Matt Simmons Interview - Empty Holes & Black Swans

[hatrack]

EDIT

MS: I thought "Good lord, if they're that secretive within Saudi Aramco that this guy who is senior enough to be going to Houston for the coil tubing conference, and has been there 18 years, doesn't dare tell me. It took about three months after the book came out before I started getting feedback from within the system, and then there were these Saudi Aramco guys saying "God, what a fabulous book. We had all told ourselves that this stupid guy in Houston was writing this stupid book that Saudi Arabia no longer has any oil through total incompetence and how these camel jockeys screwed up the world's biggest oil fields, and it made us madder than hell." And, of course, the book didn't say anything like that.

BC: You're saying we don't know what the reserve numbers are, and that we need more people to honestly tell us. This is a world resource and we shouldn't be risking humanity's future without knowing what's going on.

MS: Absolutely.

BC: If you're looking at investments, what draws your interest?

MS: Our firm has daily recommendations, and I basically stay totally out of that. I tend to buy a stock and then hold it for five or ten years, unless I think that I've made a mistake. And I tend to think more about which sectors to avoid or be interested in to look at. One of the things that really amazes me about the stock market and their love/hate relationship with energy is that of the current weighting of institutional investors in the market, the S&P weighting of energy is about 9%. Institutional ownership comprises about half of that. What's interesting is that about two-thirds of the ownership is in the major oil companies, which is the one group that I would avoid like the plague. So the market is invested in the wrong area – the major oil companies.

BC: They haven't been able to keep up their reserves.

MS: Yeah, and they can't. Their decline rates are so high and they operate such old, mature basins that they can't drill enough wells, and they don't have places to drill wells, and they don't have a sustainable strategy. So, in that respect, the oil service companies are the savior of all the problems.

EDIT

http://www.howestreet.com/articles/index.php?article_id=5720