The economy, the stock market, and our understanding of the future direction for energy and transportation may all be on the brink of major changes .  This letter will open a discussion of these ideas. 

A Very Tough Month

Before turning to the future, I must confess that the immediate past month was  most painful for the EIS portfolio.   Oil prices hit a violent downdraft in July, which especially impacted my “options on futures” strategy.  It declined in value by about 33%.  Since the purpose of these options is to provide portfolio …

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I strongly recommend the following report from the 7/30/08 Financial Times in its entirety to serious oil supply students, but I will offer the following summarizing comment: According to the CEO of Schlumberger, a serious shortage of personnel trained to operate sophisticated oil drilling equipment, caused by two decades of low oil prices, will severely limit the ability of the industry to expand oil production.  It takes ten years to turn out a fully trained deep ocean drilling technician, apparently. A key element of the problem is that …

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Today I took profits in the Chilean mining company, Sociedad Quimica Y Minera de Chile (SQM), selling 40% of the EIS portfolio’s holdings.  It remains one of the five largest holdings in the portfolio and I have the highest respect for the company.  But the price had appreciated more than 300% since my first purchase just last February, the chart looks like a fully grown hockey stick, and it is now selling at over 50 times running earnings. I bought SQM initially as an alternative energy play.  Lithium …

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By Jeb Blount and Carla Simoes

May 15 (Bloomberg) — Brazil won’t auction new oil properties until at least 2009 because there is a lack of equipment necessary to expand exploration, Mines and Energy Minister Edison Lobao said.

Oil companies need to start work on the leases they already have before Brazil can contemplate its planned Round 10 auction or revive its stalled Round 8 auction, Lobao said today in an interview in Brasilia. State-controlled Petroleo Brasileiro SA, or Petrobras, has seen timetables broken by platform shortages.

To try and reduce …

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A comprehensive report is forthcoming. Models available upon request.UBS: Initiation of US Offshore Drilling SectorTaking the Plunge, Not Afraid of the Deep Initiating sector coverage with a bullish stance. A combination of a strong longer term macro outlook, resilient commodity prices, and attractive valuation leads to our positive recommendation for the U.S. offshore drilling sector. Offshore drillers are highly correlated to oil prices, and we have concurrently dramatically increased our oil price forecast. As the energy cycle continues to lengthen, offshore drillers will …

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Bonanza for Drilling and Service  companies
Tue Mar 11, 2008 9:00am EDT

HOUSTON, March 11 (Reuters) - Deep below the ocean floor off Brazil is Tupi, possibly the largest offshore oil field ever discovered.

Brazil controls Tupi, but getting crude oil out will create billions in revenue for oilfield service companies like Halliburton Co (HAL.N: Quote, Profile, Research) and Transocean Inc (RIG.N: Quote, Profile, Research) that have the expertise needed to tap the extremely complex reservoir.

Brazilian state oil company Petrobras’ (PETR4.SA: Quote, Profile, Research) …

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As readers of this site know, I have the utmost respect for the views of Charlie Maxwell.  His recent interview with EnergyTechStocks.com  has been reported elsewhere, but in case anyone missed it, I recommend that you pay attention.  

It is fascinating to me that Charlie’s views are so congruent with the work that Chris Skrebowski has done using his megaprojects analysis to project peak oil and the timing of future stresses to the global economy from expected oil shortages. Here is a link to part one which discusses the degree …

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Time to Get Back in the Water

I hate market timing. It’s expensive, it’s disruptive to fundamental investment practices, and it often does not work. But in early January I felt that exceptional circumstances required action. So I stepped aside for a few weeks, as I described at the time. I’m glad I did. While the EIS portfolio declined 4.4% for the month, that compares favorably with energy indexes (OIH down 16.7%) and the broad market (SPY down 6%).

The exceptional circumstances, as you know, were the interrelated problems of a …

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From Seeking Alpha
by Stockerblog

With the price of oil bouncing around between $90 and $100 per barrel, maybe its time to look at the oil drillers, which can provide substantially more upside than the large integrated oil companies or the oil income trusts. Here are a list of 14 oil drillers, all but two of which have market caps above $1 billion, and all but two of which pay dividends:.

Atlas Energy Resources (ATN) is a developer of of natural gas and oil principally in Michigan, New York, Pennsylvania, …

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