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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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Time to Look North of the Border

2014 has been a tough year to find value in energy.  With oil shale still representing the best investment opportunity in the United States but with the massive run that most US E+P's have already had, it's been tough to find value in the space.  That's why I'm starting to think that the remaining value in E+P might lie north of the border, in Canadian oil companies.  

The model for production and the risks between the US and Canadian companies I follow couldn't be more different, with US firms pursuing unconventional oil from horizontal hydraulic fracturing and Canadian firms generating growth from oil sands development, mostly in the Athabasca.  But in the end, value in the E+P space is related to price -- and with Canadian share prices staying steady while US companies soar, oil sands, as burdened as it is, is looking better all the time.

Of course, it is the Keystone pipeline controversy that helps keep the price of shares of Suncor (SU), Canadian Natural Resources (CNQ) and Cenovus (CNE) down.  Even if the further development of oil shale isn't much dependent upon Keystone, and other pipelines for transport are available, the overhang of Keystone as the symbol of oil sands remains.  A Keystone approval would be the ultimate signal for getting into these names.

But there are other, more fundamental reasons to own Canadian E+P.  While the costs of initiation of an oil sands "well" are greater than for a fracked well in West Texas, the costs to keep it…




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