The problem, of course, is that if manufacturers can’t borrow to buy from suppliers, and wholesalers can’t borrow to buy from manufacturers, and retailers can’t borrow to buy from wholesalers, then consumers can’t get auto loans, credit cards, and mortgages.

The economy faces a serious headwind.

The companies in the toughest position, however, are those that are highly leveraged. Even though interest rates have fallen substantially, they aren’t able to access the credit markets (at reasonable rates) or increase their bank lines to get the liquidity they need.

And therein lies an enormous opportunity for investors like you and me – profiting from corporate takeovers.

Corporate Takeovers – Solid Companies vs. Weak Competition

Companies that have solid balance sheets and high levels of cash are now in a position to scoop up their weakened competitors through corporate takeovers. That allows them to purchase assets on the cheap and potentially increase their profit margins – by eliminating the competition – at the same time.

Let me give you a few examples.

• In the U.S. recently, drug giants Merck (NYSE:MRK) and Pfizer (NYSE:PFE) have unveiled deals to buy Wyeth (NYSE:WYE) and Shcering-Plough (NYSE:SGP), respectively.
• Chinese companies, backed by the dollar-flush Chinese government, have been on a shopping spree lately. Already this year, Chinese firms have announced more than 300 takeovers totaling nearly $68 billion.
• In the pharmaceutical industry, there is plenty of fair game. Many small biotechs, for example, are running out of capital. This dovetails nicely with Big Pharma’s shrinking drug pipelines.
• The gaming industry, too, is hurting bad. For instance, credit downgrades and potential bankruptcy hang over companies like MGM Mirage (NYSE:MGM) and Harrah’s. But Penn National (NASDAQ:PENN) is in a fine position to buy them or other weakened competitors.
• Look at the oil equipment leasing industry. Nabor Industries (NYSE:NBR) carries $4 billion in debt. (Earlier this year it had to pay 9.25% to raise $1.1 billion.)
• But Patterson UTI Energy (NASDAQ:PTEN) is laughing all the way to the bank. Its sound financial condition – and zero debt – are allowing it to invest millions in new equipment.

When the price of oil rebounds who will be in the best position to prosper? Clearly, it’s Patterson. That forces Nabor to at least consider the idea of putting itself up for sale.

This same corporate takeover scenario is playing out in multiple industries in markets all over the world.

How Many Potential Corporate Takeover Candidates Are In Your Portfolio?

Yet when I ask investors how many potential corporate takeover candidates they have in their portfolio, more often than not they simply shrug their shoulders and say “none.”

That’s unfortunate. Investor’s Business Daily recently reported a survey of institutional investors conducted by Boston Consulting. Over 80% of them agree that the current market represents a “once in a lifetime” opportunity for corporate takeovers.

My advice? Don’t rest on your laurels. Buy a handful of potential corporate takeover targets now – before all the new deals starting popping.

Good investing,

Alexander Green

Source: Corporate Takeovers: ‘Once in a Lifetime’ Investment Opportunities

According to Leon, “This is the most difficult environment I’ve lived through. And I’ve been doing this for 41 years.”

Capital & Crisis editor Chris Mayer caught up with Leon at a value investing conference recently. Cooperman presented Atlas Pipeline (NYSE:APL) as one of his favorite ideas of the moment — a pick Chris previously recommended to Catital & Crisis readers.

More from Chris:

Atlas is a natural gas pipeline company. It owns 1,600 miles of pipeline connected to nearly 6,000 wells and is adding over 800 new wells per year. It also operates a growing interstate pipeline system in the Fayetteville Shale.

These are low-risk assets, and Atlas continues to increase its dividend every year. Cooperman expects Atlas to increase its dividend for years to come, given the prime location of its pipelines in Appalachia.

Atlas will pay about $4.25 next year. It closed yesterday at $21.70. That’s good for a yield of 17.7%! As Cooperman said, “At my age, a dividend yield like that is better than sex, but that’s just me.”

Cooperman thinks APL is worth at least $46 per share, which is close to where my numbers come in. (Hence, my “buy up-to-price” of $48 per share, which, admittedly, is sort of comical now with the stock at $17).

Comparable master limited partnerships (or MLPs) yield about 12%. As Cooperman said, he can find no reason why such a discrepancy exists. The market has completely trashed the MLP universe in general. Cooperman offered two reasons for this. The first is that these investments were popular with hedge funds that would borrow cheaper money and park it in higher-yield MLPs. The market sell-off forced many of these hedge funds to sell out of these investments.

The second is that since the credit markets are locked up and MLPs need access to capital to do “transformational acquisitions,” as Cooperman put it. The market thinks growth rates here are dead. As Cooperman pointed out, at a 17% yield, you don’t really care about growth. Even so, Cooperman thinks APL will continue to grow at low single-digit rates without access to capital, as more product passes through its existing pipelines.

Another old-timer, Seth Glickenhaus, now 94 years old, also likes the pipeline companies.

There was a nice article about Setch in The Wall Street Journal last week: “A Street Longtimer Speaks,” by E.S. Browning. He’s the chief investment officer at Glickenhaus & Co., which manages $1.8 billion. The longevity of the value crowd is always inspiring. You don’t see in-and-out traders still working it in their 90s.

Glickenhaus told the Journal, “We like pipeline stocks with good yields and stable businesses.”

]]> http://www.contrarianprofits.com/articles/follow-investing-guru-leon-cooperman-into-atlas-pipeline-apl/6139/feed 0 http://www.contrarianprofits.com/articles/where-will-future-oil-production-come-from-and-how-can-investors-profit-today-part-2/2418 http://www.contrarianprofits.com/articles/where-will-future-oil-production-come-from-and-how-can-investors-profit-today-part-2/2418#comments Fri, 23 May 2008 12:36:51 +0000 Dan Denning http://www.contrarianprofits.com/articles/where-will-future-oil-production-come-from-and-how-can-investors-profit-today-part-2/2418 The IEA forecast for a daily increase in global oil production of 31 million barrels by 2030—a 37% jump—sounds like pure fantasy. Do the facts support it? Are big oil companies already searching for that future oil and finding it? Do they have plans to produce it?

To answer those questions we turn to a report published in late March by UBS energy analyst Jon Rigby and his team in London. Their incredibly useful report is called, “Will there be enough production capacity?” UBS has been battered by its huge sub-prime related losses. But their work on where future oil production will actually come from nearly redeems them. They have asked just the right question at the right time, and answered…

]]> The IEA forecast for a daily increase in global oil production of 31 million barrels by 2030—a 37% jump—sounds like pure fantasy. Do the facts support it? Are big oil companies already searching for that future oil and finding it? Do they have plans to produce it?

To answer those questions we turn to a report published in late March by UBS energy analyst Jon Rigby and his team in London. Their incredibly useful report is called, “Will there be enough production capacity?” UBS has been battered by its huge sub-prime related losses. But their work on where future oil production will actually come from nearly redeems them. They have asked just the right question at the right time, and answered it in detail.

The report reaches a number of surprising conclusions about the global oil market. It also includes a useful database of oil projects scheduled to enter production in the next five years. These are projects which could add meaningful capacity (100kbpd or more) to global oil production. We’ll look at who stands to benefit in a moment. But first, some of the report’s findings [emphasis added is ours]:

• “Declining existing basins, rising costs, increased technical challenges, stretched supply chains, geopolitical blocks and tightening fiscal terms all seem impediments to growing global production capacity for oil and gas, despite the clear pricing signals.
• “There is no obvious wall of new production coming to the market in response to high prices.”
• New projects scheduled to come on-line from National Oil Companies (NOCs) belong mostly to three major firms: Aramco, Petrobras, and Gazprom.
• New project cost is rising and becoming more technologically challenging, especially deep-water.
• “Nominal growth rates tied to global GDP now look more unrealistic as potential upstream growth slows. This appears reasonably consistent with a growing view that oil production may actually not exceed 100Mbbl/d.”

The idea that global oil production may never exceed 100mbbl/d is worth a much closer look. I’ll get to that later. But before we look at the end, let us look at the beginning of the end and where new production might come from as the world’s oil producers try to bridge the gap between 87mbpd and 117mbpd.

The good news is that there IS new production capacity in the pipeline this year and next. Keep in mind that the final investment decision on the projects entering into production this year was made anywhere from 3-6 years ago. That shows you how far in advance you have to plan for new production (assuming you’ve even found oil in the first place).

There is no such thing as just-in-time oil production. But let’s take a look at projects that will come on line between now and 2010. We’ve selected only those projects that will produce more than 200kbp or more:

Country	Project Name	Oil (kb/d)	Operator	Project Type
Kazakhstan	Tengiz Expansion	250	Chevron	Conventional
United States	Thunder Horse	250	BP	Deepwater
Saudi Arabia	Hawiyah NGL	370	Aramco	Conventional
Saudi Arabia	Khursaniya	500	Aramco	Conventional
Saudi Arabia	Shaybah Expansion	250	Aramco	Conventional
Saudi Arabia	Khrurais expansion	1,200	Aramco	Conventional
Azerbaijan	ACG Phase 3	400	BP	Deepwater
Nigeria	Agbami	250	Chevron	Deepwater
UAE	Upper Zakum	200	ExxonMobil	Conventional
Qatar	Pearl GTL	210	Shell	GTL

If you include LNG and the barrels of oil equivalent produced from it, your list expands a little more to include the following projects:

Country	Project Name	Oil (kboe/d)	Operator	Project Type
Qatar	RasGas3, Train 6	291	ExxonMobil	LNG
Qatar	RasGas3, Train 7	291	ExxonMobil	LNG
Peru	Camisea	224	Hunt Oil	LNG
Qatar	Qatargas4, Train 7	251	Shell	LNG

Beyond 2010, the future is murkier. But the UBS team has identified projects for which the final investment decision has been made. Assuming cost blowouts can be avoided and the projects aren’t cancelled, here are some of the bigger projects that could come on-stream between 2011 and 2015:

Country	Project Name	Oil (kb/d)	Operator	Project Type
Saudi Arabia	Manifa	900	Aramco	Conventional
Kazakhstan	Kashagan Phase 1	450	Eni	Conventional
Iran	Yadavaran	300	NIOC	Conventional
Kuwait	Kuwait North Redevelopment	450	KPC	Conventional
Kazakhstan	Kashagan Phase 2	550	Kazakh JV	Conventional

There are some massive LNG and natural gas projects coming on-stream between 2011 and 2015. Gazprom, Shell, BP, and ExxonMobil all look like big winners, should oil prices stay high and pass through to higher LNG prices.

The new oil finds off-shore in Brazil’s Santos Basin are not included in the UBS report because they are not likely to enter into production during the next five years. They will be difficult to produce in any event. Petrobras says the Tupi find may contain as many as 8 million barrels, while the Carioca field may have 33 billion barrels of reserves, of which about 10 billion could be recoverable, according to Citigroup.

Current Production Trumps Reserves

One UBS claim which may surprise older oil hands is that, “the capacity to produce—not reserves—is critical to energy markets.” UBS does not conclude that current producers should be valued differently that companies with large reserves but current production challenges. But it’s worth thinking about.

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