That’s why, in my investment letter, Outstanding Investments, I’ve constructed a kind of end-to-end offshore energy mutual fund – from prospect to pipeline. Each company has a broad skill set. None is just a one-trick pony. Some of the companies overlap in skill sets, and even compete with each other.

A few of my favorite names include Norway’s offshore powerhouse StatoilHydro (STO: NYSE), as well as subsea equipment provider FMC Technologies (FTI: NYSE). Then there’s platform and pipeline builder McDermott Intl. (MDR: NYSE), as well as offshore services provider Superior Energy Services (SPN: NYSE).

Going forward, I’m be looking to recommend other deepwater plays…at the right price, of course. I’m looking for companies that can grab hold of key parts of the growing offshore business, and produce great profits in the coming years. I think you’re going to be astonished at what unfolds.

I recently attended the annual convention of the American Association of Petroleum Geologists (AAPG). (Some guys go to classic car shows; I go to geologist conventions). I’ve been a member of AAPG for 30 years, and it’s always fascinating to spend some time there. The meeting rooms and poster sessions feature reports from the front lines of the search for petroleum, natural gas and other energy resources.

One theme emerged loud and clear from this year’s conference: Deepwater. Most of the major oil discoveries that remain to be found in the world will be offshore, in deep water.

The always-ebullient Brazilian geochemist, Marcio Mello — CEO of Brazil’s HRT Petroleum Co. — wowed the crowd with a discussion of the oil potential of the South Atlantic. “Six of the last ten giant oil discoveries in the world were offshore Brazil,” he pointed out. And then Marcio moved the discussion to the other side of the South Atlantic and gave an eye-popping description of the oil potential of the offshore regions of Namibia.

“The Namibian offshore is analogous to that of Brazil,” Marcio stated, with slides and hard data to back it up. Then he showed his proprietary research into natural offshore oil seeps off Namibia, and the geochemistry that demonstrates immense hydrocarbon potential. “But Namibia,” said Marcio, “is way underexplored. So you can put down a little money for the concessions and get very rich.”

The point for investors is how much of future world energy development will involve subsea systems.

For additional perspective, let’s examine the current structure of the American energy supply. Right now, most of the U.S. energy mix comes from burning coal, natural gas and oil. In fact, according to the U.S. Department of Energy, the U.S. gets 87% of its total energy mix from burning fossil fuels. Another 7% of U.S. energy supply comes from nuclear power. The total is 94%.

That leaves about 6% of the U.S. energy mix to come from so-called “renewable” and alternative sources. And 3% of that 6% is renewable hydropower from unique sources like the Hoover, Grand Coulee and other dams. And we’re not building any more big dams.

Thus, only about 3% of U.S. total energy comes from things that grow, blow or shine. Of that 3%, about half (1.5%) is from “biofuels,” and that’s if you count a company like Weyerhaeuser (WY: NYSE) burning sawdust to run the sawmills.

Finally, there’s a very minor part of the total U.S. energy mix — about 1.5% — that comes from windmills, solar and geothermal. For as much visibility as these things get in the media and pop culture, their energy output is tiny — slightly above statistical noise in the overall national mix.

So just follow the numbers. The “alternative” energy sources are a miniscule component of the current energy mix. That’s after a few good years of significant investment, with lots of political support and plenty of tax breaks.

It will take many years (many decades!) for these energy sources to expand and meet the energy needs of the U.S. And that’s despite whatever the politicians and policymakers wish for in their dreams.

That’s why the U.S. must continue exploring for oil and gas. I cringe when I look at the falling rig counts in the U.S. and around the world. Every well that’s NOT drilled is one less source of hydrocarbon in the years to come, as depletion causes output from current wells to decline…which brings us back to the South Atlantic, one of the world’s greatest petroleum provinces.

Some experts think that the hydrocarbon resources in the pre-salt formations off the Brazilian coast may rival those of Saudi Arabia in magnitude. We’ll see about that. But it’s beyond dispute that Brazil and its energy resources are a complete game-changer for that nation, and the rest of the energy-consuming world. It goes back to basic geology and the history of plate tectonics.

When South America started to pull away from Africa about 140 million years ago, an isolated seaway formed — a proto-Atlantic Ocean — that filled again and again with sequences of limestone, thin shales and, finally, massive salt beds. The processes of petroleum geology worked as advertised in the region. And these processes left utterly eye-popping volumes of petroleum locked in high-quality reservoirs covering vast areas.

The big downside (and it’s big and down, to be sure!) is that all that oil is under a mile or two of South Atlantic seawater, covered by three or four miles of rock and salt beds — it depends where you’re located on the continental shelf and slope.

But that’s why it takes companies with phenomenal technical and managerial skills, plus deep pockets, to play in this great game. The bottom line is that with the right companies working at it, there’s enough oil down there to produce a very big payday, not just for Brazil, but for many of the companies that contribute to the effort.

I’ll discuss at length the new developments offshore Brazil during my talk in Vancouver at the upcoming Investor Symposium, July 21-24. The title of my talk will be Is God Brazilian? So that ought to give you a clue about what I think lies under all that water column and rock down there.

Source: Deep, Wet and Brazilian

Don’t expect oil prices to remain at these low levels for long, says Byron King. Demand weakness for crude is temporary. And oil-producing nations cannot sustain their own economies unless oil prices are close to $100 a barrel. Byron says it could be time for investors to slowly build up a position in oil service stocks.

This from Whiskey & Gunpowder:

Along with the market decline, the price of oil has fallen. It’s down 50% within three months. Back when oil hit $147 per barrel in July, I said that the price “ought” to be in the range of $100-110, with the possibility of a drop into the $90s. That’s what the fundamentals told me back then.

Most of the decline in oil price from $147 down to about $100 was directly related to the strengthening of the dollar. So the oil price slide in July, August and the first part of September was mostly a monetary phenomenon.

Then we had the mid-September credit crunch and market meltdown. That dragged the price of oil from $100 or so per barrel down into the $70s (with price excursions down into the $60s). The demand weakness for oil has become clear in the past six weeks or so. Everybody just sort of woke up and figured out that the world was entering into a recession. The flip side is that inventories are building back up.

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The Fed’s Handout Line Open to All Failing Companies

Who will be the next failing company to come to the Fed with hands out ready for a handout? It’s hard to tell…unless you have the right information.

One quick look at the secret 100-F document of Lehman Bros. and AIG would have predicted their collapse. Find out which company will be next by clicking here.

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This has taken down all of the oil and oil-service companies. Among the latter, Superior Energy Services (NYSE:SPN), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) have all tumbled. Even the perennially “too expensive” Schlumberger is way down.

The thing about the oil service companies, though, is that a lot of their business is all but recession proof. And much of the oil service business is immune even to wide swings in oil prices. That is, many oil company capital budgets are drawn up a couple of years ahead of time. So oil service companies should have work despite the macroeconomic situation. Not as much as in the boom times, maybe. But it’s not going to be as bad for the oil service companies as a lot of people seem to think.

There are many reasons for this. Sometimes an oil company has leases that are going to expire if it does not drill within a certain time frame. So the oil company has to drill. Or maybe the oil company has a rig under contract. So it has to drill before the contract expires and the rig moves on to other sites. Or maybe there is maintenance or a major workover on a well or field that just plain has to get done for reasons of safety or the environment. As I said, there can be a lot of reasons.

So keep an eye on the oil service companies. As Monty Python once said, they are “not dead yet.” The oil service companies are way down from previous high prices. I believe that this is a time to nibble. Don’t blow your whole wad of cash, but begin to accumulate a position while we watch how the larger economy unfolds. I think we’ll see stronger oil prices sooner, rather than later.

Oil Exporters Surprised, and Waiting at the Rope Line

Speaking of how the larger economy unfolds, some of the most surprised people on the planet are the folks who run oil-exporting countries. Hey, they believed their own press releases. They thought that oil prices would continue to rise upward, ever upward. All they had to do was figure out what to do with all the money that was going to pile up in their bank accounts. No waiting at the rope line for these worthies. But right now, demand destruction trumps even market manipulation by OPEC, not to mention the inexorable effects of depletion.

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Get Gold Cheap… Before It Takes Off Again

Gold is giving you another chance to get in for the inevitable ride up at a bargain.

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So what are the OPEC people thinking? They are hopping mad. The OPEC folks sure got used to high oil prices in a hurry. They don’t like these low oil prices. It costs money to run a petro-welfare state.

According to the International Monetary Fund, Iran, Venezuela and Nigeria need oil prices above $95 per barrel just to cover their respective national budgets. Saudi Arabia requires oil prices above $75 to cover its budget. Well over half of the revenues of the Russian Federation come from taxes on hydrocarbons. Mexico gets over 40% of its federal revenues from taxes on Petroleos Mexicanos (Pemex), the national oil company.

So low oil prices are causing problems for the oil-exporting states of the world. No major oil exporting country can long afford to see oil prices where they are now. Come what may, OPEC is going to turn valves and reduce supply. It’s just a question of how soon this will occur, how much oil OPEC will take off the market and what that will do to pricing. No less an authority than Hugo Chavez of Venezuela recently stated that “Venezuela can live with a price of $90 to $100 per barrel. But not less than that.”

“The Era of Cheap Oil Is Finished”

According to Iranian Oil Minister Gholamhossein Nozari, “The era of cheap oil is finished.” When a reporter from the New York Times asked Nozari what price Iran would want for its oil, Nozari declared, “The more the better.” Nozari stated that he is urging his fellow OPEC members to cut production by up to 2.5 million barrels per day.

How much oil is 2.5 million barrels? By comparison, the $6 billion BP (NYSE:BP) Thunder Horse Platform — 20 years in the making in deep water in the Gulf of Mexico — should produce 250,000 barrels per day by the end of 2009. So with one move by OPEC, there goes the equivalent of 10 Thunder Horses.

OPEC representatives are touring national capitals, urging non-OPEC oil producers, such as Russia, Mexico and Norway, to follow the cartel’s lead and cut production, according to Reuters news services. OPEC is trying to engineer a coordinated move to drive oil prices back up over $100 per barrel.

Most OPEC nations have already reached their own version of “Peak Oil.” Traditional oil-export powerhouses like Iran and Kuwait have admitted as much. Aside from Saudi Arabia, most OPEC exporters see a window of less than 20 years for significant international oil exports. By then, internal rising demand and falling output (due to depletion) will severely constrain the world oil markets. So all OPEC nations are interested in selling oil now for as much as they can get.

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The End of Cheap Oil

You wouldn’t think so. After all, oil prices just plummeted…

But the fundamentals are clear as day. Oil is destined to get a lot more expensive.

It’s going to change life in the U.S. and the world…forever…but you can protect yourself and prosper… Click here to take advantage of oil’s temporarily lower prices.

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“We Want the Money Now”

Last May, I attended the Offshore Technology Conference in Houston. I had a revealing discussion with an oil manager who works for the national oil company of an African country. He told me this:

“The Saudis think there is an ‘optimum’ price for oil. They don’t want to raise prices too much, too fast. They say it will kill the economies of the West. But for my nation, we disagree. There is no ‘optimum’ price for oil. We don’t care about the economic effects on Western consumers. If Western consumers want to drive, they will pay. Or they can walk, like millions of people do where I come from. So we pump oil every day. We want to get as much as we can for the oil. We want the money now so we can fund the priorities of our national government. We cannot tell the people that they have to live in poverty for another generation because we are afraid that Westerners will not be able to drive their Mercedes-Benzes.”

So you can see why the odds favor rising oil prices within a few months.

Source: Oil Prices Down…for Now

Many in the mainstream press are calling an end to the “commodities bubble.” But oil and energy expert Byron King warns investors against betting against cheap oil and gold.

Byron says what we are seeing now is a short- to medium-term correction in the trends for energy and resources. Investors who buy beaten-up oil service stocks and gold miners now stand to make major profits…

Back when oil was in the $140s, I said – in both print and broadcast interviews – that oil prices were running up too far, too fast. I predicted that oil prices would decline to $100-110, based on the fundamentals. Well, we’ve seen the decline and we’re almost there.

High oil prices have caused big changes in patterns of consumption. Indeed, the U.S. Department of Energy just announced that U.S. oil demand fell by about 800,000 barrels per day during the first half of 2008, compared with the same period last year. This is the biggest volume decline in 26 years, since the recession of the early 1980s.

Sure, some headlines describe what’s going on as something like the “oil bubble” or “commodities bubble” popping. Some people are talking and acting as if we were going back in time to the last era of cheap energy, cheap gold and cheap commodities. But don’t believe it. Don’t bet on it. And don’t play the markets that way.

A Gold And Oil Correction Was Due

What’s going on? We are in the midst of a short- to medium-term correction in the trends for energy and resources. Keep this in mind: This is a CORRECTION, not a fundamental change in the long-term correlation of things.

The long-term trends are still upward, in terms of value and pricing. But for now, the money is leaving energy and resources for pastures that look greener.

What pastures are greener? Well — speaking of green — the U.S. dollar is strengthening. It turns out that the euro is not the powerhouse currency that a lot of people believed it was. So the dollar has been strengthening against the euro for the past couple of weeks.

The Euro Can Go Down

And it turns out that euroland has its own economic problems. In fact, the euro can go down against the dollar, as well as up. That’s exactly what has happened. Euro down, dollar up. So in consequence, we are seeing the dollar going up, and oil and gold going down.

There is more to the equation. The economists are describing a recession occurring in parts of the euroland economic space. Germany — with Europe’s largest economy — has been hard hit, so there’s been quite a bit of drag on the euroland economy.

And then there are indications that the long-awaited U.S. recession is finally just around the corner. Really, we are just in the middle innings of the banking meltdown and housing crash in the U.S. The recent stock market turnaround may just be the seventh- inning stretch. I expect to see more large banks and investment houses either fail or get bailed out before the end of 2008.

So with two of the world’s largest economies about to enter the doldrums, world markets are seeing demand for energy and commodities slacken.

Thus, we have monetary issues with the dollar. And there are demand issues with economic slowdown in two of the world’s largest economic blocks. Prices for benchmark items like gold and oil are falling.

Stocks to be looking at…

And this is taking the stuffing out of energy and gold stocks. The mining stocks are down. The oils and service companies are down. It’s painful to watch. But it’s not a reason to give up.

As I said, this is a correction. This is an August swoon. Share prices are down, so it’s time to look at your shopping list. You can pick up shares in 2008 and pay 2005 prices. You can build a portfolio for the next five years with some prudent stock picking in the next couple of months.

Some of the most beaten-up oil and oil service companies are Apache (APA: NYSE), Halliburton (HAL: NYSE), Baker Hughes (BHI: NYSE) and Superior Energy Services (SPN: NYSE).

Some of the most beaten-up miners are Kinross Gold Corp. (KGC: NYSE), Yamana (AUY: NYSE), Hecla Mining (HL: NYSE) and the development-stage NovaGold (NG: AMEX).

When oil and gold turn around – which they will – all of these companies should do very well.

Source: The Gold and Oil Correction