The Rising Influence of Rising Affluence

[OakesCS]

Sutherlin’s comments re Tesco

DoA ;^)

you found the comment i intended you to see.

Sutherlin was only a director of Tesco; unfortunately directors frequently don't know much about the businesses they supposedly oversee. Hopefully for you he knows more about mining.

The nat gas business has fundamentally changed from 15 yrs ago and there is no going back. People who make historical comparisons between the price ratio of oil to NG and then conclude that NG prices must rise to get back to that historic ratio are ignoring that fundamental change and will probably lose their money [hopefully i got the lose/loose case correct so Dew won't delete my post].

Whether Tesco's market cap is $250M or $300M is irrelevant - both are miniscule compared to the major players in the overall natural gas services industry.

part of the reason for the fundamental change in the NG market is the advent of cheap means of exploiting shale gas. Because sophisticated drilling, completion, and production techniques are not necessary for shale gas dozens of "mom & pop" drilling and production companies have cropped up to exploit shale gas reservoirs. This has resulted in a situation that is a bit like the California gold rush of the 1850s where thousands of small operators descended on the resource and rapidly and sloppily stripped off the easiest and richest reserves. That didn't last long - partially because the sloppiness caused health and environmental hazards. The same is starting to happen in the shale gas business because small operators tend to be on the sloppy side. In addition, when NG was higher, drillers were just drilling wells w/o regard to whether or not a well was economic. If enough holes were drilled the avg would work out to being profitable. That won't last either. Eventually, the big service companies will gain back the market and be able to impose higher prices on the market.

So, yes, NG prices will increase again but I wouldn't bet on the oil:NG price ratio to close to its historic avg. When NG will make it back to $7 is outside my willingness to speculate but in anycase I wouldn't bet on Tesco being a big grower in market share or stock price. Whether or not that will have any bearing on JOYG is something I know not.