Replies to post #100 on Strictly: Drilling

[Old Frank P]

Bob, brief explanation -- upstream means exploration and production; it's the gauge for sustainable growth. Downstream means refining and marketing, including income from gas station and variety stores, this sector of the operation offers more revenue and better profit margins in bad times. Integrated companies like Husky, Petro Canada, Suncor, Imperial and Shell have both upstream and downstream operations. These companies tend to be measured more conservatively, and are not considered growth machines unless you look into the Canadian sector.

Alberta is second only to Arabia for its oil export to the U.S., if by any chance there is a disruption in the Persian Gulf (Strait of Hormuz) guess what province becomes strategically important to the U.S. war on terrorism.

By the way, there is very little conventional oil left in North America, which leaves us with the tarsands projects here in Alberta. The reason I like Canuck integrated oils is because they're heavily levered in the oilsands. Suncor, for instance, is doubling production this year, they will double production yet again, for 2008 – they guys are growth machines. All the above companies I’ve mentioned are expanding upstream and downstream operations at a nice clip.

So it’s really up to you and your view of how long and how dramatic this war is going to be. If it’s finished by the end of the month, a trip into the oils will be an expensive holiday because of world wide economic contraction. If you believe the war to be long, oil will perform as well as gold, if not better long-term.

Regards
Frank P.