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High-Risk Investing Is the New Trend in Energy: Interview With Andrew McCarthy, CEO of Emperor Oil

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McCarthy discusses a new trend in energy-company investments: the high risk play. Plus, a true look at the energy situation in Africa.

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James Stafford: How are technological advances contributing to the juniors' readiness to operate in risky territory?

Andrew McCarthy: With ever improving technical advantages in extraction methods I believe we will see more opportunities for resources which have a lower cost structure. Shale oil and gas developments will continue to evolve and conventional oil will have to compete on a cost level. Traditional extraction methods won't have the same exploration budgets nor will they be able to compete unless the extraction is simple and inexpensive. I believe this is why we are starting to see a renewed interest in Africa and South America.

Energy reserves are abundant, they are often defined by past work and are inexpensive, efficient and safe to extract. This creates a significant advantage that can in many cases offset the political and geopolitical risk that was once associated with these parts of the world.

I also see the world becoming a safer place. Modern communication has improved access to information and changed people's basic needs to wants and desires. Resource development creates employment and wealth – the cornerstone from which luxury and comfort is attained. Energy development is fundamental to advancing social, economic, health and safety standards for the world.

James Stafford: On a broader level, does natural gas have much further to fall, or have we seen the bottom?

Andrew McCarthy: I think we have seen a bottom in North America but Europe's moratorium on shale exploration and China's environmental concerns and air quality issues create a huge demand for natural gas, which in turn creates a long-term, sustainable model for natural gas exploration, development and export.

James Stafford: Will the shale revolution live up to the hype?

Andrew McCarthy: I really don't believe the hype has even started yet. Unfortunately, the uninitiated are still focusing on the concept of 'fracking,' while this is in fact one of the oldest technologies. We've been 'fracking' oil and gas wells since the 1930s. What has changed and continues to change is the technology applied – do you know they actually use CAT scan equipment to check shale porosity? It's truly a fascinating region of science. The shale oil developers refer to 2010 like its ancient history and there is no reason to expect this rapid pace of development and advancement to slow.

James Stafford: While shale is currently the hot item, which sector will be the next big thing for energy investors?

Andrew McCarthy: Conventional oil is an excellent place to invest if you can find opportunities in areas that have excellent resources and are overcoming or mitigating their political risk. I think that technology stocks which are focused on the energy sector create wonderful investment opportunities. We are in a technological revolution in this industry. When people speak of peak oil they should first realize that the issue is energy – not oil. And in order to talk about a peak we have to eliminate the human factor – man's creativity, ingenuity, invention and design always has and always will prevail.

(Source)

This article was written by John Stafford of Oilprice.com.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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