There's more than one way to invest in energy, and you don't have to choose between majors and juniors. Frank Curzio, editor of the Small Stock Specialist newsletter, tells us exactly why every investor needs a diversified portfolio of juniors, large-cap oil and gas producers and natural gas services. In this interview with The Energy Report, Curzio talks of a shifting political climate and why it could mean a massive boom for U.S. natural gas exports. Don't let yourself be caught out in the cold when the natural gas market catches fire.
Frank Curzio is the editor of Small Stock Specialist, an investment advisory that focuses on stocks with market caps of less than $3 billion. He is also the editor of Stansberry & Associates' exclusive Phase 1 Investor advisory. Before joining Stansberry, Frank wrote a stocks-under-$10 newsletter for TheStreet.com. He's been a guest on various media outlets including Fox Business News, CNBC's "The Kudlow Report," and CNBC's "The Call." He has also been mentioned numerous times on Jim Cramer's "Mad Money," is a featured guest on CNN Radio, and has been quoted in financial magazines and websites. Frank's "S&A Investor Radio" is one of the most widely followed financial broadcasts in the country. Over the past 15 years, Frank's investment strategies, including value, growth, top-down and technical analysis, have regularly produced 200%, 300% and 500% winners for his subscribers.
The Energy Report: Frank, will the ongoing crisis in Ukraine keep oil prices above $100/barrel ($100/bbl)?
Frank Curzio: Yes, I think so. Even without the short-term effects of geopolitical risk, the fundamentals should keep oil at an average price of $95/bbl over the next few years in the U.S. I don't see it trending too much higher, but I also don't see it dropping.
The reserve replacement ratio for some large U.S. producers remains over 100%, which is good. International oil companies, like Saudi Aramco, Gazprom (OGZD:LSE; GAZ:FSE; GAZP:MCX; GAZP:RTS; OGZPY:OTC), PetroChina Company Ltd. (PTR:NYSE) and Petróleos Mexicanos (PEMEX) have replaced less than 80% of their oil reserves annually over the past three years. That is troublesome.
Outside the U.S., it's very difficult to find oil that's economically priced. There's plenty of oil, but in a lot of places—Russia and several spots in the Middle East, in particular—explorers and producers are having trouble finding oil that can be developed for less than $90/bbl.
However, demand is still strong. Some reports show people are driving less, but according to a report by IHS Automotive, a record 82 million (82M) automobiles were sold last year around the world. Airbus set a sales record last year, as well, demonstrating strong aviation demand. The emerging markets have been down, but I expect to see more stimulus packages targeted at producing short-term growth over the next few years from the BRIC nations (Brazil, Russia, India, China), particularly China.
In the U.S., manufacturing is strong; gross domestic product is expected to hit 3%. Housing starts are solid in this low-interest rate environment, which will be around for years according to the Federal Reserve Bank. All of these are fundamental changes that will result in oil prices averaging $95/bbl over the long term.
TER: You'll be speaking at the Stansberry Society Conference with T. Boone Pickens. He takes the position that the U.S. should look to clean energy and capitalize on low domestic natural gas prices by converting heavy truck fleets from diesel to natural gas. Can that be accomplished?
FC: Yes, I'm siding with Boone Pickens; the process has already begun. Wal-Mart, UPS, Coca-Cola, Pepsi and Waste Management are all switching their engines from diesel to natural gas—compressed (CNG) or liquefied (LNG), so they're also building CNG and LNG fueling stations.
Fuel costs are the biggest expense for transportation companies. Using natural gas instead of diesel amounts to huge savings for companies with large fleets.