Investors like to examine pricing anomalies, particularly related to commodities that could be viewed as substitutes but trade at radically different prices. One barrel of crude oil has approximately six times the energy content of one thousand cubic feet (mcf) of natural gas. One mcf of natural gas is approximately equivalent to one million BTUs (MBTU). Despite the energy equivalence, for a variety of reasons, the pricing relationship between oil and natural gas is almost never exactly six to one. Read this article for our analysis.
In a presentation today, Contango Oil & Gas CEO Kenneth Peak stated that the economics of oil and gas exploration in shallow Gulf of Mexico waters have improved significantly compared to 2008 conditions due to a dramatic decrease in dayrates for the jackup rigs used in shallow waters that has more than offset moderate increases in administrative and insurance costs. Mr. Peak also spoke at length about the new permit process in place and Contango’s efforts to adapt to changing regulatory requirements. Read this article for more details.
The shale gas boom in the United States has been something of a mixed blessing for independent oil and gas companies. While new technology has opened up vast new areas of exploration and production, natural gas prices have been in a serious slump since peaking in mid 2008 which has created challenges for companies seeking to justify the cost of shale production. At recent prices, shale plays may be delivering only marginal profitability at best given the high cost of production. However, while natural gas prices remain stuck in a trading range near $4/mcf, crude oil prices are approaching $90/barrel, a level not seen in over two years. Companies may be starting to respond to these price signals. Read the article for more details.
Despite our best efforts as value investors to avoid anything that may resemble speculation, sometimes unique circumstances can arise that force us to replace typical passive behavior with an active choice. Such a scenario will soon face shareholders of Contango Oil & Gas who will receive one share of Contango ORE (CORE) for each ten shares of Contango in a spin-off scheduled for December. Contango has attracted a following among value investors and has been capably managed by Chairman and CEO Kenneth Peak since the company’s founding in 1999. Is CORE an intelligent speculation? Read this article for our thoughts.
Contango Oil & Gas Company has announced plans to spin off shares of its wholly-owned subsidiary, Contango ORE (CORE) to shareholders in December. CORE was set up to explore for gold and rare earth minerals and currently controls 750,000 acres in Alaska. The purpose of the spin off is to separate a speculative venture from Contango’s established oil and natural gas business. Read this article for more details.