Today being All Fools Day, lest people get the wrong idea, one needs to stress that one is deadly earnest in this - and posting this with a straight face. Hand on heart. This blog is sharing part of a newsletter about the incredible potential of East Africa's oil find, by Crisis and Opportunity's Christian DeHaemer.
It gives the background to the revenue-sharing deal between Tullow Oil and the Canadian company, Africa Oil - which owns about 32,000 square miles of East African oilfields.
I hope that it will be taken note of by the leadership of all Ghana's political parties - as well as the board members and management of the Ghana National Petroleum Corporation (GNPC) and the Ghana National Gas Company (GNGC).
The time has now come for the GNPC and the GNGC to be more aggressive in securing the best possible value, for what remains uncommitted, of the remainder of our nation's oil and natural gas deposits.
The main reason I am sharing part of Christian DeHaemer's investment newsletter, is to make the point, dear reader, that sadly, if the deal had occurred in Ghana, between the GNPC and Tullow Oil, it would be Tullow, instead, not the GNPC, which would have ended up with royalties of 67 percent of the production revenues.
Surely, as a people, we must end that negative "Uncle Tom" mentality, which results in our leaders ending up always giving away our birthright, so to speak, to foreigners for peanuts? Please read on:
"Exclusive: The story oil industry insiders spent millions keeping this secret from you
I Bought this Stock Based on a Single Word
This little-known management group's last 7 projects averaged 10,600% gains...
and they've just pulled off their latest — and biggest — deal yet.
Sometimes, a single word is worth more than a thousand pages of financial reports and analyst opinions.
Let me illustrate for you...
In 2002, a little-heard-of management firm took over three tiny oil and mineral exploration companies located in points around the globe where you wouldn't send your mother-in-law:
One was an oil explorer with properties in the Middle East – market cap in 2002: $4 million – shares trading at 45 cents.
Another was a petroleum company operating in Russia – market cap in 2002: $13.5 million – shares trading at 55 cents.
The third was a gold mining company operating in Western Africa – market cap in 2002: $45 million – trading at $1.35 per share.
Four years later, they sold the first company for $16 per share – market cap: $750 million – gains: 18,750%.
Two years after that, they unloaded the second one at $31.50/share – market cap: $1.9 billion – gains: 14,074%.
Two years after that, they sold the third for $30.50/share – market cap: $8.98 billion – gains: 19,955%.
In total, this management firm took on 7 of these development projects in the last 9 years – average returns on those 7 projects: 10,600%.
That's not a typo or a misplaced decimal point.
These 7 companies grew, on average, by a factor of over 100 from their initial 2002 market cap. And that's just an average.
One of these 7 lucky companies started off as a $2.1 million microcap; another was at just $4.6 million when this management group took the reins...
Today they're worth $2.4 billion and $5.4 billion respectively.
That means that every dollar you invested in 2002 would have yielded you a return of $1,142 and $1,173.
Of course, not all 7 stocks did quite as well...
The worst performer of the group rose a mere 1,608%.
Overall, this legendary management company turned $204.4 million dollars into a staggering $21.67 billion.
So when I heard that this management company had made another acquisition earlier this year — by far their biggest project yet — I knew we were in for something unprecedented.
I literally needed to know nothing else about this investment other than the fact that this legendary management firm had taken over operations.
You see, this time we weren't dealing with a microcap mineral or oil explorer...
What we're looking at what could easily become the world's next Chevron, BP — even Exxon.
The plan was massive any way you looked at it:
Over 124,000 square miles of never-before-developed property were on the table...
A piece of oil-rich land about the size of New Mexico was going to be split up among just a couple oil companies — and with it, an estimated 71.1 billion barrels of crude whose raw resource value today stands at $69 trillion.
Here's where it gets really interesting, though: Billion-dollar names like Apache and Tullow and Anadarko have also signed contracts for blocks of land within this 124,000 territory.
The oil company this management group took over, however — with a market cap of just $330 million — was the smallest of the bunch.
And here's the kicker...
Despite this company's small size, their chunk of this 124,000-square-mile development zone is anything but.
In fact, when all is said and done, this growing oil company will hold one of the biggest shares of what is probably the very last major land-based crude deposit left untapped... anywhere on the planet.
You're about to learn everything you need to know about this incredible management group which has made a name starting some of the fastest growing and most successful oil exploration firms in history.
More importantly, I'll tell you about their latest project — and the details of a move they're about to make to leverage their huge position into profits of up to 2,040% annually for the next thirty years...
A profit flow which will start as early as November of this year.
But before I get to all that, I want to give you an inside look into the secret plot this quarter-trillion-dollar cartel cooked up to divide what is almost certainly the last great land-based oil deposit on earth.
Geology Has No Borders
"East Africa is experiencing one of the highest levels of investment in the world right now — but we're only seeing the beginning."
— New York Times
Earlier this year, I bought my way into a covert meeting of some of the most powerful oil execs in the world.
It cost me about $10,000 out of pocket to get there and to make it past security, but I flew commercial.
God only knows how many millions the rest of the attendees, many of whom arrived on their private Gulf Streams and Learjets, spent on this week-long meeting.
It happened at the only four-star hotel in Nairobi, Kenya... behind closed doors and away from the prying eyes of the press.
And for good reason: This meeting was never supposed to be public information.
However, unbeknownst to the CEOs, COOs, and big-dollar corporate geological consultants who were in attendance, there was one financial journalist present when the doors of the conference room were shut and latched...
They had intended for that number to be zero, because in the next couple years, the land development deal they were there to finalize will shift the balance of power of the global energy market.
But they didn't want anyone to know that just yet.
You see, Africa's got a reputation for being a backward, unindustrialized backwater — on a continental scale.
What many don't know, however, is that Western Africa supplies 12% of the world's global annual crude oil demand.
With four OPEC nations inside its borders (Algeria, Angola, Nigeria and Libya), Africa is second only to the Middle East in terms of membership in this nearly omnipotent cartel.
But while North and West Africa crank out almost 6 million barrels of crude per day, East Africa is hardly on the map at all.
All this is about to change forever...
Because not only have major production operations sprung up in the Sudan and the Democratic Republic of Congo in the last five years, effectively moving the oil frontier east...
But major natural gas deposits were confirmed off the coasts of Ethiopia, Kenya, and Tanzania just last year.
And as anybody who's studied fossil fuel geology knows, where there is natural gas, there are also crude oil deposits close by.
The most compelling evidence that East Africa is holding some of the world's richest fossil fuel resources goes back loooong before the natural gas strike and the recent expansions in West African production.
You see, scientists have known for years that much of East Africa shares the same basic geology as the region on the opposite side of the Gulf of Aden...
Land which is today occupied by Yemen, the United Arab Emirates, Qatar, and the biggest oil empire of them all, Saudi Arabia.
If you look at the diagram below, paying special attention to the fossil fuel deposits highlighted in red, you'll see the basic concept behind what happened here millions of years ago:
Up until 18 million years ago, East Africa and the Arab Middle East were joined.
When the rift formed, the continents drifted apart, taking the oil with them...
Discoveries in North and Western Africa began to confirm these suspicions 30 years ago, but it wasn't until last year that Tullow Oil's natural gas strike off the coast of Tanzania finally made it clear to the execs what geologists had known for decades...
East African geology isn't just similar to the geology which gave the Saudi Royal families the legendary Marib-Shabwa and Sayun-Masila Basins.
It's the same geology.
Now, to the bigwigs at this Nairobi conference, all this news was a mixed blessing.
Representing companies that have made some of the biggest discoveries the industry's ever seen over the last thirty years, it's their job to find new oil...
And with East Africa, they're about to chalk up another victory — a major one.
However, it will also most likely be the last cheap oil any of them ever find. Because as the world's mainstay oil deposits gradually dry up, the industry has no choice but to start seeking out harder-to-reach pockets of crude.
Evidence of this comes from the vast number of off-shore oil drilling platforms that have popped up in recent years...
In fact, while the rest of U.S. production has fallen by 50% since the 1980s, offshore oil production has risen to account for 1/3 of the total national output — double what it was relative to 20 years ago.
This is especially alarming when you consider the cost of operating these offshore platforms has gone up 530% since 2001.
On top of that, at an average cost of $100 million, each of these rigs is about 1,000 times the cost of a typical conventional well... and that's before you even factor in the $1 million/day operating overhead.
But progress cannot be stopped.
And each year, more and more of these platforms are built and positioned.
Leading the charge is the United States, whose own conventional land-based deposits peaked in the 70s. The rest of the oil-producing world isn't far behind.
As the easy-to-reach resources are used up, there is simply no alternative but to go farther out to sea, drill deeper, and take more risks.
The results of this you and I know personally: rising prices at the pump... rising prices of any goods requiring transportation... rising prices to heat and cool your house.
So a massive, shallow-lying, land-based crude deposit couldn't have come soon enough.
And not just for the oil exploration firms — but for all of us who rely on cheap oil.
There is, however, another reason we should consider ourselves all lucky. And it's got nothing to do with geology — and everything to do with the nation hosting our secretive little meeting...
Investors Are Already Here
Just to give you an idea of how serious the men at the conference are about setting up shop in Kenya, here's a fact for you:
Kenya is a nation of about 225,000 square miles. Of that, the cartel which took over the Hilton Nairobi will own close to 124,000 square miles. That's more than 55% of the country's total landmass.
Doing that in the United States would require the private leasing and development of all the land west of Omaha, Nebraska.
Now remember, this cartel consists of companies as large as 48-billion-dollar Apache...
Together, the members are worth well over $150 billion. So if anybody is up for the job, they are.
But here's the really intriguing part:
The Canadian-based oil explorer I've been hinting at this whole time — with a market cap less than 2% of Apache's — has singlehandedly secured over 32,600 square miles of this territory, a full 26% of the total land acquisition — making them the single biggest shareholder in this 124,000 square mile development zone.
If you look at the highly confidential block map below, you'll actually see the parcels:
You'll also notice the figure next to the surface area, the percentage share.
Now, I know what you're going to say: So they really don't have exclusive reign over this potentially priceless real estate?
Well, here's where it gets even more interesting.
You see, with a market cap of only $330 million, this exploration company isn't big enough to thoroughly exploit a landmass the size of the state of Indiana.
So to maximize efficiency and profitability, they've partnered with another company that is big enough.
Those share values I mentioned don't represent the percentage of the parcel my new pick owns, but rather the royalties they'll be collecting from the production. And as you can see, that figure isn't small.
With rights to as much as 67% of the earnings that come out of this land, this small but brilliantly-run company will literally be sitting back and collecting checks while their partner does all the work.
So who is this mysterious big-name partner?
Well, that may actually be the best news of all...
Because the company that will developing and managing this massive property on behalf of my new recommendation is none other than $19 billion exploration giant Tullow Oil.
In the world of fossil fuel exploration, sweetheart deals like this come around maybe once in a career...
A giant, world-acclaimed outfit doing all the work so that their tiny partner can rake in unheard-of profits.
To figure out exactly what kinds of returns you can expect, the math is pretty simple:
If the USGS is anywhere near correct, and this region contains 71 billion barrels...
Then my company's holdings would contain in the neighborhood of 19 billion of those barrels.
At an average royalty rate of 50% on that resource, at today's prices, my company will stand to profit close to $923 billion of this project — almost 3,000 times their current market cap!
But let's do away with any optimism and see what kind of numbers we're dealing with if things don't turn out quite so well:
Let's say the USGS is way off on their figures based on preliminary drill test results. They overestimated the total deposit by a factor of five. Let's also assume that it will take 30 years for Tullow to produce and refine the resource...
Even with 50% royalties, those unrealistically low figures still translate into annual gains equivalent to 20.4 times my company's current total value — or profits of 2,040% each and every year for the next three decades.
Sounds incredible, right?
Well, it's not.
You see, at the heart of this deal isn't just the land or the incredible partnership with Tullow...
It's the management dream team that I've been talking about from the start.
As I already mentioned to you, they've pulled off record-breaking successes before.
Here's a list of those 7 projects, along with the returns the generated:
Out of seven companies, The Lundin Group is averaging returns in excess of 10,600% over a nine-year period!
That amounts to annual gains of 1,180% — and it doesn't even account for the shorter hold periods of the three massively-profitable buyouts that this team worked out between 2006 and 2010...
The absolute worst performer of the bunch brought a 1,600% return, while the best made investors $1,173 for every dollar invested!
Just imagine... a mere $852 investment in 2002 would be worth $1 million today!
Again, this is not a typo.
The management group behind my latest oil exploration pick has made a world-renown name out of turning small startups into multi-billion-dollar monsters. They were literally the only guys in the business who could have put a property package of this size and value under such a small and efficient corporate umbrella.
So now you know why the $10,000 investment to get into the meeting where I learned this all — before the start of production — was a bargain.
Once production begins — and this news hits the covers of the Wall Street Journal and this company's CEO starts getting interviewed by Forbes and Fortune Magazine — the information won't be worth a dime.
It's the definition of an explosive opportunity."
End of culled portion of newsletter by Crisis and Opportunity's Christian DeHaemer.
Why, dear reader, can't those who run our country and the GNPC and GNGC, pull off such revenue-sharing deals too, I ask? One hopes that going forward into the future, we will come to hear of such deals in Ghana's favour, when our leaders negotiate oil agreements with the likes of Tullow Oil. A word to the wise...
Tel (Powered by Tigo - the one mobile phone network in Ghana that actually works!): + 233 (0) 27 745 3109.