The stronger the world sees the U.S. and its economy, the stronger our currency becomes. The stronger our currency becomes, the more downward pressure is placed on commodity prices. It seems that we are headed to a continued higher value for the dollar and thus, SHORT TERM, I suspect oil prices will have a hard time getting higher than $55.00 a barrel.
However, I am happy about this fact. The moderate and stable oil prices allows the cost of drilling and the demand for services to stay low, and thus allows reserves to be developed over the next 12-24 months at very reasonable price.
Remember, we are all drilling today for the Eckard AML philosophy:
Aggregate for three years
Maturate for two to four years
Liquidate at the fourth to seventh year
This allows the time to invest, secure tax breaks, put the assets into motion, and then seek to exit when the market is headed on the upward slope of the bell curve. The highest rate of return will be on the expeditious maturation, and exiting of these tangible and alternative assets.
Investors should be looking at buying energy stocks that are in the service related services to hold for 24-36 months as they gain more contracts and the industry rebounds. The growth of energy service companies and their stock prices will do very well over this time frame. Investors interested in buying energy stock in exploration companies should only look to invest with major positions that are located in the Oklahoma Scoop trend, and West Texas. Eagle Ford, Bakken, Utica, and others that are still marginal. Companies are showing up in the West Texas area as the new Alpine High and Delaware Basin is being developed, and is early on in its infancy!