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Are we out of oil? Jim Letourneau talks about our hope in technology

on 3/31/2010

Jim Letourneau Big Picture Geoscience Inc.

In utopic science fiction movies, high tech robots make everything better: They keep humans happy, healthy, and safe. In dystopic science fictions movies, high tech robots make everything worse. So which will it be?


If you were to ask today's newscasters and mass media journalists, the future of oil looks dystopic: People are consuming oil faster than we can pull it out of the ground and process it and many people are worried that we aren't producing eco-friendlier electric-cars or hamster-powered cars fast enough.


But not Jim Letourneau. Mining industry contrarian Jim Letourneau is a Professional Geologist specializing in Petroleum Geology. He's based in Calgary Alberta and for the last six years he has written the Big Picture Speculator, a newsletter that covers energy, metals, and technology stocks. We spoke to him recently about the minerals and mining industry and quizzed him on some of the topics that were top of mind for him.


The first thing he talked about was whether or not we are running out of oil. In fact, that was a keynote speech of his at a conference in January where he listed all of the things that would keep the world from running out of oil. He said, "there are a lot of technological advancements that are going to keep our supply of oil stable – even at current prices – and they are really good investments."


It's well know that many wells still have oil in them – it's just that the industry believes (and popular media reports) that we can't get any more of the oil out of them. "There are still two-thirds of oil left in the ground. We know the oil is there, we've already found it, we just need better technology to get it out of the ground," said Mr. Letourneau. Fortunately, there are innovative technologies being developed to fix that problem. "It's really a technology play and not a geology play any more," he added.


Companies that "specialize in the niche will do really well as long as oil prices hold up." One company Mr. Letourneau highlighted is Wavefront Technology Solutions Inc. "It's a pretty technical story but the bottom line is they can get more oil out of the ground."


"Even in old fields, it's technology that allows companies to go in and ramp up production," said Mr. Letourneau.


Along with oil, Mr. Letourneau gives us some good insight on lithium and rare earth elements. "It's a pretty hot sector. A lot of people are calling it a bubble or even 'mania' but I don't think we're there yet. A bubble occurs when people have an irresistible urge to get involved in the sector and we just don't have that. There's still a lot of skepticism and people are still not sure that it's a good sector to be in."

Mr. Letourneau doesn't base this on feelings; he trusts what he sees: "If you look at the stock charts, most of the [rare earth metals companies] have run up and then consolidated and built a nice base to allow them to [advance]. That's what I'm expecting. From what I can see we haven't reached the mania phase."


We pressed him further to talk about a bubble and whether or not we were in one and, if so, where we were: "I would say that we're only in the third inning and heading into the fourth, for both rare earth stocks and lithium stocks."


There's lots of space in the industry and Jim Letourneau likes that: "There's some nice consolidation, stories are getting cleaner, and managements are getting their acts together to see what's going to work and what isn't. So I think there's more to come."


Even though he was careful to mention that he is not a licensed advisor, Mr. Letourneau made some very insightful comments about the market: "If it is a good sector to be in, it will eventually become overvalued."


And then, extending his insight (and perhaps even his contrarian point of view), Mr. Letourneau responded to a question about when investors should think about getting out of a particular investment: "When you wake up and look at a stock price and think 'wow, that's awesome', that's usually a good time to sell. And you don't have to sell all of your stock at once. Sell it in thirds or sell in 20% increments."


"I'm horrible when it comes to prices," he admitted. He watches the technical analysis like candlestick charts. "You don't want to sell a big winner too soon. Usually the market will tell you when good things are happening.


Technology companies are of interest to Mr. Letourneau right now and they might be of interest to investors, too. "There are some similarities between bio tech companies and mining companies. Biotech companies were really crushed [in the recent recession] and a lot of companies were trading at all time lows but they were still making advancements. It's a very risky sector and very few companies are successful but a lot of them are really cheap. I think it will start to come back soon."



Mailing address:

Jim Letourneau

Big Picture Geoscience Inc.

Mission RPO 23111

1706-4ST SW

Calgary, AB T2S 3A8



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