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May 11/08
A ) Natural Gas and Oil Drive Higher - and Drive The AMP Portfolio
( personally , I never tire of that headline)
Natural gas advanced as crude oil surged to a record and the euro climbed against the U.S. dollar.
Oil touched $126.25 a barrel, the highest since futures began trading in 1983. The 15-nation currency versus the dollar today extended its gain from an eight-week low. Returns from investing in commodities have surged this year, led by natural gas, as investors sought alternatives to stocks.
``The natural gas move is 100 percent crude-price related,'' said Peter Linder, an analyst and senior adviser with Calgary- based DeltaOne Energy Fund. The fundamentals for gas are also ``very strong'' amid an outlook for reduced supplies. Natural gas for June delivery rose 27.4 cents, or 2.4 percent, to settle at $11.537 per million British thermal units at 3:05 p.m. on the New York Mercantile Exchange. It earlier rose to $11.569, the highest price since $11.88 on Dec. 29, 2005. Gas has gained 54 percent so far this year.
The June through March 2009 contracts on the Nymex are in contango, a market condition in which gas for delivery in a subsequent month becomes more expensive than in the month before it. A steep contango encourages traders to buy gas and store it for later sale when it's more profitable.
Linder Increases His Nat Gas Target Prices
Linder, who in a March 5 interview with Bloomberg News forecast an average natural gas price of $11 to $12 per million Btu this summer, today modified his outlook to $12 to $14 because of surging crude oil. Oil has gained 21 percent since March 5. Gas closed at $9.741 per million Btu on March 5 and has advanced 18 percent since then. ``The real surprise going forward is going to be gas prices,'' said Linder. It will be moved by oil prices ``and speculative traders.''
Crude oil for June delivery gained $2.27, or 1.8 percent, to $125.96 a barrel in New York. Futures have advanced 31 percent so far this year and have more than doubled in the past year.
Euro Climbs
The euro today advanced for the fourth time in five days against the dollar, rising 0.6 percent to $1.548 at 3:43 p.m. in New York from $1.5394 yesterday.
The dollar dropped 10 percent since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the European Central Bank has left rates unchanged.
Oil at $200 is ``possible if we have a continuing devaluation of the dollar with respect to other currencies,'' Organization of Petroleum Exporting Countries President Chakib Khelil said yesterday at a press conference in Washington.
Inventories are pointing to higher price / support
Gas inventories in the week ended May 2 increased 65 billion cubic feet to 1.436 trillion, an Energy Department report said yesterday. Supplies were 11 billion cubic feet below the five- year average and 17 percent less than last year.
``To get to a comfortable 3.4 trillion cubic feet by next winter, weekly increases must average 76 billion until November,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York in a note today.
Stockpiles have increased an average of 68 billion cubic feet a week during the North American summer over the past five years, Bill Newman of Research Capital Corp. of Calgary, said in an April 14 report.
Fundamentals are strong and LNG will not meet the demand
``The same fundamentals that are driving crude are driving natural gas,'' said Brad Florer, a Kottke Associates Inc. trader in Louisville, Kentucky. ``The margin in supply for natural gas is LNG and it's tied to the dollar just as crude is because it's a global market.'' Shipments into the U.S. of liquefied natural gas, or LNG, for the first quarter were 800 million cubic feet a day, less than half of the 1.9 billion cubic feet in the same quarter a year earlier, according to research from Stacy Nieuwoudt, an analyst at Tudor, Pickering, Holt & Co. in Houston.
Today Nieuwoudt revised her 2008 import forecast to 1.3 billion cubic feet a day from 2 billion. Imports in 2007 averaged about 2 billion cubic feet a day.
Higher prices in Europe and Asia, where gas prices are linked to crude, lured LNG to those markets in the first quarter, she said.
``The U.S. market is the LNG market of last resort,'' Nieuwoudt said. ``When no one else needs LNG, cargoes flock to U.S. shores'' though that will not happen this year.
Global trading of LNG rose about 8 percent last year as cold winter temperatures and the closure of nuclear plants in Japan boosted consumption, according to U.S. consultant Facts Global Energy.
The increase in the Natural Gas Watchlist / discussion is a major reason for the expansion of The AMP Book / Seminar Material to 175 pages.
Birchcliff Energy ( BIR) $ 11.89 up $ 1.13 ( 10.50 %)
NOTE : Birchcliff moved higher on Friday on a huge increase in volume.
On Friday I added 10 % to the holdings.
Vero Energy ( VRO) $ 9.45 up .09 ( 1 % )
Peyto Energy Trust ( PEY.un) 420.95 up .05
Accrete Energy ( GZ) $5.85 up .38 ( 7 %)
NOTE : Accrete Energy was recently added to our Watchlist and I made my initial portfolio purchase- at $5.40
B) Bow Valley Update
BVX $ 5.55 down .35
Bow Valley is a member of our AMP Portfolio / The North Sea Four
almost unnoticed has been a move up to the current price level - from below $5.00 to the $6.00 range before Friday.
HIGHLIGHTS
- Sales volumes averaged 4,717 boe/d in the first quarter of 2008, an increase of 475% from the first quarter of 2007 and 25% from the fourth quarter of 2007.
- Field production volumes in the first quarter of 2008 were 3,995 boe/d, 3% lower than fourth quarter estimated field volumes of 4,134 boe/d (reported as 4,388 boe/d due to positive prior period volume accrual adjustments booked in the fourth quarter of 2007).
- Funds flow in the first quarter of 2008 was $31.9 million ($0.37 per share), which represents a significant increase from funds flow of $3.0 million ($0.04 per share) in the first quarter of 2007 and funds flow of $22.2 million ($0.26 per share) in the fourth quarter of 2007.
- The Company recorded a net loss of $3.2 million in the first quarter of 2008 (loss of $0.04 per share), a decrease over earnings from the first quarter of 2007 (income of $0.5 million). The Company recorded an unrealized foreign exchange loss of $6.5 million in the first quarter of 2008, driven by the weakening of the Canadian dollar relative to the U.S. dollar and British pound sterling. The Company also recorded an unrealized fair value impairment of $4.8 million in respect of its Asset Back Commercial Paper ("ABCP") holdings.
- U.K. operating netbacks were robust, averaging $82.14 per boe, an increase of 61% from the first quarter of 2007 and an increase of 14% from the operating netbacks during the fourth quarter of 2007. Operating and transportation costs averaged $6.43 per boe in the first quarter of 2008.
- The Company recorded capital spending of $40.8 million in the first quarter of 2008.
C ) Thompson Creek Metals Update
TCM $ 22.92 up .32 ( 1.42%)
We purchased TCM for the growth potential - and that continues to be a good reason to hold or add.
Management is expanding the production while reducing dept.
Moly demand and therefore pricing remains strong.
Management’s Discussion and Analysis
Three Months Ended March 31, 2008
- Net income for the first quarter of 2008 was $46.8 million or $0.41 per basic and $0.37 per diluted common share, compared to $47.7 million or $0.46 per basic and $0.43 per diluted common share in the first quarter of 2007.
- A payment of $100.0 million was made to the former shareholders of Thompson Creek Metals Company USA in January 2008 as settlement of contingent consideration based on the average market price of molybdenum in 2007. This amount was accrued in the Corporation’s consolidated financial results for the year ended December 31, 2007.
- Long-term debt incurred for the acquisition of Thompson Creek Metals Company USA was reduced by $16.7 million during the first quarter of 2008 and by $182.5 million since the acquisition. At March 31, 2008 the principal outstanding on the First Lien credit facility was $219.4 million.
Expansion Plan and Funding
- The Corporation and the other joint venture participant in the Endako Mine approved an expansion at the mine that will increase the capacity of the Endako mill to 50,000 tonnes of ore per day from its current operation at 28,000 tonnes per day. The expansion has an estimated capital cost of Cdn$374.0 million of which approximately Cdn $280.0 million will be funded by the Corporation.
- A feasibility study on the development of the Davidson Project was completed in March 2008 and is under review by the Corporation. The development has an estimated capital cost of Cdn$109.0 million.
D) The ( Vancouver / May ) AMP Seminar
Planning Not Wishing for Success
Seminar Registration - please print out the Application Form in the right hand margin
( or for seminar materials ONLY )
Seminar Materials AVAILABLE NOW ( THE AMP Book )
What is Your Plan for 2008 ?
AVAILABLE NOW - PROFIT NOW - 175 pages bound copy 9 1/2 " by 11 1/2 '
MAY 2008 Edition
"Building Your AMP Portfolio
Our Best Ideas for 2008 -09"
You have a plan for building your portfolio.
You have a book that shows a plan for 2008 and beyond.
AT A MINIUMUM - if you are investing thousands of dollars in a particular recommendation - invest $35 to develop a portfolio plan. That's common sense - and common sense is highly valued because it is uncommon. Use the order form in the top right hand margin.
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E ) Coal
Another commodity that continues to climb and help The AMP Portfolio
Coal Price in U.S. East Climbs to Record $98 on Rising Exports
May 9 (Bloomberg) -- Coal in Eastern U.S. spot markets climbed to a record for a fifth consecutive week as European power producers sought additional supplies and domestic utilities began replenishing inventories.
Coal for delivery at the Big Sandy River, a benchmark for supplies from the Appalachian states, rose $2, or 2.1 percent, to $98 a short ton, according to data compiled by Bloomberg. It was the highest price in at least 24 years.
Coal has surged to records around the world this year as storms and power shortages reduced exports from the largest producing regions, including South Africa, China and Australia. In the U.S., coal generates more than half of the power supply and utility stockpiles are declining.
``Global coal inventories remain low, U.S. exports are accelerating and new coal-fueled generation is being built in 75 nations around the globe,'' Peabody Energy Corp ( BTU). Chief Executive Officer Gregory Boyce said in a statement. Peabody, the largest U.S. producer, forecast profit will nearly double this year because of rising prices. U.S. miners are increasing production to meet the surge in global demand. Coal production climbed to 22.6 million tons last week, up 4.5 percent from a year earlier, according to the U.S. Energy Department.
Record Prices
Coal in Pennsylvania, which has higher energy content and more sulfur than grades from other U.S. regions, gained 50 cents, or 0.5 percent, to a record $97.50 a ton. Coal in the West, which is cheaper than Eastern coal because it costs more to ship to power plants and export terminals and typically contains less energy, also rose. Deliveries from Wyoming's Powder River Basin, the largest U.S. production area, rose 25 cents, or 1.7 percent, to $15 a ton, the highest in more than two years.
Prices for metallurgical coal, which steelmakers use to produce coke, have more than doubled in the past year.
Fording Canadian Coal Trust, which holds 60 percent of Elk Valley Coal, the world's second-largest exporter of coal used in steelmaking, said in a statement yesterday that it signed contracts for 90 percent of 2008 production at $275 a ton, up from an average $97 last year.
Teck Cominco
TCK.b $ 48.10 down .61 ( 2 %)
( a conglomerate with a large interest in coal /i.e Elk Valley )
Sprott Asset Management
SCP $ 4.15 up .35 ( 9.21 %)
( NOTE see last weeks articles on SCP - including the Friday announcement of the expansion of its coal investment . The stock moved to a 52 week high and continues to trade on good volume )
Final Words
The behaviour of the market is unpredictable, but the behaviour of the market's participants is about as predictable as you can get. For long-term success, investors need the discipline to do two things:
1. Invest during points of pessimism
2. Exercise patience.
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