Fossil Fuels - Energy and Capital

Better than Big Oil

Energy is — and always will be — a profitable long-term play.

You should know that by now.

If you don't believe it, you're better off burning your cash for warmth.

Last week, I shed some light on the Mexican oil crisis. At first glance, I'll admit my sour view of Mexico's oil production is more doom and gloom, but I'm hard pressed to find a reason why they won't self-destruct from Pemex's production collapsing.

But does that grim outlook mean we're should throw in the towel?

Absolutely not...

Several weeks ago, I asked a quick, simple question: Right now, which energy plays are you most comfortable holding for the long run?

The answers that flooded my e-mail inbox shocked me.

The vast majority of responses were one of the supermajor oil companies: ExxonMobil, ConocoPhillips, Royal Dutch Shell, Chevron, and BP.

I had to learn why.

Trouble for the supermajors

At first, I had to grudgingly admit the supermajors have given shareholders a nice return — assuming you were lucky enough to invest in them twenty-five years ago...

No matter how skeptical I am of the supermajors, they've certainly paid off over the long run — even if it took holding your position for two decades.

But their luck has run out.

There's one reason why I'm not too thrilled about their future returns: national oil companies.

You've heard of them before... China's CNOOC, Saudi Arabia's Saudi Aramco, Russia's Gazprom, and Venezuela's PDVSA are just a few on that list.

And let's not fool ourselves; these are the true oil giants. In total, national oil companies control approximately 90% of the world's proven oil reserves and more than half of the world's oil production. That share will continue growing over time.

Think about it...

Two years ago, oil prices reached an all-time high of $144 per barrel. If anything, countries are suddenly realizing how valuable their natural resources have become — and they're not going to give them up without a fight.

When Iraq first opened bidding to develop several major oil and gas fields, companies were rejected because their bids were too low. Yet the complications which arose during Iraq's bidding process were trivial compared how other countries handled the supermajors.

In Chavez's May Day takeover in 2007, he officially took control of the last privately run oil fields. Compensation for the former owners was far lower than market value.

Now, it's doubtful that Venezuela's state-run company will have neither the money nor expertise to develop the massive Orinoco Belt oil projects.

Within the last few years, it's almost become cliché for countries to give the finger to ExxonMobil and crowd. And the increased sensitivity over national resources is a signal that things will get much tighter for the supermajors.

The effect was clear...

Over the last year, only two of the six supermajors have managed a small gain for shareholders.

Take a look for yourself:

As I said before, there are much better long-term opportunities than these dying supermajors.

Infrastructure investing

One of the problems with energy traders today is that they always fail to look ahead. Maybe they don't have the same bullish outlook on energy that we do.

Not that those opportunities aren't there, mind you.

Sometimes the stars align, and all the hard work you've put into your research pays off handsomely. My readers are always quick to point toward the 727% gain they banked on one such occasion.

However, there is another side to the equation — one that investors often forget even exists. It's not just about production. Remember that. If the trillion barrels of untapped oil locked in the Green River formation has taught investors anything, it's that oil is worthless unless you can bring it to market.

That is also becoming a harsh reality for many Bakken producers, who have been forced to ship their crude by rail and sell their oil at a discount. And yet it's not just U.S. producers that are looking for relief.

Remember how the United States has been shifting the bulk of its oil imports to Canada?

Our Saudi oil imports have decline 35% within the last seven years. Meanwhile, Canadian crude imports have surged 61% during the last decade.

I'd suggest taking a closer look pipeline stocks. Many of them are expanding current projects to meet future demand.

And the fact that these pipeline plays have managed to outperform the supermajors over the past year is not a coincidence...

It's only going to get better here on out for them, too.

Until next time,

Keith Kohl
Energy and Capital

P.S. At the heart of these pipeline profits is the latest oil boom to hit North America. The best part is that my readers and I have been closing gain after gain from the beginning. And right now, we're on the verge of making our next round of profits. Feel free to check out our latest oil report, highlighting one company that has an ace up its sleeve. Click here to learn more about this opportunity.

Why Stalin's "lost oil" could bank you 180 times your money by this time next year

Joseph Stalin isn't widely known for the mistake he made nearly 70 years ago...

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Read our latest report now before this story makes headline news.

Mexican Oil Crisis

It happens almost every day.

For some unknown reason, tow trucks seem to have a field day outside my office.

Countless times I've seen people scramble outside, only to watch as their car is pulled down the street.

Believe me, the price of getting your vehicle back is steep enough to make you regret being towed. I have a feeling I'm not the only one of us that has experienced this nightmare.

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Thankfully, I've learned my lesson when comes to Baltimore's tow truck racket; and having been a victim several times before, I can't help but feel sympathy for the driver.

So this morning, I wasn't surprised to see the tow truck driver give me a toothless, knowing grin as he passed. His smirk was enough for me to go back and double-check that my parking pass was clearly visible on my dashboard.

The moment I rounded the corner to the lot, I saw the reason why he was so smug.

Resting comfortably — sans parking pass — was a Hummer. The massive vehicle was parked right next to my beat-up Cavalier. In the blink of an eye, the guy was furiously at work.

“Not gonna give them a chance, huh?” I said.

He looked at me, this time with a hint of contempt.

I continued, “Shame to tow a brand-new truck like this.”

His quizzical face gave me the opening I needed.

“Don't worry, it's not like they will be driving it for much longer.”

He gave me another hard look, then stopped what he was doing to ask me what I was talking about.

Facing peak oil realities

“Do you think someone was actually driving this beast when gas was over five bucks? Filling up is so cheap now, people are starting to forget again,” I said.

He conceded the point.

Like everyone else, he hasn't thought much beyond today's price tag on the pump.

Unfortunately for Hummers around the world, oil isn't $30 per gallon anymore...

In fact prices have been stuck between $70 and $85 per barrel for more than a year.

Sure, there have been a few exceptions; oil briefly climbed above $93 per barrel last May.

As demand slowly makes its comeback, the possibility of $100/bbl oil doesn't seem so far-fetched. It won't happen this month or next. But sooner or later, triple-digit oil prices are inevitable — and much of that is thanks to peak oil.

I know that our year-over-year production increased by 411,000 barrels per day 2009. (You can see those figures with a few simple mouse clicks.)

And yes, I understand that eight states boosted their oil production last year... But dig just a little deeper and you'll find that most of the increase came from only a few areas.

However, in order to continue that streak, oil prices will have to rise. There's no way around it. The oil we're pumping out now is much more expensive.

I'd hate to burst anyone's bubble, but it's not as easy as shooting the ground with your gun, Jed Clampett-style.

And it's getting more difficult to stifle my laughter when people tell me the world will be producing 130 million barrels of oil per day in 2030.

Mexico's fall from grace

“But if we can't get enough from ourselves, isn't that when other countries will take advantage of us with their own supply?" the question from the tow truck driver interrupted me.

I should have expected him to say that... He's no stranger to taking advantage of others' misfortune.

“Not exactly. The picture doesn't get much better for them, either.”

Six years after U.S. oil peaked in 1970, it wasn't some famous geologist or oil tycoon that made a massive discovery... It was a simple fisherman.

When seeping oil began messing with his fishing nets, the nuisance was investigated by PEMEX, Mexico's national oil company.

You know the rest of the story. Just five years after the discovery, the Cantarell oil field was pumping out more than a million barrels per day.

By 2003, production had grown to 2.1 million barrels per day. Of course, Mexico's oil exports to the U.S. reached a new record that year, too — to the tune of 1.6 million barrels per day.

The next year, however, PEMEX announced that Cantrell production would experience a sharp decline of 14% per year from 2006 and beyond.

The reality was much worse. In the summer of 2008 — when oil prices reached a new high $144 per barrel — production from the Cantarell dropped sharply to 973,668 barrels per day, a 36% decline.

Since then, things have gotten worse for Mexico.

Remember, we're talking about a government that derives 40% of its budget from oil revenue.

As you can expect, peak oil has taken its toll on our Mexican oil imports:

How bad is the situation?

PEMEX recently announced the company will be importing crude oil for the first time in decades.

Think about that for a minute.

The problem is that Mexico's refineries — the last of which was built thirty years ago — can only handle light crude, not the heavy stuff they are starting to produce.

I've said this to my readers many times before, and I'm still as adamant as ever: Mexico will become a net oil importer within the next 7 to 10 years.

When that happens, I can only hope the Mexican government — as corrupt as it is — has its act together.

Of course, it also means the U.S. will have to find an extra 1.2 million barrels per day from somewhere else...

Although the amount of imports that PEMEX is considering right now is only 3% of their total production, this is just the beginning.

Forget the short-term fears

Energy has, and always will be (in my mind, at least) a long-term play.

Don't get me wrong, you can jump in and out of an energy stock on a daily basis, and still walk away with a small fortune in your pocket.

Granted, I don't recommend you do so blindly... or else be prepared to learn a hard lesson.

Make no mistake, the opportunity is there. I've watched as Christian DeHaemer's readers banked 727% gains on a single oil stock without batting an eye.

But too many people are grossly underestimating the value of a solid energy stock in the long run.

On Monday, I'm going to show you two of those plays in particular.

The best part? The way things are shaping up, this creates a win-win situation for investors.

The price of delay

“Sounds like Mexico is in for some trouble,” our tow truck driver grumbled. His scowl was back, probably after realizing how much time he'd wasted talking to me in the lot.

“Maybe... But at least you can prepare for it,” I replied, more to myself than to him. He'd already turned his back to finish securing the Hummer.

With one quick glance at the parking pass hanging from my mirror, I started to make my way back to the office. As soon as I turned the corner, I could hear a woman's voice screaming to leave her car alone.

So much for waiting.

Until next time,

Keith Kohl
Energy and Capital

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U.S. Oil's Big Potential

I know it's easy to get distracted by China.

After all, Chinese demand is on the rise. China has officially passed Japan as the world's second largest economy. During the second quarter of 2010, China's GDP totaled $1.337 trillion — thanks to the country's 10.3% quarterly growth.

Yes, there are some tremendous opportunities is Asia right now. My office cell-mate Christian DeHaemer has proven that to me time and again. One of his latest oil gambits has banked 727% gains for readers.

Today, however, I want to focus on an investment strategy a little closer to home...

Slowly but surely, U.S. demand has been rising. Although we're more than two million barrels below our peak of 21.2 million barrels per day — set back in June 2005 — it's still good news.

And there's even more good news for investors, if you know where to look.

When things hit the fan in 2008, oil prices plummeted. The price for a barrel of crude oil — the sweet Texas kind — fell as low as $33 per barrel. There was nothing to be done. If you're having nightmares from the collapse, I won't hold it against you to step away for a minute.

Thankfully, I know how to cheer you up...

Since our demand has started to recover, one thing has stuck out like sore thumb. And if you take a closer look at U.S. oil import data, you'll see it, clear as day.

We're no longer relying on our old go-to countries for oil imports. (I'm talking about Venezuela, the Saudis, Nigeria, and Mexico — four of our largest sources for foreign oil.)

Call it what you want, but the cold, hard truth is the United States is reducing its dependence from those highly-volatile oil producers. For the first time in decades, daily oil imports from Saudi Arabia and Venezuela have fallen below one million barrels. Saudi imports have fallen 40% in the last seven years.

Let's face it: As our demand recovers, what are the chances we'll hear an outcry for more Saudi oil?

We won't.

Perhaps the U.S. has finally learned its lesson. At least we can hope so...

And if the U.S. continues to lower its dependence on foreign oil, we're going to have to get it from somewhere else.

The most expensive oil mistake you can make

I can't even count how many times I've seen people make this mistake... Even you might have been tempted to fall for the trap.

People hear about trillions of barrels of oil buried beneath Colorado, and they immediately lose their wits. They're told that nearly three trillion barrels of oil can flow out of the Green River formation, satisfying U.S. demand for thousands of years.

You probably remember my rant on the Green River oil shales. Simply put, developing that resource is too energy intensive. I believe one of my readers put it best: “Shale oil is not even close to the crude oil that feeds our refineries.”

What's worse is that folks hear "shale oil" and connect the wrong dots. It's not the same as the shale plays making headlines. Besides, waiting four to five decades on a possible chance of developing the Green River oil shales is waste of time and money — your money.

I have a better idea...

Trading ahead of the herd

Last week, I was happy to write about the bright side of U.S. oil production.

If you're just now learning about the Bakken oil play, I'm sorry to say that you're late to the party. It's been two years since the USGS released their last Bakken assessment, which reported the oil formation held up to 4.3 billion barrels of technically recoverable oil.

Since then, the state's oil production has jumped more than 100,000 barrels per day. Despite that 76% increase, officials expect production levels to grow to more than 350,000 barrels per day next year.

Sure, you can still find a number Bakken drillers worth a closer look... Or, you can look down the road and see the obvious hurdle which must be overcome first.

The one drawback to North Dakota's good old fashioned oil boom is the lack of infrastructure. The rush to drill the Bakken was so great, the infrastructure simply couldn't keep up.

In other words, producers had a difficult time bringing their production to market, which means they were forced to sell their crude at a discount.

At one point, Lynn Helms, director of the State Department of Mineral Resources, stated that North Dakota sweet crude was selling at a 28% discount to the daily price.

This year alone, the state added approximately 110,000 barrels a day of pipeline capacity... and there's more on the way.

Here are three infrastructure plays to stay ahead of the game:

ONEOK Partners L.P. (NYSE: OKS) - The company recently announced plans to spend up to $550 million to build a 615-mile NGL pipeline to transport NGLs from the Bakken Shale.
TransCanada (NYSE: TRP) - Once completed, the company's Keystone XL project is a 1,959-mile 36-inch pipeline that will start in Alberta and connect with the Keystone pipeline that will be built through Kansas to Cushing, Oklahoma. The pipeline will hit the best up-and-coming oil plays, including the Bakken producers in Southeast Saskatchewan, Montana, and North Dakota.
Enbridge (NYSE: ENB) - Last month, Enbridge announced plans to double its pipeline export capacity in North Dakota. Even though the company hasn't spilled the details yet, Enbridge is certainly worth a second look.

Until next time,

Keith Kohl
Editor, Energy and Capital

P.S. Although BP's well is no longer leaking oil into the Gulf of Mexico, the damage has been done. Now it's time for the election-seeking politicians to come in and make a huge mess of the situation. But Congress' knee-jerk reaction to ban offshore drilling and completely overhaul the system comes with a profitable silver lining — and I've laid out all the details for you right here.

Three Upcoming U.S. Oil Stocks

In 1956, the U.S. oil industry was on top of the world.

With 30.4 billion barrels of proven reserves and a daily production of 7.15 million barrels on the table, things were better than ever before. The 551 oil wells across the U.S. were pumping out an average of 13,000 barrels per well per day.

All it took was a small speech in San Antonio to bring everything to a crashing halt.

On March 8, 1956, a Shell geologist named Marion King Hubbert was standing on the side of the stage at the Plaza Hotel, ready to deliver his now-famous peak oil speech.

Moments away from taking his turn at the podium, he was called offstage for a phone call. It was from a worried assistant at Shell, pleading with him to "tone down" the speech. He was told that the U.S. reaching peak oil production within the next fifteen years was an absurd idea.

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The phone call, however, fell on deaf ears, and Hubbert went on to speak. If you happen to be a history nut like myself, you can read his entire paper here.

We know how the story turns out. U.S. oil production peaked in 1970. You can see the peak for yourself, straight from the Energy Information Administration (EIA):

And yet, it's a crisis that too many have ignored...

Ignoring the U.S. Oil Crisis

I'm willing to bet my cat's ninth life that most investors have no clue about what's going on. And the reason I'm not worried about PETA breaking my door down is because those investors aren't looking at the entire picture.

"Domestic production is great, isn't it?" they say to themselves without a hint of confidence.

"After all," they continue, "the EIA's Short-Term Energy Outlook was brimming with good news."

Here's a brief rundown on their latest outlook:

Domestic crude oil production increased 370,000 barrels per day in 2009 and expected to rise by 110,000 barrels per day in 2010.
U.S. crude oil production is projected to rise to 5.4 million barrels per day in 2011.
Non-OPEC oil supply forecast was raised to grow 720,000 barrels per day in 2010, primarily from the United States, Brazil and Azerbaijan.

If you prefer to join them with blind enthusiasm, prepare to lose a lot of money.

We're smarter than that.

Let's take a closer look at those EIA numbers, shall we?

In 2009, only eight states managed to increase their crude oil production over the previous year. In case you were wondering, California and Alaska – two of our three biggest oil-producing states – were not on the list. Don't even get me started on those two.

As expected, North Dakota led the pack. Actually, if you take Texas' 19,000 bbl/d increase out of the equation, the combined increases from the six remaining states was lower than North Dakota... it's difficult to believe that some investors have never heard of the Bakken oil play.

As of March, 2010, only four of those seven states are producing more oil than their 2009 levels. In fact, three of those states are producing less than 2,000 barrels per day more than they were at the end of last year.

This is where North Dakota is in a league of its own. In May, North Dakota's oil production was approximately 300,000 barrels per day. That's more than twice what the state was producing in 2007.

But it's not just production that's caught our attention.

OPEC Envy

It's too bad the U.S. oil industry can't cook the books like OPEC.

OPEC members, despite pumping more than a third of the world's oil supply, haven't seen a single decline in reserves over the last thirty years. It's sad that their suspicious oil reserves have become a global joke.

You can believe them if you want. While you're at it, you might as well wish for world peace.

Unlike OPEC, proved reserves in the United States have fallen alongside production, dropping to levels we haven't seen since 1941. According to the EIA, the U.S. has approximately 19.1 billion barrels in proved reserves.

Still holding on to those optimistic feelings?

The Fate of Offshore Oil

Before I get any further, I wanted to quickly bring offshore drilling into the mix.

As you know, the U.S. has placed another drilling ban into effect. You can catch up on the details here.

For now, forget about the offshore drilling ban. Even if a U.S. judge doesn't strike the moratorium down, we all know that offshore oil production is too important to the U.S. to simply abandon. More restrictions will be placed on the offshore industry. More safety protocols will be implemented.

At the end of the day, drilling will resume.

It's either that or cozy up with Saudi Arabia again. We know how that turned out last time.

While I'm on the offshore subject, let me show you why going all-in on offshore production isn't the best choice to make.

Although offshore oil in both Federal and State waters make up one-third of our domestic oil production, our offshore proved reserves only amount to 3.9 billion barrels. Also, that oil isn't going to be produced cheaply, a point you should be well aware of by now.

However, there are much better opportunities out there right now...

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Investing in U.S. Oil Stocks

"If you hate U.S. oil so much, why do you invest in it?" one reader recently asked me. I'll spare you the rest of his comments, which were sent despite the gentleman having a broken caps-lock button – no surprise there.

I'll be the first to admit that the doom and gloom tends to get the better of us when it comes to U.S. oil.

What he failed to realize, as my readers have proven to me time and again, is that the backside of the peak oil curve will be much more profitable than the ascent.

As you've probably guessed by now, these three oil stocks are in the thick of North Dakota's oil patch.

Oasis Petroleum (NYSE: OAS): Oasis holds about 292,000 net acres in the Williston Basin. It also recently announced a 240% production increase over the second quarter of 2009, as well as a 25% jump over last quarter. 98% of its production comes from its Williston Basin properties.
Hess Corp. (NYSE: HES): Hess' latest grab for American Oil and Gas has caught our attention. When the news was announced, analysts were putting the value at $450 million, and if Hess can seal the deal, they'll be walking away with a huge steal.
Voyager Oil and Gas (OTCBB: VYOG): Voyager is a smaller play that could be making headlines. It has approximately 24,000 core net acres in the Bakken/Three Forks formations in North Dakota and Montana; and I have a strong feeling that a Montana oil boom is right around the corner.

Now, these are just three companies with a Bakken upside. If you do your homework, you would find dozens more oil and gas gems worth a closer look. In fact, these Bakken-weighted stocks have delivered winner after winner to my readers, with one stock alone pulling gains over 400%.

Until next time,

Keith Kohl

Editor, Energy & Capital

P.S. Just as BP's disaster is finally taking a turn for the better, you can bet our legislators are going to make a grand mess of things. The U.S. House of Representatives recently passed a vote to completely overhaul the offshore drilling system. Although the government's knee-jerk reaction was to ban offshore drilling, there's a silver lining to this whole mess that presents us with a very profitable opportunity - and I've included all the details for you in this special report.

Just click here to learn more.

Why BP's Nightmare Isn't Over Yet

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

This past week was interesting, to say the least...

For the first time since April, BP was putting out some good news with an announcement on Wednesday that the Macondo well had reached a static condition. In other words, the well pressure was under control and the drilling mud had done its job.

On Thursday, BP was given the green light to begin pumping cement into the well, which is part of the static kill procedure.

And this week saw even more good news for BP. According to the NOAA, approximately 50% of the oil spilled had degraded into tiny particles. Roughly 26% still remains as a thin layer on top of the water or as tar-balls, which either washed ashore or was buried in the sediment.

So we're in the clear, right?

Not even close...

Exploration Company Secures Billions in Gold ... For Only $250k

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Unfortunately, the nightmare isn't over yet — specifically for offshore drillers.

When the House of Representatives passed a vote to overhaul the offshore drilling system, part of that bill included removing the $75 million liability cap.

Although the bill has to pass through the Senate to become law, the news is certainly grim for smaller, offshore drillers that don't happen to have billions of dollars just lying around.

But the static kill news was good enough for the market. By mid-week, energy stocks across the board had moved higher. Also helping push oil prices higher recently has been the weakening dollar.

Take a look for yourself:

Oil prices rose above $83 per barrel for the first time since May, gaining more than 15% in the last four weeks.

But sadly, the great start this week had fizzled as it progressed — by Thursday, the market shifted its focus from BP's good news to signs of a slowing economy.

Stocks began to drop when the Department of Labor released their jobs report; the number of jobless claims rose 19,000 to 479,000 last week.

So much for the rally.

Before you get too stressed, remember there's always a way to profit in this market...

Here are a few of this week's top profit ideas:

The Fate of U.S. Oil Production: How to Profit from the Offshore Drilling Ban
In the wake of BP's debacle in the Gulf of Mexico, the fate of offshore drilling is under attack. The recent offshore drilling ban is further evidence that election-hungry politicians are going to milk the publicity for all its worth. But all is not lost for smart oil investors — and we'll give you the details on three American oil-drillers that are reaping the benefits.

Mongolia's Untapped Oil Fortune: The Last Place on Earth You Expected to See an Oil Gusher
Energy and Capital Publisher Brian Hicks uncovers the truth about Mongolia's $51 billion lost oil fortune, and shows you one tiny company that owns it all.

A Breakthrough in Nuclear Waste Cleanup: Secretive Startup Offers Nuclear Waste Solution
Green Chip's Nick Hodge discusses new nuclear solutions being developed by under-the-radar companies.

Uranium Bull Market: China's Historic Power Grab
Wealth Daily Editor Ian Cooper takes a look at where the latest bull market may be heating up.

The Bullish Case for Energy Storage: 4 Reasons Energy Storage is the Next Major Bull
Editor Nick Hodge serves up the 4 biggest reasons to be bullish on energy storage.

How to Front-Run the Chinese Legally: Why You Should Buy Gold Before China
Publisher Brian Hicks brings readers Part 2 of his strategy for front-running the Chinese legally, this time by investing in gold.

Molycorp, Inc Rare Earth IPO: Did this Rare Earth IPO Even Have a Chance?
Green Chip Editor Jeff Siegel discusses a new rare earth minerals play.

Why are Blue Chips So Cheap?: Quality Stocks are Still Cheap
Wealth Daily Analyst Adam Sharp points out the difference — and the importance — between value stocks and value traps.

Enjoy your weekend,

Keith Kohl
Editor, Energy and Capital

P.S. Although BP has cleared a major hurdle in this catastrophe, the coast isn't clear for offshore drillers. In fact the House of Representatives recently passed a vote to completely overhaul the offshore drilling system. Part of the bill eliminated the current $75 million cap on liability. But where many see crisis, we see opportunity...

You see, an uncertain future in offshore drilling is making certain onshore plays extremely profitable right now. In this report, I've highlighted three of my favorite oil stocks, including one that's up over 439% for my readers. Simply click here to learn about these investment opportunities.

Montana Oil: The Next Bakken Rush

Sometimes a story just doesn't unfold the way you expect it to.

For Montana's oil industry, the carpet was pulled out from underneath them when the media's attention was snatched away by the state's neighbor to the east...

It must have been painful for them to watch North Dakota's oil industry explode, even in spite of a massive global recession.

But the last laugh hasn't been heard.

And that's because Montana is preparing to re-take the spotlight — and for investors searching for the next phase of the Bakken oil boom, it's time to give Montana its due.

Sympathy for Montana

If you've looked into the Bakken formation, there's a good chance you've come across the Elm Coulee oil field.

Located in Richland county, on the eastern side of Montana, the Elm Coulee field was discovered in 2000.

Like most Bakken wells, companies have utilized horizontal drilling and multi-stage fracturing techniques to increase production.

By 2006, the field was pumping out 56,000 barrels per day from approximately 350 wells, with an estimated ultimate recovery of 270 million barrels. A year later, the Elm Coulee field had become the highest-producing onshore field in the lower 48 states.

To put that into perspective, Montana's oil production in 2003 averaged 53,000 barrels per day. In 2006, the Elm Coulee field was responsible for almost 60% of the state's production that year.

You've got to have some sympathy for Montana...

Though Montana shares a portion of the now-famous Bakken, the Treasure State's oil production has struggled while a good old-fashioned oil boom has been taking place right next door in North Dakota.

Over the last five years, oil and gas producers across the U.S. have had shale fever. But sadly for Montana, North Dakota has taken center stage.

After an impressive start into the shale fever gripping the country's oil producers, Montana's oil production lost momentum.

The state's production (pictured below) — which reached averaged 99,000 barrels per day in 2006 — fell to 76,000 barrels per day in 2009.

Montana became the forgotten step-child in the U.S. oil industry.

But don't feel too sorry for them, because things are about to change...

Time to cash in on the Bakken fame

As you know, North Dakota has been a hotbed of activity for oil and gas drillers.

According the Baker Hughes rig count, there are 128 active drilling rigs. You only need one guess to figure out where those rigs are drilling... Approximately 95% of those rigs are drilling in the Bakken and Three Forks formations. The Three Forks formation is located beneath the Bakken.

That means the number of active rigs has jumped 333% since oil prices collapsed to $33 per barrel in December 2008.

North Dakota's drilling boom is paying off, too. Last week, North Dakota overtook Oklahoma's position as the country's third-most active drilling state. Remember, North Dakota surpassed Oklahoma in 2009 to become the fourth-largest oil producer in the U.S.

And North Dakota's success is good news for Montana.

Drillers looking to expand their Bakken exposure are starting to revisit Montana. As companies continue to improve upon drilling and completion techniques, those Montana leases are looking more attractive.

How can we be sure?

Digging a little further, you'll discover that the Montana Board of Oil and Gas is being flooded with drilling permit applications. According to one administrator, Tom Richmond, oil and gas there could be more than 300 permits this year.

Taking another look at the latest rig count by Baker Hughes, there are only five rigs currently drilling in Montana. All five are drilling the Williston Basin in Richland County.

2011 is shaping up to be a strong year for Montana.

The latest scramble to pick up leases in northeastern Montana is reminiscent of the land rush that occurred in North Dakota in 2008. If you remember, the catalyst for North Dakota's oil boom was when the USGS updated their Bakken assessment in April 2008.

Of course, the Bakken has been extremely generous to investors. In fact it's helped my readers close winner after winner — including more than 400% on one of our favorite Bakken stocks.

You can bet they won't miss out on Montana's good fortune.

Until next time,

Keith Kohl
Editor, Energy and Capital

P.S. BP's disaster is about to take a turn for the better. After casing the relief well, the company can finally attempt to permanently seal the well... But the nightmare isn't over for offshore drillers. The U.S. House of Representatives passed a vote last Friday to completely overhaul the offshore drilling system. You can bet our legislators are going to make a grand mess of things. The silver lining of this whole mess is that it presents us with a very profitable opportunity — and I've included all the details for you in this free report. Simply click here to learn more.

Exploration Company Secures Billions in Gold ... For Only $250k

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Profit from Mongolian Coal Stocks

Over the past few months, I've been telling you about the world’s most undervalued oil company.

It’s up 727% since I recommended it, and is still undervalued by more than 1,000%...

And this play, dubbed Stalin’s Lost Oil, still has plenty of room to run.

But today, I'd like to tell you about a company that could be the next big energy winner.

It's the world’s most undervalued coal producer.

And the value numbers are staggering.

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In fact the next sentence sums it up:

This 45-year-old company has more than 100 million tonnes of high quality, thermal coal, and yet it has a market cap of only $20 million.

That's right. The company produces more than 500,000 metric tonnes of coal per year, and currently boasts a reserve base of 100 million tonnes (or more) of high quality thermal coal — the very type of coal that China covets.

This is no flash-in-the-pan startup... This outfit employs 1,200 workers and supplies about 15 percent of Mongolia with high quality coal.

So, why is a coal company that is usually valued at $5 per tonne of reserve now trading at twenty cents per tonne?

I’ll tell you why.

This company is cheap for a number of reasons, the first of which is, that it is in Mongolia — which, as you know, is a euphemism for the middle of nowhere.

But as we've seen with the 727%-plus gains from Stalin’s Lost Oil play, the story is getting out.

Mongolia is the next major commodity hotspot.

Pre-IPO pricing

The coal company you are researching used to be owned by the government, and has a forty-five year history of production. They were privatized and listed on the Mongolian Stock Exchange in 2003 after a pro-capitalist, democratic, free market government took over.

But just a few months ago, a private New York-based hedge fund acquired 54% of the company. This company has been near the top of list in Barron’s for profitable hedge funds. It makes its living by buying undervalued companies in frontier markets and unlocking that value.

This time, the plan is to take the company public in Hong Kong...

Which means you can buy today before it IPOs on a major international exchange.

In order to list the company on a major global exchange, the company hired a Western drill company to substantiate the amount of coal and produce a Joint Ore Reserve Committee (JORC) compliant reserve statement.

Stick with me, this is important…

JORC is sponsored by the Australian mining industry and is a widely accepted professional reporting standard in Asia. This would qualify the company for a listing in Hong Kong.

(For the record, the last Hong Kong IPO, The Agricultural Bank of China, was oversubscribed and made $21 billion.)

This is what the JORC found:

This Mongolian Coal company is now trading at a low valuation of 20 cents per tonne of coal reserves.

Other Mongolian companies like SouthGobi and Mongolian Energy trade at an average of $5 per tonne of coal reserves. So there's a massive upside here — just as with Stalin’s Lost Oil…

But you want to be in before the Hong Kong listing.

The company recently traded at US$ 2.95 per share with only 7 million shares outstanding, which means if the company starts to move, it will move fast.

And there are lots of positives here. The Mongolian Currency (MNT) is appreciating against the U.S. dollar:

And the Mongolian stock exchange was the best performing market this year — up 68%.

The way to buy this stock is at pre-IPO prices and wait for the listing in Hong Kong.

But this stock is not for slackers; you might have to send a few faxes…

That said, I've worked with this New York hedge fund before, and my readers have made a great deal of money on company's like Hurricane Hydrocarbons, and on an Australian uranium company that was bought out by Paladin Energy for a high triple-digit gain.

(Please note that I am in no way affiliated with this fund, nor have I received payment or benefit.)

Catalysts

The basic catalyst for this Mongolian Coal company is that word of its basic value will get out — as a result of exports to China, promotion by the hedge fund, a Hong Kong listing, and the rising awareness of Mongolian stocks in general.

You have to understand the value here.

The company is so inexpensive that the rail spur it owns to the Trans-Mongolian Railway is worth $40 million alone.

Again, this company has a market cap of $20 million and is sitting on 100 million tonnes of coal. It would have to go up by 25 times to be of fair value even to its Mongolian peers!

But you can’t wait. The shares are starting to move. It was up 11% last week to 4,001. (USD1 = 1352.5 Mongolian Turgid (MNT))

That puts your per share price at $2.95.

This is one of those trades that comes along once a decade. It's not for the herd.

But if you have what it takes, join us and get rich.

Christian DeHaemer
Editor, Energy and Capital

Investing in Offshore Oil Stocks

Be honest. Has BP's management makeover really changed your opinion about the company?

More importantly, have you let the media frenzy over offshore drilling sway your trading decisions?

If you answered yes to the latter question, I have some bad news for you.

As the anti-offshore sentiment reaches a feverish pitch, offshore stocks have taken a beating. In last Saturday's "Weekend Edition," you got a firsthand look at how difficult the market has been for these Gulf players. None were spared, as share prices were herded off a cliff.

Now, it's time to buy into their panic. Here's why...

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Does offshore oil have a future?

Yes.

I know there are a few people out there who don't believe in the peak oil theory; but no matter how optimistic you are about future oil production, you can't deny the important role that offshore oil will play in meeting future demand.

Let's get some of the facts straight:

25% of the world's oil production comes from just 20 oil fields.
Most of these massive fields were discovered prior to 1950 and have been producing since.
Nearly all of these fields have passed their peak production.
Another 50% of the world's oil production comes from just 110 other fields.
The remaining production is produced by approximately 70,000 smaller fields.
The average oil field has a natural decline rate between 8%-9%.

The problem is that oil discoveries have been declining for more than four decades. Furthermore, companies are pushing further and drilling deeper than ever before.

The lack of major oil discoveries i not fiction, nor theory.

And we can't forget the story of the Cantarell oil field, either...

The once-mighty Cantarell field used to be among the largest oil fields in the world. Discovered in 1976 by a fisherman, the death of Cantarell will eventually force Mexico to become a net oil importer. Pemex, Mexico's state-run oil company, estimates its 2010 crude production currently averages 2.5 million barrels per day.

I can't put it simpler than this: The world needs offshore oil.

That includes deepwater targets.

Offshore drillers: best friends

Like it or not, offshore drillers in the Gulf of Mexico have become best friends. The media fallout from the Deepwater Horizon disaster has officially lumped them all together for the public to condemn.

Today, the word offshore and oil have become synonymous with BP.

And being labeled with BP is inescapable — no matter what a specific company's safety record says.

Recently, four oil companies have banded together to form a rapid-response system to deal with future deepwater oil spills.

ExxonMobil, Chevron, ConocoPhillips, and Royal Dutch Shell have announced they are committing $1 billion to the creation of this plan. Although $250 million bucks a pop sounds like a hefty price tag, keep in mind that as of this morning, BP has spent approximately $256 million in claims.

According to the four companies, the plan could be in place as soon as in six months from now. At that pace, it'll just be in time for the latest drilling moratorium to be lifted.

Coincidence?

The value of offshore stocks

Over the last two weeks, my colleague Christian DeHaemer has laid out his "Forty Rules of Trading." If you haven't read it yet, I suggest doing so today. His words of wisdom could save you from making a costly mistake.

Chris's trading rules had me daydreaming this morning. Several years ago, I was at odds with myself on whether or not to buy a particular oil stock.

He said, “Well, would you be comfortable owning this stock five years or ten years down the road?”

I was.

And when nearly every energy company took a nosedive in 2008, I asked myself that question on a daily basis. At one point, back in March 2009, the price had been severely beaten down. When several readers expressed concern as the stock plummeted to $1.12, our long-term confidence prevailed.

Rather than dump our position along with everyone else, we bought. A year later, that beaten-down oil stock opened at $17.41.

The reason I'm bringing this up is because I get that same feeling when I look at offshore stocks... If you have the same outlook for oil as we do, the decision is a no-brainer.

Of course, there are other signals.

Although no single factor will make us put our hard-earned money into a stock, one indicator for us to measure the company's value is calculating its PEG ratio. It's a good rule of thumb to use, and one that's helped make my readers a nice profit. The idea here is that lower the PEG ratio, the better.

Many of the offshore players in the Gulf of Mexico are trading with very attractive PEG ratios. And as you can see, the market hasn't been too kind to them during the last three months:

All six of these stocks have a PEG ratio below 1. I don't believe there will be a better opportunity than right now.

The moratorium is still being touted by the media, most of whom have no idea how crucial offshore production will become.

Eventually, these deepwater drillers will get back on their feet.

Until next time,

Keith Kohl
Editor, Energy and Capital

Billionaires' Game-changing Fossil Fuel Gamble

Ladies and gentlemen, we're witnessing the end of an energy era.

George Soros and T. Boone Pickens know it -- which is why they're investing millions of dollars in the world's next biggest "future fuel."

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China's Silent War for Canadian Energy

It isn't easy to find a hotel in Fort McMurray at dawn...

That was the problem my friend and I immediately faced upon arriving in town.

And if it weren't for the beautiful view, I would have been more distressed than I was.

I've shared this with many of you a while back, but for my newer readers, you can see just how stunning it is:

Soon after snapping that picture, my friend had managed to bribe a hotel clerk to check us into a room.

It was your typical hotel room, yet had one unique feature (at least, something I had never seen before): Everything was labeled in Chinese.

And I mean everything.

From directions to local attractions and restaurants to instructions on how to use the television, it was overwhelming. Part of me even expected to see the Bible covered in Chinese symbols, but that wasn't the case.

Right away, I knew what was going on.

China had set its sights on the 175 billion barrels of bitumen buried underneath the Athabasca oil sands deposit.

And now, nearly three years later, the same thing is happening again...

Quietly taking over Alberta's oil sands

Just one week before the explosion on the Deepwater Horizon, China Petrochemical Corp. spent $4.65 billion for ConocoPhillips' 9% stake in Syncrude Canada Ltd.

Whenever I see the Chinese spending billions in an specific oil play, I can't help but get excited.

That deal is just another chapter in China's increasing control over Canadian energy...

Back in 2005, CNOCC spent $150 million for a stake in MEG Energy Corp., which has an interest in 800 square miles of oil sands leases.

Also that year, Sinopec shelled out approximately $84 million for a share of Canada's Northern Lights oil sands project.

China's latest deal for its stake in the Syncrude project revealed a very profitable secret; a mistake that we plan to take to the bank.

But before I get too far ahead of myself, we'll play a little catch-up for my newer readers...

Bombs or bitumen?

For the last few years, a quiet oil war was has been raging across Canada.

Earlier this year, I gave you a brief glimpse into that secret oil war.

You see, Alberta has always been Canada's leading energy producer. However, their lead has been slipping — thanks mostly to a stagnant royalty environment for oil and gas companies.

In their search for Alberta's fair share, the government has forced many oil and gas companies to look for opportunities elsewhere.

And believe me, Alberta's neighbors took full advantage of the situation...

Saskatchewan's portion of the now-famous Bakken formation has led to record land sales, particularly in the Weyburn-Estevan area. Thanks to new drilling and completion techniques, companies in both Saskatchewan and North Dakota can extract the light-sweet crude from the formation.

And if North Dakota's success is any indication of how things will turn out in Saskatchewan, my readers stand to make a small fortune.

If you're new to the game — or just looking for a place to start — you can check out three of my favorite Bakken plays in this free report.

In British Columbia, natural gas drillers were quickly grabbing land in the Horn River shale play. Back in 2007, companies spent more than $240 million in new leases. Alberta, however, isn't going to give up without a fight, and I think the future of the Athabasca oil sands will ultimately give the province an edge in the Canadian oil war.

And the future development of the Alberta oil sands is where China went wrong.

The future of the Alberta oil sands

China's deal for 9% of the Syncrude project was a step in the wrong direction. What most investors don't realize is that 80% of it is buried too deep for surface mining.

That's right... too deep.

So the rest of that bitumen must be recovered using in-situ techniques. And the problem is that the bitumen is too viscous to drill a traditional well. In other words, the bitumen must be heated first before it can then be pumped to the surface.

Surface mining has been around for decades. The original Suncor mine began operating in 1967.

I'm telling you right now that surface mining the Athabasca oil sands deposit is going the way of the dodo — and that's China's fatal error in purchasing a stake in Syncrude.

You see, the game is changing for Alberta's oil sands...

The future of the oil sands is in the in-situ production. Currently, one of the best bets is in a method known as steam assisted gravity drainage (SAGD).

First developed in the 1980s, the method involves drilling two horizontal wells. Steam is injected into the upper well, which heats the bitumen enough so that it flows into the lower well; the bitumen is then pumped to the surface.

Here's one player to look at: Connacher Oil and Gas (TSX: CLL). The company recently announced the start-up of their 10,000 barrel/day Algar plant, located at the company's Great Divide project.

So what's the downside to Alberta's massive oil sands deposit?

In today's hyper-sensitive environment, protesters are as relentless as ever.

Now, I'm not here to tell you that they're wrong... I've seen the result of those huge mining operations. The environmental impact looks even more significant if you ever get the chance to fly over the area.

I will, however, be realistic.

The U.S. needs that oil. Canada is going to develop that resource and sell it to us. Those anti-oil sands campaigns are more proof that things are changing. The fact is that surface mining will not last forever. In fact I'll be surprised if those trucks make it another twenty years. And by then, in-situ extraction will be the preferred production method.

Either the oil sands operations will evolve or everyone loses.

Over the next few weeks, we'll look at both sides of those in-situ methods.

I'm also going to show you an old oil play that's getting a fresh new start... and the company that's leading the other players in the oil game.

Until next time,

Keith Kohl
Editor, Energy and Capital

P.S. I know that most of my readers don't want to wait that long... And that's understandable. If you want to get ahead of the curve on this play, I've laid out the details on the one company with an ace up its sleeve, here.

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Oil Service Stocks: Not a Bargain

The one thing I love about the markets — and industries in general — is that they never fail to surprise you.

Just when I was thinking the low price of natural gas at around $4 a mmbtu would ensure the underdevelopment of fracking reserves…

And that Obama’s newest anti-business move to shut down offshore drilling would necessarily translate into a decimation of the rig count...

It goes on and hits a new record.

For those who don’t know, the rig count is simply the number of oil or gas drilling rigs that are currently being used at the moment.

According to Baker Hughes, the on-land rig count in Louisiana has reached an all-time high in the second quarter with 174 rigs. That’s up from 163 in the first quarter.

And even more startling, the number has doubled in the last year.

This is directly due to the development of Haynesville shale. Not only are these sites economically viable at the current low price of natural gas, but many operators must drill in order to hold their leases.

And it looks like these drill rig rates will continue to expand unless the price of natural gas drops precipitously.

That’s just not going to happen.

Natural gas cooking

As you can see by the chart above, the price of natural gas in the U.S. has put in a floor at $4.

Just yesterday, the front month contract for natural gas jumped 23 cents to $4.85 based on storage news from the federal government.

It appears that natural gas in storage is lower than it was for the same week last year. The EIA says that there are only 2.68 trillion cubic feet of working gas as of June 25, 2010. This represents a 1% decline from the previous year.

One percent might not seem like a lot to you, but it was enough to push prices as high as $4.92 yesterday, up from $4.53.

I believe it was two weeks ago in this space that I told you that natural gas had bottomed.

In fact readers of my Crisis and Opportunity trading service made 59% in four days on this move. (Not that I’m bragging, of course.)

But the past is the past; that move is over.

The question now is how you can benefit from the new move in the number of rigs. Or more specifically, how can you benefit from the companies that lease rigs or make products for the natural gas fracking industry.

Because the shale companies that use the horizontal rigs are the ones seeing the activity — service companies like Smith International (SII), Halliburton (HAL), and Baker Hughes Incorporated (BHI).

These companies have p/e ratios of 144, 40, and 25, respectively.

You would think that after the past year of flat oil prices, these companies would be dirt cheap, but that just isn't the case.

Smith saw revenues decline 11.30% last year and earnings dropped 88%. Even Halliburton — with its liability hangover with the Gulf of Mexico spill — is doing quite nicely, thank you very much.

Take a look:

As you can see from the chart above, it’s only about 10% off its 52-week highs.

Halliburton reports earnings on July 19. We will know how this rally stands after that.

Schlumberger Ltd. (SLB), the country's second biggest oil service company, reported profit of 28 cents per share in the first quarter of 2010 — 2 cents above the consensus estimate. The stock is down $2 today, to $57 and change.

The upshot is that despite the record number of land rig rates and the fact that the oil service market is bouncing back off its lows, Wall Street has priced this in and is punishing even those that beat expectations.

You would expect that with all the negative press and Obama’s ban on deep water drilling that there would be tremendous buys in this field.

But there aren’t. Take your money elsewhere.

Heck, even Big MO is paying a 6.6% dividend (NYSE: MO).

Sincerely,

Christian DeHaemer
Editor, Energy & Capital

Exploration Company Secures Billions in Gold ... For Only $250k

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OPEC: The Beginning of the End

There's a moment that every oil-exporting country will experience, sooner or later.

The few select countries lucky enough to label themselves "oil exporter" know it — and have nightmares of the day their number is up.

Why the fright?

Because we live in a cutthroat, fossil fuel-driven world — a reality we have little chance of changing in our lifetime.

Still think everything is right with the world's oil production?

Let us take a lesson from a country that's been through the ropes...

Collapsing under the weight of peak oil

For Indonesia, the point of no return came in 2004.

Up 'til then, the country's oil production stayed above 1.4 million barrels per day, peaking at approximately 1.6 million barrels per day.

Unfortunately, Indonesia's demand for crude oil had more than doubled since the 1990s.

Take a look for yourself:

The country was destined to become one of the bottom feeders, an energy-dependent slave to the same people they once called equals.

Of course, becoming a net importer had other devastating effects...

Like most OPEC countries, Indonesians were living in a world of dirt-cheap gasoline, thanks to subsidies.

In 2005, President Yudhoyono announced a rollback of those subsidies... By the end of the year, fuel prices soared 125%.

By 2008, the lack of reinvestment had killed any chances of regaining their former glory. In May, Indonesia was forced to withdraw from OPEC.

At least OPEC was nice about it... The group had left the door open for Indonesia's return, should Indonesia wish upon a star and come up with their miracle.

Thus ended Indonesia's 46-year friendship with OPEC.

Why You Should Listen to Walmart

OPEC: The beginning of the end

Right now, the same story is playing out again.

I want you to try and imagine Americans getting upset over fuel prices. Not too difficult, right?

At one point or another, you've felt that frustration. I remember watching a guy spend more than $80 to fill up his gas guzzling SUV.

On the West Coast, the idea of $5 or more for a gallon of gas may not seem so bad... But picture an entire country rioting over $0.38 a gallon.

Well it happened — and a lot more violently than you might be aware of.

In 2007, Iranians burned gas stations when the country announced an unpopular gas rationing. If they wanted to get more than the allotted 26 gallons per week, they had to pay more.

In 2010, it may be happening again... The country said last month it will stop the sale of subsidized petrol in September.

Iran — which produced 3.8 million barrels per day in 2009 — has a severe lack of refining capacity.

At what point will Iran, OPEC's second largest oil producer, suffer the same fate as Indonesia?

Assuming an 8% decline rate for its onshore fields and an 11% decline rate for offshore fields, Iran must find between 400,000 and 700,000 barrels of new oil each year, just to make up for the loss of production from mature fields — not an easy feat with U.S. sanctions on your back.

As the story unfolded for Indonesia, I'm afraid it's only a matter of time for these other once "export countries".

Oil in the ground is worthless

If all we did was read the headlines, Venezuela is on top of the world.

The country is attempting to add its oil deposits in the Orinoco Belt to its reserves. For the record, that would add another 105 billion barrels, putting them safely atop the list with 316 billion barrels (the Saudis have approximately 264 billion barrels).

Unfortunately, oil is absolutely worthless when it's in the ground, which is where most of Venezuela's oil will stay.

The problem is the oil deposit in the Orinoco belt isn't the same as the light, sweet crude from the Bakken formation... Or even the light, seawater-tasting oil pumped from Saudi fields.

We're talking about extra-heavy, sour crude.

And an even bigger hurdle for Venezuela is how to develop that oil. The country sorely lacks the expertise to do the job. Also, Chavez gave the boot to foreign companies after his May day takeover.

If you recall, that was when Chavez wrested control of Venezuela's oil fields from companies like ExxonMobil, Chevron, Conoco Phillips, Statoil, and BP Plc.

You know the saying, Fool me once, shame on you; fool me twice, shame on me...

I'm sure Chavez and his advisors are sitting the dark, salivating over the thought of screwing the next round of oil companies to set foot in Venezuela.

The other side of the fence

For other OPEC members, the outlook for oil production isn't too bright. Saudi Arabia is flirting with the idea of stopping future oil exploration; Iraq and Kuwait have realized how precious their oil has become, and are refusing to give it away cheaply.

When I look closely at the situation, I see nothing more than huge nationalized oil companies sitting on oil fields that have mostly peaked.

But don't let the doom and gloom get your hopes down... That's what separates the smart investors from the herd.

And it's why we don't put our hard-earned money into Venezuela's heavy oil trap.

If you haven't noticed, the peak oil crisis represents a huge window of opportunity. Although the Ghawar oil field is more akin to a wishing well, my colleague Christian DeHaemer just revealed the name of a tiny oil company that just struck oil in the most unlikely of places.

You can learn more about this opportunity in his brand-new report.

Until next time,

Keith Kohl
Editor, Energy and Capital

P.S. For those investors looking for profits closer to home, it doesn't get better than the old-fashioned oil boom taking place in Alberta... My readers and I tapped into one Canadian oil driller with an ace up its sleeve. Find out about the company leading North America's oil comeback.

Peak Oil and the Myth Behind Our Energy Independence

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

Last Sunday, when the grills went cold and the scorching sun finally set, there was only one thing left to complete my July 4^th weekend...

The grueling ride home through traffic.

This year was no different.

The six to eight hour grind through stop-and-go traffic has become a part of the ritual. I've come to accept it.

Yet, as I noticed more Hummers showing their gas guzzling faces than usual, I couldn't help but shake my head and wonder whether or not the American public has forgotten about $150/bbl oil.

After all, it's only been two years...

But the re-emergence of Hummers aside, there was something else that captured my attention.

The public is about to get blind-sided by the upcoming peak oil crunch.

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The long road to energy independence

I know a lot of you may believe in Obama's pledge to help the U.S. eliminate our overwhelming dependence on foreign oil.

At times, I find myself hopeful. I want to believe that people finally get it.

But it doesn't matter how optimistic we are.

The future of U.S. energy security is a dark, gloomy picture. The cold, hard truth is that peak oil is nothing more than a talking point for politicians.

Please don't think for a second that Obama is the first president to make that pledge.

Here's a little-known fact that people tend to forget every four years: Every president since President Nixon has, at one point, stated the U.S. needs to focus on energy security — specifically, that the issue of energy security revolves around our dependence on foreign oil.

That's 35 years and counting...

Is it finally about to happen?

Take a look how things are going so far:

Remember, it took a massive global recession to slow our runaway oil consumption. Unless you're a fool, you know the recession won't last forever.

What do you think will happen when the world's economy is back on its feet?

Peak oil: closer than you think

Over the next few weeks, I'll be talking a lot more on peak oil, so don't worry too much if you're new to the subject.

You see, an oil crunch is a lot closer than you think.

Since April, the fate of offshore drilling has been in jeopardy. Politicians have been demonizing deepwater drilling ever since.

Now the chances of them having any knowledge on offshore drilling are slim... But that's okay; I don't expect them to look beyond their own re-election campaign.

I won't speculate much more because the White House is expected to hand down its decision on the drilling ban this week.

What I do know right now is that if deepwater exploration is pushed back any more, there will be a drilling frenzy for onshore oil.

I've laid out all of the details for you in this free report.

Prayers won't save the Saudis from peak oil

I'd love nothing more than to sit here and tell you that we'll be fine.

I can't do that.

Giving the public a false sense of security will make matter worse — much worse. It should be clear that an oil crunch is about to take center stage... again. This time, however, it will make $150/bbl oil look like pennies.

While most of us were enjoying our Independence Day festivities, Saudi Arabia's King Abdullah dropped a bombshell....

According to the Saudi press, the Saudi King ordered a complete halt to oil exploration operations.

You read that correctly.

Takes your mind off of the BP drilling ban, doesn't it?

As you know, Saudi Arabia is the world's largest oil producer, pumping out 8.26 million barrels per day just last month. The country holds reserves of more than 260 billion barrels of crude oil and condensate.

Why are they halting exploration?

According to King Abdullah: "... I have ordered a halt to all oil explorations so part of this wealth is left for our sons and successors, God willing."

Could this finally be the nail on the peak oil coffin? Is the mighty Ghawar oil field about to follow the same path as Mexico's Cantarell oil field?

At this point, only time will tell. The Saudis closely guard their oil field data, so it's impossible to know for certain.

And don't forget that OPEC members are masters of deception. OPEC members magically doubled their reserves in 1980s; Iraq did it twice in five years.

Either way, it's a strong message from Saudi Arabia to the world — one that says, “Don't expect us to keep the taps open for long.”

Peak oil profits

For us, it's a different story.

This latest announcement by the Saudis doesn't come as a surprise. If anything, it re-affirms our belief in peak oil.

Right now, there's an unprecedented buying opportunity in the markets. And every time I see the market get beaten back down, that feeling gets even stronger. We've witnessed the bottom for oil prices back in December 2008, when a barrel of crude cost $33.

For the last two weeks, I've mentioned that the U.S. has only one place to turn to feed its 18.6 million barrel per day addiction: Canada.

In fact our Canadian imports are now more than double our imports from Saudi Arabia. The U.S. currently imports about 2.46 million barrels of Canadian oil ever day.

With the Saudis out of the picture — and Mexican production dropping like a stone — looking to those Canadian drillers is a no-brainer.

I've actually found a tiny unknown Canadian oil stock that's stands to make investors 1239% by 2012.

You can learn more about this opportunity by clicking here.

Until next time,

Keith Kohl

Editor, Energy and Capital

P.S. In case your work week was as hectic and unforgiving as mine, feel free to kick back and catch up on the week's top investing stories from Energy and Capital and our sister publications.

The Biggest Cold War Blunder: How Stalin Lost $51 Billion Worth of Crude Oil
When the Soviets discovered a massive oil field in Mongolia, they quickly took control. Thanks to their inability to pump out the precious crude, the Russians left the entire field intact. Energy and Capital tells you about the one tiny oil company that stands to make investors a veritable fortune from this forgotten oil field.

Breaking Through the Frozen Soil: Lake Superior's $550 Billion Secret
Miners have been trying to unlock this secret for five decades... That is, until two companies finally cracked the code. Find out how you can capitalize off of this $550 billion secret that has already made readers 207% since September.

Is Mongolia the Next Dubai? The Story of Stalin's Lost Oil
Energy and Capital Publisher Brian Hicks shares with readers his insider intel as to why Mongolia is about to ride the Chinese oil-craze into a golden age.

New Law Guarantees this LED Company Shines: Uncle Sam Just Put Money in Your Pocket
Publisher Brian Hicks explains how a new government law guarantees you make profits in energy efficiency stocks.

The Next Junior Mining Stock Bull Market: Gold and Silver Prices Soaring; Markets Lag
Wealth Daily Editor Greg McCoach discusses gold and silver prices and the next junior mining stock bull market.

Asia Establishes Cleantech Dominance: China is Best in Breed
Editor Nick Hodge profiles clean energy process in Asia, and offers a few ways to profit from their energy hunger.

The Only Good Thing about the BP Spill: The Silver Lining of the Situation in the Gulf
Energy and Capital Contributing Editor Jim Amrhein gives readers insight into the silver lining of the Deepwater Horizon spill and what it means for the U.S. drilling economy...

Why Silver will Always Beat Gold: The Magic Ratio
Wealth Daily's Luke Burgess explains to readers why silver investments always beat gold in uncertain markets, thanks to the "magic ratio".

Energy Efficiency Emerges as Strongest Cleantech Sector: My Chat with the Street's Most Powerful Investment Bankers
Green Chip Editor Nick Hodge goes over data presented by Wall Street bankers at a recent energy conference, and concludes that efficiency is the best investment right now.

Is Mongolia the Next Dubai?

I wish you could have seen what I awoke to last Saturday morning.

My room was perched on a slight hill, in a clearing overlooking the edge of the water.

Through the picture window just beyond the foot of my bed, I could see the green outline of a giant lake's mountainous rim sloping gradually into the blue vastness.

The only thing wrong with the image was the clock on the nightstand.

It claimed that it was 2 PM... I almost never slept past 7 in the morning.

And then I remembered...

I was 13 times zones from home.

Welcome to Gusinoye Ozera — Goose Lake to us English speakers.

Located just a few dozen miles from the Russian/Mongolian border — not far from the famous world's deepest lake, Baikal — the area around Goose Lake populated by a grand total of about 2,300 permanent and several hundred part-time, very wealthy residents.

It was the dead middle of central Asia; 2,000 miles from the nearest ocean and about as far away from the big city as I've ever gone.

Which initially made it all the more confusing why my buddy Jouquin picked this location, over all the others in the world, to build a 7,000 square foot home.

And why others like him seemed to be doing the same.

That was until I opened my eyes and saw that view.

And not long after, the smell of the roasting meat that I remembered from the previous night came back, and pulled me out of bed.

Born in Argentina, Jouquin Ramos (not his real name) was brought to the states by his family as a child back in the early 70s.

He was kind of tall, gangly, and lately, seemed physically adverse to any clothing besides light linen pants, loose-fitting short-sleeve shirts and footwear that didn't require socks.

But that was the mistake most people made with Jouquin.

His easy demeanor and the eternal appearance of being headed to a party (or back from one) hid the sort of drive that few had.

He knew what he wanted from an early age — and knew how to get it.

After college, with the help of some seed capital from his uncle, Jouquin got his start in the shipping business.

Since then, like a whirlwind, he's had his fingers in everything from metals to oil.

His true passion, however, involved finding views just like this one... and making them his own.

Of the 6 or 7 homes that I knew him to own, most were in places where "nobody could find me no matter how hard they looked", as he liked to say.

But this took the cake.

If the 9 hour flight from Dulles wasn't enough, it took another 7 on a private charter just to get to within helicopter distance of the house.

When all was said and done, the view had cost me over 20 hours in various air vehicles and God knows how many permanently gray hairs...

But as I sat down at a table on giant stone terrace and watched Jouquin's kitchen staff assemble an impromptu breakfast right where I sat (according to Jouquin, freshly delivered caviar alone accounts for several thousand dollars in fuel costs every time he makes the visit), I realized it was all worth it.

Like many of my friends, Jouquin is a true global capitalist; an entrepreneur who built himself up from anonymity by knowing where to invest ahead of the curve.

"The markets do not tolerate personal preference," he always told me. "Do not treat your investments like your wife. Treat them like your girlfriend. Once your interest dissipates, cut the strings."

I'd just finished eating the mind-bending braised pig-belly (a local favorite), and settled back with a glass of champagne when Jouquin stood up from the table.

I could tell by his urgency that my relaxation was going to be short-lived that day.

"Come on," he said, waving my up from my chair. "I've got something to show you."

"You have something to show me?" I asked, letting my eyes make a demonstrative pass over the storybook landscape unfolding from the patio's edge. "Are you serious?"

"Yeah man, this is nothing, come on... I want to show you something really big. Something important. In the next ten years, it'll could make this whole region the next Dubai."

I guess I don't need to tell you that no matter how relaxed I may have been at the time, when a guy like Jouquin refers to something as "really big", it doesn't take me long to change gears...

Within 15 minutes we were back in his helicopter, settling into the two-hour trip back to the airport in Irkutsk.

I almost couldn't believe my eyes as I set foot back into the very same charter jet I'd gotten off of less than a day before.

When we touched down just a little less than 90 minutes later, however, there were no mountains or lakes or untamed wilderness to greet us. There was no fresh air, or clear skies, or kitchen staffers waiting to bring me my next ounce of prized caviar.

There was nothing but an old airbase, dotted with aging buildings, rusty hangars, and trucks that looked like they may have seen combat against the Nazis in their younger days.

We were processed into the country of Mongolia by a single man who took a cash payment instead of any form of documentation or a declaration of goods, and we were on our way.

As our rented Land Cruisers took us away from the airfield, the desolation just continued.

Who would ever want to be out here? I asked myself.

Moreover, who would ever want to leave that lake house — with a smile on his face — and spend half the day getting here?

Forty teeth-rattling minutes later, our two-car caravan pulled to a stop.

The only thing that really distinguished our destination from the road we took to get there was a chain link fence, with warnings written out in a foreign language I could tell was neither Russian or Chinese.

"Here it is." Jouquin said, spreading his arms before the vast expanse of dust. "You're looking at the future, my friend."

"The future" was a handful of utility vehicles, some construction equipment, and a couple one and two story metal-roofed buildings...

... And stacks and stacks of building material, some of which already had a fresh coating of rust on it.

"Ok, Jouquin," I sighed. "What's the punch line? Where are we?"

"Welcome to the heart of the new Dubai! This is where it all begins," he said with a smile so big I started to wonder if maybe he'd been sneaking drinks on the plane.

"You brought me all the way out here, for this? You know how much I wanted to take a dip in that lake?"

"When I tell you what's under your feet, my friend, I think you'll want to take a dip in this one much more."

It made me feel silly, but I looked down at the ground, like I'd missed something initially.

Just as I'd thought... dust and rocks. I looked at Jouquin, slightly annoyed now.

"Look closely," he said, his smile fading. "Look around you... what do you see?"

He looked at me, then glanced over at a stack of building material several hundred feet from where we were standing.

And then it hit me. It was everywhere. Mountains of it.

"Pipeline?"

"Bingo," Jouquin grinned. "Pipeline. Several hundred miles worth."

I looked at the ground again.

"You're standing on over 6 billion barrels of oil, my friend," Jouquin said, tapping the dirt with his foot.

This is the point where my memory became a bit hazy.

Luckily, I had plenty of time to collect myself on the flight back to Irkutsk...

And plenty of time to digest the magnitude of what my old friend had just shown me.

This oil reserve — one of the biggest ever discovered — had initially been owned by the Soviets under Stalin.

However, after finding oil that was geographically easier to access, they shelved the development of the site until a later time.

That time, of course, never came... The USSR fell apart in the early 90s, and with nobody to develop the site, the region was left abandoned.

"Chinese domestic oil production hasn't been able to keep up with demand since 1992." Jouquin told me as we sipped chilled vodka in our plane seats.

"They were at a 60% deficiency 4 years ago... Soon, they'll be the biggest oil consumers in the world, but instead of shipping it in from the Middle East, or drilling out at sea, they'll be pumping it out of the ground right here, and piping it across straight across the border."

"Six billion barrels," I said to myself, "that's over $430 billion worth."

"At today's prices," he added, "and not only that, but it's some of the easiest oil to get to in the whole world. The reserve's one of the shallowest known. I know it didn't look like much, but that site I just showed you holds over 600 million barrels all by itself, and they're just a couple of weeks away from production."

He paused. "This is going to be some of the last cheap oil on earth, my friend."

It was a striking revelation, and from then on after, other things started to make sense to me as well.

It was no accident that Jouquin had chosen this lakeside tranquility for his vacation home. In fact it was no accident that dozens of other wealthy venture capitalists were flocking to this once untouched piece of real estate.

The smart money always came ahead of the next boom.

The plane landed and we returned to his lake house in the early hours, but now it wasn't so easy to relax.

The next morning — or I should say, afternoon — Jouquin told me all about the outfit that owned and operated that field we'd visited.

They're small — valued at $107 million — but with the reserve lying just a few thousand feet beneath the surface (1500-6000 feet), they're also in the best spot imaginable to benefit from their estimated 638 million barrel share (11%) of Mongolia's entire awakening oil empire.

With increasing demand and scarcity of supply, however, crude prices could surpass 2008's peak and reach as high as $150/barrel by summertime...

Which would push Mongolia's total oil wealth up toward the $1 trillion mark.

Best of all, the world's second biggest consumer of oil, China, has already earmarked $30 billion to ensure that they get first crack at it.

In a time when the Middle East is scrambling for a way to maintain post-oil economies, Mongolia — overlooked by the cheap oil rushes of mid twentieth century — is about to ride the Chinese oil-craze into a golden age.

Ultimately, it'll bring hundreds of billions — perhaps even trillions — into the region... Which is exactly what Jouquin and his neighbors are banking on.

Personally, I don't think I'll be buying up any land around the Mongolian border anytime soon.

I will, however, be taking a closer look at this company.

With an oil reserve already valued at more than 400 times the company's current market cap, we could be looking at one of the last great oil-empires during its very infancy.

For more on this company, and the rest of the story of Stalin's Lost Oil... click here.

To your wealth,

Brian Hicks
Publisher, Energy and Capital

The Only Good Thing about the BP Spill

In about 30 seconds, most of you are going to stop reading this...

You’ll either dismiss me as an out-of-touch, lunatic-fringe quack and move on to the YouTube video-du-jour of some poor sap taking a wiffle ball to the groin — or you’ll be so furious at me that you simply won’t be able to read any longer without breaking your computer, waking the baby, or causing a disturbance at the office.

But it’s not my intention to ruffle feathers or start a ruckus...

Only to contritely confess before God and Gaia and everyone else...

That I’m an oil lover.

I’m not just a fair-weather friend, either. I always love oil. Even when it hurts, like now.

I simply love the fact that gazillions of tons of ferns that died millions of years ago are now propelling my truck (and my car, and my Harley) down the highway. That’s because I see the consumption of oil as conservation in its most fundamental form — using the old and dead to power the new and living.

It’s nature’s own recycling; a noble way to give thousands of long-extinct species of flora a chance to transcend the eons and live again.

For erstwhile leaves of grass to once more sound their Whitman-esque YAWP — if only for a fleeting moment as they rush or rumble out of my various tailpipes...

Ready to fling your laptop?

Don’t just yet...

Besides loving oil and all that it makes possible, I’m also a veteran fisherman and hunter who has lived his entire life a stone’s throw from one of Earth’s greatest estuarine environments, the Chesapeake Bay.

As such, I have undying affection for wetlands and beaches and coves and marshes and rivers — and the woods and meadows and farms that bracket them...

And I simply cannot imagine how I would feel if the nightmare that’s bearing down on the Gulf Coast were happening just off the Delaware and Maryland coast instead.

I’d want answers. I’d want action. I’d want restitution. I’d want justice.

I’d want blood.

I’d probably even want regulation — which is painful for a conservative anarcho-libertarian like me to even say...

But what I wouldn’t want is for America to cripple itself over it.

The first shot (in the foot) of America’s “green oil” revolution?

Much has been speculated and discussed about the possibility of a permanent moratorium on offshore oil drilling in U.S. coastal waters in the wake of the Deepwater Horizon leak, what’s shaping up to be perhaps the worst oil disaster in world history…

Some call it the beginning of an American “green oil” or “dry oil” movement.

But rhetoric and policy debates and judge’s rulings aside, whether that happens or not is completely irrelevant to the possibility of future catastrophic oil spills in the Gulf.

That’s because the U.S. isn’t the only nation that can drill for oil there.

So full of our Starbucks and Smart Cars are we under the Stars and Stripes that we forget about other nations — like Mexico and Cuba. And Russia…

According to a Reuters article from February 26, 2009, Mexico’s state-owned oil major is aggressively inking offshore drilling deals with private drillers:

Mexico's state oil company Pemex said on Thursday it had awarded three offshore drilling contracts worth a combined $249.7 million to privately held MexDrill and a unit of Nabors Industries…

Clearly, Mexico is going after the oil in the Gulf waters under its control.

And for several years, we’ve been hearing vague reports of Cuba planning to drill for oil in the waters off the Florida coast — but such appalling notions have faded into the background now that our blue waters are turning black.

However, some outlets of the major media is still reporting and/or speculating that this idea may be closer to reality than any American wants to imagine right now…

According to a March 18^theditorial in the much-maligned Washington Times:

Russia is making a bold strategic leap to begin drilling for oil in the Gulf of Mexico. While the United States attempts to shift gears to alternative fuels to battle the purported evils of carbon emissions, Russia will erect oil derricks off the Cuban coast.

Numerous sources confirm that despite the wishes of many Floridians that their no-drill zone be extended far beyond even the island of Cuba itself, a Carter-era U.S. agreement does indeed allow for Cuban (or Russo-Cuban) offshore drilling in waters near Florida…

And apparently, the ink is dry on a series of contracts allowing (or guaranteeing) this.

According to a BBC report from last July 29^th:

Russian Deputy Prime Minister Igor Sechin signed four contracts securing exploration rights in Cuba's economic zone in the Gulf… Russia's Zarubezhneft oil concern will work alongside the Cubapetroleo monopoly in the deep waters of the Gulf.

Hmmm. So it’s more than simply speculation and sensationalist reporting.

The Mexicans and Cubans and Russians and God knows who else are going after underwater oil in the Gulf of Mexico and other coastal waters off the continental U.S.

Why I’m glad the Deepwater Horizon spill happened to BP

Let me back up a minute…

You all saw those time-lapse computer models of the possible reach of the Deepwater Horizon spill on the news a few weeks ago. Ergo, you know it’s entirely possible that the oil from the leaking well might soon be swept down the backside of the Sunshine State, through the 90-mile straight between the Florida Keys and Cuba, and up the East Coast to damn near the Maryland and Delaware shores…

Now, I hate to ask the question that no one wants to think about, but:

How is what’s happening with the Deepwater Horizon leak materially different from what would happen if the Russians caused a spill of similar scale off the Cuba coast?

Millions of gallons of crude oil would still be swiftly swept northward to ruin thousands of square miles of sea ecosystems and hundreds of miles of prime American coastline, wetlands and waterways…

There is one difference, of course: The fact that the U.S. can actually exert pressure on BP, Transocean, and other companies that may be affiliated with the disaster for things like cleanup, compensation funds, etc.

Also, the fact that these companies are publicly traded forces them to exact some measures toward responsibility for their actions, lest they be even further punished by consumers in the markets.

Compared to the alternatives, it’s a good thing for America that this disaster happened to BP.

Imagine what Cuba's or Mexico’s response would be if such a thing happened on their watch — under the expertise of one of their benevolent, state-owned companies that are not accountable to the public’s ire in any way…

After nearly 50 years of trade embargos against them, do you think Cuba would hand the U.S. millions of dollars per day to clean up any kind of mess they might make?

You think cash-strapped Mexico, feeling shunned at America’s resistance to an illegal immigrant invasion from the south, would be compensating U.S. coastal merchants and residents who’ve been affected by a Gulf disaster of their creation?

More importantly, do you think the U.S. government would be able to make them do these things?

My point is this: Despite the Deepwater Horizon tragedy, nothing short of warfare or an international Gulf no-drill treaty that’s in no one’s best interests can stop oil drilling within spill-range of America’s coasts.

And as much as I love the natural world, I confess to loving America more — American oil drilling jobs. American oil companies. American oil leases...

American cars and trucks and motorcycles and outboard motors and plastics and asphalt and roof shingles and everything else that depends on petroleum.

We must stay competitive in the oil markets, and that means drilling in the Gulf.

It also means drilling for both conventional and unconventional petroleum resources onshore…

And with nothing but crude-coated birds and drilling bans and BP bankruptcy stories monopolizing the headlines, it may surprise you to know that there are now some newly perfected, high-tech, low-impact methods that a handful of small companies are using to extract large quantities of oil locked under remote patches of North American soil.

For a petro-holic and nature-boy like me, it’s the perfect investing combination. I get to make money from fair-game domestic trading in the only energy technology I truly love and believe in…

And I get to sleep well at night, knowing that I’m not funding any company that could ever cause another Deepwater Horizon-type disaster.

Click here to learn more about these companies — tickers, profiles, prospects, etc…

Sincerely,

Jim Amrhein
Contributing Editor, Energy and Capital

P.S. I didn’t have nearly enough space to give you all the incredible details on these high-tech “frack” drillers here, but you can get a complete report on the subject written by a qualified expert (Keith Kohl of The $20 Trillion Report) right here, FREE.

Natural Gas vs. Wind Stocks

An unlikely showdown occurred yesterday.

Understandably, I'm not usually one to have a row with one of my readers; but when their hard-earned money is on the line, nothing is out of bounds for me.

The problem was that this poor soul was a hopeless romantic. For hours, he ranted and raved about wind energy.

First it was the great revitalization that would happen in rural economies... Then he dazzled his own mind with the thought free fuel, stabilizing electricity prices, creating jobs.

His lecture went even further, explaining how wind was the perfect source of energy. From a cleaner environmental footprint... the lack of mining and transportation like the “filthy” oil sands... and finally, how we'll be preserving countless acres of land.

Believe me, he went on and on like the Energizer Bunny. And on and on... You get the drift.

In fact he was so focused on the development of wind energy; he even made a point to say how profitable wind stocks were.

That part I had to concede. My colleague Nick Hodge has been making a killing on wind stocks for years. He mused how easily his readers just banked 26% from one wind company.

When I pressed him on it later, he went on to tell me about three wind stocks that could double by the end of the year.

So it was an open-and-shut case, right?

Sadly, no.

Like I said, this guy was a dreamer...

Reality blowing in the wind

It's not that I don't like the idea behind wind energy.

On paper, it sounds great.

For example, when the gentleman excitedly told me that wind energy was growing at a tremendous rate, I knew he had lost perspective on his investment.

This would certainly explain the generous profits to be made in the wind stocks, he (and many wind investors) failed to take into account a very important factor.

I want you to look at something. Below, I've let the EIA break down our total energy consumption by source:

(Click to Enlarge)

Obviously, oil's grip over our energy picture is stronger than ever. Also notice that our consumption of wind energy jumped 196% during that time — more than any other source of energy.

The reality, however, is that wind makes up a dismal amount of the overall picture.

In 2007, wind made up just 5% of U.S. renewable energy consumption. And like it or not, all of our renewable energy sources combined amounted for a mere 7% of overall consumption. You can see that break down from the EIA right here.

Fifty or sixty years down the road, you might have me convinced. But by then, we will have already transitioned away from oil with another energy resource.

And I'll tell you right now that it's just as clean as wind — and more profitable.

Natural Gas Stocks: The 2010 Comeback

One thing that will put aside the development of wind energy is natural gas.

And in the U.S., there's no better opportunity to take advantage than right now.

It makes perfect sense, too.

For starters, we have the supply. This should be overwhelmingly evident.

After the first shale gas explosion (no, not in the BP sense of the word), we began to realize how abundant our resources were. Soon after the success in the Barnett shale, several other massive shale formations were tapped.

Earlier this year, I explained why these U.S. shale basins will be a game-changer. At the time, I only used four as an example. As you know, there are several other extremely profitable plays in both the U.S. and Canada.

Also, we have the infrastructure in place. The network of pipelines across the U.S. has kept the natural flowing.

And right now it's incredibly cheap.

When energy demand collapsed along with the housing market, oil and gas prices took a beating. Crude oil collapsed to $33 per barrel in December 2008; natural gas tumbled below $3 per Mcf.

But when oil prices rallied in 2009, natural gas prices remained stagnant — mostly due to the oversupply.

In the last year, natural gas prices have remained cheap:

Now here's the kicker...

Natural gas isn't going to stay this low forever, especially when demand is finally picking back up.

Furthermore, when the U.S. finally makes the transition away from oil, we will be forced to account for even more demand — and you can count on peak oil to facilitate that change.

When I first started investing in natural gas stocks, there was one mantra that quickly adopted: Always buy during the summer months and sell during the winter months. Seasonally, that's when natural gas is at its peak.

And if you haven't noticed it yet, our future in natural gas hinges on developing these shale plays.

One area in particular has a head start.

This free report lays it all out for you — including three plays that stand to double on a natural gas recovery.

Until next time,

Keith Kohl
Editor, Energy and Capital

The Smart Grid: A Smart Investment

It's being called “the biggest investment of the next 50 years” by the CEO of GE.

The likes of Cisco and Bank of America are also on the edge of their seats, anticipating the boom of smart grid technology.

In fact a Bank of America (NYSE: BAC) analyst recently said they expect 80-140 million meters to be installed in the next 10 years — and a total smart grid investment of $215 billion in the next four to five years.

This is going to be huge.

The time to invest in smart grid technology is now — and we have all the details of how you can get in on pure plays in this report.

Mayors at Annual U.S. Conference Jump on Natural Gas Vehicle Bandwagon

As if BP didn’t do enough to secure the rise of natural gas in America, you can now thank your local politicians, too...

Mayors from various cities and towns across the United States gathered for the 78th annual U.S. Conference of Mayors meeting in Oklahoma City this past week.

For the duration of the conference, the mayors had the opportunity to experience first-hand the benefits of clean burning natural gas vehicles as they were shuttled around in natural gas vehicles sponsored by industry leaders and the American Lung Association.

This demonstration of the advantages of natural gas was meant to coincide with an endorsement of the clean burning fuel by the group — which is about to prove to be quite the blessing for natural gas industry investors.

You see, the Conference is calling Congress and the White House to pass the “New Alternative to Give Americans Solutions” (NATGAS) Act — a bill which establishes massive tax credits and federal incentives for natural gas vehicles.

In addition to the tax relief for vehicle purchasers and manufacturers, the group is also urging the Feds to renew another bill which would continue a $0.50/gallon tax credit for compressed or liquid natural gas fuel.

And they’re not just harping on financial relief; the mayors are also calling for expanded federal research into natural gas engines.

American Clean Skies Foundation CEO Gregory Staple says, "This resolution proves that mayors are keenly aware of the role natural gas can play in decarbonizing their cities and spurring the local economy. The low-cost opportunities to run municipal fleets on natural gas would result in budget savings and cleaner air, especially compared to diesel."

Now’s the time to invest in natural gas vehicles

With federal and local endorsements and tax incentives, the future for natural gas vehicles has never looked brighter.

The fuel price has never been lower, and several companies are already banking on the future of natural gas vehicles.

One of these is Clean Energy Fuels (NASDAQ:CLNE), a natural gas refueling company owned by oil tycoon T. Boone Pickens.

Their stock is up over 317% since October 2008. It is expected to climb dramatically with the expansion of natural gas vehicles across the public and private sectors.

In fact I just put the finishing touches on a report that details a company that produces engines that run on natural gas. This outfit has already signed contracts with Wal-Mart, Peterbilt, and Volvo. And lately it's been busy building bus engines for India and much of Europe.

I have a good feeling they’ll make Clean Energy Fuels’ 317% gains look like pennies in the bucket...

You can read all about it right here.

Consider it your investment guide to getting in on the inevitable natural gas revolution.

Call it like you see it,

Nick

The Dawn of Intergalactic Oil

Space: The final frontier.

... For the oil industry?

It appears so, as word leaked yesterday from high-level NASA officials that a multi-billion dollar, 10-year initiative had been launched to begin transporting oil back to Earth from Titan, one of Saturn's moons.

According to scientists, this smoggy moon located on the outer rim of Saturn's rings is said to contain more natural gas and other liquid hydrocarbons than all proven oil and gas reserves on Earth.

And with petro supplies declining at an alarming rate around the globe, the oil industry is now seemingly prepared to embark on the first-ever intergalactic oil exploration mission in history.

"This is vital, essential, critical — whatever word you want to use for it — to the survival of big oil," stated an unnamed oil executive.

"You hear it and you just can't believe it's possible. It sounds like a sci-fi movie. But this is where we're at... This is the future of our industry."

Using observations from NASA's Cassini spacecraft, officials have determined that hydrocarbons actually fall from the sky in the form of rain on Titan, and are collected in lakes and dunes. It seems that this moon may be the first known "endless" source of oil ever discovered.

"Titan is just covered in carbon-bearing material — it's a giant factory of organic chemicals," said Ralph Lorenz, a Cassini radar team member from the Johns Hopkins University Applied Physics Laboratory.

Cassini has only surveyed 20% of Titan so far and already the lakes and dunes observed there are estimated to hold more fuel than all of Earth's current reserves combined.

"We'll get that oil back here, even if we have to build a pipeline from Saturn to the Earth," says a veteran oil wildcatter. "It may cost more money than the world's ever seen, but it'll cost more for us not to do it."

Unnamed NASA sources have already begun work on a $98 billion exploration and retrieval vessel rumored to be named The Baron.

Once the ship reaches Titan, its 12-man team will siphon approximately 5,000 barrels of fuel into the ship's storage cells. It will then begin the return journey to Earth to determine if its cargo is viable to be used inside our atmosphere.

Total roundtrip time of the vessel is expected to be four years.

If the mission is successful, plans are to have a fleet of oil ships launched within months of The Baron's return.

"Forget solar, wind, ethanol — all the alternative energy stuff. This may be what saves our planet from a true energy crisis," says the oil executive.

How close are we?

Okay, time to 'fess up...

Most of what you just read is a work of fiction.

There's no partnership between NASA and Big Oil... No Baron spaceship or mission to Titan.

What is true, however, is that Titan is estimated to hold more oil and gas than planet Earth. The Cassini spacecraft really did return with this eye-opening news.

And someday — sooner than you think — we could very well be reading articles like this on the front page of every newspaper in the world.

Because as long as our oil addiction rages on while our planet's reserves continue to dwindle... stories like this remain a very real possibility.

And now with offshore drilling at least temporarily (and perhaps permanently) dead in the water, thanks to the BP spill, you can wipe a huge potential supply of oil off the charts.

The fact remains that, for the moment, America's #1 up-and-coming source of petro lies in oil shale — specifically the shale of the Bakken region in North Dakota.

While California, Texas, and Alaska continue to watch production numbers plummet every year, North Dakota only continues to see figures increase.

And it's easy to see that now that President Obama has ordered oil companies out of the water, shale regions like Bakken — which is estimated to hold over 4 billion barrels of oil and counting — are going to see a massive influx of new exploration and production.

I've compiled a brand-new report on this "game-changing" situation occurring right now in the oil industry.

Inside you'll find details about three small American oil firms with heavy ties to the Bakken formation.

These firms are already established and successfully producing crude in the region and their share prices are primed for a major move upward as North Dakota becomes the next domestic oil hot zone.

You can access this report — for free — right here.

In the meantime, remember you heard about Titan here first. One day, it could become a household name.

The tiny moon that saved the oil industry...

Until next time,

Keith Kohl
Editor, Energy and Capital

Is Natural Gas the Future of Energy?

I get a lot of information...

Some of it free tips from industry insiders. Some of it from expensive institutional research tools — the same stuff Goldman and Citi analysts have access to.

And while I can't share all my secrets, today I'd like to present some startling (and highly valuable) information that I've steadily been seeing in those high-end reports and from the insiders I talk to.

First and foremost, take a look at this:

The gray bars show U.S. crude oil production, which has been steadily decreasing.

The orange bars show U.S. crude oil imports, which have been steadily increasing.

Right now, we produce about 6,000,000 barrels per day of U.S. oil, but we import about 10,000,000 barrels of it. By 2015, we'll be producing less than 5,000,000 barrels per day and importing over 13,000,000 barrels of it.

Our addiction is getting more serious, and our ability to satiate it more dire.

In an industry so valuable — with so many geopolitical and economic implications — the way we choose to meet our energy demand will make or lose fortunes.

Not coming from oil

Even though the drilling moratorium was lifted yesterday by a federal judge, I believe that action is temporary. An appeal has already been filed, and U.S. Interior Secretary Ken Salazar will file a new ban this week.

And in addition to ban in the Gulf, most other offshore drilling in the States has come to a standstill.

Exploratory drilling has been suspended off the coasts of Alaska and Virginia. The Governator has withdrawn support for a plan to expand offshore drilling in California. And Florida Governor Charlie Christ is looking for a way to permanently ban drilling off his shores.

With offshore crude accounting for 33% of U.S. oil production, we're going to have to find a replacement — and fast.

Since total production has been falling for years, you can bet the replacement won't be more onshore oil.

Increasingly, it looks like the answer's going to be natural gas.

Welcome to Gasland

A brief from an energy consultancy I subscribe to said this week that the United States will “increase its natural gas consumption to overcome the decrease in crude supplies.”

We're already seeing this play out in Congress, and the country's wealthiest investors are already placing bets in response.

I recently told you that utilities are already switching to natural gas for baseload generation because of the pressures being place on coal. Now, political officials, security experts, and billionaires are pushing for nat gas to be used as an oil substitute as well.

In a recent essay, billionaire T. Boone has this to say about our increasing natural gas reserve figures:

This incredible surge in total gas resources will completely reshape the international energy landscape. Domestic natural gas is going to be so plentiful and so cheap that liquefied natural gas carriers from Qatar and the Middle East will stop coming to the U.S. They'll go to India and China instead. We just won't need them anymore.

He's on the board of directors of and has a large investment in Clean Energy Fuels Corp (NASDAQ: CLNE), a company that builds natural gas fueling stations.

Nancy Pelosi's husband has bought the stock as well. And you should, too.

Because the New Alternative Transportation to Give Americans Solutions (NATGAS) Act is already moving through Congress. It would, among other things, offer hefty tax credits for the purchase of natural gas vehicles and require 50% of U.S. government vehicles to run on natural gas.

Even former CIA Director James Woolsey is pushing this approach, saying in a recent op-ed that:

We have well over a 200-year supply of natural gas according to current estimates. We have enough to do everything, and we're going to look like fools if we don't use it in transportation.

The Congress should adopt legislation that significantly enhances the use of domestic natural gas as a transportation fuel for heavy duty trucks and fleet such as that which is contained in H.R. 1835, the NATGAS Act.

The Center for American Progress echoed that sentiment in their own report.

As I said, the way we choose to meet our immense fossil fuel demand will make or lose fortunes. And as you can see, America's powerful and wealthy are already pushing a certain approach, and lining up to line their pockets in the process.

Here's what you need to do to profit:

First, buy the United States Natural Gas Fund (NYSE: UNG) as a long-term investment.

Second, buy Clean Energy Fuels Corp. (NASDAQ: CLNE) and follow T. Boone and Pelosi to the easy money.

Third, read our new report on the future of fuel, and learn about another natural gas investment being backed by billionaires that could hand you several times your money as this transition plays out.

Call it like you see it,

Nick

The Samurai's Secret that can Make You 2682%

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Find out why the Chinese are now hoarding every ounce they can get their hands on... And how one company may have found the solution to a global crisis.

Beyond BP: Looking Past the Oil Spill

Put the BP cleanup aside, if even for a few minutes.

I know it'll be difficult... Between the latest news on the cleanup efforts and the fact that everyone has a magical — and often ridiculous — solution to the problem, the media is on BP overload.

After sifting through hundreds of e-mails lately, I've noticed a common theme: What's next?

Today, we're looking further down the road.

And trust me, dear reader... It's a little more complicated than simply saying that onshore plays will be more attractive than the deepwater fields. Even my four-year-old niece knows that much...

What most people don't realize, however, is just how bad things are going to get.

A brewing oil crisis

One thing we can always count on to exacerbate a situation is a politician who needs a second term. Having said that, I have no doubt in my mind that President Obama will extend the current drilling moratorium in the Gulf of Mexico.

That's a given.

The level of outrage at BP, much of it justified, will send Obama into an apologetic, sheepish state of politics. As you can guess, appeasing the public's ire involves a deepwater drilling ban for years to come.

In fact, countries around the world are eager to hop on the moratorium bandwagon.

According to the International Energy Agency, an extended global moratorium on new offshore drilling areas could cut the world's offshore production by as much as 900,000 barrels per day. It would take less than five years to happen.

In the Gulf of Mexico, up to 300,000 barrels of oil per day could be lost if new projects are delayed. At the very least, we can count on that lost oil from the Gulf of Mexico.

Unfortunately, it's not just the deepwater oil that we're losing each year.

Past the peak

We know that U.S. oil production isn't teetering on the brink of collapse — it is collapsing.

This shouldn't come as a surprise to us.

If it does, then you might be new around here.

Last year, only six states managed to increase their crude oil production: West Virginia, Kentucky, Mississippi, Utah, Oklahoma, and North Dakota.

That's it.

I know what you're thinking... That's not so bad, right?

At least six states were able to produce more oil.

Let's put this into perspective.

With the exception of North Dakota, remember that we aren't exactly talking about the most prominent oil producers. The combined production increase from the five others amount to less than 14,000 barrels per day.

That's it.

In fact those states (again, sans North Dakota) that managed to increase oil production together produce less than one-third of the amount Texas does.

If the mediocre producers are able to increase production, we can expect our larger producers to pull out the big guns and improve oil production, can't we?

Things get even worse when you look at our top oil-producing states: Texas, California and Alaska. Together, they make up 43% of our total oil production.

Not too shabby, you say?

During the last twenty years, both Texas and California managed to increase year-over-year oil production twice. Alaska only did it once.

You can see the bad news for yourself here.

As oil prices surged to $147 per barrel, Texas was the only one of the big three to increase production. And even then, it was only by a mere 2%.

One state, destined to rule them all

I'll admit I left North Dakota out of the picture above... And that's because my outlook for North Dakota is in a league of its own.

Although the top three oil producing states have a dismal track record, North Dakota has been able to increase its oil production for six straight years. As you are well aware, its success lies solely from the Bakken formation.

But if you want an idea of how important the Bakken is, remember that the formation makes up nearly 60% of the state's oil production. By the end of the decade, between 500,000 and 600,000 barrels of oil could be pumping out of Bakken wells.

The fact is that the Bakken has become oil's game-changer.

Of course, even that won't save us from peak oil... We'll eventually have to get our oil fix from more sources.

Oh, Canada!

This should be a no-brainer.

Take away the potential production from deepwater prospects, add peak oil into the mix, and we're in for a tight ride for our oil addiction.

Our options?

Well, we can count out Mexico... If Chavez keeps up his antics, we can definitely forget about Venezuela's ability to develop their heavy oil assets.

We can even cross Russia off our list, too. Unless Russia doesn't change its laws, exploration will be restrained and Russian oil and gas production could begin declining by 2012. Exploration has dropped more than 65% this year. The problem is that the new fields are signed to the state — not the company that made the discovery.

Can you really blame them for not pursuing new fields?

It's a good thing we have an energy powerhouse for a neighbor.

Right now, investors have an unprecedented buying opportunity. And believe me, it's not limited to just one field or formation. The entire country is rushing to develop its energy sources. It has become a win-win situation for my readers.

And I'll tell you all about it all next week.

Until next time,

Keith Kohl

P.S. Next week, I'm going to shed some light on an oil patch that is starting to turn heads in Canada. Geologists are even referring to this area as "the next Bakken." Now, I understand a few of you don't like to sit around, twiddling thumbs as other investors get the jump on an opportunity.

So if you want to get ahead of the game, feel free to check out my free report right now. Simply click here to learn more about this opportunity.

BP's Quest for Time

The Dwarves dug too greedily and too deep. You know what they awoke in the darkness of Khazad-dum... shadow and flame.

— Saruman, The Lord of the Rings

There is something primordial about BP's quest for oil in the Gulf of Mexico. It's an Icarus-like story of super-ambition; of reaching too far, delving too deep.

I don't know if you've stopped to contemplate what BP was trying to do...

The well itself started 5,000 feet below the surface. That's the depth of the Grand Canyon from the rim.

And then the company attempted to drill more than 30,000 feet below that — Mt. Everest would give 972 feet to spare.

Furthermore, the company sought oil in a dangerous area of the seabed.

It was unstable and many think BP sought it out because seismic data showed huge pools of methane gas — the very gas that blew the top off Deepwater Horizon and killed 11 people.

More than a year ago, geologists criticized Transocean for putting their exploratory rig directly over a massive underground reservoir of methane.

According to the New York Times, BP's internal "documents show that in March, after several weeks of problems on the rig, BP was struggling with a loss of 'well control.' And as far back as 11 months ago, it was concerned about the well casing and the blowout preventer.”

The problem is that this methane, located deep in the bowels of the earth, is under tremendous pressure...

Some speculate as much as 100,000 psi — far too much for current technology to contain. The shutoff vales and safety measures were built for only 1,000 psi.

It was an accident waiting to happen... And there are many that say it could get worse — much worse.

Geologists are pointing to other fissures and cracks that are appearing on the ocean floor around the damaged wellhead.

According to CNN:

The University of South Florida recently discovered a second oil plume in the northeastern Gulf. The first plume was found by Mississippi universities in early May.

And there have been other plumes discovered by submersibles...

Some geologists say that BP's arrogance has set off a series of events that may be irreversible. There are some that think that BP has drilled into an deep-core oil volcano that cannot be stopped, regardless of the horizontal drills the company claims will stop the oil plume in August.

Need the Mudlogs

Geologist, Chris Landau, for instance, has called for a showing of the mudlogs. A mudlog is a schematic cross sectional drawing of the lithology (rock type) of the well that has been bored.

So far, no one has seen them... BP keeps them hidden.

Mr. Landau claims:

It is a dangerous game drilling into high pressure oil and gas zones because you risk having a blowout if your mud weight is not heavy enough. If you weight up your mud with barium sulfate to a very high level, you risk BLOWING OUT THE FORMATION.

What does that mean? It means you crack the rock deep underground; as the mudweight is now denser than the rock, it escapes into the rock in the pore spaces and the fractures. The well empties of mud. If you have not hit high pressure oil or gas at this stage, you are lucky.

But if you have, the oil and gas come flying up the well and you have a blowout, because you have no mud in the well to suppress the oil and gas. You shut down the well with the blowout preventer. If you do not have a blowout preventer, you are in trouble as we have all seen and you can only hope that the oil and gas pressure will naturally fall off with time, otherwise you have to try and put a new blowout preventer in place with oil and gas coming out as you work.

Obviously, the oil and gas pressure hasn't fallen off

In fact... it's increased.

The problem is that BP may not only have hit the mother of high-pressure wells, but there is also a vast amount of methane down there that could come exploding out like an underwater volcano.

I recently heard a recording of Richard Hoagland who was interviewed on Coast to Coast AM.

Mr. Hoagland has suggested that there are cracks in the ocean floor, and that pressure at the base of the wellhead is approximately 100,000 psi.

Furthermore, geologists believe there are another 4-5 cracks or fissions in the well. Upon using a GPS and Depth finder system, experts have discovered a large gas bubble, 15-20 miles across and tens of feet high, under the ocean floor.

These bubbles are common. Many believe they have caused the sinking of ships and planes in the Bermuda Triangle.

That said, a bubble this large — if able to escape from under the ocean floor through a crack — would cause a gas explosion that Mr. Hoagland likens to Mt. St. Helens... only under water.

The BP well is 50 miles from Louisiana. Its release would send a toxic cloud over populated areas. The explosion would also sink any ships and oil structures in the vicinity and create a tsunami which would head toward Florida at 600 mph.

Now, many people have called Hoagland a fringe thinker and a conspiracy theorist. And they may be right... But that doesn't mean he isn't on to something.

EPA finds high concentrations of gases in the area

The escape of other poison gases associated with an underground methane bubble (such as hydrogen sulfide, benzene, and methylene chloride) have been found.

Last Thursday, the EPA measured hydrogen sulfide at 1,000 parts per billion — well above the normal 5 to 10 ppb. Some benzene levels were measured near the Gulf of Mexico in the range of 3,000 – 4,000 ppb — up from the normal 0-4 ppb.

More speculation of doom

The Oil Drum, an industry sheet, recently ran an article about the sequence of events that tried to stop the oil spill.

The upshot of industry insiders was that after trying a number of ways to close off the leak, the well was compromised, creating other leaks due to the high pressure. BP then cut the well open and tried to capture the oil.

In other words: BP shifted from stopping the gusher to opening it up and catching what oil it could.

The only reason sane oil men would do this is if they wanted to relieve pressure at the leak hidden down below the seabed... And that sort of leak — known as a “down hole” leak — is one of the most dangerous kind.

No stopping it

It means that BP can't stop if from above; it can only relieve the pressure.

So, more oil is leaking out while BP hopes it can drill new wells before the current one completely erodes.

BP is in a race against time... It just won't admit this fact.

According to the Oil Drum:

There are abrasives still present, a swirling flow will create hot spots of wear and this erosion is relentless and will always be present until eventually it wears away enough material to break it's way out. It will slowly eat the bop away especially at the now pinched off riser head and it will flow more and more. Perhaps BP can outrun or keep up with that out flow with various suckage methods for a period of time, but eventually the well will win that race, just how long that race will be?

... No one really knows...

Which leads us back to Mr. Landau's point about the mudlogs and why BP won't release them.

I don't know... Maybe I'm wearing my tinfoil hat too tight this morning... But this stuff seems possible — if it's only a worst case scenario.

What strikes me as odd is the way the leadership of BP and the Obama administration is acting.

BP is running around apologizing to everyone they can find. Obama says give us $20 billion in escrow and $100 million for the people Obama put out of work on the oil rigs due to his six month ban — and BP says, "Sure thing mate, no problem."

And all of this in a 20-minute meeting?

I've been dealing with oil companies for a long time and it just doesn't add up...

Contrast it, for instance, with the Exxon situation in Alaska or the Union Carbide disaster in India.

Exxon fought tooth and nail for its shareholders; it appealed court rulings for 19 years. Union Carbide wasn't settled for 25 years.

BP is rolling over like a simpering dog. Why?

The only reason I can think of is that the company knows — better if not as well as the Obama administration does — that it will get worse.

Much worse.

I've put together a list of oil cleanup stocks for the readers of my Crisis & Opportunity. Many are running, and one has pulled back into a solid buy range. Three more are on my buy list.

All I know is that this spill isn't even half over. Oil in the Gulf will lead the news-cycle for the foreseeable future.

And the companies that make products that stop, absorb, or disperse oil have an endless supply of work. I've done the research, and found some companies that could profit cleaning up the spill. You can learn about them in my investment letter, Crisis and Opportunity.

Sincerely,

Christian DeHaemer
Editor, Energy and Capital