For investors willing to take a long-term view on their resource portfolios, this could be the best of times, says U.S. Global Investors CEO and Chief Investment Officer Frank Holmes. If you add patience to your portfolio management strategy, holding discounted oil and gas and metals mining stocks is one way to leverage the price equilibrium that will come when China’s growth hits the market. In this interview with The Energy Report, Fund Manager Brian Hicks shares the names of the juniors farther up the food chain that he is adding to the fund.
The Energy Report: Brian, in your last interview with The Energy Report in May, you were watching the price of West Texas Intermediate crude as compared to the average of the past six major bottoms. What is the chart telling you now?
Brian Hicks: It appeared in April and May that we might see a recovery in crude oil prices. A lot of folks were excited about the rapid decline in the rig count. However, U.S. production remained quite resilient, trending north of 9 million barrels per day (9 MMbbl/d). That caught a lot of people by surprise—the fact that production had not rolled over—and led to a dip in crude oil prices over the summer; they dropped below $40 a barrel ($40/bbl) briefly.
“We feel like BNK Petroleum Inc. is undervalued if you look at the reserves in the ground.”
Approaching the end of the year, we see some signs of production slowing. There is a lot of carnage in the energy patch right now. A number of operators are going through their bank redeterminations, are seeing their credit lines cut and are no longer able to issue any high-yield debt, so that’s started to crimp drilling budgets. …read more