Macro Tsimmis

intelligently hedged investment

SELL Oilsands Quest (BQI)

Posted by intelledgement on Wed, 10 Sep 08

Well…sorry to see this one go. Those of you who have been following BQI along with us here know that we really like this company. What they are doing is good work: work that will help

  • People on the planet in general, by significantly extending our supply of hydrocarbon-based energy
  • North Americans, in making us less dependent on overseas energy
  • Saskatchewans in particular, by boosting their economy (and the company has excellent relations with the local natives)
  • Management and shareholders, who stand to get rich (or, at least, richer)…in the long run

Plus, of course, the story of how this gets accomplished is intrinsically an interesting one. And it’s always a pleasure to be able to observe competent managers at work.

However…“timing is everything” goes the cliché, and today we are following the lead of the Intelledgement Macro Strategy Investment Portfolio (IMSIP) and dumping everything associated with energy in light of the developing financial crisis. 

As we write. oil is still selling for over $100/BBLS. BQI is a potential goldmine with oil at $60/BBLS…but the problem is that the demand for energy is highly likely to decline here. In fact, it already has: the price of oil has declined nearly 30% in just the last two months. Admittedly from all-time highs that most likely overshot the “true value” of crude (whatever the heck that might be LOL), but we foresee additional demand destruction ahead, and if the market behaves as it usually does, an excellent chance of an overshoot to the down side in the value of oil…and, by extension, BQI. 

For many reasons, we hope to be back here soon. That would mean that the developing crisis is resolved quickly and the world’s economy gets back on a healthy growth path. But be it sooner or later, given the way the wind is blowing, we expect to be back here (or with some successor company who picks up the thread of developing the Saskatchewan oil sands) at a lower price.

We actually hope it is not too much lower, as that would likely only result from a bigtime general downturn. But that risk is large enough to militate selling here.

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