Some investors seem to imagine that by searching on the internet
They are wrong.
If you are not all that familiar with oil deals, perhaps you know something about lobsters. In any case, for the sake of the following discussion, we will assume so.
We're talking about lobsters like the one that crawled under the kitchen refrigerator in the movie Annie Hall, pictured below.
American lobster, Homarus americanus.
Look up "lobster" in Wikipedia, and the first words of the Gastronomy section are: "Lobster is best eaten fresh ..."
As a kid, I had no interest in lobster. None. Even though my family spent some time in New England - at places like Cape Cod, Bar Harbor, Nantucket, and Monhegan Island (all of which are places where they know what a lobster is supposed to be like), I only came to appreciate lobster much later in life.
And what I learned was this: Lobster should only be eaten fresh.
I really enjoy lobster. But because I live in Oklahoma City, I save my lobster-eating for when I am either in
To get a clear understanding of "fresh", go to Rockland, Maine
From Rockland Maine, drive about 27 hours south and west (approximately 1700 miles +/-) until you get to Lincoln, Nebraska. * [see note at bottom]
There in Lincoln, you may be able to find a restaurant (similar to the uncountable many across this country), where it says, right on the menu, "fresh Maine lobster". Over in a dark corner of the reception area, there may even be a dingy-looking tank, with something vaguely resembling a lobster, lying immobile in the bottom of it.
No matter how that lobster found its way to Lincoln - whether by mule train or by Boeing 747 - you know perfectly well (after your 27 hour drive!) that this here lobster ain't all that "fresh". Still alive, maybe (although just barely) but not "fresh". And you know, from Wikipedia that "Lobster is best eaten fresh ...".
For the low-down on 'fresh seafood' see the following:
So how DID that lobster finally arrive in Lincoln?
Lincoln may be about as far downstream as you can get in the "fresh" lobster distribution network. Somewhere like Bowlegs, Oklahoma would even be further downstream, but Bowlegs isn't the kind of place that probably has any restaurants that are likely to have "fresh Maine lobster" on the menu.
So, okay, then ... When you are ready to go out for lobster (which "is best eaten fresh ...") where are you going to be able to find good (fresh) lobster?
Not in Bowlegs.
Here, then is Rule 1:
To get fresh lobster you have to go to where there IS fresh lobster.
Picture the kitchen of a typical lobsterman's home. What do they eat?
In fact, when Mr. Lobsterman pulls into port, and starts off-loading his catch, what do you suppose happens when he spies among his catch, an exceptionally fine female specimen of Homarus americanus?
Well, think about it.
My guess is that you would pluck that exceptionally fine lobster out of the batch you are selling, and take it straight home and steam for your family to enjoy for dinner that very morning. (Yes, it's morning when the lobster boats get back into port.)
If you think about this a bit, YOU (the lobsterman) are exactly the reason why the really good lobsters are pulled out of the batch right there on the lobster boat or at the dock in port and never get into the "fresh" lobster distribution network. (And even if some do somehow make it past the dock, the wholesale buyer, who also knows his lobsters, would grab them for himself and take it home to HIS family .. and so on.)
So here is Rule 2:
Even if some exceptionally fine lobsters do somehow get into the "fresh" lobster distribution network, it is highly likely ("P-99" in probability parlance) that the best ones will get pulled out of the distribution steam, long before they get all the way downstream to some restaurant in Lincoln, Nebraska.
So whatever lobster does eventually make it to Lincoln is ... over-priced and not very fresh and not very good.
Now ... about oil deals.
If he can't sell the deal in Oklahoma City, he heads to Dallas.
(So, basically, it might be a fair observation to say that no one in Hong Kong has ever seen a real domestic U. S. oil deal. The only thing they HAVE seen is the kind of crappy over-promoted stuff that has been passed over by everyone else to whom it has already been marketed!)
As Lincoln Nebraska is to lobsters: Hong Kong may be about as far downstream as you can get in the distribution of U.S. oil deals. Or maybe we should say Singapore? See latest at the bottom of this page!
"But," you say, "I live in Florida [... or Silicon Valley ... or Boston ... or Newport Beach, California ... or Redmond, Washington...]. What does that have to do with me?"
Forget about maps. In the context of the distribution of oil deals you're a lot closer to Hong Kong than you are to Oklahoma City.
So yes, oil deals are like lobsters.
The good oil & gas deals never leave town.
Perhpas you are content to spend your evenings surfing around the internet for the mother of all oil deals. Of course, that is your choice.
But you know from the discussion above, the really good deals are not going to come looking for you ... in Hong Kong (or wherever).
If (as the saying goes) you want to "take it to the next level", and you are an accredited investor, serious about the long term investment, and disciplined enough to set a 3 year budget for participating in oil and gas deals, why not have an experienced oil and gas professional on your side of the table, to find the kinds of opportunities that are best for you.
This is what we do for our clients.
The first step:
(If you have not already done so, I urge you to get a copy of MONEY IN THE GROUND. Why? Not because I wrote it, but because it will provide a common-denominator of understanding from which we can move forward.)
Oklahoma City, OK
* In the interest of Full Disclosure, about Lincoln, Nebraska:
Actually, I have no idea whether or not there actually IS a restaurant in Lincoln, Nebraska that has 'fresh Maine lobster' on the menu with a dingy-looking tank in the reception area. (This specific part of the discussion stands as a proxy for all the many restaurants across this country that are not in Maine, but DO have 'fresh Maine lobster' on the menu. You've probably been in one.)
And just to be clear.
Copying and distribution of this article is permitted in any medium,
Copyright © 2007 by J. Orban & Co. LLC.
Here is a an on-going real-life example case reported
See the full article here: