Hard Oil, Easy Profits

Jan

2008

Written by Christian DeHaemer

With oil at $97 a barrel, companies like Exxon Mobil, BP and Chevron are throwing parties like AOL in 1999! Not only are they lighting Cohibas with 500-euro notes, they're jacking up prices to customers and putting the screws to Congress to subsidize drilling.

Just kidding. I was channeling my inner Mother Jones there for a minute. The truth is that as the price of oil has climbed 25% a barrel over the last six months, profits at major oil companies have declined.

I know, I know... You're thinking, "But Christian, how can this be?"

I'll tell you: You can't sell what you don't have.

That's why, despite record oil prices, Morgan Stanley just downgraded BP Plc, Europe's second-largest oil company.

BP just fell the most in five years. Merrill Lynch lowered estimates by 25% to $4.4 billion. And according to Bloomberg, the CEO is cutting jobs and slashing divisions. And this comes after Exxon Mobil missed estimates.

The problem is that all the easy oil has been found. The "hard oil" is farther afield, under the ice cap or in politically hostile environments. And retrieving that oil cost more money cutting into profit margins.

But still, oil drives the world, demand is accelerating, and new sources must be found -- regardless of costs. Those sitting on undeveloped oil fields are in the catbird seat. I've found one such $4 company with massive holdings off the coast of South America. Do yourself a favor and take the three minutes to read this free report.

Christian DeHaemer
Editor, Crisis Trader

P.S. BP's Q4 will be announced on Feb. 5.