Wednesday, May 28, 2014

Forbes touts Energy XXI

Good article in Forbes. I own Energy XXI in my Beat Buffett fund and also in my personal accounts. I think it is very undervalued especially considering they are just seeing the beginning fruits of horizontal drilling the Gulf of Mexico.

The past generation of offshore operators drilled vertical wells into those fields to suck up oil as if through a drinking straw. But today Schiller is taking a page from the onshore boom and drilling horizontal wells that will snake sideways through the reservoirs. These, he insists, will produce more oil, last longer, and generate better profits than the onshore shale oil wells in places like the Bakken and Eagle Ford, which have captured so much attention and investment in recent years.

I also thought the view that if it wasn't for shale oil boom in the US world oil prices would already be at $200 per barrel. I agree they would much higher than they are now but the world economy would have collapsed with oil prices that high. Nevertheless the point is taken, not enough oil to go around.

 At a current 92 million barrels per day, world oil consumption has never been higher. Schiller has faith that once the American onshore oil boom levels out, investors will soon begin to appreciate the bounty that EXXI is sitting on. “Don’t believe this ‘the world is awash in oil’ crap. Thank God we added 3 million barrels per day in North America. Do you know where the price would be today without these shale plays? It would be $175 or $200,” he says. “The world is just consuming a vast amount of oil.”

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