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The Next Thing......




Our investment fund is premised , in part, on the notion that the upstream energy sector is a volatile place and that volatility creates a willingness to change. The market takes a hit, humans panic and commit to "be better" and software accommodates the willingness.


The stock market's demand for a greener planet moves the balance of power over prices for hydrocarbons out of West Texas to the Middle East and Russia. US producers are rewarded for cashflow and NOT expanded reserves - this all translates into more stable production (and less volatility). All of this is not a new revelation.


So lets recognize that the biggest recent moves in stock values among operators are those that demonstrate cash flow production as a result of "restraint". The question arises..."Now that that is done...what is next that makes an operator's stock competitive?" I don't quite yet believe that going green is commercially attractive for operators BUT it does make one's stock a plausible portfolio holding as an "agent of change".


Operators are going to have to demonstrate wholesale a capacity for change (i.e. process improvement) else the cost of capital is going to increase (this is code for stock values going down). They have to advertise what they are going to do and then report that they just did it. It is only then that the market will ascribe value now to plans for future improvement. Everybody knows that Apple is going to come up with something good in the future and the stock reflects it. So what are we looking at here?

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