VersaillesinNY Posted January 30, 2014 Share Posted January 30, 2014 These are Bruce Berkowitz's former partners and analysts: http://www.goodhavenfunds.com/media/pdfs/2013_AR.pdf "In the aggregate, we now have a reasonably sized holding in the energy business, particularly focused on natural gas. Huge discoveries of “shale gas” in the United States led to a drilling boom and then a sharp decline in gas prices. We made our initial investments over a year ago as panicked investors drove gas prices to $2 per thousand cubic feet (“MCF”), well below the level that most need to generate profits. Current natural gas pricing is closer to $4 per MCF. Our current holdings consist of Devon Energy, Exco Resources,WPX Energy, and Birchcliff Energy. Of these, Exco and WPX recently experienced leadership changes, which we believe may act as a catalyst to improve operations. Although natural gas prices are heavily influenced by weather, there are some good reasons to think that another huge price bust may not occur for a while. Crude oil contains about 6 times more energy than natural gas while the price of crude oil hasrecently ranged between 20 and 25 times the price of natural gas. We expect that gap to narrow as industrial users attempt to make substitutions. More importantly, severe regulatory restrictions on the burning of coal and the building of new coal-fired plants continue to increase the market share of natural gas in electrical generation. Furthermore, a small but growing part of the commercial transportation business is converting from diesel to natural gas. Lastly, there are a number of permitsin progressto create modest but meaningful export capacity for natural gasto take advantage of large price differentials, such as in Japan where landed prices per MCF are more than four times U.S. wellhead prices. Given relatively soft valuations and a bright longer-term outlook, we continue to look for additional opportunities in this area."GoodHaven_Fund_2013_Annual_Report.pdf Link to comment Share on other sites More sharing options...
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