Tuesday, August 22, 2017

Permian basin could have "infinite" supply of oil. Adding Occidental Petroleum (OXY) to portfolio



We should view the Permian Basin as a permanent resource," he says, "The Permian is best viewed as a near infinite resource - we will never produce the last drop of economic oil from the Basin."

No one disputes that the resource in the Permian is huge, but 'infinite' is a big word.  I asked him to expand on that concept.  "That is the practical reality with the amount of resource that is in the ground," he says, "The research we've done indicates that we have at least half a trillion barrels in the Permian at reasonable economics, and it could be as high as 2 trillion barrels.  That is, as a practical matter, an infinite amount of resource, and it is something that has huge geopolitical consequence for the United States, in a very good way.  It has a huge consequence in terms of GDP, and right now it is creating an American energy global ascendancy."

It is curious that over time we have been told we constantly running out of resources like oil but we never do.

I think what is meant by a permanent resource is that we will transition away from using oil as a primary transportation fuel well before we produce the last economic barrel.

Anyway, I have been looking at OXY for a while anyway and recently read another article that discussed how the new CEO has streamlined the company and refocused on the Permian basin, petrochemicals, and the mid stream operations.

In addition, OXY has initiated oil exports from the former Ingleside, naval base in south Texas.

not much to discuss except they control a million acres in the Permian, low cost producer, dividend is around 5-6%, and the CEO has said she wants to increase cashflow protect the dividend and grow the share price.

Oil is out of favor currently but it is a commodity and goes through cycles. I think we are closer to the bottom so I am taking a position.

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