Opening the Oil & Energy Investor Mailbag: Questions from Our Readers

Opening the Oil & Energy Investor Mailbag: Questions from Our Readers

by | published January 15th, 2019

We’re starting something new here at Oil & Energy Investor.

Or rather, we’re continuing something old.

It’s been quite some time since I last opened up the mailbag, and I was very pleased to see that there were dozens of excellent questions in response to my columns and other energy-related topics.

So, I thought it was high time I began to address these questions. In each Q&A session, I will be answering a few of your queries in detail.

I’m always on the lookout for more questions and comments. If you have any questions on what I address here today, or on any Oil & Energy Investor column in the past or future, please leave a comment below and I will answer as many as I can.

In addition to these Q&A sessions, you can access more of my research over in Energy Advantage, where I give detailed “profit recommendations” and specific updates on what’s going on in the oil, energy, and defense sectors. If you’d like to learn more about it, just click here.

Now, let’s begin.

Richard H. writes:

Whatever happened to the nuclear power units about the size of a large shed placed in the ground to supply power to an industrial court or a certain size community?

There has been a noticeable decline of interest in these units. When I first recommended mini nuclear units, there had been some introduction in various parts of the world to serve as a local power source in remote or low-population areas.

My move at the time was with a huge Asian-based corporation that had the best unit on the market. Once again, this was a very small part of a mega company’s activities. That meant we tended to see the holding advance (a depository receipt purchased at a premium to the domestic stock value) based on how many thin screen TVs and other consumer electronic products the company sold.

More recently, the unit space has been taken over by interest in Advanced Small Modular Reactors (SMRs). These can be serialized, put out power from one to hundreds of megawatts, and provide a range of uses (e.g., local power, heat processing, industrial, desalination, among others).

There is now competition for new designs underway, highlighted by the U.S. Department of Energy’s SMR Licensing Technical Support (LTS) program. Unfortunately, the funding legislation initiated in FY2012 has not been earmarked to be renewed.

Rapid introduction is at least a decade away and would require some further streamlining of the regulatory environment. Meanwhile reactors utilizing non-traditional coolants such as liquid metals, salts, and helium are being developed. These may allow for more rapid regulatory approval and would dramatically improve safety.

However, when it comes to power and electricity, there are strides being taken. In fact, you’d be hard pressed to find an energy sector that’s not moving forward by leaps and bounds.

In electricity, there is a new technology being developed that could render chargers and cords completely obsolete. In other words, we may be going completely wireless within the next couple years.

It sounds like science fiction, but it’s 100% real. Not only that, but the profit opportunities here are immense, and you could take part. Just click here for more information.

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Jerome S. writes:

What will the Venezuela collapse mean for the average American consumer and tax payer? Is the collapse as you predict going to have an effect in the price of commodities in the U.S.? Or the price we pay for the essentials that we are consuming at our local outlets? What does it do to the American economy?

There will be little direct impact on Americans from the Venezuelan collapse. Little other than oil comes into the U.S. from Venezuela, and even then, alternative sourcing (including from U.S. domestic producers) is readily available.

However, Citgo is still majority-owned by PDVSA (the Venezuelan state oil company) and significant amounts of PDVSA and Citgo debt is owned by Russian and Chinese interests.  That means any attempts to sell Citgo and its refining/distribution/retail network in the U.S. is complicated by some geopolitical concerns.

The primary effect coming from the collapse involves the continuing decline in global crude production volume. Venezuela had been the second-largest producer in OPEC (after Saudi Arabia) until almost two years ago and still holds the largest reserves in the world. While there are other OPEC and outside sources that can pick some of the slack, this has been developing into an increasing upward pressure on global prices.

Bill P. writes:

Why are MLPs that are focused on mid-stream oil and gas transportation languishing in this period where oil and gas are being pumped and transported in record quantities? Any thoughts?

When Master Limited Partnerships were first introduced, they were thought to be the next great move in energy investment holdings. MLPs provided a much higher dividend than traditional midstream company stocks while allowing for average investors to participate in an expanding ownership class.

MLPs are very vulnerable to the cycles in underlying oil and natural gas pricing. They also have limited access to working capital. MLPs generally cannot (or at best cannot easily) access debt. That means expansion or carryover of working and operational capital needs would be funded via acquisitions. That resulted in the drying up of economic moves on other pipeline and terminal assets.

Put simply, MLPs found themselves overpaying for the book valuation necessary to maintain solvency. The largest MLP ever seen – Kinder Morgan – subsequently restructured into three separate traditional corporate structures as a consequence.

There is still a play here in two ways. First, by selecting specific MLPs servicing particular basins and regions where the expansion of oil or gas volume (remember that midstream service providers gain revenue by using pipelines for both throughput and storage) can utilize existing capacity.

Second, and far more interesting in my judgment, is the new generation of MLP clones that combine midstream holdings with production assets upstream and/or processing/distribution downstream.

A major U.S. focus here can be on combining natural gas well production via pipelines to liquefied natural gas (LNG) export manufacturing trains or wells-to pipelines-to crackers for petrochemical feeder stocks.  Both will have considerable upside.

Like this opportunity I’ve found right here.

LNG is one of the biggest and fastest growing industries within the energy sector, and the U.S. is fast becoming one of the heavyweights in producing and exporting.

Bringing to the forefront one tiny LNG explorer and producer that could skyrocket – and let investors profit from it as well. It may be small now but it soon could become a household name.

In your household too; just click here to learn more about it.

Herbert G. writes:

What do you see happening in the oil and gas industry, and gas investments in Israel? As part of the Middle East, it has these reserves, but it doesn’t get as much press as the rest of the countries over there. What do you think?

Israel has two large offshore natural gas fields – Tamar and Leviathan. The government has committed much of the volume to domestic consumption and an agreement with Jordan. There are likely additional deposits to be discovered, although some involve areas also claimed by Lebanon.

There are two keys moving forward, both of which having a major impact on whether investment is likely to be coming in short-term.

First, a resolution of the development border questions with Lebanon. Second, and of a more fundamental importance for the offshore development of the Eastern Mediterranean as a whole, is the securing of adequate guaranteed transit volume and finance for the major EastMed pipeline project to Greece and beyond.

This requires agreement by Israel, Lebanon, Egypt, Cyprus, and Turkey. I will have meetings in Nicosia, Cyprus in less than two months on all of this.

Tommy S. writes:

Is water movement in the ocean a good source of power?

Tidal and wave power has been an energy source I have discussed before and is being focused upon in several parts of the world. Yet applications are either a small portion of very large corporations (in which it is not possible to focus only upon the tidal/wave power segment) or is the stand alone process of micro caps.

One leader in the field I have discussed in Oil & Energy Investor and earlier brought into (and out of) the Model Portfolio for my readers over in Micro Energy Trader has been Ocean Power Technologies (OPTT). The company has had some very interesting joint projects with the U.S. Navy to produce base power on Hawaii, and its PowerBuoy trademarked system has shown some genuine promise in several parts of the world.

Unfortunately, OPTT has an exceptionally small market cap ($7.4 million) and is easily buffeted by the “tides” (pun intended) of market volatility. The stock has shown some upward momentum over the past month but has still lost some 70% of its value since November of 2014.

It also operates under the weight of some rather cavalier public relations by company executives that occasionally borders on outright hype. I continue to track OPTT daily but do not consider it a play at this time. There are no other tradable ways into this energy source currently.

However, there is a different tradeable source that has a significantly profitable entryway into the power industry.

Forbes has stated that it holds “the most important technology in the world right now.”

And that’s not a small thing to say.

Not only that, but the potential profits that could come out it is sky high.

And you could join in.



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