Replies to post #46 on The Rising Influence of Rising Affluence

[DewDiligence]

HES was off 11% today and there are rumors it has to do with the company’s drilling a dry hole in Brazil.

On the 28-May-2009 APC webcast at the Sanford Bernstein conference, an analyst asked CEO Jim Hackett, “What did Hess do wrong when they came up empty?” Hackett didn’t answer directly, but he implicitly confirmed that HES had drilled a dry hole by saying he thought HES knew what they had done wrong.

What I don’t get is why there was a delayed reaction and HES’ share price was not hit until now. Could the dry-hole discussion on the recent APC webcast and today’s rumor relate to two different incidents? That strikes me as highly unlikely.

[DewDiligence]

NG-powered transportation is such an obvious solution to US dependency on foreign oil that its lack of support from Washington is baffling.

This is the main topic of the Jim Hackett interview I posted in #msg-38185926.

[DewDiligence]

Re: SeekingAlpha / investment merit of oil-service firms

US firms like Chevron (CVX), ExxonMobil (XOM), and ConocoPhillips (COP) are undervalued and are long term buys.

So far, so good.

Occidental Petroleum (OXY) and Hess (HES) are more directly leveraged to oil prices than are the big three and may well appreciate at faster rates going forward.

The institutional portfolio I manage has HES for exactly this reason (#msg-38256080). (We don’t have OXY, but I have nothing in particular against the company or the stock.)

Oil service firms like Schlumberger (SLB), Transocean (RIG), and Diamond Offshore (DO) will perform well in the era of peak oil as the world continues its unwise addiction to gasoline based transportation solutions.

I have a problem with this assertion! First, what if NG-powered transportation does catch on in a big way? More important, putting aside the issue of how transportation will be powered, how can investors be certain that rising oil prices will automatically boost profits of the oil-service companies in proportion to the price rise (or better)?

Higher oil prices will presumably lead to more drilling and a higher volume of business for service companies, but there’s a limit to how many projects these firms can undertake at one time. Once oil prices are sufficiently high to allow the service firms to be fully engaged, it’s unclear to me how they benefit to a significant degree from even higher prices. The institutional portfolio I manage does not currently own SLB, RIG, or DO.

Comments?