Editor's note: We're all heading to the company Christmas party today, so we're keeping The Digest short. Happy Holidays.
Oil super-major Royal Dutch Shell today was awarded a contract to redevelop Iraq's Majnoon oil field. Majnoon is one of the biggest oil fields in the world at an estimated 12.8 billion barrels. Iraq opening its borders to foreign oil companies is an important political step... And it always makes big headlines.
But the money the foreign oil companies make from the deals is negligible. Shell will earn $1.39 for every barrel it can extract above current production levels. Majnoon currently produces 45,000 barrels per day. Shell says a best-case scenario is 1.8 million per day. Assuming everything goes perfectly at Majnoon, Shell will earn $2.4 million a day. And it has to split the money with its Malaysian partner in Iraq, Petronas. That kind of money is a drop in the bucket for a $175 billion company like Shell, which means you can't make any money buying the stock.
But other, lesser-known companies operate in Iraq with much sweeter deals in place. For example, Matt Badiali recommended Addax Petroleum to his S&A Resource Report readers in May. The company owned stakes in Iraqi and African oilfields. In August, Chinese oil giant Sinopec, wanting access to Iraq, bought the company for $7.24 billion. Subscribers made 56%.
Badiali recommended another company like Addax in our exclusive service Phase 1 (it's simply too small to recommend in the Resource Report). This junior miner has a market cap of less than $1 billion. And it has more cash than its total market cap. The company also owns a 75% stake in a multibillion-barrel Iraqi oil field. From these numbers alone, the company could quadruple from here. The story gets better...
The company recently announced the sale of some noncore oil properties for $1.5 billion – almost twice its market cap. It's expected to use that money to pay a huge special dividend (probably around 15%) and fund its Iraqi oil operations. At current prices, Matt says this company is a "steal." He's telling Phase 1 readers to load up. To learn more about Phase 1 and access Matt's Iraqi oil recommendation, click here...
Our friend David Galland at Casey Research received a copy of John Paulson's presentation for his new gold fund. Slide No. 2 of the presentation reads as follows:
- Printing money will lead to paper currency depreciation
- Demand for gold as a reserve currency will increase
- Demand will overwhelm supply, causing price to rise sharply
Paulson's theses on gold are no secret. And we've covered them ad infinitum in The Digest. But we still find it amazing the most respected money manager of our day is so brazen with calls to short the U.S government. Unfortunately for Paulson, it doesn't make much sense to invest in his gold fund. You could spend less than $200 on subscriptions to PSIA and the S&A Resource Report and get all the gold-related investment recommendations you'd need. Or you could just buy bullion and the gold ETF (GLD). If we're all right about the gold boom – and with the current rush to print dollars we inevitably will be – every type of gold investment will soar. You don't need to pay a hedge-fund manager "2 and 20" for alpha.
Our favorite gold pundit, Jim Rogers, is on a global media tour talking up his book. Yesterday, he told CNBC's Maria Bartiromo gold will be a great investment over the next decade and hardly anyone owns it yet. He surveyed 300 people (including big money managers) at a speech in Prague. Rogers said 76% had never owned gold... "So when you say it's a bubble... nobody owns gold yet," Rogers said.
New highs: Verizon (VZ), Johnson & Johnson (JNJ), iShares High Yield Bond Fund (HYG), Burlington Northern Santa Fe (BNI), Amerigas Partners (APU), Enterprise Partners (EPD), Keyera Facilities (KEY-UN.TO), Coca-Cola (KO), Altria (MO), International Royalty (ROY), Providence Service Corporation (PRSC).
An all-Dansker mailbag... He'll be thrilled, no doubt. Send your e-mails to feedback@stansberryresearch.com.
"Gotta love that taxpayer parasite know as Dansker. Yes, it's scary enough that he votes... it's even more scary that he breeds. Look at his offspring... it's daughter like daddy. He makes a great poster boy for selective sterilization." – Paid-up subscriber Steve M
"I suspect we will have the last laugh on Dansker when this subhuman's 'annuities' are inflated to nothing and he is left eating dog food for dinner. You are quite correct that people like this tax-feeding low life are the reason democracy doesn't work." – Paid-up subscriber Cathy Cuthbert
Regards,
Sean Goldsmith
Baltimore, Maryland
December 11, 2009