Everybody knows we are in a ‘bear market’ for oil & natural gas. Prices have dropped by two-thirds in the last couple of years, supply is far higher than demand, and the media pundits claim the industry isn’t turning around for a couple more years. All that may be true, but PENNECO investors and other smart investors know O&G investment is just like what Mark Twain said about land: “Buy it, they’re not making it anymore.”
We obviously haven’t hit the highly predicted “peak oil” phase, where supplies diminish and there’s no more oil to be found. So, that actually makes us bullish on exploration and drilling. Once PENNECO has found oil or natural gas for our partners, it’s not going anywhere – and nobody is making any more. So, pumping and storing or selling crude and natural gas becomes a matter of the markets, like any commodity.
“But prices are so low!” you say. Yes, yes they are. What do they say about selling stocks? Buy low, sell high. We know that is over-simplifying the situation, but only in the fact that buying or leasing to drill requires very large amounts of capital compared to buying stocks. If you’ve got the money to invest today, though, the pressure on small investors and producers to achieve some liquidity is immense.
And, while upstream companies are struggling with low prices, downstream has seen its commodity costs diminish by two-thirds! So, downstream companies are flourishing. Right here in Pennsylvania, new natural gas plants are being constructed, in part because of Marcellus Shale production. On the Texas gulf coast, ExxonMobil and other downstream corporations are building tens of billions of dollars in new refining plants in the next decades. These investments are continuing in spite of the oil downturn, because the fundamentals about petroleum say that it’s a good investment over the long term.
It’s predicted that the shale gas industry will “create 1.6 million jobs and a $200 billion economic impact by 2035.” That’s 20 years of profits for smart investors. PENNECO believes those two decades are still the beginning of the shale gas revolutions. We’ve seen a lot in our 40 years, ups and downs, scares and jubilation. The low prices today are just a speed bump. PENNECO investors have been taken care of, and we expect that will always be the case. Our partners would tell you – If you can, buy now. They’re not making anymore, and it’s not getting any cheaper.