Keith Kohl - Angel Publishing

Investing in the Eagle Ford Formation

Earlier this week, I hinted about a second investment sweet spot in the U.S. oil boom that has been overlooked.

To be more accurate, however, we should say that this play is being overlooked by the wrong people.

Fact is, some of the biggest M&A deals in the United States aren't being made in North Dakota, but rather on Texas soil.

Why?

Although some states are geologically blessed with the right oil and gas resources, Texas has had all the luck since the birth of the U.S. oil industry. And ever since the gusher at Spindletop, you just can't lose in the Lone Star State.

After all, this is where the U.S. shale revolution truly began.

By 2006, the success in the Barnett Shale started to spread to other formations across the country. Some of us still remember the buildup to that story:

Here's the best part: It's all happening again in south Texas.

We'll narrow it down even further for you – it's called the Eagle Ford Shale. The formation spreads across southern Texas and is the source rock for several other oil and gas zones, such as the Austin Chalk formation (which lies directly above the Eagle Ford formation):

Like virtually every other shale play in the U.S., we've known for decades that the Eagle Ford held a significant amount of oil and gas. Back in the 1970s, however, we lacked the technology to develop it.

And if you want a glimpse at history repeating itself, here's the latest activity that's been going on:

Click to Enlarge Image

So far, more than 3,000 drilling permits have been granted and there are over 1,000 oil and gas wells on the books that are planned to be built.

Then again, perhaps the Bakken will soon be overshadowed by this play. There's actually more rigs drilling into the Eagle Ford – 255 at last count – than the entire state of North Dakota!

Now, there's a reason why I mentioned that the wrong people are missing the story here. You see, while most investors are starstruck by the multitude of Bakken stories breaking out of the mainstream media, they've most certainly overlooked this opportunity.

It's a mistake that the international community isn't making.

~~oil-sign-up~~

Picking the Right Eagle Ford Profits

Although the Bakken formation in North Dakota has been the darling of the U.S. oil industry lately, it would be a mistake to discount the potential in south Texas.

Believe me, dear reader, we're not the only ones that have taken notice of the Eagle Ford... and it seems that everyone wants a piece of the North American shale boom.

In fact, I'll show you the kind of growth that investors have been used to:

As you can see above, these three oil and gas stocks have crushed the S&P 500 over the years. And all three have been attracting international attention over the years.

We all remember CNOOC's (NYSE: CEO) $2.16 billion deal with Chesapeake (NYSE: CHK) in 2010 that gave the Chinese state-run oil company a 33% stake in Chesapeake's Eagle Ford acreage.

But it's not just the Chinese that are scrambling for shale interest, either. That same year, Reliance spent $1.15 billion to acquire a 45% interest in Pioneer Natural Resources' (NYSE: PXD) 212,000 net acres in the play.

The highlight for us came last July in the $12.1 billion BHP Billiton-Petrohawk deal. The buyout deal sent Petrohawk shares 65% higher the day it was announced. Not surprisingly, Petrohawk drilled the very first Eagle Ford wells in 2008. Of course, my many of my veteran readers were well ahead of that play, to their very profitable advantage.

Of course, the deals were back in full swing a few months later in September, when the Gas Authority of India Limited (GAIL) took a 20% interest in 20,200 net mineral acres in a joint venture (JV) deal with Carrizo worth $95 million.

Recently, the Japanese have entered the shale scramble after the country's third-largest grain-trading company paid $1.3 billion for a 35% stake in Hunt Oil's south Texas land. For the record, that comes out to $25,000 per acre, on which the companies plan to drill several hundred wells during the next decade.

What's the bottom line here?

~~oil_signup~~

~~keiths_signoff~~

Burying Peak Oil

“Can't say I blame them for reacting like that,” I was told over the phone late last week.

What started as a typical call with a friend turned into an hour-long conversation about Peak Oil. Both of us had just gotten word of Australia's Report 117 and the fact that the Australian government was keeping a tight lid on its contents.

“So you're saying it was okay for them to bury it like that?” I asked.

“Nowadays, I don't put anything past them... Besides, it's not like we didn't see it coming.”

Unfortunately, I knew all too well what he meant.

First, a brief rundown on Peak Oil.

Simply put, Peak Oil is the point at which oil production reaches its maximum rate. Every single oil field on the planet goes through this cycle.

Now, let's be clear here. We're not talking about how much oil is left in the world. The problem has never been that we're running out of oil...

Rather, Peak Oil refers to the rate at which we can produce it.

Think of it like this: If we could put every drop of oil in the world into one gigantic barrel, and we were given a small cup to draw the oil from the barrel, we'd be in serious trouble. The oil is sitting right in front of us, but we are unable to get it.

Back in 1956, a Shell geoscientist by the name of Dr. Marion King Hubbert delivered an ominous speech forecasting U.S. oil production would peak in the early 1970s.

Hubbert's prediction came to fruition in November 1970, when our production averaged 10.04 million barrels per day, making the Peak Oil "theory" a dire reality:

But with the peak of oil production behind us here in the United States, a more dismal peak is on the horizon — the point when the world's oil output reaches its limits, followed by a permanent decline.

That point is closer than you might expect (assuming, of course, that we haven't already reached it)...

The Silencing of Report 117

We're used to Peak Oil reports failing to grab mainstream attention. When the IEA's 2008 World Energy Outlook announced that the world's energy system is at a crossroads, it didn't turn many heads...

But at least the IEA published their report instead of burying it.

Don't feel too bad if you've never heard of Report 117 — until recently, nobody had. Turns out the report's conclusion was too much for some to handle, since the government decided not to publish it.

Here's the backstory. Five years ago, Australia's Bureau of Infrastructure, Transport and Regional Economics (BITRE) started a project to “look in a strategic way at possible alternative transport energy futures.” One of the issues on the table: the world's oil depletion.

In 2009, the report was completed. And it didn't take very long to cut to the chase:

However, deep and non-conventional oil production are growing strongly, turning a slight decline into a plateau for total crude oil (production). Given the growth in deep and non-conventional (production) balancing the shallow decline in conventional production, it is predicted that we have entered about 2006 onto a slightly upward slanting plateau in potential oil production that will last only to about 2016 – eight years from now (2008). For the next eight years it is likely that world crude oil production will plateau in the face of continuing economic growth.

After that, the modeling is forecasting what can be termed 'the 2017 drop-off'. The outlook under a base case scenario is for a long decline in oil production to begin in 2017, which will stretch to the end of the century and beyond.

The rest of the report (which you can read in its entirety here) painted a rather grim picture for the world's future oil production.

With the exception of the Canadian oil sands, the report's outlook on North American oil production wasn't too optimistic, either:

The news isn't "bad" for everyone.

After all, scarcity breeds value.

~~oil-sign-up~~

Investing in Quality and Quantity

Back to my phone call. When I told my friend that most people had never even heard of the Australian report on Peak Oil, his response was: “Sounds about right. 'Course that don't mean much to us, does it? By the time the rest of the crowd catches on, I reckon there'll be a whole bunch of us laughing our way out of the bank. And all it'll take is just two sweet spots here in the U.S.”

And while he made a good point, I have a feeling the “crowd” is catching on more quickly than my friend had hoped.

That much was evident last Wednesday while watching Continental CEO Harold Hamm talking about the Bakken with Cramer.

As Cramer said in the interview, you really can't talk about the Bakken without mentioning Continental Resources (CLR), which holds the largest acreage in the play.

While it took him until August to notice CLR, we've been well aware of how profitable this producer has been for our readers over the years:

Not too shabby for such a volatile market.

CLR is also a perfect example of the growth we're used to seeing. Here's a strong North Dakota driller pumping a little over 75,000 barrels of oil equivalent per day, which is double the amount they were producing in 2009.

As I've mentioned before, this is light, sweet crude of the highest quality (with a gravity of about 47, according to Hamm).

But why is this so important?

Remember, Eni's 2011 World Oil and Gas Review reported that medium sour crude (stemming from the Middle East, Russia, and Central Asia) made up the main source of the world's oil production, while the global supply of light and low-sulfur crude continues to decline.

Yet with all the hoopla surrounding the Bakken, I'm surprised at how little attention the smaller players have gotten over the last few years — many of which have presented investors with a huge opportunity in non-conventional production.

The Bakken isn't our last word on the U.S. oil boom...

~~oil_signup~~

~~keiths_signoff~~

Shale Implosion?

Recently, the EIA dropped another bombshell on the shale gas boom.

We've had front-row seats to the surge in natural gas production that's taken place in the United States over the last seven years.

And finding those plays has never been much trouble.

According to the EIA, almost 90% of the total technically-recoverable shale gas resources are located in just three regions: the Northeast, Gulf Coast, and Southwest.

But lately, the government has been sending mixed signals when it comes to shale gas...

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So what happened?

Remember last year when the United States Geological Survey released its report stating the Marcellus Shale formation (the largest shale gas play in the U.S.) held more than 400 trillion cubic feet of natural gas?

At the time, it was huge jump over their previous estimate of just 84 TCF.

Then, just as Obama delivered his “all-of-the-above” plan to develop domestic energy sources, the EIA suddenly had other ideas...

A few days ago, Nick Hodge explained how the United States will become an LNG exporter as early as 2016.

And we know that companies like Cheniere are already lining up long-term contracts for gas shipments reaching as far as India and China.

Yet even with the latest revision, that 2016 date will be met — and here's why...

Even the latest trimming of Marcellus reserves doesn't diminish the role that these shale gas resources will play for the next several decades; nor does it significantly change the big picture when we break down our natural gas production:

Some things aren't going to change — and that includes our growing reliance on natural gas.

As you can see above, more than half of our future natural gas production will be from shale and tight gas resources.

The Opportunity is There for the Taking

If you were looking for news to bump natural gas prices from their weakest levels since 2001, the Marcellus revision has already helped push natural gas 20% higher this week:

click image to enlarge

Investors will be hard-pressed not to be optimistic over natural gas in the long run.

The only question for investors now is when to jump in feet first.

You can find more profit ideas for today's market, below...

Enjoy your weekend,

Keith Kohl
Editor, Energy and Capital

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Montana's Second Oil Boom Begins: Why Montana Oil Profits Won't Leave Investors Out in the Cold
Montana's oil industry won't stay in North Dakota's shadow for much longer...

Natural Gas Rebound

They're playing a global game of chicken.

At stake: nearly one-fifth of the world's oil supply.

And it appears as though nobody wants to flinch first.

Sure, we've heard the bluffing before; but the latest warning from Iran that they will definitely close the Strait of Hormuz if the EU oil embargo interrupts their crude exports could prove disastrous.

Of course, Obama made his position clear during his State of the Union address on Tuesday night — and it didn't bode well for a peaceful resolution:

The regime is more isolated than ever before; its leaders are faced with crippling sanctions, and as long as they shirk their responsibilities, this press will not relent. Let there be no doubt: America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal.

So much for not flinching...

We may only give the president's hard-lined words a passing thought, especially considering our oil imports from Saudi Arabia have fallen by about 30% over the last four years — and continue to decline.

Some countries can't say the same...

Chinese Woes and Canadian Cheers

Between Saudi Arabia and Iran, almost two million barrels per day are flowing into China.

As the second-largest crude buyer in the world (yes, Uncle Sam still holds on tightly to that crown), they can't be too happy with U.S. foreign policy at the moment.

Then again, we're not expecting China to sit idle while a third world war looms. And we have a good idea where they're looking to secure that energy.

A North American Energy Comeback

Make no mistake about it: Canada and the U.S. are flush with natural gas.

Now, that's not to say consumption has tapered off. Rather, we're consuming more of the stuff than ever before:

And as Nick Hodge explained yesterday, that demand is going nowhere but up from here on out.

But even when our natural gas supply glut eases over the next few years (a situation I'll delve into deeper next week), there will still be a certain degree of shipping it across the Pacific — especially with prices this low here at home:

For investors, some charts can get even uglier:

It wouldn't surprise me if Obama had a stake in UNG. Despite all the bullish rhetoric in his speech, he got one part dead wrong.

~~eac_nat_gas~~

Obama's Slipup

Oddly enough, it wasn't just Obama's 'No Options Off the Table' approach to dealing with Iran that caught me off guard.

I practically fell out of my chair after the president said, “Our experience with shale gas shows us that the payoffs on these public investments don't always come right away.”

It was easy to see how he had missed the mark with that statement. Had he followed my Energy and Capital readers and me in 2010, he could have nearly doubled his investment on burgeoning shale plays like Range Resources (NYSE: RRC):

Believe me, that's not an anomaly for us.

The increase of M&A deals steamrolling through North America has given investors a sudden flurry of profits.

One of the best recent examples of this was last summer when BHP shelled out $12.1 billion in cash for Petrohawk Energy. That same day, shale gas investors pocketed a 61% premium on their Petrohawk shares.

In 2008, we saw the same situation unfold as ExxonMobil bought out XTO Energy, a strong natural gas player in the U.S. Exxon's entrance into the shale industry — one that came with a $41 billion price tag.

Although Obama didn't get the memo on how profitable these companies can be, we can certainly understand why he was excited, can't we?

After all, our domestic gas production is on the verge of exceeding our consumption, with billions of dollars in future LNG exports all but guaranteed.

And the EIA is optimistic that our crude output will reach 6.7 million barrels per day by 2020.

You see, there's a reason this surge in M&A deals will continue over the next few years...

Fact is, many of the large oil and gas companies are having a tough time keeping their own production afloat — and they're willing to spend billions to do it. ConocoPhillips, for example, just announced a 17% increase in year-over-year revenue, yet production declined by almost 8% in their fourth-quarter production.

As for the payoffs for public investments, Mr. Obama, the future of our U.S. oil and gas production is ripe for the picking.

~~nat_gas2~~

~~keiths_signoff~~

Montana's Second Oil Boom Begins

We can't help but feel sympathetic for Montanans.

Much like the rest of the country, Montana's oil production was in a downward spiral for as long as anyone could remember.

Between 1981 and 1999, the state's output was cut in half.

Things weren't looking good...

But at the turn of the century, good news finally struck. (Remember, we're talking years before the shale revolution began — nearly a decade before the USGS's reassessment of the Bakken formation in 2008.

The newfound success was thanks to the discovery of the Elm Coulee oil field, located in Richland County on the eastern edge of the state, in 2000.

By 2005, development was in full swing:By June of 2006, Montana reached the 100,000 bbls/d mark for the first time in history (with more than half of that amount coming from just Elm Coulee).

A year later, the field was considered the highest-producing onshore field in the lower 48 states discovered since 1950.

Unfortunately, the fairy tale didn't last. We know how Montana's oil fortune played out.

Despite the good news, state production fell by more than 30% over the last five years. And at the same time, Montanans had to sit back and watch neighboring North Dakota's fame and good fortune take off...

For the good folks of the Treasure State, the grass really was greener on the other side. And the economic impact has been nothing short of a miracle.

The reasons for Montana's envy are many:

First, there's the 3.4% unemployment rate that North Dakota enjoys (more than half of Montana's own unemployment rate)...

Then there's the nearly billions in revenue the state will make over the next few years...

And North Dakota residents are getting wealthier by the day. According to the U.S. Dept. of Commerce, personal income in the state grew by 6.9% in the first quarter of 2011 compared to the fourth quarter of 2010...

Tack on the fact that all this growth isn't slowing in the slightest...

With more than 10% of all the oil and gas rigs in the United States drilling on the western side of North Dakota, it's only a matter of months before it surpasses the production rates of Alaska and California.

~~shale_gas~~

Investors Won't Be Left Out in the Cold

We've said so before, but Montana has become the forgotten step-child of the U.S. oil boom.

Which is just one of the reasons why most investors won't see these profits coming.

All the telltale signs of an upcoming boom are there, and I believe some of the best sleeper picks for 2012 and 2013 will come from the Treasure State.

This may be the year that Montana regains some of the spotlight.

We've been following the increased activity in Montana's oil and gas industry throughout 2011, and certainly won't be surprised if the state doubles — or even triples — current production in the next three years.

As you can see below, the number of oil rigs drilling on Montana soil has surged 137% compared to last year:

Although it's nowhere near the number that North Dakota has, it's a good sign going forward.

And some of those drillers have been very successful. Several months before it was bought by Statoil for $4.4 billion, Brigham reported a new record initial production rate for its Johnson well in Richland County, Montana.

All the major Bakken players have a stake here, from Continental Resources to Whiting Petroleum.

Of course, both of those Bakken investments have panned out well for early investors:

Seeing both of those Bakken stocks nearly double since early October, most people think they've missed out.

What they don't realize, however, is that the next stage of the U.S. oil renaissance is only beginning...

~~oil_signup~~

~~keiths_signoff~~

Politics Killed the Pipeline, Not the Profits

“OPEC absolutely loves Obama right now,” I was told over the phone this morning.

The guy on the other end of the line isn't even from the United States. In fact, he was calling from two hundred miles north of the Montana-Canadian border.

Despite his lack of citizenship, I quickly found out why he has a vested interest in the mess our politicians are making here in the U.S...

When pressed for more details, he laughed right into the receiver: “Shoot, I'd even vote for him if I could! Fact is, he's going to make a lot of us up here a lot of money,” he said with confidence.

It was hard to argue with that when I knew perfectly well he was being truthful.

I've had that feeling ever since the Keystone XL project started hitting snags.

When Obama first announced he would delay the decision, it was only a matter of time before he caved to the pressure.

And to be fair, can we really expect anything less during an election year?

It turns out the uproar over the project centered around the section of the pipeline running across Nebraska and the Ogallala Aquifer:

The opposition insists an oil leak here would be devastating to the water supply. And yet, the 25,000 miles of pipeline already in place (2,000 miles of which are located in Nebraska) isn't drawing their ire.

For the record, that's 730 billion barrels of oil that cross the entire aquifer each year (again, more than 100 million of that figure travel through Nebraska's portion).

And let's forget for a minute the 20,000 (and as many as 100,000 related jobs) that come as an added bonus to the pipeline.

This isn't a sudden brand-new issue at play; oil has been piped across the aquifer for decades.

No, there's a much bigger reason Obama fumbled this decision...

Why OPEC Cast Its Vote for Obama

You see, the environmentalists weren't the only ones protesting the pipeline, clapping with joy when Obama rejected TransCanada's application on Wednesday.

He had the full support of OPEC, too.

Even Chavez was secretly wiping the sweat off his brow. After all, an additional 830,000 barrels of Canadian oil per day flowing south into Texas would mean our oil imports from Venezuela would be the first on the chopping block.

Why would that put Chavez in a bind?

We've been doing a fairly good job of limiting our exposure to Venezuelan crude over the last few years:

click to enlarge image

We know that Venezuela's oil supply isn't the most attractive around — and it doesn't hold a candle to the light, sweet stuff flowing from areas like North Dakota.

We're talking about heavy, sour production that's more expensive to refine.

~~eac_nat_gas~~

And if you want to see how crucial the quality is to refiners, call to mind the situation that unfolded last summer when Libya's oil production was shut-in.

In good form, the Saudis decided to pick up the slack until Libya's exports could get back up and running. The problem, unfortunately, was that many of the European refineries weren't able to handle the low-quality crude that makes up Saudi Arabia's spare capacity.

This is what it all comes down to: more Canadian oil means less from more volatile sources like OPEC.

Normally, we could just end things here. What was a no-brainer for Obama turned out to be a disaster.

But why would the government be worried about shunning Canadian imports? Canada really has only one true customer, right?

Well, that's not exactly true...

We've grown so accustomed to Canadian imports that we're taking them for granted.

And that that could be the worst mistake we ever make.

Politics Killed the Pipeline — Not the Profits

Look, it's no shock my hockey-loving friend was still excited after the Keystone pipeline rejection.

Companies like Enbridge already have a plan in motion. Instead of relying on the United States, they're ready to connect to a whole different oil-consuming beast.

And that project just got a little boost of support from the Canadian government.

Following Obama's indecision, Canadian Prime Minister Stephen Harper reiterated his plan to expand Canada's customer base.

Earlier today, he was quick to point out that “the 'decision' by the Obama administration underlines the importance of diversifying and expanding our markets, including the growing Asian market.”

And there you have it, folks.

Harper spelled it out, plain as day...

If the U.S. doesn't want it, China will get it.

Next week, I'll show you exactly which Canadian oil stocks will make investors a hefty profit when this Canadian-Chinese relationship blossoms.

~~keiths_signoff~~

Oil and Gas Service Stocks

Publisher's Note: Before you get to Keith's editorial for today, please take a moment to sign up for our educational presentation on silver and gold.

It will be held on January 31st and includes a 2012 gold forecast, the best ways to buy, and how to avoid taxes. It's free to all who sign up.

Good Investing,
Nick Hodge

A year from now, you won't hear me say I didn't see it coming...

That's the feeling that swept over me yesterday when I was filling up my gas tank for $3.75/gallon (I realize that's actually cheap considering what some of my West Coast readers are paying).

And I know $5 is right around the corner.

But truth be told, I don't think I'll complain when it tops $5 a gallon.

Because I've been hearing — and telling my readers — about a little theory called Peak Oil that was presented more than fifty-five years ago...

Perhaps the most common misconception about Peak Oil I come across is this idea that we're running out of oil.

That simply isn't the case here — and it's never been about how much oil is still in the ground...

Instead, it all comes down to the rate at which we can produce what's left.

And if you want a firsthand look at production rates, take a quick peek at this chart:

That's the story of U.S. oil production — at least, it was up until a few years ago.

And while we'll never return to the good old days, it isn't for lack of trying.

More Drilling, More Profits

Three days ago, when I saw that the latest number of U.S. oil and gas rigs had fallen below 2,000, I wasn't concerned in the least.

In places like North Dakota, there are still more than 200 rigs drilling away.

In Canada, there's an outright drilling surge currently taking place. They added 250 rigs just this week.

And this is all leading to a tremendous opportunity...

You see, we know what's coming in 2012. Billions of dollars from the North American oil and gas landscape will pour into investors' pockets.

For the last few weeks, I've shown you time and again that the smaller drillers are consistently outshining the lackluster performances of ExxonMobil and friends...

That much isn't going to change.

But it's not just the speculative players that will be flushing our pockets with cash in 2012. Smart investors are constantly finding new ways to play the oil and gas renaissance taking place in Canada and the United States.

I'll give you an example.

Today, Carbo Ceramics (NYSE: CRR) is still one of the best shale plays that most investors have never heard of — and the best part is they don't have to produce a drop of oil to deliver you gains.

Carbo manufactures ceramic proppants which replace the sand used in the hydraulic fracturing process. They're making artificial sand to help drillers improve productivity.

And right now is the perfect environment for companies like Carbo...

~~oil-sign-up~~

Over a million wells have been stimulated using hydraulic fracturing — including more than 90% of the wells drilled today.

Although many of us have been following the war over hydraulic fracturing that's being played out in the media, the entire issue comes with a huge catch: It doesn't matter which side you are on.

Fact is, an outright ban could potentially be crippling to us. Without it, production would plummet — and we'll be headed right back down the Peak Oil slope.

We'd also have to find someone to ship us hundreds of thousands of barrels a day.

Believe me when I say our sources are drying up faster by the day.

Aside from Canada, not many other producers would help us out — mostly because they're having struggles of their own. Mexico's oil and gas production is in just as much trouble as ours.

And let's be honest, do we really need to add more OPEC oil into the mix?

Our outlook is grim enough... It's mid-January, and oil prices are still in triple-digit territory.

~~keiths_signoff~~

Safe, Secure Income in an Unsure Market

Investors love certainty.

If I offered you two choices — taking a hundred dollar bill in exactly thirty days, or the possibility of that same hundred dollars tomorrow — which would you pick?

Though many investors tend to have a speculative streak in them, hoping to hit the next ten-bagger, it's highly doubtful even they would choose the latter option, given the current market climate.

One of the simplest and most efficient ways to earn a safe annual return in an unsure market is through solid, high-paying companies offering an attractive annual yield.

Today, I'll give you four safe energy plays that offer us a such a safe haven.

Fact is, there's no safer place than energy.

After all, demand growth is practically guaranteed.

And when the IEA's International Energy Outlook 2011 was released, we got an idea of exactly how much...

Global energy consumption between now and 2035 will increase by about 53%.

The overall mix isn't terribly difficult to see — especially when oil, gas, and coal make up roughly more than 81% of our current energy mix.

And that mix isn't going to change much in the decades to come. Twenty-five years from now, that same IEA report still expects fossil fuels to make up three-quarters of our energy consumption.

Sure, it's a slight decrease (natural gas is the only fossil fuel projected to increase its share in the global mix), but it's certainly not the drastic change that a few expect — or would hope for.

Let me show you why things here in the United States aren't all that different from the global outlook:

Already this week, Nick Hodge and myself mentioned two high-yielding energy stocks, PetroBakken Energy (TSX: PBN) and Enerplus Corp. (NYSE: ERF).

Both are returning safe annual dividends over 7% to shareholders.

And I'll give you four more right now:

Company	Symbol	Market Value	Annual Yield
Enbridge Energy Partners	NYSE: EEP	$9.3 billion	6.54%
Pioneer South West Energy Partners	NYSE: PSE	$962.5 million	7.50%
Pembina Pipeline Corp.	TSX: PPL	$4.5 billion	5.60%
Kinder Morgan Energy Partners	NYSE: KMP	$27.6 billion	5.60%

Even though nothing in this market comes with a guarantee, this is the closest we'll find to a safety net.

The risk, as you may know, would be sudden (and in our opinion, inexplicable) declines in oil and gas prices.

Throughout 2011, the average spot price of Brent crude was more than $100 a barrel, with the light sweet crude from Texas not far behind:

Of course, these high-yielding income stocks are only one way for you to take this coming energy bull by the horns.

Here are a few more ideas to help you profit...

What China is Buying Now: AK47s, Rhino Horns, and Black Gold
Andarko Petroleum (APC), the $40 billion dollar Texas oil company, recently found between 15 and 30 trillion cubic feet of recoverable gas in the Mozambique Channel. It might be the biggest gas field found in the last decade... and as good a reason as any to buy the wildcatters.

Youngstown Fracturing Earthquake: Did Fracturing Really Cause 11 Earthquakes in Ohio?
Editor Jeff Siegel discusses how recent earthquakes in Youngstown, Ohio, will shape the future of fracturing.

Investors Can Find It All in the Bakken: A Little Oil Rivalry Goes a Long Way
There's a piece of Bakken profits for every type of investor.

Natural Gas, the New King of Energy: "It's Essentially Free Energy"
"Everything we do now is based on natural gas. Everything. It's a major shift that'll last for decades..."

Ron Paul's Gold: What Ron Paul's Buying
In his book, End the Fed, Ron Paul says: "Nothing good can come from the Federal Reserve. It is the biggest taxer of them all. Diluting the value of the dollar by increasing its supply is a vicious, sinister tax on the poor and middle class." Plus, what Dr. Paul has in his portfolio...

Invest in What You Know: Stay Away from the New Dot-Com Stuff
If you don't understand it, don't invest in it. Nick Hodge explains how to stick to the stuff you know best.

North American Oil Production On the Rise: OPEC Isn't Cutting It
As demand for oil increases, once-dominant oil-producing nations are producing less while North America picks up the slack.

Protect Yourself Against Higher Gasoline Prices: Chart Suggests Oil Going to $125 a Barrel
Some energy analysts are predicting a 50% jump in the price of oil if the situation in Iran turns into an armed conflict or an oil blockade... As a technical analyst, I'm starting to think that either scenario is baked in the cake, according to one oil chart.

Our Natural Gas Investments for 2012: Alaska's Last Chance at Redemption
Why Alaska is about to turn its back on the United States.

Gold Going to $2,200?: Morgan Stanley Predicts Gold to Hit $2,200 in 2012... Maybe as High as $2,464
I’ve been long gold for several years. I’m still long this year.

~~keiths_signoff~~

Investors Can Find It All in the Bakken

"Sorry to tell you we don't have much time today.”

He'd agreed to give me a quick early-morning tour of the rig earlier this week.

I took one look around and immediately understood why this man didn't have much time...

With a 5,500-foot vertical well to be drilled, the last thing he wanted to be was behind schedule.

After all, it was his crew, his rig, and his time.

When news that North Dakota's oil production topped 510,000 barrels per day, this didn't come as a surprise for us. The entire state is busy drilling at a feverish pace, driving more and more investors there every day.

Thanks to the Bakken formation, just three counties produce nearly half of the state's entire oil production.

click to enlarge image

Williams County — where I found myself that day — has been pumping more than 83,000 barrels per day as of late, comprising 16% of the state's total.

True to his word, the tour was brief... but well worth the time.

As we walked through the site, the scent of petroleum was overwhelming. Of course, this wasn't this first time I'd smelled the pungent odor.

“This kind of reminds me of my trip up to see a few oil sands operations,” I told him.

His mood suddenly soured, and I was sure I'd offended him.

“Bah, I got a younger brother who went to Fort Mac for work — as if we didn't have enough here. The kid's making $125,000 a year up there,” he told me.

I didn't want to delve into the obvious rivalry that had developed between the two men, but he continued after a slight pause, “Sure, they've got a bit of oil up there, but everybody knows that now... Of course, he gets mad every time he comes back for Christmas and I remind him that the tar they're pumping out doesn't come close to our stuff.”

Quality or Quantity?

My guide had made a good point.

You see, the quality of oil is determined by its weight — also known as its API gravity — which is compared with water. Typically, if the measurement is greater than 10, it's lighter and floats on water; anything less than 10 is heavier and sinks.

Good old-fashioned WTI comes out around 39.6^o, and Brent — the current global benchmark being used — has a gravity of about 38^o.

The bitumen up north in Fort McMurray is of the extra heavy variety. Production from the oil sands has an API gravity around 8^o.

It then has to be upgraded into what's known as synthetic crude, which carries a weight of around 33^o.

Needless to say, the heavier the oil, the most expensive it is to refine.

On the other side of the spectrum, the light, sweet crude from the Bakken has a gravity of about 42^o— making it easy to see how attractive crude from the Bakken is to producers.

~~oil-sign-up~~

Something for Everyone

After a few hours, we were walking away from the rig when the guy started to shake his head.

“I've been drilling this county every day for the last few years, and I gotta tell ya, Keith... I rarely see a loser here,” he said with a grin.

He wasn't going to hear me disagree with him there, that's for sure.

I happen to know one clear-cut winner in the Bakken: everyday investors like us.

Whether it's a little more risk to pay out big, or the safe high-dividend paying companies that are the bread and butter for investors over the long run...

We can find it all in the Bakken.

And I'll show you both right now...

In March 2009, Brigham Exploration was trading below $2 when a few of my readers decided to join the Bakken fray. Not two years into their investment, Brigham was bought out by Statoil to the tune of $36.50 a share. A $1,000 investment in 2009 delivered profits of nearly $19,000.

This is an ongoing profit cycle that's been gaining steam since 2007.

Truth is, some of the best small-cap oil stocks in North America are nestled in the various counties of North Dakota.

It's where I found three little oil and gas gems just waiting to be plucked, each one holding the potential to double our money before year-end...

Or if having security is more to your liking, there's plenty of it waiting in the Bakken. (And let's be honest, a bit of security in this kind of market volatility is too good to pass up.)

Companies like Enerplus (NYSE: ERF) are not only expecting to increase production by as much as 15% over the next 24 months, but they're also paying out a hefty 8.4% yearly dividend.

I'll give you one guess as to where they hold more than 200,000 acres of undeveloped land...

Saskatchewan also happens to be the area where another high-yielding producer is securing investor profits.

When Nick Hodge mentioned the potential of PetroBakken Energy yesterday, it wasn't on a whim. At this level, PetroBakken Energy is buy pumping out 50,000 barrels per day and offering a solid annual dividend of 7.3%.

Make no mistake; the opportunity here is endless — and promising.

Especially in light of the fact that North Dakota is set to become our nation's second-largest oil producing state this year — a reality that will most likely play out in the next few months.

How profitable will 2012 be for you?

~~oil_signup~~

~~keiths_signoff~~

Our Natural Gas Investments for 2012

I can only imagine how frustrating it must be to watch helplessly as a fortune idles away before one's eyes without a glimmer of hope to take advantage of it...

That's how I feel every time I come across Alaska's oil and gas industry.

Admittedly, we've never given Alaska much hope to recover its oil production, which peaked more than two decades ago.

And if we wanted to take it a step further and pinpoint the exact moment when everything began to fall apart, it was in March 1988.

The state's oil production averaged 2.86 million barrels per day that month. And since then, it's been one long downhill slide:

Let's assume for just a moment that ANWR is suddenly opened up...

Pretend that all opposition mysteriously vanished and companies were free to develop the billions of barrels there.

The problem is years would pass before anyone saw a single drop of oil.

The EIA previously suggested it would take a minimum of a decade for companies to begin production.

Between setting up the infrastructure, getting the equipment in place, getting leases approved, drilling exploratory wells, and finally placing wells on production, it would be 2022 before they pumped any crude.

What's more, ANWR production might have added approximately 800,000 barrels per day to the mix. Of course, by that time the state's production will have plummeted to less than half of what it is today.

I can't help but feel a twinge of sympathy for Alaska...

But it isn't because developing ANWR is a fairy tale oil execs tell themselves before they go to sleep.

Nor is it due to the state's ever-declining oil production.

It isn't even because the USGS dropped a bombshell on the state when it drastically revised its estimate for the amount of conventional undiscovered oil in the state's National Petroleum Reserve (NPR).

(That USGS report slashed its estimate by a staggering 90%, from 10.6 billion barrels of oil down to just 896 million barrels.)

No, the reason I feel sorry for Alaska is because the state is sitting on a wealth of natural gas — with only a slim chance of capitalizing on it.

How much natural gas are we talking about here?

Alaska's North Slope has about 35 trillion cubic feet of proven natural gas reserves, with another potential 200 tcf that could ultimately be discovered.

It's not as if the state's marketed natural gas production is at zero; Alaska was the seventh largest-producing state back in 2007.

But there's a lot of room to grow...

Alaska's Jealousy Rages

So what's the problem?

I have a feeling you know the answer to that question.

The United States is flooded with natural gas production.

And for the fifth consecutive year, our domestic gas production increased.

Alaska's frustration over shale production must've increased tenfold over the last five years, mostly because state production simply can't stay competitive with the shale gas boom happening in the lower 48 states.

The Last Frontier's diminishing oil production means it will have to find another cash cow.

And lo and behold, here's 35 trillion cubic feet of natural gas that may never see the light of day.

~~eac_nat_gas~~

It seems the only possibility is to turn away from the United States. That's why Alaska's governor recently called a powwow with execs from the state's top three oil producers: Exxon Mobil Corporation, ConocoPhillips, and BP.

The governor had one goal in mind: to convince these bigwigs to tap into a market that would be willing to pay good money for Alaskan natural gas: Asia (LNG exports, to be specific).

Don't think it'll happen? It already has...

Two months ago, Alaska's Kenai terminal shipped one cargo of 41,441 mt of LNG to Japan.

But in order to tap into the Asian LNG market with natural gas from the North Slope, ExxonMobil and friends would have to build a pipeline running the entire length of the state.

Let me say just this once I think the supermajors might be on to something...

How I'm Trading Gas in 2012

Let's face it; most people aren't talking about natural gas right now — especially since prices fell below $3/Mcf recently. Basement-level prices and a supply glut tends to discourage investors.

But they also present a window of opportunity for you to get in on the ground floor right now.

I'll take it a step further, too, because it's not Alaska's LNG exports that I'm going to bet my money on...

In fact, there are a few natural gas players that have been developing this same strategy for years, and by the time Alaska starts building that pipeline to the North Slope, these companies will already have cornered the market across the Pacific.

Look for my full report in just a few weeks.

~~keiths_signoff~~

Let the Chinese Invasion Continue

“Zao shang hao.”

It was too early in the morning to be riding an elevator with this guy.

We were in the heart of Calgary, heading up to the top floor of the hotel I'd called home for a few days during a scouting trip for my next oil play. I was heading back to my room to grab a few things I had left there before starting out for the day.

The moment he stepped inside the elevator, he frantically began whispering to himself...

“Zao shang hao. Zao shang hao. Zao shang hao.”

Pushing a room service cart, I had a good idea of where he was going. He was on his way to serve breakfast to several Chinese businessmen, rehearsing the entire way to their suite.

After hearing him repeat this mantra for the tenth time, I tried to boost his confidence, “I don't think you'll be forgetting that anytime soon.”

He must have realized how odd it sounded, because he smiled at me as he said, “Sorry about that. It means 'Good morning' in Chinese.”

“Are you normally in the habit of learning foreign languages at work?” I asked.

“Absolutely. My boss said I have to learn a bunch of these basic phrases. Ya know, stuff like 'Good morning,' 'Thank you,' and such.”

So what had my elevator companion thumbing a Mandarin pocket dictionary on his one free night of the week?

China's Last Resort

Although his morning language exercises may not have made much sense to most people, I knew exactly why a Calgary hotel manager was catering to the Chinese...

Their country has been pouring billions of dollars into Western Canada.

What's so special about Canada?

For starters, the Chinese realize they have an ever-increasing appetite for energy.

By 2040, China's oil demand will have caught up with Uncle Sam.

During the last decade, the number of cars in China jumped 333% to 62.9 million. By 2020, there could be as many as 220 million automobiles tearing up China's roads. (I guess nobody was listening when the Chinese government told its people they shouldn't own private cars.)

And to think that's just oil...

~~oil-sign-up~~

The country's natural gas demand is heading higher — much higher. In twenty-five years, China will be consuming as much natural gas as the entire European Union.

It's just one of the reasons the Chinese are scrambling right now to secure future energy supplies.

And believe me when I say they're spreading the wealth around. They know how unappealing it is to have to rely on a single foreign power to meet their domestic energy demand (a situation we're all too familiar with).

We can expect China to do everything in their power to avoid that kind of dependence.

Let's face it, dear reader; the absolute last place you'd want to be indebted to is Russia.

How many times has Russia used its tremendous oil and gas resources as leverage?

Anyone else remember when Russia completely cut off all gas supplies to the Ukraine back in 2005?

And the Russians are aware of China's growing thirst for energy...

Notice that every other country besides China is cutting their Russian imports of fossil fuels.

According to that chart from the IEA's World Energy Outlook 2011, China paid Russia just a little over $5.1 billion in 2010. By 2035, that amount is projected to grow 1,547% to $84 billion!

Can you think of a better reason for China to invest elsewhere?

This isn't some sudden epiphany on China's part. They've been quietly scooping up stakes in unconventional oil and gas plays across the globe.

In 2007 and 2008, the Middle Kingdom spent more than $40 billion in oil and gas acquisitions in places like Iran, Libya, and Venezuela.

Just yesterday, Nick Hodge told you about one of China's latest deals in North America.

While you might not expect to hear about another one so soon, PetroChina took full ownership of Athabasca Oil Sands Corp.'s Mackay River project on Tuesday in a deal worth nearly $700 million.

You have to admire their strategy: When in doubt, just bet on every horse in the race. North America, it appears, is their favorite stomping ground for making deals.

And China's rush to stake a claim in the shale plays across Canada and the United States are making us extremely happy...

The way we see it, you can either pick up the buying companies like PetroChina that are late to the party (at a hefty $137 per share), or you can beat them to the punch... which is precisely what we're doing.

~~eac_shale_gas2~~

Something's Brewing in BC

Back in the elevator, I couldn't help having a bit of fun. As nervous as the room service attendant was (he was now repeating 'Thank you' over and over again), I decided to offer him a tip before I departed.

“Ohayou Gozaimasu,” I told him with a straight face.

He was puzzled, and I could tell he was racking his brain to see if he had forgotten one of his phrases.

The young man wasn't yet aware that Canadian natural gas won't just be headed to China. There's another country across the Pacific willing to pay top dollar for future Canadian LNG...

“Well, once you have Chinese nailed down, you'll be moving on to Japanese.”

The look on his face was priceless.

~~keiths_signoff~~

Investing in Oil and Gas Infrastructure

If the thought of holding on to a stock for more than a few months is daunting, then this is the perfect opportunity for you to take control...

Many of my friends fall into this category. Most of them believe beyond all doubt that holding an energy stock in this market is suicide.

Of course, that line of thinking has never made much sense to me.

And I always have to point out that these same friends are the ones being killed in this recession — not long-term energy investors.

Their silence is golden.

The reality is energy offers us a very profitable run over the long term...

Some of the safest investments available are found in building our future infrastructure.

The Long-Term Value in Infrastructure

Last year, nearly $550 billion was spent globally on oil and gas exploration and production.

According to Barclays Capital, that budget is going up another 10% in 2012.

We can't blame companies for shelling out more cash — especially considering a barrel of crude is still treading above $100/barrel:

click to enlarge image

We'd be crazy not to take a closer look at pipeline stocks.

If we took all of the oil and gas pipelines crisscrossing the United States, we'd have enough pipe to circle the globe more than 100 times. That's about 2.5 million miles.

And as demand recovers, we can expect many more miles to be built:

click to enlarge image

The Long-term Value in Infrastructure

So, just how are these infrastructure investments stacking up?

~~oil-sign-up~~

Several times this year, we've seen how the small-cap drillers have consistently crushed Big Oil's performance.

In fact, most of the major oil companies out there are now playing catch-up to what we've known for years, spending billions of dollars in new acquisitions to make up for that folly.

And those small caps aren't alone in their success:

As you can see from the chart above, some of the biggest pipeline players — like Enbridge (NYSE: ENB) — are also putting the supermajors to shame.

Despite all the market volatility in 2011, Enbridge still delivered more than 36% gains to investors.

It's simply part of the long-term equation: There's a spur of investment happening to develop North America's oil and gas resources.

Even the latest delay in TransCanada's Keystone XL pipeline is just a bump in the road.

A new route is already being planned: the $13 billion project designed to transport 1.5 million barrels per day of Canadian oil to Cushing.

Meanwhile, more pipeline projects are being added to the mix...

Enterprise Products Partners (NYSE: EPD) and Genesis Energy LP (NYSE: GEL) just announced a 149-mile pipeline in the Gulf of Mexico.

It's the reason Kinder Morgan Energy Partners (NYSE: KMP) spent $38 billion to buy El Paso Corp., which controls a 43,000-mile interstate pipeline system.

Some of the MLPs (like Enbridge Energy Partners, L.P. (NYSE: EEP), which owns the Canadian portion of one of the largest crude oil pipeline systems in the world) currently offer a yield of 6.4%.

The bottom line here is the resurgence in our domestic oil and gas development will require a remarkable amount of new infrastructure to transport production to market.

And that's not just speculation...

Because if these investments aren't made now, we'll soon be back to begging the Saudi Kingdom for more oil. (Let's hope it won't come to that.)

What's more, we're not the only country fighting to meet future energy needs.

This energy race is only now starting to heat up. And later this week, I'll tell you exactly what — and who — we're up against.

~~keiths_signoff~~

Another Date Which Will Live in Infamy?

Last week, Iranian officials announced to the world they would answer any American-led economic sanctions with an embargo of their own: the shutdown of the Strait of Hormuz.

On Christmas Eve, the saber-rattling escalated another notch when the Iranian navy launched a ten-day exercise within these waters to illustrate just how quickly and easily they could shut down this heavily-trafficked passage to the Persian Gulf.

Just yesterday, Iran's Navy Commander Admiral Habibollah Sayari further reinforced the point he'd been making for the last week by claiming that this mission would be as easy as "drinking a glass of water."

The American response came swiftly and definitively, with the United States 5th Fleet stating that such actions will not be tolerated.

The reason this threat had such immediate effect on our own policymakers becomes clear with one look at a map of the region:

More than 15 million barrels of Middle Eastern oil pass through the Strait of Hormuz daily.

As a natural choke point between Iran, Iraq, Saudi Arabia, Kuwait and open water, the Gulf of Hormuz can be used to control shipments between four of the world's top 12 oil producers and their customers across the globe.

Here are some key strategic facts about this twisting stretch of sea between the Persian Gulf and the Gulf of Oman:

As of 2009, the Strait of Hormuz provided passage to 33% of the world's oil-borne oil shipments — and 17% of all oil traded worldwide;
The majority of this oil passes through the Strait on its way either to the United States or Asia, including a full half of all the oil imported by China.
In addition, the Strait provides passage to 2 million barrels of liquefied natural gas every day.
At its narrowest, the Strait of Hormuz is 21 miles wide, with navigable shipping lanes just 2 miles across.

The implications here cannot be overstated.

With close to half a trillion dollars in oil and natural gas passing through this narrow body of water annually, the world's fourth-largest oil producer has found a unique and frighteningly effective way of declawing any attempts by Western powers to project their influence on Iran's internal policy.

Many have already compared this move to the July 1941 cessation of oil exports from the U.S. to Japan, an American response to aggressive Japanese military expansions into China and French Indochina in the late 30s and early 40s. Every December 7th, Americans still remember the result of that hardball diplomacy.

But this time, it's not the Japanese Empire — but the American Empire that finds itself on the verge of losing access to its lifeline.

~~eac_report~~

It doesn't take a great amount of analytical ability to predict what is likely to happen next...

In the last 20 years, no Muslim nation has fared well when oil — and U.S. access to the commodity — was put into question.

And it appears that with this latest development — and the public naval exercises which are taking place as you read this — that pattern of forced 'regime change' might be furthered yet again.

In the coming weeks, issues such as Iran's highly controversial nuclear program will take a backseat to the very question that's been plaguing the U.S. since domestic oil production peaked back in the 1970s...

Where will we get the fuel which makes our nation run?

As inevitable as another armed conflict with a nation whose government is ideologically opposed to everything we hold dear, I would like to remind everyone that at least as far as the question of oil is concerned, maybe another war is truly unnecessary.

You see, while the world watches and waits to see if this powder-keg will finally explode...

While we sit and wonder who's going to fire the first shot, and whether that shot will be a nuclear-tipped one...

There are people hard at work to make sure that we never need to depend on things like the Strait of Hormuz, Iran, or any Middle Eastern oil-peddling nation ever again.

Not far from North Dakota's western border sits a small town by the name of Williston.

With a population of barely 15,000, this outpost of two- and three-story buildings, along with several others like it dotting the region, produce as much oil every day as the nation of Australia.

If this hunk of the American Great Plains were a nation unto itself, it would rank 29th among global oil producers.

Daily output is expected only to rise from here on out, reaching close to a million barrels per day by the close of the decade. Of course, this is a far cry from the 15.5 million barrels that pass into the Persian Gulf every day...

But what's happening in Williston is just a symptom of America's new industrial rebirth.

As the first major oil power to see its production levels wane, American oil has been fighting an uphill battle since traditional, easy-to-access oil reserves began going dry in the 70s. Many have viewed this as a sign of decline...

But while a new guard of oil suppliers emerged in the Middle East, American energy companies have spent the last 40 years figuring out new ways of getting to the less easy-to-access oil.

The quest has been long, hard, and full of pitfalls and setbacks. But the mastery of techniques like horizontal drilling and hydro-fracking are starting to pay off.

Today the biggest and most important innovations since the first oil wells popped up in the American West more than 120 years ago have firmly taken hold, reversing the general trend of American oil production decline:

The long-term fruits of this of these non-traditional methods of fossil fuel recovery are almost unimaginable.

With new techniques and discoveries opening the possibility of more oil than ever before — as much as 1.7 trillion barrels in North America — it is not just possible, but very likely that issues such as the one currently unraveling in the Middle East might very soon become a thing of the past...

Permanently.

~~keiths_signoff~~

One Gas Investment that Will Triple Your Money

With the holidays right around the corner, everyone's looking for a deal.

The writing is already on the wall for us...

Within the next three years, you absolutely cannot say we didn't see this coming:

There's only one destination for the upcoming surge in LNG exports.

Earlier this week, we talked about the dramatic increase in energy consumption that's on its way to China. By 2035, China will be consuming more natural gas than all of Europe.

The question I always ask my readers is: How are you preparing for this investment surge?

Preparing for the Gas Surge

The bears tell us LNG will never catch on, and if it does, it'll be years — even decades — before the impact is felt and the profits start rolling toward investors.

Those sentiments couldn't be further from the truth.

One future LNG exporter already experienced that move:

That spike you see above happened when Cheniere Energy Inc. (AMEX: LNG) announced a 20-year deal with BG Group to export LNG to international gas markets.

One month later, the company inked another 20-year deal, this time to ship 3.5 million tons per year to LNG Spain's Gas Natural Fenosa.

That deal alone is worth $9 billion for Cheniere, and not many would expect a third deal to come so quickly...

But it happened.

Hoping to secure its piece of the shale gas boom going on right now in North America, India's state-run energy company GAIL reported a $15 billion deal with Cheniere Energy to supply 3.5 million tons of LNG per year from their Sabine Pass LNG terminal.

If you're trying to secure long-term profits, the opportunity doesn't get much better than this.

In fact, Cheniere Energy is about to take things a step further...

The company is now making plans to build a second LNG export plant on the U.S. Gulf Coast, this time in Corpus Christi, Texas. The facility will have an export capacity of 1.8 billion cubic feet of natural gas per day by 2017.

Assuming the development doesn't hit many snags, you can expect to see these guys inking more long-term supply deals.

By the time the first shipments of LNG leave their Sabine LNG Terminal, this stock may have already tripled your money.

Below you'll find some of the hottest investment stories to cross my desk this week.

Getting started is easier than you might think...

Saudi Oil Minister's Calm Breaks: OPEC's $7 Trillion Dollar Mistake
You don't see Saudi oil ministers lose their calm often, but this time they have good reason... And all it took was losing $7 trillion worth of energy revenue. Efforts to develop this massive resource of natural gas are only now underway, and the smart investors are getting a piece of this play early.

The Secret Behind the R-4 Trigger: How a Single Options Formula is Making People Rich
The real moneymakers on Wall Street have an ace up their sleeves when it comes to turning a profit in a chaotic market: options. The problem for average investors is in learning the ins and outs of options investing. It can be tricky and confusing... And that's exactly why Ian Cooper developed his R-4 Trigger System.

Iran Oil Opportunities: Iran Can't Stop the Oil
Editor Jeff Siegel discusses the end of Kyoto and how to invest from Iranian threats.

2011 Hedge Funds in Review: We're Sorry...
Analyst Ian Cooper takes a look at hedge fund performances in 2011, and explains how they can improve for 2012.

Farmland Blows Up in 2011: Ethanol Sets Fire to Farmland Stocks
Forget "Correlation": This sector just scored historically high profits and is swimming in cash.

FREE Video Seminar with Gold Guru: Just 4 Days Left to Sign Up
There could be as much as $160 billion worth of gold in this isolated Canadian region. Thirteen-year gold investor and bullion dealer Greg McCoach calls it the “…biggest gold discovery in decades.” Join us December 21 at 6 p.m. for a groundbreaking FREE video investment conference.

The Common Sense in Energy Investing: Finding Value in the World's Cheapest Energy Stocks
The long-term investment value in today's cheapest oil and gas stocks.

Uranium Supply in Question: Shortage Expected in Next Two Years
As everyone gushes about America's newfound abundance of oil and natural gas, another energy dilemma has slipped our collective minds...

Iran Threatens to Send Oil to $200 a Barrel: War in the Economic Jugular Vein of the World
Editor Steve Christ takes a look at the latest saber rattling in the Strait of Hormuz, and explains why predictions of $200 a barrel might actually be on the light side...

Exposing the Bakken Boom: The Epicenter of America's Industrial Rebirth
If you were to ask me about my concept of the American dream, I'd tell you about what's happening to people in Williston, North Dakota, the cradle of the North American oil shale revolution... and how you can build your own version of this dream for yourself, your children, and your grandchildren.

Warren Buffett's Solar Investment: Big Bets on Alternative Energy
Warren Buffett just ponied up $2 billion for a 550 megawatt solar farm... but that doesn't mean the bottom for solar is in just yet.

Generational Investment Opportunity: Your 1830s Moment
The resolution of global balance sheet imbalances will eventually result in complete panic where we'll likely see yields of 8%-10% on great stocks. Finally, buy and hold will begin to work again — just when most people abandon stocks altogether.

~~keiths_signoff~~

The Common Sense in Energy Investing

I can't help but feel sorry for them.

Walking through an office full of traders last week, it was difficult not to.

You see, these guys have been living on coffee and cigarettes for months, their eyes glued to flashing computer screens...

It's all part of the countless buying and selling they do on a daily basis.

Before I reached the end of the hallway, I heard them whispering amongst themselves. It seemed half of their hush-hush conversations concerned Europe; the rest, Obama.

I caught sight of one poor soul holding an argument with himself. Whichever side was winning wasn't clear, but his feverish pace was taking a grim toll.

“I'm getting killed out there,” he murmured as I peeked around the corner of his unadorned cubicle.

You might be asking yourself why I am so sympathetic to the professional trader's plight.

Well, for all their maneuvers in the market, these people don't hold an ounce of sense when it comes to investing. And I know for a fact that these "professional traders" are losing even more to another group of investors...

Us.

Guaranteed Energy Growth

If I'd had the chance, I'd have given the gentleman debating with himself just one bit of advice: Energy stocks are ripe for the picking.

It's obvious how skewed the global oil industry is today. To think otherwise would be foolish.

Within a matter of five decades, we've seen National Oil Companies gain control of nearly 95% of the world's oil reserves. OPEC members alone are responsible for one-third of global supply.

What many people don't realize is how distorted things are on the other side of the equation.

The ten largest oil-consuming countries in the world today make up 60% of total demand.

Ten countries!

Just take the top five of that list, and we're talking about 40%.

That means half of the world's oil demand — now approaching 90 million barrels per day — comes from a handful of countries...

click to enlarge image

Did you happen to notice the light blue slice of the pie?

Within just 15 years, China's oil demand has more than doubled.

Several weeks ago, the IEA reported 90% of the growth in global energy demand will come from non-OECD countries.

By 2035, China will account for more than 30% of the world's energy. China's demand for oil last month was the second-highest on record.

Although it won't be enough to overtake the United States' top spot, finding that energy will be a daunting task...

Of course, the Middle Kingdom is already making preparations — which is why Chinese companies have been scouring North America for a solution, spending billions in the process. And it's no secret as to which energy sources will be dominating the scene by then.

~~eac_nat_gas~~

What's the cost behind this inevitable growth? 1.5 trillion dollars every year from now until 2035.

According to the IEA, that's how much the world will need to invest in the energy-supply infrastructure.

So you can understand why we're looking to do more than just scrape by with day-to-day trading...

Look, no matter what you do, you'll never be able to control the daily flow of news coming from Europe, or know exactly how the geopolitical game of Risk will turn out in the Middle East.

You can, however, practically guarantee your energy profits.

How?

It's a theme we've touched on all year:

You can either roll the dice with the bigger names in the field, all of which are being squeezed out of the world's oil fields by those domineering NOCs, or you can do exactly what the big players are doing — that is, you can find the sorely undervalued players that are being scooped up feverishly.

Take a look at the following chart:

Ever since my report alerted readers to the huge potential in the U.S. oil sector, plays like this one have more than doubled.

The best part?

This is only one example of how profitable these plays are right now, all during a market that's tearing professional traders (like the ones I mentioned earlier) apart on a daily basis.

That's why I've been beating this drum for years — and will continue to do so.

~~oil_signup~~

~~keiths_signoff~~

How Investor's Are Crushing Big Oil

“Did I hear you right? You're saying that entire states are jealous of you guys?”

The man in the seat next to me started laughing.

We had just left a meeting, jumped into a cab, and were halfway to La Guardia before I realized he wasn't joking around...

A smirk crossed his face as he replied with confidence, “That's right, partner. And we don't need 800 miles of pipeline, either. I wouldn't put a dime out there if you gave it to me.”

My fellow cab passenger was referring to the Trans Alaska Pipeline, which zigzags across the state's landscape from Prudhoe Bay to Valdez.

The pipeline system was put into place following the oil crisis of 1973, and completed just before production from the field began flowing in 1977.

“It's certainly dropping like a stone,” I agreed.

It's not happenstance that 1989 — the year the Prudhoe field's production peaked at two million barrels per day — was the last strong year for the state's crude output.

Since hitting that peak, Alaska's annual production decline averaged 5.28% for the last 22 years!

That isn't guesswork; that's a fact.

It's no wonder the guy was so reluctant to invest his money there. And I could tell by the way he spoke so lightly about Alaska's Peak Oil crisis that it was clear where he made his first million...

By the time we reached the airport, I knew exactly where he'll make his next million.

Of course, that much was evident from the bolo tie wrapped casually around his neck and the Stetson resting on his head. The only thing missing was a saddled horse.

~~eac_nat_gas~~

Conversation turned and I asked him why he thought Alaska was so envious of his home state of Texas.

“In our case, Texans are luckier than most. Most states would be happy for just one strong area... Us? I can count on two hands how many shale plays have sprung up in recent years.”

I got the feeling he's worked on his fair share of drilling rigs as he rattled them off: “... then there's the Pearsall, a bit of the Haynesville, the Barnett, and of course the Eagle Ford — that's the one getting the love right now.”

And he was absolutely right. It was Texas' Barnett shale that kicked off this shale revolution, but for the last two years, the Eagle Ford shale has been being developed at a feverish pitch:

click to enlarge image

Thanks to these new plays, Texas has managed to do what Alaska simply can't: hold off the decline.

What the cowboy in the cab wasn't mentioning, however, was the up-and-coming player in the U.S. oil industry. And the one on my mind wasn't Alaska.

“So what do you think of North Dakota? I asked.

That was the question he must have been dreading. His face showed the slightest hint of disappointment as he was forced to concede the tremendous success North Dakota has had since 2006...

It's Foolish Not to Invest Now

Although his "Texas Forever" attitude was obvious, my cowboy friend is no fool when it comes to his investments.

In this matter, we're both on the same page. We even share a similar investment strategy.

You see, neither of us was interested in the oil majors, like Exxon. Those are the very companies that came late to the party — and now they'll be paying top dollar for a piece of the action.

If there's any doubt as to whether or not the smaller shale stocks can outperform the world's largest international oil players, investors may want to rethink their position...

See that green line high above the others?

That's how just one of my favorite small-time companies has stacked up against the Big Boys.

Think about how that gap will further widen going forward — especially as drilling costs start dropping.

Today, it takes half the time to drill a well in the Bakken it did a year ago...

~~oil_signup~~

Until next time,

Keith Kohl
Editor, Energy and Capital

When the Shale Revolution Spreads

His engineers kept telling him the shale venture was nothing but a waste of money.

It's a good thing George Mitchell wasn't listening as he drilled the first wells in the Barnett Shale formation in Fort Worth, Texas, in 1981...

Their pessimism toward developing the Barnett Shale didn't deter him.

Even back then, he knew he was sitting on a wealth of natural gas.

The only problem was figuring out how to tap into the shale rock, which is not very permeable.

Over the next twenty years, Mitchell sunk a lot money into research and methods for how to drill the shale.

He finally sold his company to Devon for $3.5 billion back in 2002, and is still considered "the Father of Shale Gas" to this day.

Thanks to a recent study conducted by the Perryman Group, we can see just how wrong Mitchell's engineers were.

Since 2001, the play has created over 100,000 new jobs and more than $65.4 billion has been injected into the economy.

Over 14,000 Barnett wells produced about 1.8 trillion cubic feet of natural gas last year, bringing the total output from the play to more than 9 trillion cubic feet of natural gas.

Click to Enlarge Image

In 2011 alone, activity in the Barnett has generated more than $11 billion — with 70 rigs currently operating in the area.

But this isn't some anomaly, considering we've seen this same prosperity happen time and again since the Barnett rush began, especially in cases like the Bakken.

Trust me, we're not the only ones hoping for continued shale success in the States...

~~shale_gas~~

All Eyes on Us

The world is waiting with bated breath for the outcome of the U.S. shale boom.

Some countries can't wait any longer.

Poland's shale development is gaining traction after one drilling venture proved successful. Last spring, the EIA estimated that Poland held more than 187 trillion cubic feet of technically recoverable reserves.

Anything that might help the country ease its dependence on Russian gas is worth the effort. (Imagine having to rely on Russia for 70% of total natural gas demand!)

It's the same story wherever shale gas is found.

In Mexico, where the once-prominent Cantarell oil field is now a shell of its former glory, PEMEX expects to try its luck in shale gas.

Over the next three years, the Mexican state oil company plans to drill 175 wells to evaluate its shale gas potential, spending nearly a billion dollars per year on the program.

This development will take some time...

In five decades, PEMEX expects to have more than 6,500 wells producing 8 billion cubic feet per day — or about 14% of its total gas consumption.

Mexico is already investing $10.4 billion building almost 3,000 miles of natural gas pipelines in anticipation for future gas production.

Unfortunately, there's a slight hitch in their plans.

As you know, the use of hydraulic fracturing is a critical part of the production process. Several million gallons of water are needed for each well.

The shale gas deposits found in Mexico are located in areas with no water. The development of this region alone could make waterless fracking technology invaluable to future production.

Meanwhile, Russia is practically bribing Exxon for the technology used to tap into shale rock.

A deal inked with Rosneft has given Exxon access to oil exploration in the Arctic Sea, but it comes with a different kind of price tag...

In exchange, Exxon will offer Rosneft the chance to invest in several of its tight oil drilling projects in Texas.

Of course, Exxon themselves would also be in the dark if it weren't for the $41 billion the company spent buying XTO Energy.

And there's one country watching Uncle Sam's shale boom closer than anyone else.

The Chinese have nearly 50% more recoverable shale gas than the United States, with more than 1.2 quadrillion cubic feet available.

Make no mistake; that's one of the main reasons the Middle Kingdom's national oil companies have been pouring billions of dollars into U.S. shale ventures.

Very soon, China will be looking for a shale revolution of its own...

Until next time,

Keith Kohl
Editor, Energy and Capital

What Has OPEC and China So Scared?

It's all too easy to forget how tight oil supplies can get.

That might be because we're used to hearing empty threats — like when Chavez warned the world he would form a brand-new superpower oil cartel.

Not that we've ever put much stock in his rants, mostly because he needs us more than we need him; our refineries along the Gulf Coast were built to process the heavy oil Venezuela produces.

The latest round of sanctions imposed on Iran, however, gives us pause...

The tension further intensified on Wednesday when Britain ordered Iran to close its embassy in London.

And with this situation, things could get ugly — and fast.

The ONLY Metal More Precious Than Gold

Most investors obsessing over gold's luster are in for a major shock.

We recently uncovered another metal — now being fought over across the entire planet — that's far more precious, valuable, and profitable to investors than gold will ever be.

This rare video exposes the entire eye-popping story.

The biggest concern isn't over disrupting Iran's oil production.

The country only pumped about 3.6 million barrels per day last month. Replacing that supply would make an already tight market tighter, but it could be done.

No, we're more worried about a tiny waterway roughly 34 miles wide...

Flowing between Iran and Oman is the Strait of Hormuz, which connects the Persian Gulf with the rest of the world:

It's the most critical choke point in the world, through which travel nearly 16 million barrels of oil on a daily basis — or roughly 17% of the world's oil supply (not to mention all the liquefied natural gas exports from Qatar).

Whether or not the threat of military action taking place is justified, it's enough for certain OPEC countries to look for alternate shipping routes.

The precautions taken by the United Arab Emirates are a perfect example.

The UAE built a 480-kilometer pipeline to transport up to 2.5 million barrels per day of its crude exports to the Fujairah terminal on the Gulf of Oman.

And OPEC members aren't the only ones with cause for concern.

About 75% of crude exports shipped through the Strait of Hormuz have one destination in mind: Asian markets — including Japan, India, and China.

Right now, China has about 50 million vehicles on the road...

That number is projected to triple by 2020.

It's no wonder China is pumping billions of dollars into less risky oil-producing regions, especially considering China's oil demand is growing at a feverish pace.

You can find the week's top stories in the energy markets and more, below.

Until next time,

Keith Kohl
Editor, Energy and Capital

Rare Earth Profits Surge: Nobody Saw This Technology Coming
While everyone else is distracted by the 170 billion barrels of oil beneath Alberta's soil, a small mining company is busy developing a "super-mine" that will lead to billions of dollars in profits in rare earth minerals. The best part: This tiny miner's fortune is paying off big for early investors.

3 Bakken Stocks Under $10: How to Own Your Piece of the Bakken Oil Wealth
The secret behind North Dakota's oil boom is out, and a herd of investors is finally catching on to what we've known for years.

Bill Gross is Wrong: You CAN Earn More than 5% Per Year
The best strategy to win big safely in this volatile investment climate.

Ron Paul's Free Market Solutions: Trade Is More Profitable Than War
Editor Jeff Siegel discusses Ron Paul's take on international diplomacy.

Facebook IPO: How to Trade Facebook Today
Analyst Ian Cooper explores the reasons to ignore a Facebook IPO, and offers two alternative "backdoor" trades.

Fed Declares War on Dollar: A Matter of Days Before the Banking Crisis Gets Hot!
What happens to U.S. stocks — and gold — when Europe catches fire?

Wanted: Vanadium Supply: The Next Rare Earth Scenario
Vanadium has all that rare earth-type opportunity, yet it has a very stable base on the steel-strengthening side... And it's about to take off in the next year or two.

2012 Stock Market Forecast: 8 Reasons to Be Bullish Next Year
Editor Steve Christ takes a look into his crystal ball and makes his 2012 stock market forecast.

My 5 Rules for Successful Investing: The Greatest Investment Lesson I've Ever Learned
When I look back now, I realize I was just lazy. I didn't want to deal with the day-to-day requirements of constantly monitoring my investments. So I decided to let somebody else, "the expert," deal with the headaches. I couldn't have been more wrong. Here's what I learned...

Energy: Security Vs. Independence
Editor Keith Kohl explains the difference between energy security and independence — and why investors should never mistake the two.

Why Should I Invest: What's It All For?
From homeownership and a four-year college education to a nine-to-five job and an individual retirement account, in many cases what they were "supposed" to do turned out to be the wrong thing to do.

Alternative Energy Warnings: Delusions - The Secret to Lost Opportunities
Editor Jeff Siegel provides a rational look at our energy future.

Energy: Security Vs. Independence

I nearly fell out of my chair before he had finished his sentence.

The last place I expected to hear this was a conference room.

On Monday morning, I found myself sitting around a table with about half a dozen other investors. We were there to listen to a small up-and-coming driller that was ready to move up in the world — or so they believed.

Although the company rep delivering the spiel didn't look old enough to shave, I was willing to give him the benefit of the doubt that he knew what he was talking about.

But within the first five minutes, I was ready to leave.

Had the coffee been better, I might have had a reason to stay. Sadly, it was about as stale as the rhetoric I was listening to, so I quietly made my exit after the first break.

Halfway down the hall, I realized I wasn't alone...

At first, I couldn't put a finger on where I had heard his speech before.

It dawned on me right around the point where the oil rep said (with a disturbing amount of confidence) that the United States could drill itself out of its dependence on oil imports.

What surprised me even more was seeing the heads around the conference room table nodding in agreement — all but one, who immediately started laughing.

This same investor followed me out the door and down the hall.

He clearly shared my skepticism, and there was no disguising his thick Texas accent when he spoke: “Pipe dreams and fantasies. That's all I hear nowadays.”

“We shouldn't laugh too hard at the poor kid,” I said. “He isn't the first to think it'll happen.”

He shook his head as he replied, “Don't I know it.”

~~oil-sign-up~~

The Terrible Case of Peak Optimism

Rumor has it Nixon was walking down the halls of the White House early in his term when he suddenly began swearing. He had just been told, for the first time, that the United States could no longer produce as much oil as it was consuming.

A few years later, Nixon would unknowingly start the long-standing presidential tradition of reassuring the public that Uncle Sam was on the road to energy independence with his statement to the public:

What I have called Project Independence 1980 is a series of plans and goals to set to insure that by the end of this decade, Americans will not have to rely on any source of energy beyond our own.

Unfortunately, Nixon's optimism has become a rite of passage for politicians.

In 1975, President Ford set much less ambitious goal for energy independence: to lower oil imports by two million barrels per day within three years.

By the time Carter took oath, oil imports had increased by almost three million barrels per day.

Of course, his promise that the nation would never use more foreign oil than it did in 1977 started on the right track. Unfortunately, it didn't last very long:

More than 38 years later, I'm hearing the exact same plan for U.S. energy security being touted.

The only difference — which I discovered on Monday morning in that conference room — is that it's not just the politicians who believe this will still happen...

But let's ponder what exactly it would take for this independence to take place.

For starters, the United States would have to literally double its current oil production. That means we need to find the equivalent of five more states like Texas, our largest oil-producing state.

We need to take into consideration the time it would take to develop those fields. After all, it took nearly a decade for the Prudhoe Bay field to start production following its discovery in 1968. Production peaked two years later at 1.5 million bbls/d.

The bottom line is it's simply not going to happen, no matter how much drilling takes place.

So instead of promising the impossible, we should look elsewhere for our nation's energy security.

I'll give you a hint: It's not going to come from the 4.3 million barrels OPEC sends our way on a daily basis.

Taking Control of Your Oil Investments

With that in mind, there is a way investors are able to sidestep the political rhetoric and take direct control of action.

About two weeks ago, I mentioned how we can replace our oil imports from two of our largest OPEC suppliers from just one place. As it turns out, we'll be replacing a lot more than that within the next few years.

Trust me, it's not the major oil and gas players that are on the top of the list; major players like Exxon are actually looking for the exact same companies.

It pays to take a closer look at the smaller producers that have the land under foot and the money to drill...

~~oil_signup~~

Until next time,

Keith Kohl
Editor, Energy and Capital

The Pipeline on Rails

“I'm not worried. If push comes to shove, they'll get the oil to market,” I told my colleague from my seat behind the wheel.

“How do you think they'll manage that?” he asked.

Looking back, I can understand his skepticism.

Just a few weeks ago, Obama made the politically undecided move to delay TransCanada's Keystone XL Pipeline project.

Although the main purpose of the 1,980-mile pipeline would have been to ship production from the oil sands, there were plans to add an extension, effectively linking up with Bakken.

This would have shipped an extra 65,000 barrels of oil out of North Dakota on a daily basis.

I smiled and rolled down my window.

A thick odor drifted into the car, and I was struck with a sense of déjà vu from the all-too-familiar smell of oil.

Not two weeks before, we had been driving past one of Syncrude's massive surface mining operations when the same smell penetrated our senses.

It caught the attention of my passenger, and he immediately looked out my window. I followed his gaze and it became obvious where it was coming from...

About fifty yards off the barren road we were driving on was a set of railroad tracks that stretched far into the horizon.

We had come up on the tail end of the longest line of railroad tankers I'd ever seen.

And the petroleum perfume it was giving off gave us no doubt what those tankers held.

“That's how...” I replied to his earlier question.

“Will it be enough?”

“There's one thing we have on our side — money.”

It's true. If you too had witnessed this line of oil tankers firsthand, all you would have seen were dollar signs.

The problem isn't money. There is no lack of interest in energy plays like the Bakken.

In fact, more than $480 billion has been spent so far through M&A deals in the energy sector. Here's a peek at just a few of them:

That's already much higher than the $418 billion spent last year.

The problem isn't on the production side, either.

I confessed to my colleague that I had been slightly wrong when I said in September that North Dakota would catapult ahead of Alaska and California's oil production within five years.

Truth is they're going to do it next year.

I sensed his doubt at this proclamation, and it was all too easy to make a believer out of him.

The EIA recently reported North Dakota's oil production in September topped 460,000 barrels per day.

Think about that for a second...

That means within a matter of six years, the state's production jumped 369%!

Nowhere else will you find that kind of growth story — and it happened in spite of oil prices crashing to under $33 per barrel in December 2008.

The ONLY Metal More Precious Than Gold

Most investors obsessing over gold's luster are in for a major shock.

We recently uncovered another metal — now being fought over across the entire planet — that's far more precious, valuable, and profitable to investors than gold will ever be.

This rare video exposes the entire eye-popping story.

During that same period, Alaska's output fell sharply by 40%. Without a miracle, it will be impossible for the state to reverse that two-decade downward trend.

And California didn't fare much better.

At this rate, North Dakota will be our second largest oil-producing state by early next year.

By now, you've probably guessed that the problem lies with infrastructure...

For starters, my friend was right to ask whether these tankers were enough. Fact is they're not.

North Dakota hit their maximum pipeline capacity years ago. When my buddy informed me that about 28% of the Bakken oil (roughly 130,000 barrels per day) is shipped via rail, I couldn't help but offer him a slight correction.

Just a few weeks ago, the Bakken Oil Express departed North Dakota bound for St. James, Louisiana, with about 70,000 barrels of oil in tow.

Soon, they'll be shipping 100,000 barrels of oil per day. Before you know it, their capacity will reach more than 250,000 barrels per day.

“Maybe you're right. So what do we do about it?”

That, my friends, is by far the easiest question to answer. Pipelines will be built. More rail capacity will be added. They're even ready to put a brand-new refiner y in place.

And the whole time, we'll be in the right position to profit from it all...

All the major players like ExxonMobil will be spending billions of dollars over the next few years for their piece of Bakken real estate.

It's why I put together this new report.

When the Bakken propels North Dakota to the second largest oil-producing state in the U.S., these are the stocks you want to own.

As I explained to my colleague that day, it's simply a matter of time.

Until next time,

Keith Kohl
Editor, Energy and Capital