Pescod Says...

CRUDE OIL
$66.62 -0.22

It wasn’t too long ago in the good ole days that every-
one seemed to be talking about peak oil. The world econ-
omy was humming along just beautifully, thank you very
much, and oil was in increasing demand just about every-
where...well, just about everywhere except North America.
Oh! The good ole days!
One of the biggest industries of the time was churning
out books that dwelled on the topic of peak oil and how
sooner or later the world would run out of this stuff and the
price would go to $150, $200, $250 a barrel. Take your pick.
Oh! The good ole days!

I don’t think too many people believe that anytime soon
now. Heck, we might have bought into that theory our-
selves, once upon a time, now I can’t see this peak oil be-
ing believable...even ten or twenty years out doesn’t seem
possible.

Maybe now a person has to play oil and gas
stocks for cycles, price range, seasonal moves, but more
importantly—discoveries.

Last week the New York Times did a feature article enti-
tled “Oil Industry Set the Brisk Pace of New Discoveries”
and points out that almost 10 billion barrels have been dis-
covered in the first six months of this year. The Times
writes, “The oil industry has been on a hot streak this year,
thanks to a series of major discoveries that have rekindled
the sense of excitement across the petroleum sector de-
spite falling prices in tough economies.

These discoveries
spanning five continents are the result of hefty investments
that began early in the decade when oil prices rose and of
new technologies that allow explorers to drill at greater
depths and break tougher rocks.”
The Times continues, “More than 200 discoveries have
been reported so far this year in dozens of countries in-
cluding Northern Iraq’s Kurdish region, Australia, Israel,
Iran, Brazil, Norway, Ghana and Russia. They have been
made by International giants like ExxonMobil, but also by
industry minnows like Tullow Oil.”
As far as their 10 billion barrel number, you could use
much bigger numbers if you consider discoveries made in
the last 12 months or so. The numbers are all over place
for the sub-salt discoveries offshore Brazil, but you could
use numbers as low as 10 billion barrels potential or as
much as 50 billion barrels. New discoveries in the Gulf of
Mexico made recently are in the two to five billion range.
They’ve just made one of the biggest ever natural gas dis-
coveries in Venezuela and projects planned in Venezuela
could add significantly to production.
Then of course there are areas like Kurdistan, where we
don’t doubt there is going to billions if not tens of billions of
new discoveries made over the coming time.

Given that it’s one of the most corrupt places in the
world, and politics are a big problem, one could question
who would ultimately own the prize, but we don’t doubt
discoveries will be made.
At the same time as all these oil discoveries are being
made and we must admit, some of them are going to take
at least $60 oil to see actual production, there have been
immense changes in technology from horizontal drilling to
fracing that is going to make the discovery and the pro-
duction of oil much more efficient and cost effective.
Then of course, there is the story of Wavefront Energy
which we’ve talked about many times in the last four or
five months and is one of our favourite stories. If their
technology works, it is simply going to revolutionize the
oil and gas business and if they can produce an extra 15%
to 20% of the oil out of old oil fields, with tens of billions of
barrels plus that could be found this way, is simply mind-
boggling.
Yes, there might be a peak oil some day, it’s just proba-
bly decades in the future.
Mind you, there are other opinions. Goldman Sachs,
who seems to change their bets on oil prices weekly, is
now suggesting $85 for the end of 2009 from $65 and $95
for the end of 2010.

We caught up with a very busy John Kaiser today and
he’s busy because he’s got one of the hottest hands in the
mining sector. He is the guy that was talking about rare
earths before people even knew what it was, and some of
his picks have absolutely flown.
When we caught up with him today, we were hoping to
get some information on Quest Uranium (QUC), one of his
previous picks was moving today, but he preferred not to
comment.
Meanwhile, for those following Peregrine Diamonds
(PGD) it would be very important to read his comments in
today’s Kaiser Bottom Fishing Report (just go to
info@kaiserbottomfish.com) and heaven forbid, anyone
would listen to a technical analyst for opinions on Pere-
grine rather than someone who knows fundamentals.

But when we ask Kaiser to pick one stock to buy today,
he goes for something right out of left field, a walk on the
wild side and picks International Enexco for their “hot pot”
project in Nevada which is expecting assays shortly, but so
far is coming up with all the rights poisons and work to
date suggests there might be something interesting com-
ing. Kaiser points out the little company has $8 million in
the bank.