Drill Baby Drill???

Here is a post I made to an ENERGY discussion group of which I am a member--

I have been wondering about the sale of mineral assets to foreign sovereign companies.  Here is the story I have made up--

                Step 1--large foreign companies are willing to pay "too much" for assets in the ground because their currency is stronger and they have a much longer time horizon.  Ultimately

they can also direct where those assets will be deployed.  Sellers are desperate for cash due to current low nat gas prices and love the BIG dollars that are saving their bacon now. 

The best assets these companies are willing to let go of go here or to other large "informed"  investors.

                Step 2--the other assets of lower quality, smaller size, are rolled up into MLP's and sold off with high "dividends" to uninformed investors based upon optimistic valuations.

                Step 3--The companies selling assets attempt to keep the best properties for themselves think UTICA for Chesapeake for example. 

 

                Overall--the selling companies retain the right to drill and produce the wells being sold for a fee of course.  The valuation is based upon historical depletion rates and the selling

companies make a profit and have all their money out of the properties sold in Steps 1 and 2.  Hence the selling companies are motivated to produce wells even at a loss since the loss is to the investors NOT the producers.  Other lease requirements might also cause drilling and production during depressed pricing periods.   

My Questions--

                1)  Does it seem inconsistent for conservatives to scream "DRILL BABY DRILL" while foreign companies are snatching up resources in the heartland?

                2)  Is there some trigger we could see that would indicate that NAT GAS for example is getting priced on the world market and shipped out to the owners home countries?

                3)  The $6 price for NAT GAS is what CHK indicates is their breakeven but isn't it believable that there are many operators who can get it done for much less?  Also CHK might be saying that, but at the end of the day if they are able to, like other companies, take their money off the table by selling the assets at a profit, do they really care?

                4)  Is there really a way to invest in Oil and Gas that is NOT subject to whipsaw by the effects of Other Peoples Money and popularity contests?  The Spiral Dynamics Integral  discussion group is suggesting that the "money" experiment may take 10 painful years to reprice assets based upon real values.  IF that is the case then how does one really buy milk closer to the cow when talking about investments for clients and self?  It seems to me that most investment products including stocks are subject to this effect.