March 29, 2013
- While Wall Street sleeps, a drill bit turns 7,267 miles away: Developing opportunity takes the stage in this unscheduled edition of The 5...
- “One of the world’s greatest frontier oil provinces” identified by Byron King nearly four years ago… and now “It’s time to make or break things”
- “A wild, unexplored, unknown frontier”… but at 91 cents a share, it’s irresistible
- The ultimate cash-in-a-mattress solution… readers stand up in defense of Bitcoin… a massive oil resource far, faraway from the Middle East… and more!
“It’s time to make or break things,” said Byron King matter of factly.
“Now that the drill bit’s in the seafloor, the news could break at any moment. This is the real deal.”
We interrupt this nontrading day with urgent developments.
Under normal circumstances, we wouldn’t send you an issue today. U.S. and Canadian stock markets are closed for Good Friday. The commodities trade is electronic-only. CNBC is running a Treasure Detectives marathon.
But as you can deduce from Byron’s comment, these are not normal circumstances. While everyone else was sleeping in, we’ve been all over a hidden opportunity in the energy space. We’ll tackle it in earnest for this special edition, and then catch up on a backlog of reader mail. The PRO edition of The 5 is taking a break and will return on Monday.
“The discovery,” says Byron in an interview we recorded on the fly, “is tucked away in one of the world’s most remote locations — one that I’d bet not one in 100 people here in America could point out on a map.”
Underneath that site lies as much as $703 billion worth of oil.
The make-or-break moment now is the product of Byron’s dogged research going back four years, much of it documented in our own virtual pages… plus his own training as an oil field geologist at Harvard going back nearly four decades. What follows is a chronicle of Byron’s research bringing you up to the present — and urgent — opportunity.
“Most of the major oil discoveries that remain to be found in the world will be offshore, in deep water,” Byron reported from the American Association of Petroleum Geologists conference in Denver on June 12, 2009.
There an expert speaker said six of the last 10 giant oil discoveries in the world were offshore Brazil. Longtime 5 readers know about Tupi — the Western Hemisphere’s largest oil discovery of the last 30 years, pinpointed in 2006. Production began in 2009… and there’s potential for 1 million barrels per day of production by 2020.
By the time of this conference, Brazil was already an old story for the pros. “Namibia,” the expert told the assembled crowd, “is destined for oil riches.”
“Offshore Namibia is quickly becoming one of the world’s greatest frontier oil provinces,” Byron told us on Sept. 23, 2009.
“The same brilliant researchers and scientists that discovered the potential of Brazil’s Tupi field are now doing extensive research in offshore West Africa, in particular offshore Namibia. One researcher I’ve been following very closely believes the offshore areas of Namibia are ‘geologic analogues’ to Brazil.”
Makes sense. Think Pangaea, eons ago, when South America and Africa were joined at the hip…
In time, Byron dubbed this far-flung patch of the Atlantic the “oil kitchen” — because the separation of the continents generated huge deposits of hydrocarbons, effectively “cooking” them beneath the earth’s crust.
“This may be the best potential,” Byron concluded, “for any offshore-related investment anywhere.” He recommended a tiny company sitting on lucrative drilling rights offshore Namibia for 75 cents a share.
“If there’s a frontier spot on Earth where you can say that drilling risk is low for wildcat development,” said Byron on Jan. 26, 2010, “it’s offshore Namibia.”
“I’ve been meeting with senior executives of the oil service industry,” he reported from a conference in Rio de Janeiro. “I’ve toured the facilities of Halliburton and FMC Technologies. I’ve met players from all over the world. And I spent a long afternoon discussing both oil field history and current events with a retired member of Brazil’s national petroleum agency, ANP.
“The pros showed me seismic, geochemical and satellite data. I saw gravity and magnetic maps.
“The consensus: The offshore regions of Namibia are absolutely — as the saying goes — ‘hydrocarbon prospective.'”
Unlike Byron, your editors are not Harvard-trained geologists. But we’re fairly sure the saying is geologist-speak for “Hot damn!”
The first big profit move came on Feb. 25, 2011. The tiny company sitting on this tract of ocean was bought out for $782 million.
For investors who bought in at 75 cents in September 2009 and then sold, that worked out to a 723% gain.
“I am up over $35,000,” a reader named Doug wrote Byron a few weeks before the announcement. “We have seen a $30,000 investment rocket to $150,000 in less than a year,” said another named Charles.
“Byron King is an extraordinary researcher and analyst,” a third satisfied reader wrote to us. “He has managed to ferret out and unlock the hidden values of many companies that he has discovered well before other analysts and the market have, so I have profited mightily from his ‘boots on the ground’ approach and acute analysis.”
Byron tells us he even heard from a reader who made $250,000 — enough to put his son through four years at MIT.
But the story wasn’t over yet. It just got very quiet. Eerily quiet for those who weren’t paying attention.
For the acquiring company — itself a small fry in the oil world — the last two years have been about the distinctly unglamorous scut work of preparing to drill through 3,700 feet of water and another 12,000 feet of rock and salt.
Yes, that’s nearly three miles below the ocean’s surface. An astonishing feat of engineering… but not the sort of thing that’ll wow a Wall Street suit looking for a hot “story.”
So the company and its tireless efforts have been completely off the mainstream’s radar.
It seemed nothing could move the needle… not when the initial estimate of 2.3 billion barrels was raised last year to 6.9 billion. And not now, as a Fox Business report pumped up the estimate again to 7.4 billion — as much oil as in the Eagle Ford Shale in Texas.
Now comes do-or-die time.
On Monday night, Byron settled in with his family after dinner when he was interrupted by an urgent communication. It was from one of his contacts at the company. The years of prep work were over: The drill bit hit the seafloor.
“When the drilling results are announced,” says Byron, “I think we’re going to see an explosion in the share price of this company.”
Byron emphasizes that’s only weeks, or even days, away now. So the window of opportunity is exceedingly small. Dawdle, and you miss out on a company that right now is only 91 cents a share — so it’s easy to build a small grubstake. Or a large one.
Is this a speculative play? Absolutely. It’s not for everyone, says Byron: “It’s a wild, unexplored, unknown frontier.” It’s not risk-free.
But the rewards are immense… and the odds are better than even. “It’s a limestone (or perhaps dolomite) reef structure,” Byron says, reverting momentarily to geologist-speak.
What’s that mean? “By way of comparison, and based on seismic, it resembles what I’ve seen in, say, the Permian Basin of West Texas — where there’s LOTS of oil.”
Better yet, “there are voluminous oil seeps from the seafloor.” Never a bad sign.
Again, the drill bit is spinning as we speak. News of the results could break at any moment. And at that time, Byron’s interview will be old news and we’ll be forced to pull it offline. Give it a look now… while there’s still time.
OK, before we catch up on that reader mail… Vancouver favorite Barry Ritholtz passes along this irresistible tidbit.
The old joke about stuffing cash in a mattress? It’s no longer a joke. A company in Spain achieved perfect timing — introducing its mattress with an embedded safe only days before the crisis in Cyprus broke.
“If it happened in Cyprus, why couldn’t it happen to me?” the company’s president tells The Wall Street Journal.
Really, what else is he going to say?
“I don’t agree with some of your reader’s comments on Bitcoins,” writes a reader reacting to the notion that gold is the last word on money.
“Bitcoins aren’t subject to any fluctuations caused by paper shorting, as gold and almost every other market or currency is. If someone sells Bitcoins, then the price goes down in proportion to the amount sold. If someone buys significant numbers of Bitcoins, the price goes up. If people use Bitcoins to shift large amounts of money between currencies or locations (i.e., only temporarily in Bitcoins), then the price fluctuates wildly.
“Bitcoins are the closest thing we have to a ‘pure’ currency. The value of a Bitcoin is worth exactly what someone is prepared to buy one for. If no one wants to sell, then the price goes up until someone is prepared to sell. And vice versa.
“A Bitcoin can’t be counterfeited. Yet. If I want to buy one from a complete stranger, even a criminal in another part of the world, I can do so knowing I’m not buying a fake. I would never trust myself to do that with a gold coin. I can even buy tiny partial Bitcoins so I don’t place myself at risk. I am my own bank. I don’t charge storage fees. There are very minimal fees to transfer, and none between end-users.
“Bitcoins could do to banks and PayPal, etc., what Napster did to the music industry. Bitcoins could die, but it is the future direction of currencies. For now, it helps if you’re a bit/lot geeky, but if it sticks around, it will become easier.”
“I must disagree with your reader who says Bitcoin is not ‘good money’ because it lacks intrinsic value. I have heard this argument many times, and once agreed with it myself. However, the question of intrinsic value is a red herring.
“The ‘value’ of any commodity varies from individual to individual. A commodity becomes relatively valuable when a lot of people value it more highly than other things. It becomes money when it is highly valued by most people for the precise reason that it is highly valued by most people. While gold has some uses other than as money, the demand for it, and thus its value, would be far less if it were not so well suited to its monetary role.
“Bitcoin, by contrast, has no use other than its use as money. But it fulfills all of the functional requirements of money — scarcity, fungibility, divisibility and durability — perfectly. Indeed, it was designed to do so. It has physical existence as a duplicated electronic pattern on hundreds of thousands of memory devices across the globe, making it far more difficult to destroy than a gold coin. If its value has ‘fluctuated wildly,’ it would be well to note that for at least the past year, that fluctuation has been in one direction, up. And the value of every other currency denominated in Bitcoins has fluctuated equally wildly in the opposite direction.
“The value of any money depends on the network effect. The more people use it, the more valuable it becomes. The more valuable it becomes, the more people use it. Historically, this is exactly how gold rose to its position as the best money. We are seeing the same process in action today with Bitcoin. When USD/BTC tops 20,000 later this year, let’s talk again.”
The 5: “Given that the founder is nowhere to be found,” writes Paul Ford at BusinessWeek, “it feels like a hoax, a parody of the global economy. That the technology used to implement it has, so far, shown itself to be impeccable and completely functional, and that it’s actually being exchanged, just makes it a better joke.
“The truth is it doesn’t much matter if it’s a joke or not. It works.”
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. “Egypt is a mess,” adds Byron with a final thought. “Libya is a mess. The rest of North Africa is a mess. Iraq is a mess. Saudi Arabia is pre-revolutionary. Yemen is revolutionary. And those are our ‘friends’ over there. Of course, the rest of the Middle East is a total mess, too.”
“Face it, the whole region is going to hell in a handbasket. And you don’t really think that things are going to get better over there, do you? That’s my point.
“We could use some serious oil that’s not in the Middle East.” And 7.4 billion barrels is serious oil. And the deposit Byron’s thinking of is 3,808 miles from Saudi Arabia.
The drill bit is turning now. News could break at any moment. And then the 91 cent stock sitting on this deposit will be worth $6.37. That’s a sevenfold increase.
Don’t believe it? We don’t blame you. Byron walks you through the math right here.