Agora Financial’s Rude Awakening

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Gaithersburg, Maryland

• A black gold bonanza…right at your doorstep,
• “The stuff that makes a good story around bars filled with oilmen,”
• Abu Dhabi’s most eye-popping models and plenty more…

Joel Bowman, reporting from nowhere in particular…

“It’s like a feeding frenzy in here,” a stout Englishman informed your editor earlier this week. “Can you believe it? These maniacs are buying them in the morning and then selling them in the afternoon…many for a good profit,” he continued, sweeping his arm across the giant pavilion space below us.

Your editor was not visiting an exchange floor, where one would expect to see traders buying and selling stocks or commodities. We were attending Citiscape Abu Dhabi, an international real estate and investing event held once a year in the capital of the United Arab Emirates.

The “maniacs” our enthusiastic observer pointed out were ultra-rich Arab investors who bought properties – sometimes whole developments – during the morning session, then flipped them in the afternoon session, following tea and biscuits and a midday prayer. It was like watching a property bubble in hyper-speed; like Florida and Southern California’s real estate markets on crack, if you will.

This year’s handshake extravaganza drew in excess of 300 exhibitors, flogging their wares from over 50 countries around the world. Some 30,000 visitors ogled the flashy displays and inked multi-million dollar deals on skyscrapers that haven’t even commenced construction. 

Even some of the “miniature” models of the developments - stretched out over vast areas of the enormous atrium and six grand halls – covered enough floor space for a modest home.

One fellow showed us his tiny city, laid out on a table big enough for 20 hungry Vikings to eat off. The hundreds of buildings and streets represented what he called, “Washington D.C. right here in Abu Dhabi.”

“We looking to consolidate all government buildings into single area to create capital district, like what they have in America,” he told us.

“It will go right in the heart of this city and will have universities and hospitals, parks and housing enough for many people to live,” he proudly announced.

“How many people?” we accidentally wondered out aloud.

“Oh, between 250,000 and 300,000. We just finalizing the plans, but it should be done in about three years,” he replied…without even blinking. 

Then there were the actual models, dressed to the nines and wooing anyone who looked wealthy enough into the temporary offices to sign checks and shake hands. (Strangely enough, your editor was left to wander the exhibition hall without solicitation. We’re considering wearing a dishdasha, the traditional Arab dress, and a big gold chain to next year’s event.)

Our dubious thoughts regarding the sustainability of these developments aside, we were awestruck by their magnitude just the same. Whether the UAE’s brimming petrodollar coffers flow into sensible or senseless investments, only time will tell. Most often, we find, when a man finds himself with unearned riches, he works most diligently to rid himself of the burden.

But back to the U.S. for a moment. In the column below, Chris Mayer has a look at some oil a little closer to home and wonders how a black gold bonanza in the Rockies might affect the portfolios of early investors there. Enjoy…

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The Dakota Oil Rush
By Chris Mayer

Isabella Lucy Bird (1831-1904) was an amazing traveler and a pretty good writer. I have a soft spot for adventurers. Especially for those who can write well. In her time, she traveled all over the world. She traveled throughout Asia. She lived for a time among the Ainu people in northern Japan. Bird also made it to Hawaii, where she climbed the Mauna Loa volcano. She also wandered in Australia and rode horses in Persia. This is just a snippet of her life’s itinerary. She got around.

In 1873, Bird set off for the Rocky Mountains. Back then, the Rocky Mountain region was an untamed wilderness, peopled with a few hardscrabble pioneers. Bird began her journey in San Francisco. She headed west across Nevada and then trudged into the Colorado Territory. Bird set her adventures down in a series of letters to her sister Henrietta. She stitched them together in a book, published in 1879.

Here she records her vivid descriptions of the landscapes of the Rockies. She writes of the “snow-splotched mountains,” the glades and sloping lawns, the elk and the bears. One bear came so close she “heard the grass, crisp with hoar frost, crackle under his feet.” She writes of the profound stillness and “cherry-fringed beds of dry streams.” And the “deep, vast, canyons…[that] lie in purple gloom.”

It’s that vastness and beauty, that sense of exploring, that still gives the Rocky Mountains a romantic aura even to this day. I enjoyed reading Bird’s letters… and they got me in the mood for today’s letter. Today, despite all of our sophisticated toys, the Rocky Mountains remain mysterious in ways of oil and gas.

Oilmen and speculators wonder just how much oil and gas might lie in this region. Some of the hottest exploratory regions in America lie in the Rocky Mountain region. In particular, in the so-called Bakken Trend.

Steven Ward is a former employee of Amoco Oil. He now works as an independent oil analyst specializing in Canadian and Western European oil companies. He wrote a neat piece that I stumbled on as I was researching my next recommendation. The title was “The Bakken Trend: Lost Dutchmen Mine of the Oil Patch?”

The Lost Dutchmen Mine is a legendary gold mine somewhere in the Superstition Mountains east of Phoenix. It’s a fascinating story. If you Google “Lost Dutchmen Mine,” you’ll come up with all kinds of interesting commentary.But Ward used the Dutchmen legend as a takeoff to talk about various similar legends about oil riches in oddball places. “Stories abound about great oil riches in faraway places yet undiscovered; the foot of the Himalayas, the Spratly Islands, the Atlantic Rockall volcanic peak,” Ward writes.

He relates how similar legends exist about the continental U.S. and Canada. Specifically, these legends proliferate around a region called the Bakken Trend. It lies in the giant Williston Basin that stretches across parts of the Dakotas, Montana, Manitoba and Saskatchewan.

He writes about geochemist L.C. Price, who worked for the U.S. Geological Survey. Price delivered a stunning report on the Bakken Trend. He concluded that it contained 200-500 billion barrels of oil. He turned in his report to the USGS, which began its review. But Price died in 2002 with the USGS still holding onto the report, refusing to release it.

Here you have similarities to the story of the Lost Dutchmen Mine. In this tale, a German immigrant named Jacob Walz supposedly found gold in the Superstition Mountains. He died before vindicating his claim. Ward writes, “Bakken oil remained elusive… the stuff that makes a good story around bars filled with oilmen.”

Long story short, the Bakken is getting attention again. New work on the area confirms the essence of Price’s research, if not the 200-500 billion barrel estimate. “Finally,” Ward writes, “it now appears that the Bakken Rush is finally on in the U.S. as well as in Canada.”

A number of companies have been buying up unexplored land areas in the Bakken. EOG Resources is one significant producer in the Bakken. Marathon Oil, according to Ward, is the only integrated oil company with an office in North Dakota. Its sole mission: Explore the Bakken.

“Still doubting?” Ward writes. He offers more recent analysis by geologists, from 2006. This work put the estimated barrels in place at 300 billion in North Dakota and Montana alone. Also, geologist Julie LeFever, who worked with L.C. Price on his initial report, published a paper adding that additional barrels lie in various layers of the Bakken. “The rush for the Bakken is finally on,” Ward writes. “Investors should catch it if they can.”

I recently recommended a play on the Bakken Trend to the subscribers of my investment service, Mayer’s Special Situations. The company I recommended holds significant assets in the Bakken. It also has another, potentially bigger asset in a rich basin in Wyoming. This stock has already performed extremely well since I recommended it, but I’m still expecting larger gains.

Meanwhile, I’m continuing to explore for other stocks that are focused on the Bakken Trend. I would encourage all investors to do the same. The investment opportunities in the Bakken are just beginning to emerge.

[Joel's Note: A couple of day’s back we rushed Chris’ brand new investment report to 50 Rude readers. Ol’ faithfuls will know that Chris’ research has formed an integral part of our investment service to you, so we’re always glad to be able to get you guys in first when he hatches a new investment idea.

When we sent along Chris’ last in-depth study, the Blue Gold Report, a handful of astute Rude readers had the chance to jump in before the crowd got a hold of the stocks Chris recommended. They then cashed out of one of the five water stocks on the play list for a 100% gain a couple of months back…while the others sit comfortably in their portfolio, up 83.08%, 45.75%, 89.66% and 136.48%.

Once again, we’d like to get you in on the ground floor. Chris’ new report, detailing a clever way to cash in on a backdoor royalty play can be found right here. If you’re interested, take a look and see if it suits. The report will be going out to another group of Agora Financial readers over the weekend, but we thought you might appreciate the heads-up.

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[Rude Endnote: “Here are some of my predictions,” wrote one reader, chiming in with his own virtual two cents on the price of oil.
 
“Short term: $130 by the end of May
 
Medium term: $150 by the end of August
 
Long term: $200 by the end of April 2009
 
“I am also basing my predictions on the combination of money supply and increased demand vs. supply. I believe this will be the top of a bell curve or ‘bubble’. After this the price could rise more but should start to level off as the world starts to wean itself off of solely using petroleum based transportation, and fall back to somewhere around $150.

“I believe that there will be an explosion of electric transportation: Cars, busses, trams, trains etc. This is old, cheep and existing technology. At the beginning of the 20th century, most cities had overhead electric lines that powered trams and busses! Electric transportation is around 80% efficient as compared to 40% for petroleum based automobiles.

“Logically China and India will lead in this department since they are adding more cars per capita, per year than any other country, thus the cost of not going electric will be a much greater drag on their growing economies than western countries, whose per capita usage of oil is flat.”

Shhh…don’t tell Abu Dhabi the world’s moving away from oil. Or at least, wait until I’m gone.

Until tomorrow…

Cheers,

Joel Bowman
Rude Awakening