Holmes expects the next hot trends in the commodities sector to be lithium, uranium and natural gas.
There’s a lot of interest for lithium batteries and I think there’s major car companies and battery companies that are looking for deposits,” he said.
“This time last year the worst performing was lead, and this year lead was one of the best performing commodities—so it’s important to take a look at the bottom and scraping along the bottom, uranium looks attractive."
"And [natural] gas," Holmes added.
In the meantime, Hansen said although there is no reason for investment demand for gold to change, he is in favor of the agricultural commodities.
“I see opportunity in corn, wheat and soybeans because the agricultural commodities have been overlooked this year,” he said.
“So investors have focused on precious metals and energy, but the major agricultural markets which are very important for day to day use have not participated because investors overlooked them. So we may see some improvement in the ag markets which have been overlooked.”
McMoRan Exploration announced success at its Blueberry Hill deep gas exploratory sidetrack offshore Louisiana, which has been suggested in the past as having 500 billion cubic feet (bcf) of gas reserves potential.
Unlike the well known "Blackbeard" prospect being assessed by McMoRan, Plains Exploration, and Energy XXI, Blueberry Hill is shallower, and there shouldn't be any delays to acquire exotic production or testing equipment. We imagine Blueberry Hill may be put on production by the end of the year, and based on the comments in McMoRan's press release, would not be surprised by a 30 million to 50 million cubic-feet-per-day (mmcfd) production rate from the initial well.
The well was a deeper offset to the Mound Point field, drilled in shallow water to target deeper zones that have been found productive at McMoRan's Flatrock discovery about 11 miles away. At Flatrock, six wells have the ability to produce at a rate of around 300 mmcfd, world class rates that are the target of McMoRan's shallow-water gas program in the Gulf.
The news is tempered in the near term by mechanical issues with the well, which has not yet been logged due to equipment stuck downhole. This type of problem is typically resolved in a short timeframe.
This positive news should have an impact on Plains and especially McMoRan shares, as well as Energy XXI. While Energy XXI is not involved in the well, the concept behind the discovery is similar to what is being pursued in the area of mutual interest shared by McMoRan, Plains, and Energy XXI.
While unlikely to have immediate impact on share prices at this scale, using $15 per barrel of oil equivalent as a scoping value of potential reserves, the discovery could support around $3 per share of Plains' share price, and $4 per share of McMoRan's share price if the reserves are booked and developed at the suggested volume. Further well logging and development plans are likely to be announced over coming weeks, which could be material catalysts
The concept behind McMoRan's shallow-water gas-drilling program is that at great depth, specific sands still have excellent productivity, retaining good porosity and permeability, and benefitting from the extra pressure created at depth. McMoRan's most successful discovery of this play type is the Flatrock Field, where individual well tests have measured rates at over 100 mmcfd per well, world class, and encouraging McMoRan to look for more Flatrock-type fields.
It is premature for McMoRan to cite a discovery volume for the Blueberry Hill effort. However, in prior presentations, McMoRan scoped out the prospect as having the potential to be a 500 bcf type of discovery.
Plains is partnered in the Blueberry Hill project. Our $43 target for Plains is supported by reserve adds from its portfolio of exploration projects, and the Blueberry Hill project on its own might add 10% to Plains' current reserves base.
We expect the discovery to have a positive impact on both McMoRan and Plains securities, but also to be positive for Energy XXI, which is partnered with McMoRan and Plains in an area of mutual interest targeting large gas accumulations in shallow water.
