Keith Schaefer has driven a lot of questions our way over the last ten days or so with a strongly worded pitch implying that he has found the one oil stock that can “beat the Saudis at their own game” by making money with low oil prices… and, of course, making even more money if oil prices rise.
The ad has gone around under a few different headlines, including “You’ll Never Guess Who is the Lowest Cost Producer in the World” … and that’s essentially what it’s about, a western oil company that can produce oil for $2 a barrel from conventional reservoirs, without worrying about the high costs of shale oil or deepwater offshore discoveries.
So who is it? Well, we get a few clues that we’ll throw into the Thinkolator for you, but first let me give you a little taste of the ad for Schaefer’s Oil & Gas Investments Bulletin…
Schaefer makes two big points… first, that he thinks oil is going up, big time, and then, that it doesn’t matter because his favorite stock will do well at current prices…
“No fewer than FOUR of the world’s most successful investors – as I’ll show you in a moment – are calling for an imminent spike in oil prices.
“And this includes the man who has successfully called every single turn in the oil markets for the last 10 years.
“This fast-moving rise in oil prices is now just a matter of time – and is expected to come within the next few weeks.
“And when it does, it will trigger a huge move in the share price of my #1 Oil Stock for 2016 – easily making for triple-digit profit potential.
“But here’s the thing…
“Even if all four of these market experts are wrong – and oil prices don’t move higher…
“My #1 Oil Stock for 2016 still makes money because of its historically low production cost.”
And this is not really about a secret new way to extract oil cheaply, or a technology development… for the most part, Schaefer’s point seems to be that “this company has found some large, conventional reservoirs” — and that it’s conventional oil, the kind you just drill vertically for and don’t have to work too hard to extract from the well, so it is far cheaper than shale oil that has to be exploded out of the rock and coaxed from the earth (in effect, you do this by throwing lots of money at it).
Three of those four experts who Schaefer refers to as predicting higher oil prices imminently are…
- Pierre Andurand, a hedge fund manager who has made some big and successful oil calls (he’s the one Schaefer says ha “called every major oil market turn in recent memory” — the WSJ mostly backs that up, though they also note that his prior fund had some terrible years when oil wasn’t making big moves)
- Kyle Bass, another well-known hedge fund manager who thinks energy is the most appealing big opportunity these days (he thought so a year ago, too, and had a bad 2015, but reiterated back in January that he thought the first half of 2016 was the time to build positions in energy)
- Andy Hall from Astenback Capital, who has been lauded as a “God” for his commodities trading wins (he had a bad year last year, too, but he does see $60-80 oil according to this piece from Business Insider)
He doesn’t name the fourth expert, at least not that I noticed in the ad, but presumably it’s someone else who thinks oil is going to rebound. And to some degree, oil has already recovered pretty sharply from those mid-February panic lows (pretty much everything else has recovered since then, too) — though it’s worth noting that although I’m sure those three investors know a lot more about oil markets and forecasting prices than I do, they’ve all been wrong for at least a year. They all lost a lot of money in 2015 betting that oil would bounce back last year, and this prediction that now it will really start rising seems really to be just a continuation of the bullishness they’ve had for more than a year.
That doesn’t m