TOM PETRIE: THE ENERGY REVOLUTION

[dan_s]

Very good interview. Tom is a smart guy we should all listen to. The interview is about 27 minutes long.

IMO the U.S. will NEVER be energy independent. We are "inter-dependent" in the global economy and always will be. Tom points out that U.S. oil production will probably peak by 2020 in the 11-12 million bbls per day range. The U.S. consumes over 17 million bbl per day now. Keep in mind that we currently have all the coal and natural gas we need. At 11-12 MMBOPD we can get all the rest we need from Canada and other Western Hemisphere countries. We will no longer be dependent on the Middle East. However, the rest of the world will be. The U.S. will always have a role to play in keeping the Middle East supply of oil flowing.

Our vast supply of natural gas gives the U.S. a tremendous edge on the rest of the world. It provides cheap energy and feedstock for a lot of products.

Tom points out that when the U.S. begins exporting gas (LNG) in a couple years it will be a "transformational event". I agree. Although I highly recommend staying heavily weighted to oil now, you should all have some exposure to natural gas. RRC and UNT have the most exposure to gas, but several of the Sweet 16 hold a lot of gas reserves. One reason for adding Newfield Exploration (NFX) is because it gives the Sweet 16 more exposure to gas, although NFX will do very well even if gas stays near current price levels. I now believe the price of gas will move over $6.00/mcf in 2016 and stay above that level. Most of the shale plays need gas over $5.00 to provide a reasonable rate of return. The Marcellus Shale has the best economics.