Obama Delays Decision on Keystone XL

The U.S. Department of State announced Thursday afternoon that it will postpone making a decision on whether TransCanada's proposed Keystone XL Pipeline project is in the national interest until at least early 2013.

Under Executive Order 13337, the State Department can issue Presidential Permits for transborder pipelines projects that it deems are in the national interest. The department has led what it calls a "transparent, thorough and rigorous" review of TransCanda's permit application for the Keystone XL project, and the executive order directs the secretary of state or a designee to consult with at least eight other federal agencies. The pipeline would carry crude oil approximately 1,661 miles from Alberta's Oil Sands to refineries along the Texas Gulf Coast.

This past summer, the State Department issued its Final Environmental Impact Statement (EIS) for the project under the National Environment Policy Act (NEPA). The agency found that the 36-inch-diameter pipeline would pose "no significant impacts" to most resources along the proposed route. Prior to Thursday's decision to delay making the national interest determination, the State Department accepted public comments during a 90-day review period. Click here for a timeline showing the agency's role in the permit review process......Read the entire article.


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Keith Schaefer: My #1 Question....When Should I Invest in Natural Gas?

A Contrarian View of the Gas Market....and 4 Questions To Ask Yourself

It is, by a longshot, the most frequently asked question among OGIB readers over the last two years....“When should I buy natural gas? And should I buy ETFs? Future contracts? Natural gas producer stocks? I’ll tell you my thoughts, and I’ll also give investors four questions to ask the management teams of their natural gas producers that could help you protect your investment. The culprit of these low prices is the highly profitable shale gas plays that have grown very quickly all over North America. Shale gas wells often pay out very quickly, on an operating cost basis. The team writing the energy daily letter at National Bank in Canada had an interesting take on gas yesterday that mirrored my thoughts.

“Finally, the conventional wisdom that appears to be growing in the gas market is that the market is poised for a significant rally because of the overwhelmingly bearish mood and the fact that there are no buyers anymore out there for gas. “We would agree if in fact there were no buyers out there for gas. “But there are buyers, ETF investors (in a big way at these low prices), Reliance Industries, Mitsui, KoGas, Statoil, China National Petroleum Corporation, BG Group and Shell to name a few. Once these capital injections cease, the time will be right to become very bullish on gas. The key is to be the first one to recognize this phenomenon…or at least not the last.” The companies they named are large foreign producers who have paid big money to farm into shale plays just to learn the technology.

In 2009, the investment bankers were able to raise money for even the junior gas companies that were unhedged. Raising money for senior or intermediate producers was even easier. And just as the buy side institutions that bought those financings became wary of a long time of low gas prices, the industry was able to get capital from these international players.

Until all these sources of capital dry up and natural gas producers are feeling more forced to curtail production, gas prices could remain this low or lower. The good news is that with these low prices, producers can’t hedge good prices for 2011, like they could last year for their 2010 production.

So what does this mean for retail investors, how can we use that information to protect or increase the value of our portfolio? The answer is, know your investments, and here are four questions to ask management. Investors in the junior gas weighted stocks, in both Canada and the US, should be very cautious now.

First investors should check if their company’s are near their debt ceiling, and there are lots who are, because these companies can’t raise money (equity; or issue shares) now. They only have their debt line and cash flow. And net cash flow right now is very low for these producers.

Second, investors should ask management if they would have to take any reserve writedowns if the independent evaluators came in to do their calculations at today’s prices. A company’s reserves are their assets from which they can secure lending against. If those reserves were economic last December 31, they might not be this year at these lower prices, we have yet to see any meaningful rally in gas prices this fall, compared to last year. And reserves are This which would mean they may have to suddenly sell assets or do very dilutive financings at very low share price just to stay alive.

Third, investors should also be checking if their natural gas weighted investments are reducing production, which is good for preserving cash but generally not for the stock price. The market pays for growth, not contraction.

Energy consultants Ziff Energy recently said that junior producers should not be spending any money, in order to preserve capital during this time when full cycle costs, where you amortize everything into your costs of production, are almost twice what the current gas price is in Canada, and 50% higher than current spot price in the US.

Fourth, ask management what their plan is to survive an even longer period of low natural gas prices if they are unhedged. It’s your company and it’s your money.


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Which Came First, God or the Government?

From guest blogger Keith Schaefer at Oil and Gas Investment Bulletins.....

CEO Tom MacNeill likes to throw that line out to investors as he explains the opportunity at 49 North Resources Inc. (FNR-TSX). 49 North is a specialized venture capital company that is quickly morphing into a fast growing oil producer, with a twist. It’s focused solely on Saskatchewan. The map that illustrates his point shows a stark contrast between Alberta and Saskatchewan. In Alberta, the map has an abundance of oil and gas properties being developed. Moving east across the border in Saskatchewan is like falling off a cliff; there is a dramatic and immediate drop off in the amount of activity in oil and gas.

The productive oil and gas geology doesn’t stop on a dime like that, says MacNeill. He sees huge opportunity in that map. His theory is that 40 years of socialist governments in Saskatchewan have slowed the development of the province’s energy resources, but the new business friendly government of Premier Brad Wall has created a huge wealth of opportunity for energy entrepreneurs like himself. “This is early days (in resource development) in Saskatchewan. The only thing that’s held us up in Saskatchewan is politics. We are at Year 1 in a 50 year process. We have 50 years of upside,” he gushes.

“Use Alberta as an analogue,” he adds, noting that Saskatchewan already has more conventional oil production than Alberta. “We do 500,000 bopd of conventional production. Alberta production peaked in 1983, 40 years after (the original) Leduc #1 (well). We are 40-50 years away from Peak Oil (in Saskatchewan).” 49 North has a suite of mining and oil and gas assets, but has recently been increasing its energy weighting. As is typical of these public venture capital companies, it trades at a 40% discount to its Net Asset Value.

MacNeill has invested directly in several oil and gas land packages, and has production net to 49 North of 80 bopd now, but hopes to have an exit rate of 1000 bopd from its 10 net section land package that produces from the Viking formation “This is not exploration in the Viking. We can do 16 wells per section and we have 10 sections.” 49 North had 100% success on the five wells it drilled last quarter. MacNeill joint ventures or buys out many small operators, and helps them get big fast. “We have so many opportunities, we could make swiss cheese out of this province” he says. “We’ve done a lot of geophysical work in this province. We have a lot of proprietary information from mineral exploration work we’ve done in our mining assets, and there are great synergies there (for oil and gas).”


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Only a Handful of Investors Truly Understand

Think of it as light heavy oil, thick and gooey enough that it needs a pump to get out of the ground, but not so thick that it needs expensive heating to flow, hence the name cold flow. Now when I say that cold flow heavy oil is the most profitable, I mean that producers get more profit per barrel (the netback) than from other types of oil.

For every dollar producers put in the ground to get the oil, they get anywhere from $3-$7 back, sometimes up to $11, compared to $1-$3 for light oil. That's due to two factors:

1. The heavy oil is shallow so it doesn't cost much to get out, and
2. U.S. refineries love Canadian crude as Mexico and Venezuela heavy oil production declines, so heavy oil prices in Canada are now strong

And Canada has more of this oil than anyone else in the world. The real opportunity comes from the fact that right now, at this very moment, only a few junior and intermediate producers focus on cold flow heavy oil. That will soon change and as a result, investors will see a host of explosive new profit opportunities as this massive Canadian resource gets developed.

But make no mistake, the biggest, juiciest profits will come from those companies who are already in the cold flow heavy oil game. I've just prepared a new research report that examines three fast growing producers who stand to provide early investors with astounding returns as a result of this opportunity.

This new report, "North America's Heavy Oil and 3 Junior Heavy Oil Producers Set to Explode", spells out all the details, including:

* A detailed explanation of heavy oil and how big the market for it might be * How new technology will impact the market and create new opportunities for forward-thinking investors in the coming months * Why we're in the midst of extraordinary times for Canadian heavy oil producers and how long these good times might last * And most importantly, the names of three carefully selected junior/intermediate Canadian heavy oil producers perfectly positioned to take advantage of this unique market scenario.

You can claim your copy of this detailed report "North America's Heavy Oil and 3 Junior Heavy Oil Producers Set to Explode", immediately via email by clicking the link below.

While this report includes the type of research that might ordinarily cost hundreds of dollars, and includes three stocks with triple digit profit potential. But don't delay, as word begins to spread of the opportunity in cold flow heavy oil, the stocks revealed in this report will begin to move up sharply and I wouldn't want you to miss out.

Click here to order your copy of this in-depth report right now!


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Commodity Corner: Pipeline Outage Continues, But Oil Ends Lower

October oil futures edged lower Tuesday despite fears of a prolonged shutdown of a key Enbridge pipeline that carries crude oil from Canada to the U.S.

Crude prices settled at $76.80 a barrel, a 39 cent decrease from the previous day's trading session. The continued shutdown of Line 6A of Enbridge's Lakehead System near Chicago is providing support for oil prices. Line 6A, which can carry up to 670,000 barrels a day from Canada to the upper Midwest, will not be allowed to restart until U.S. government regulators deem it safe. Already causing a sharp increase in gas prices across the region, investors fear the supply disruption could begin to drain U.S. oil inventories.

Additionally, sluggish economic growth in Germany applied downward pressure to crude futures. A survey revealed lower than expected German investor sentiment, and industrial production in the euro area was flat in July, according to EU's statistics office. Analysts suggest that despite China's booming economy, mixed economic conditions in the U.S. and Europe have kept price increases in check.

The intraday range for October crude was $76.21 to $77.99 a barrel.

Meanwhile, natural gas for October delivery rose 2.8 cents Tuesday to settle at $3.97 per thousand cubic feet. The third price increase in as many trading days supports speculation that the days of lower natural gas futures may have passed for the season. However, some analysts are being cautious and are not declaring a seasonal rally yet. Gas prices were threatened earlier Tuesday on forecasts of storm clusters forming in the Gulf of Mexico, but no immediate storm threats have been seen, steering clear of production outages. Natural gas
fluctuated between $3.84 and $4.02 Tuesday.

RBOB gasoline settled lower at $1.97 a gallon, peaking at $2.00 and bottoming out at $1.96.

From the staff at Rigzone

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Today's Trends: Crude Imports Decline, But Critical to U.S.

U.S crude oil imports grew rapidly from mid-20th century until the late 1970s, but fell sharply from 1979 to 1985, according to the U.S. Energy Information Administration (EIA) Annual Energy Review 2009. The trend resumed upward from 1985 through 2004, then remained flat through 2007 before dropping in 2008 and 2009.

In 2009, crude oil imports were 9.1 million b/d; petroleum product imports were 2.7 million b/d; and exports were 2.0 million b/d mainly the form of distillate and residual fuel oils.

U.S. petroleum imports rose sharply in the 1970s, and reliance on petroleum from the Organization of Petroleum Exporting Countries (OPEC) grew. In 2009, 41 percent of U.S. petroleum imports came from OPEC countries, down from 70 percent in 1977. After 1992, more petroleum came into the U.S. from non-OPEC countries than from OPEC countries.

Saudi Arabia, Venezuela, and Nigeria were the three key suppliers among OPEC countries of petroleum to the U.S. market. The amount of petroleum each country has sold to the U.S. has widely fluctuated over the decades. In 2009, Iraq supplied .4 million b/d of petroleum to the U.S., EIA reported.

Canada and Mexico were the largest non-OPEC suppliers of petroleum to the U.S. In 2009, U.S. imports from Canada reached a new high of 2.5 million b/d. Imports from Mexico were insignificant until the mid-1970s, when they began to play a key role in U.S. supplies. Canadian and Mexican petroleum together accounted for 32 percent of all U.S. imports in 2009.

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Six Attacks on Natural Gas Pipelines.....IN CANADA!

A series of bombings of natural gas pipelines in northeastern British Columbia in Canada are "domestic terrorism," authorities said. The first attack was reported in early October. This past weekend, the Royal Canadian Mounted Police confirmed a sixth bombing caused a leak in an EnCana Corp. line south of Dawson Creek, British Columbia. No one has been injured in the bombings, but they have caused leaks that could prove hazardous, authorities said.....Complete Story

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