Simplified, No Jargon Investment Thesis: Asymmetric Offshore Oil Exploration, With Oil-Major Partners
A heavily discounted portfolio of small stakes in offshore oil projects run by major oil companies, with little capital required and significant upside if any one of the projects succeeds.
When I was planning to launch Bison Insights, the original concept was to focus on ideas with the potential to return 10x or more while incurring meaningful downside risk. But I could see natural gas prices starting to improve and related stocks lagging that improvement, so I shifted the initial focus of Bison Insights toward companies benefitting from that trend, especially natural gas producers and services businesses. As I have broadened my focus to my favorite stocks across the oil and gas sector, the ideas have performed well vs. the broader energy market as measured by the Oil & Gas Exploration & Production ETF (XOP) since publication (and versus the broader market):
Below, I’m revisiting the original Bison Insights theme: a “big upside” opportunity, with big risks.
The company is a small offshore oil explorer that owns small stakes in several large oil projects being developed by some of the biggest and most capable operators in the industry. In its most promising projects, these larger partners are paying some or all of the early costs to drill wells and advance development, which allows the subject of this article to benefit from potential success without spending much money upfront. If any one of these projects works, the value created could be several times greater than the company’s current market value, presenting a highly asymmetric risk-reward setup.
The stock price of this company has been on a roller coaster for the last several years, moving from small and speculative, to overvalued and overhyped, and now back to what I believe is a very attractive level:
In this article, I provide a high-level overview of the company’s assets and explain why I am finding this stock to be especially compelling at today’s price.
