Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Why is ERHE price still not going up? Maybe we are just still ahead of the curve.
added 5k @.686 - all I can do today!
Chevron in Nigeria is ramping up their GTL facility.GTL technology turns NG into extremly clean gasoline & diesel. I know a couple of plant operators going there very soon to help start up the newest GTL train.
http://www.chevron.com/deliveringenergy/gastoliquids/
buying @ .47 eom
Chevron knows how to do it.
huge project in gorgon. amongst the biggest investments Chevron has ever made IMO. not as deep as jdz though.
http://www.chevron.com/news/press/release/?id=2009-09-13
repost - why refiners love condensate
and why it commands a high price
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=42361016
Why refiners love condensate
If your crude unit is running to capacity on the part of the unit that processes the medium & heavy cuts that have been seperated from the crude,(and there is still room to process the lighter stuff), then you can slip some condensate in the crude slate and this will fill out the crude unit with incremental barrels. Incremental barrels = huge $$$ for refiners, especially when the incremental barrels are high value products (gasoline, Jet, diesel)
CVX was trying to make a deal with SEO for block 2? Do you recall where this info came from?
they were my bids. I had an order in for a couple of hours with no fill, they jumped over me a couple of times & filled others at a lower price. I was just bored & thought I would screw with them like they always screw with us....
does anybody know the history of this company? how did they get to plasma Technology from Netsaversdirect.com? I take it that netsaversdirect.com never took off? I picked up some shares the other day as plasma technology looks very interesting & bought some more today as the price took off! TIA
chevron obo press release
http://www.chevron.com/news/press/Release/?id=2006-05-26
Obo-1 Well Encounters Hydrocarbons in Nigeria/Sao Tome & Principe Development Zone's Block 1LOCAL NEWS RELEASE: Issued in Lagos, Nigeria
LAGOS, May 26, 2006 -- The Nigeria – Sao Tome & Principe Joint Development Authority, Chevron and its co-venturers Esso Exploration and Production Nigeria-Sao Tome (One) Limited, and Dangote Energy Equity Resources, have encountered hydrocarbons in the Obo-1 exploration well in Block 1 of the Nigeria – Sao Tome and Principe Joint Development Zone.
The Obo-1 well logged a cumulative total of at least 150 feet (45 meters) of net hydrocarbon pay in multiple reservoirs and provided important reservoir rock and liquid samples, which need to be evaluated and integrated into the interpretation of the Obo Area to determine the next step of the appraisal process. At this stage, it is premature to determine whether or not Chevron and its co-venturers have made a commercial discovery.
The Obo-1 well is located in 1,720 meters of water (5, 640 feet) and the drilling operation was completed in 63 days on March 15th 2006.
The JDZ Block-1 is located approximately 190 miles (300 kilometers) north of the city of Sao Tome and approximately 125 miles (200 kilometers) south of the city of Port Harcourt in Nigeria. Chevron JDZ Limited has a 51 percent equity share in the block while Esso Exploration and Production Nigeria-Sao Tome (One) Limited, and Dangote Energy Equity Resources have the remaining 40 and 9 percent equity, respectively.
Print Email
RSS Feed
Add Press Releases to RSS
was there a gap that had to fill? eom
Today I bought 3500 more at .75, I don't listen to Oily, I just wanted some more, I don't care if I didn't get them near the low of the day. I just add them to the rest that I have & my family and I have more than 200k.
Backstage or somebody else?
If you got a minute, could you please explain to me about the corporate bonds & how the bond price going up is a good sign that the common shares will remain good? I never have had bonds explained to me. Thanks in advance!
Hello - when a plant or a refinery does not perform after a turnaround, it is the fault of the plant owners, not the maintenance group performing the turnaround work. The plant owners have process & designs engineers that provide work instruction to the maintenance team. After the maintenance team has made the modifications & repairs, the plant owners have inspectors that ok the modifications & repairs. If that is not satisfactory, then the equipment is not closed up. If the plant does not perform, it means the owners went cheap and did not plan the correct work, the owners engineers screwed up, or the plant operators screwed up the plant on start up! a
bad maintenance team will cause delays, which will cost tons of money in lost production and have accidents, but if the plant owners did their job, the plant will always run good!
Go ERHC & never get into refining!
I admit it was me who bought 4k shares after
Oilphant posted today.
I have been wanting to get some down here for awhile, and it was a reason to do so sooner rather than later.
I found this article very interesting regarding a marginal (270MM) deep water field.
http://online.wsj.com/article/SB122531663876381697.html?mod=yahoo_hs&ru=yahoo
Good luck all.
I'm sure the JDZ is loaded! eom
"technical studies are planned for 2008 to determine the need for additional drilling and to evaluate developement alternatives"
http://www.chevron.com/documents/pdf/nigeriafactsheet.pdf
page 3 of 11
has Chevron dropped the "maybe not commercial" language about obo 1
first oil from Agbami field - the largest deepwater field in Nigeria.
http://www.chevron.com/news/press/release/?id=2008-07-31
Well, the best info I can find (as I am approved for loan) is that a loan for investment property will cost 1 percent more than the fixed rate for an owner occupied loan. The only way I have been able to get this info is by actually getting approved for a loan. These loan companies keep this info way too close to the chest. I don't trust them one bit. I am not actively searching for investment property right now. The prices keep on falling, and I'm doing too good in the stock market right now.
Green at .45! good luck all... EOM
Sao Tome to relaunch oil licensing in joint zone
http://www.reuters.com/article/marketsNews/idCNTL1380805320080313?rpc=44
Bry - do you know if banks are taking offers less than asking price for REO properties? I read some where that they usally don't cut the price much until they have had it for sale for at least 90 days. do you buy reo's?
TIA LOKI
Hi Bry - no, I don't know what that is. Every once in a while I'm seeing a deal pop up, I'm thinking that I would like to pre qualify for a loan and just be ready for anything. I'm certainly in no hurry, and I want to find the best rate possible. I spent some time chatting with a loan agent on line today from Ditech and I'll be damned if I could get him to give me a ballpark rate for an investment property. I just don't trust mortgage brokers. I had excellent luck with the loan on my house 7 years ago, that was an online company, but I can't remember the name of that place!
still looking for best place to get a loan out there. TIA
LOKI
yes Bry, it will be a rental. I'll take a look at lendingtree. I feel the same, I think prices will soften a bit more. I also don't expect to catch the bottom. I proved that with my stock picks as of late LOL.... I do know there are some killer deals out there to be had. A co-worker picked up a house to live in Brentwood, CA. Very exclusive gated area. They topped out at 780K, he got one that was forclosed, the bank was in it for 550k, sold short to him for 450k. I'm looking to find something easy to rent that will break even or better. Wanting to start small <200k for sure.
Real Estate Help Wanted
I am thinking of getting my first rental as prices here have fallen to the point where I think I may be able to pick up a place and actually break even or maybe a little better each month. I am in the North Bay area in California, I see a 3/2 condo that according to propertyshark went for 240k at one time, now it's less than 150k. It's less than the couple of 2/2 baths for sale in the same complex. 3 bedroom apt's are renting for 1000 -1200 per month.
Taxes are killing me, I need some relief. A couple of questions? where can I get the best loan rate? Is DITEK any good? How can I find a RE agent that is really up on digging in this market? My Father In law is an agent in Las Vegas, he will send referal & give us referal $ back, I just don't know who to send referal to. any advice for me? thanks for your .2
LOKI
some easy reading re deep sea drilling when things get slow today. http://www.wired.com/cars/energy/magazine/15-09/mf_jackrig?currentPage=1
OT - rumor has it that the night of the oil spill in SF bay, that the coalition of bay area oil refineries offered the Coast Guard full use of the coalitions booms, boats, and trained personel to contain that spill. The help was denied. The spill could have been contained within one mile of the accident. It's real bad. It's everywhere. Somethings wrong with that. IMHO
Since it is slow, and I have had a few beers, I will make my prediction on the fine. The only real thing that I know of that they have is the 100k college contribution. I say thats worth 500k fine. Of course the real damage has been done to the SP. IMHO
OT Doug C
Sorry, I tried to PM you, but I'm not a subscriber. Just FYI
http://www.chevron.com/news/press/Release/?id=2006-11-13
In at 17.00 lets get some discussion going here.
Where do you see this going?
Two sides to it.
08 Oct 2007
Chevron Calls for Dismissal of Ecuador Lawsuit
SAN RAMON, CA, Oct. 8, 2007 - Chevron Corporation (NYSE:CVX) today filed a petition in an Ecuador Superior Court seeking dismissal of an ongoing environmental lawsuit that has descended into a judicial farce, constituting a denial of Chevron's right to a fair and impartial trial based on evidence and the rule of law.
Chevron's petition to dismiss cites multiple examples of inappropriate interference in the civil proceeding by the executive branch of the government, judicial misconduct and misconduct by the plaintiffs' attorneys as well as their technical staff. The petition also argues that the court has failed to recognize the overwhelming volume of admissible evidence and irrefutable legal defenses that exonerate Chevron and cites the court's lack of jurisdiction, lack of due process and demonstrated bias (see Note to Editors).
"Chevron has acted in good faith throughout this trial, producing significant, scientifically sound evidence disproving the allegations of the plaintiffs' attorneys. A verdict delivered today and based on the only credible and properly submitted evidence presently before the court would exonerate Chevron," said Charles James, Chevron vice president and general counsel. "However, too many improper, unethical and illegal events have occurred, and the court must dismiss this case if it is to preserve any semblance of credibility. For the case to proceed in its current form would constitute a denial of Chevron's right to a fair trial based on evidence and the rule of law."
Chevron's legal team has demonstrated through volumes of credible scientific evidence that the allegations of the plaintiffs' attorneys are without merit. The petition outlines a long list of actions during the trial that, taken together, constitute a denial of justice.
"The court has now abandoned the law of the case and the Ecuadorian Code of Civil Procedure and has denied Chevron due process by acquiescing (likely as a result of political pressure and nationalistic bias) to plaintiffs' requests," Chevron states in its petition. "In the absence of a complete dismissal, therefore, this matter will result in a violation of Ecuador's Political Constitution. … Moreover, a failure by this court to dismiss this case - followed by any judgment against Chevron on the plaintiffs' unproven claims - would likely constitute a violation of Ecuador's obligations under international law."
Further, the petition states that Petroecuador, which has exclusively owned the oil fields since 1992 and has operated them for more than 17 years, never fulfilled its remediation obligations and has operated the oil fields in a manner that has caused numerous environmental problems, including frequent spills. Petroecuador officials admitted publicly that Petroecuador - not Texaco Petroleum Co. (Texpet, a third-tier subsidiary of Texaco Inc.) - is responsible for cleaning up the remaining well sites in the former Consortium area that were not remediated by Texpet.
In its petition, Chevron describes the various efforts of the plaintiffs' attorneys and their supporters to politicize the lawsuit by convincing senior members of the government of Ecuador to offer their support to the civil lawsuit. For example, in April 2007, plaintiffs' attorneys, activists and senior members of the Ecuadorian government held a joint news conference and a highly publicized visit to certain former Petroecuador-Texpet consortium sites. With the plaintiffs' supporters at their side during one of these visits, senior members of the administration offered "the national government's full support" to the plaintiffs. Also in April, the executive branch of the government issued a news release announcing the government's intention to provide plaintiffs with "assistance in gathering evidence" against Chevron.
According to Chevron's petition filed before the court, "This manner of interference by the executive branch in a private civil dispute certainly suggests an ulterior motive (i.e., the avoidance of Petroecuador's liability), and it intolerably offends the most basic tenets of due process.… this illegitimate conduct has unfairly prejudiced Chevron, changed the course of the trial, and caused the court to deny the due process to which Chevron, like all litigants, is entitled."
Chevron's petition argues that the court's failure to follow the law of Ecuador or even its own procedural orders casts serious doubt over its adherence to the rule of law. The failure to address legitimate legal defenses, while simultaneously absolving plaintiffs of any obligation to substantiate their claims with legally qualified evidence, amounts to a clear denial of justice for Chevron. If not addressed by the court, these violations of the most basic and fundamental principles of universal justice will destroy any legal legitimacy for the results of this proceeding and sentence the litigants on both sides to a lifetime of appellate and collateral litigation. Accordingly, Chevron has requested the judge to dismiss the lawsuit in its entirety.
For a complete copy of Chevron's petition for dismissal and additional information on this litigation, please visit http://www.texaco.com/sitelets/ecuador/en/.
NOTE TO EDITORS
About the Lawsuit and the History of Texpet's Operations in Ecuador
In 2003, American and Ecuadorian attorneys, on behalf of 47 Ecuadorian plaintiffs, filed a civil suit in Ecuador against Chevron and sought unspecified damages for public environmental harm allegedly caused by Texpet's operations. Among other things, the lawsuit challenged the effectiveness of a remediation program carried out by Texpet, a third-tier subsidiary of Texaco Inc. Texpet rejected the allegations and demonstrated not only that the Texpet operation complied with Ecuadorian law but that the remediation work Texpet conducted was and remains effective. More detail can be found at http://www.texaco.com/sitelets/ecuador/en/.
More recently, the trial has become a judicial farce, where scientific evidence and due process is ignored, where misconduct by the plaintiffs' attorneys and their technicians runs rampant, where the court has failed to recognize the overwhelming volume of evidence that exonerates Texpet and Chevron, where improper external pressures are applied, and where the national government has exhorted the court to rush to judgment.
Inappropriate Interference by the Executive Branch
There has been improper and undue interference from the government of Ecuador as Chevron argues in its petition. Examples of improper interference include:
The executive branch "offered the national government's full support" to plaintiffs.
In a news release, the government announced its intention to provide the plaintiffs with "assistance in gathering evidence" against Chevron.
On a recent trip to the former consortium's operations sites, government officials, accompanied by plaintiffs' attorneys and their supporters, announced to the media that Chevron blatantly failed to carry out a proper remediation at those sites and that government of Ecuador and Petroecuador officials, who approved the remediation, along with Chevron representatives, ought to be prosecuted. However, government officials and plaintiffs' attorneys failed to acknowledge or point out that the sites they visited are the sole responsibility of Ecuador's state-owned oil company, Petroecuador.
Correspondence between the plaintiffs' attorneys and Ecuador's Office of the Attorney General, discovered in a separate proceeding, provides evidence of cooperation between the Republic of Ecuador and plaintiffs' attorneys:
One of the plaintiffs' attorneys writing to a representative of Ecuador's Office of the Attorney General stated "if at some point we want the government and the attorney general to play for our side, we must give them some ability to maneuver."
An attorney general's representative writing to plaintiffs' attorneys stated, "I explained that the Attorney General's Office and all of us working on the state's defense were searching for a way to nullify or undermine the value of the remediation contract."
Judicial Misconduct
There are numerous instances of judicial misconduct that, taken together, have denied the company the right to a fair and impartial trial:
In 2003, Chevron moved to have the case dismissed on procedural grounds since there are no grounds to sue Chevron.
The court abandoned its own prior procedural rulings and reduced the plaintiffs' evidentiary burden by relieving them of the requirement to perform more than half of the judicial inspections previously ordered. This is in clear conflict with the Code of Civil Procedure (Articles 114 and 119).
The court has failed to enforce its own orders requiring the plaintiffs' suggested experts to adhere to court-ordered sampling and analytical protocols and to submit complete reports based on analytical work of all samples they collected during the judicial inspections.
Despite the undeniably suspect nature of the plaintiffs' evidence, the court has not expunged any of it from the official record. Chevron has filed 11 petitions asking the court to act on this matter. Article 258 of the Code of Civil Procedure provides that the court must conduct a hearing on the petition and issue a ruling. The court has not conducted a single hearing on any of the petitions. Rather, the court has denied one petition without the required examination, indefinitely postponed its ruling on three others, and ignored the rest.
Without completing even half of the 122 judicial inspections during the evidentiary first phase of the trial, the court granted the plaintiffs' request to proceed with the damage assessment phase (Phase 2) of the trial. This is a complete inversion of due process. The second phase of evidence production is now a wholly subjective, damage assessment conducted by a sole, patently unqualified expert appointed by the court.
Acknowledging that Phase 2 was to have relied on the scientific evidence collected during Phase 1, the plaintiffs made the untenable suggestion that environmental contamination could be inferred at all sites based on the plaintiffs' flawed Phase 1 findings.
The court appointed Richard Cabrera, a mining engineer with no known experience assessing environmental impacts from petroleum operations. This order directly contradicts the law of the case established by the court's October 2003 order, which provided that the expert determination would be conducted by the same group of experts who conducted the judicial inspections.
Mr. Cabrera submitted a proposed scope of work that largely ignores, and far exceeds, his mandate including:
Denying Chevron the basic right to participate in and observe his work that the court specifically ordered.
Refusing to provide or sign chain-of-custody documentation for the samples that he collects, which is in direct contrast to court orders. As a result, there will be no means to authenticate any of the analyses that Mr. Cabrera ultimately provides.
Sampling rainwater or surface water that has collected in a soil borehole and erroneously claiming that it is groundwater exemplifies Mr. Cabrera's lack of even the most basic skills of groundwater hydrology and site assessment.
Declining to visit all of the sites originally ordered by the court.
Refusing to present the names, qualifications and work plans for technical support teams. These teams are instead conducting their research secretly, with no oversight by the court or the parties involved.
Exceeding his mandate by proposing to conduct an "economic valuation" of the alleged damages, in violation of the court order that appointed him as an expert and designated his duties.
Failing to provide Chevron with adequate notice of his activities so that the parties can observe his work.
Failing to present evidence that demonstrates his qualifications to perform the work and his methodologies.
In its petition, Chevron argues:
"Mr. Cabrera's conduct so far in the inspection process is marked by rank amateurism, disregard for scientific protocol, and irredeemable bias. He has destroyed evidence while his clandestine and unverifiable sampling and testing can never form the basis of any legitimate expert determination of the environmental impact or its source. Mr. Cabrera's work effects a complete denial of due process."
Misconduct by the plaintiffs' attorneys and their technicians
Plaintiffs' attorneys and technicians have demonstrated a complete disregard for the court's orders, generally accepted analysis protocol, and science:
The plaintiffs have failed to comply with the court-ordered sampling protocol and the basic principles of scientific analysis, including:
Citing drinking-water source contamination at 43 sites, despite analyzing drinking water at only 12 sites.
Submitting less than the required number of judicial inspection reports and submitting reports without any supporting data.
Failing to report data for more than half of the samples collected during the first 19 judicial inspections.
Sending only five of 465 soil and water samples for analysis to an accredited laboratory. Notably, the five samples corroborate Chevron's defense. Meanwhile, for the first three years of the trial (consisting of 31 out of 45 judicial inspections), the plaintiffs used a Quito-based lab called HAVOC. According to the Ecuador Accreditation Organization, HAVOC was not accredited for the specific analysis required by the court. A civil court in Quito has attempted to inspect the HAVOC facilities eight times - each time the plaintiffs' attorneys and/or attorneys representing the HAVOC laboratory have blocked the court from conducting the inspection.
Taking samples (75 percent) from areas outside Texpet's remediation obligation areas and misrepresenting their origin.
Reporting the presence of carcinogenic hexavalent chromium when their analytical method did not measure for hexavalent chromium.
Claiming that any metals in soil samples are the result of Texpet's failure to remediate, when in fact metals occur naturally in all soil.
Claiming that contaminants like benzene were present, when in fact these compounds were not detected.
Relying on current standards, which are inapplicable as they cannot be applied retroactively to claim that Texpet failed to conduct proper remediation that was done and approved in accordance with compliance parameters established by the government of Ecuador more than a decade ago. Summing up the reasons the court should reject the plaintiffs' evidence, Chevron argues:
"Whether deliberate or the result of simple ineptitude, the technical reports submitted by plaintiffs' suggested experts show a pattern of gross scientific error that would lead any reasonable scientist or court to reject them.
"Because the scientifically unreliable and biased inspection reports submitted by the plaintiffs' experts violated the Code of Civil Procedure and the Phase 1 protocol and suffered from essential errors-gross mistakes that no reasonable person could conclude were accurate or even made in good faith-under the procedures established by the court and Ecuador law, they should have been expunged from the record of this case."
Evidence Exonerates Texpet and Chevron
Analysis of Chevron's 1,344 water and soil samples confirm Texpet's remediation was effective and demonstrated that the remediated areas pose no significant risk to human health or the environment:
Greater than 99 percent of 172 drinking water samples meet safe drinking limits for petroleum compounds as defined by the World Health Organization and the United States Environmental Protection Agency (USEPA).
Greater than 99 percent of all soil samples collected from Texpet-remediated areas confirm that the remediation met the standards set by the government of Ecuador.
While the plaintiffs claim their data confirmed their case, the only court-ordered independent analysis (Settling Experts Report on well site Sacha 53) corroborated Chevron's conclusions stating:
Texpet's remediation was conducted in accordance with the required parameters of the Remediation Plan approved by the Republic of Ecuador and Petroecuador.
There is low health risk to humans and the environment from oil at that site.
Concentrations of heavy metals in the crude oil are very low and pose a very low risk to the environment.
Results for nearby drinking water showed no contamination from petroleum or metals.
While one isolated area of the site requires remediation, the report acknowledges it is an area outside of the scope of Texpet's remediation program, and appears to be the result of a spill of unknown origin.
It is notable, too, that after the release of the Settling Experts Report on Sacha 53, plaintiffs' attorneys stopped funding their share of the expenses for the settling experts, in violation of court orders and the Code of Civil Procedure. The court has never acted on this matter.
Can I try my guess at this? Will CVX stuff and mount ERHE? then they will put ERHE on Dave O’Reiley's office wall.
There is a world wide shortage of qualified engineers. The good ones have retired, and kids going through college are going into software design or some other high tech. The company I work for often tries to woo retirees back as contractors to try to suppliment staff for large projects. Thats not going to cut it for very long. New grads are scooped up faster than a tripple A MVP by a major league team. 2nd year students are working every year during the summer months as interns.
"Its about time-Its ridiculous watching the big oil co's profit from their own negligence and lack of planning."
Just goes to show how uninformed and ignorant the general public can be.
just for your own info.
It takes years and tons of red tape to get permits to do any type of expansion to a refinery. Also, if you havent been on this planet lately, NOBODY WANTS IT IN THEIR BACK YARD! NOBODY!
It takes tons of people and resources and money just to keep what is there already safe and running to capacity on a day to day basis.
Refinings hardist to replace resource, people with meaningful experience, are retiring in droves. 35% will have retired from 2006 to 2009. You don't just hire off the street and get somebody up to speed to replace another with 25-30 years. Nobody is growing up to say I'm going to be a Refinery Operator, I'm going to be a qualified Refinery Electrician, I'm going to be a Master Welder, Im going to be a Qualified Pipe Fitter. There is a critical shortage of Process Engineers, and a critical shortage of Design Engineers. If you get the permits to expand, It's going to be hard to get somebody to make the design, unless you take them away from the day to day problems. If you got the expertise and resources to do the expansion, and the permits, then the envioronmental laws are going to change by the time everything comes together and then you are going to have to design something different so you can make the new blend, so go get the new permits and go get started on the new design. Refining is a dirty nasty business, the general public does not have a clue, most think that all you have to do is throw money at it, and wave a magic wand. If you don't understand the oil industry, why the hell did you invest in it? Oh, and by the time you have spent your billions to upgrade and expand, you have just reached the end of the bull cycle, so then you can go for another 10 years making less return on the capitol than you can make if you put those billions in a savings account.
A sucessful E&P oil company with 6 employees.
Shows that it can be done. Per Motley Fool.
Two Paths to Upstream Profits
By Toby Shute September 13, 2007
6
Recommendations
To all but the industry insiders, oil and gas investing can be fairly intimidating. We are accustomed to buying gasoline from ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) stations, but to many Fools, the familiarity ends there. If you're thinking about picking individual stocks in this sector, Peter Lynch's adage of "buy what you know" has to be left at the door. Yep, set it down right there. That's it -- now come on inside.
Over the past several months, I've covered the quarterly operating results of various exploration and production (E&P) companies. While I've introduced some fundamental concepts along the way, like per-barrel operating costs and return on average capital employed, I realize that many of these analyses may be more useful if you're already somewhat familiar with the drivers of an E&P company's success.
Today, I want to take a step back and look at the broader strategies employed by some of the most successful small- and mid-cap E&P companies. Fortunately, there's more than one way to win big in this space. Unfortunately, that means there's no single business model to seek out when sifting through the countless publicly traded E&Ps.
To demonstrate the crucial role of a winning strategy in the sector, I'm going to look at two very different upstream operators, both of which have absolutely smoked the Energy Select Sector SPDR (AMEX: XLE) over the past five years. In fact, each business has generated in excess of 1,000% returns for investors over that period. A favorable energy backdrop has provided some lift to the shares, but there's clearly more to it than that.
Path No. 1: Outsource everything
First up is Contango Oil & Gas (AMEX: MCF), a small outfit lead by founder Ken Peak. Mr. Peak doesn't hold quarterly conference calls, but his Fool-esque slideshow presentations provide a lot of insight into the company's philosophy.
Peak argues that the majority of value creation by E&P firms comes from the successful drilling of exploratory wells. That means that Contango is more focused on the "E" than the "P" side of things. The firm has sold proven reserves in the past, and I expect it to follow that model in the future, in order to free up capital for further high-impact investments.
Equally important is Peak's contention that there are no competitive advantages in this highly commoditized business. The only differentiator is cost management. Most everyone in the space necessarily speaks to cost control efforts, but Contango has structured its operations in a uniquely cost-efficient manner.
Contango outsources nearly every aspect of its business -- from prospect generation to legal services. Amazingly, the company has all of six employees. This arrangement obviously makes Contango highly dependent on the quality of its partners, but it has structured the incentives underlying these business relationships in a smart way. For example, on certain projects, exploration partners only get paid after Contango has made its investment back.
Path No. 2: Minimize exploratory risk
This is a much more commonplace strategy, particularly among onshore natural gas players. In the case of folks like Chesapeake Energy (NYSE: CHK) and XTO Energy (NYSE: XTO), they're exploiting extensive unconventional gas plays, and applying a predictable, repeatable approach to drilling out that acreage. If you hear a company talking about a "manufacturing" or "assembly line" model of drilling, this is the path they're taking.
ATP Oil & Gas (Nasdaq: ATPG) takes a slightly different approach. This company works exclusively offshore, which you might view as a recipe for higher exploratory risk. It certainly would be, if ATP were out there exploring.
There's no better way to minimize exploratory risk than to avoid exploration altogether. ATP strictly acquires proven undeveloped assets, and then develops and brings them into production. It has a very strong track record in this regard -- the company pegs its development success rate at 98% since inception.
You might be wondering how that's an effective strategy. First of all, this exclusive focus on development and production totally flies in the face of Ken Peak's assertion about where value creation occurs in the E&P chain. Second, ATP is a small fish in a big pond. (Actually, two ponds -- the Gulf of Mexico and the North Sea.) Certainly the majors and supermajors have equal or better skill at developing these assets, no?
Oh, but ATP's size is crucial to the strategy. The firm is small enough that it is able to pick up assets that aren't strategic to larger players. Note how ATP's two bids in the recent Gulf of Mexico lease sale were both apparent high bids. It's simply not targeting the same prize as the big boys.
The Foolish bottom line
As for the question of value creation, I hope that this quick look at contrasting strategies demonstrates that there are very different ways to earn outsized returns in the E&P space. For that reason, it's not enough to hunt for firms with a low PEG ratio (Contango has none, because there are no analyst estimates) or a low price-to-book (ATP's is off the charts).
To find an upstream winner, you need to look for a company that articulates a clear strategy that differentiates it from the pack. If there's a founder at the helm who owns a huge slug of shares, as is the case with both firms I've presented today, all the better. That tends to be a pretty good sign that the company is onto something special.
Small, dominant businesses with significant inside ownership are the bread and butter of the market-beating Motley Fool Hidden Gems newsletter service. You can check out the newsletter, and all its past stock picks, free for 30 days.
This share count is also doing something else. It is making me feel stronger and less alone. Look at the long holders jumping out of the woodwork. It is astounding to see how many holders have large amounts of shares. After awhile, I begin to think that the stock is held mostly by a bunch of short term traders. I can see now that perception is just that. A perception.
74k shares here!
OT - picture of fire at work.
Just wanted to show why I am wanting my investment here to pan out. Refining is a nasty business. Been cheating harm for 25 years. Good luck to all.
taken with a phone camera.
<a href="http://imajr.com/fire_133068" title="Click for full size image."