more from this blog, than the teaser ad. We all know we need to do our home work, before investing. There is indeed no easy way to make money.

BOW
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BOW

ok you guys check this out for OVER HYPE http://www.moneyandmarkets.co.uk they massively over hyped andi was lead by the greedy nose to the chopping block to the loss of $350.000 yep 350 thousand dollars and yes i admit i am a PILLOCK ( check this word out its from the UK ) Think to the BASICS… IF THEY ARE SO GOOD WHAT ARE THEY DOING WASTING THEIR TIME WRITING TO US?…. are they all god fearing persons that like to share their knowledge with the world, or do they live off our subscriptions? HERES THE BRAIN TEASER TO TEASE YOU… Read More »

Londonian
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Londonian

I've just checked and Big Gold comes free with International Speculator

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BOW
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BOW

Please anybody please tell me of ANY subscription out there thats is doing 30% profitable suggestions, i know of non that are doing it in reality as they are all lying!
i ask again!!! why if they are as good as they claim dont they just trade for themselves and make them selves multi TRILLIONAIRES IN NO TIME?
i assume this is a very very stupid question that i keep asking as nobody out there in the real world ever answers it.

Bigg Fredd
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Bigg Fredd

I just got a last chance notice from Hillarity Kramer to take advantage of her fantastic labor day deal. It's Dec 5.

Years ago, I think it was Salomon Bros that said rare coins went up 30% a year. If it worked that way, I'd have put $1,000 into coins in 1980, and have $2,620,000 worth today, and could remove $786,000 a year to live on.

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Eric G
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Eric G

http://www.checkthemarkets.com/index2.php?option=

An article written by Dr. Moors himself touting both OXY and VQ

'Nough said"!

Carlos
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Carlos

BOW, I ask myself the same question. if someone that important and well connected as he touts to be< why is he wasting his time doing a teaser? his phone would probably be ringing off the hook he would not have time for this; moreover, he would be so busy in more important things.

bow
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bow

The same old shit! nobody answers the question about subscriptions , if there was one subscription that was doing any GOOD it would and they would be world famous and the stock markety etc would fear them.
They would not need or have time to write to their subscribers as they would be too busy making trillions. Carlos are you the only one out there that gets this CON?
Well done MATE! check this out http://www.moneyandmarkets.co.uk it will show you how big this CON is.

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Bigg Freddd
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Bigg Freddd

If I have $100,000 in silver and sell it for a 2% profit, and repeat that every week,I have $200,000 at the end of the year. Will silver double in that time? Doubtful, but my way will double my money.

If I pick stocks that go up 25%, I make $250,000 if I tie up $1 million. If i sell 5000 people a $50 advisory, I make the same money with $0 investment.

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markS
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markS

I see an abundance of negativity here in regards to investment services, some of which is rightly deserved . But like people, these services all come in different size, shapes and forms, so to blanket them all as hocum is just plain simplistic. I think Travis would even agree with this, as would many of his followers here. I've subscribed to a number of services over the past decade and all have had their share of winners and losers, but overall the winners are well ahead. The hardest part for a subscriber though is often deciding which of any service's… Read More »

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BOW
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BOW

Man alive what absolute crap markS please please answer the rotten stinking question WHY DO THEY BOTHER AT ALL WITH SUBSCRIPTIIONS IF THEY ARE SO GOOD ,WHY NOT JUST TRADE! Christ Almighty! read the news flick a coin and DO IT! Thats what they do as most of them are stateing in small print that 80% will fail…… so think do everything opposite to what they say and you will be 80% in profit. And yes i have done that and turned 10K into 150K IN 5 WEEKS. But think the irony is you have to pick a proper wally,… Read More »

NEIL
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NEIL

$2.08 Silver???

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NEIL
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NEIL

4 2011 wealth creations.. Agora

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