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In This Issue:
The Phantom Trader Weekly update
Market Insights…Special Situations…Traders Network
Ø ST
Ø The Hubbert Peak
Ø Take The Money And Run
Dear Reader,
Last week I mentioned that San Telmo Energy (STUOF: OTCBB, $0.78) was a screaming buy. Shares are already up 15% since then, but it’s not too late.
The company just raised another $2.8 million. Among other things, the money will be used to tie in production at Tepee Creek, and to drill up to 6 additional wells over the coming months.
It’s been a long time coming, but the company is now a producer. And granted, there have been some delays and problems related to getting production tied in, but issues are minor in relation to he opportunity ST presents at current price levels.
By year end the company should be producing around 2,000 boed. And beyond that, I firmly believe we’ll see the 3,000 barrel mark early next year.
Buy San Telmo at current levels for quick gains, and long-term growth.
For portfolio purposes, I’ll treat this position as separate from our initial ST position.
*****
It’s hard not to pay attention to the price of oil these days.
Especially if you own a gas-thirsty SUV, you’ve been taking a noticeable hit at the pump. $40 oil, and the resultant $2 gas, is a first for this country. Yet there may be a time when we look upon these prices as the good ole’ days.
That’s because we could see $50 oil before long. And it’s not out of the question to talk about $75 oil. There’s a good case to be made that world production is nearing its peak.
Many of the massive Saudi oilfields are said to be near their peak. Named after the late Dr. M. King Hubbert, the “Hubbert Peak” is simply a theory or method for determining when a particular field, or the world, reaches peak production. In fact, it can be applied to just about any relevant system.
There are basic laws that define any finite resource:
• Production starts at zero
• Production rises to a peak which cannot be surpassed
• Once the peak has been reached, production declines—often rapidly—until the resource is depleted
Once the peak is reached, half the recoverable oil has been consumed.
Of course, the implications for a peak in world production are staggering. When that point is reached, the era of cheap oil will be long gone.
I’ll go into this topic in more depth in the coming weeks. But one thing is clear: As we reach the Hubbert Peak, there will be tremendous opportunity not only in the oil and gas sector, but resultant and developing energy sectors, such as fuel cells and unconventional energy sources.
Keep that in mind next time you shell out $2.40 a gallon to fill up the Hummer.
*****
It was June of last year when I first brought DHB to your attention. Since then, we’ve enjoyed gains of more than 125%. Not bad at all, especially considering the choppy market conditions of the past several weeks.
The way I see it, we should take some money off the table now. This way we’re guaranteed to have some ammo ready for new and developing situations.
Let me stress that there’s nothing fundamentally wrong with the company. I think their future is bright. Especially considering the fact that US troops are likely to be in Iraq, Afghanistan, and scores of other hellholes for a long, long time.
That alone should be enough to drive DHB’s growth.
Regardless, let’s take our profits and run. I’ll have some new ideas on how and where to deploy that capital in the next week.
Sell DHB.
Until then,
PT
