Guest article: (A) used the Play in energy

Crude market started on a bull run to $ 67 in May 2010. The price of crude oil over the next year is estimated at over $ 114. Prices have fallen since May of this year, and they are now trading in the range of $ 95. It's just a correction of the price or the beginning of something much bigger? We believe that this setback is temporary and that prices will recover to over $ 140 in the next 12 months. There are many reasons for this belief.

We are in the midst of a major bull commodity market that began in late 2001. Since then, the CRB index more than doubled, up to the 2008 financial crisis. This crisis was, in fact, prices are back to where they were in 2001 in about 6 months! This was a crash in the commodity markets caused by the financial meltdown, but how was this crash will play it will end with a bearish 1929-results or a 1987 bullish results? 1987 Outcome seems far more likely because just as it was in the late 1980s financial market background for raw materials, in particular energy, is very bullish.

It is well publicized that China, India and others that comes out of the dark ages, is growing fast and consumes raw materials with a tremendous speed. This is likely to continue for years to come.

The Federal Reserve led by Ben Bernanke is determined to keep rates low as possible for as long as possible. Bernanke is one of the world's experts on depression and deflation, and he will do everything in its power to ensure that this does not happen on his watch.

From the technical perspective painting energy markets is also a very bullish picture. One of the reports we analyse carefully is a commitment of traders report. This report, in fact, you can see which positions are held by the class of traders. From looking at this for many years certain movements of various categories of operators can be very enlightening.

When crude prices were collected until the summer of this year the small trader and money manager has the majority of purchases that swap dealers and commercial sale. This is one of the reasons that we were very cautious, calls for a correction. That the patch has been developed commercially and swap space traders bought aggressively while the guys who bought near the tops had to sale. This type of movement in the commitment profile is typical of a bull market correction.

But knowing the threats in the long term, do not trade or invest in the energy arena (a) sure thing ...2008 is a perfect example of this. If energy prices will continue higher what is the best way to participate with most loan with a limited risk. In our opinion it either trading futures energy market or holds a position in an emerging and extraction companies. At this time, we believe that there are better leveraged play with a defined risk in an emerging market exploration and production companies than in the future because of the available Outlook for economic growth in an otherwise cyclical sector.

Invest in small growth companies, with a solid management team in a sector that is beneficial is a theme in level III Trading Partners L.P. which has proven to be a steadfast investment thesis. After analyzing many businesses that fit our criteria, we would like to highlight one of these companies.

Treaty Energy Corporation (symbol TECO) are involved in the acquisition, development and production of oil and natural gas. Treaty acquires and develops oil and gas leases that has "proven but undeveloped reserves" at the time of acquisition. These properties are not strategic to the large exploration oriented oil and gas companies. This strategy can the Treaty to develop and produce oil and natural gas with extremely reduces risk, cost and time involved in traditional exploration. For more information, go to: www.treatyenergy.com.

The Treaty is a 22 million dollar market cap companies in the bud that holds a favorable risk reward opportunity and growth profile that cannot be ignored. The Treaty sold his first 550 barrels of oil last month on $ 3 contribution to WTI. They planned to sell another 850 BARRELS in July and 1,250 BARRELS in August. This growth equal to 32%, which has endorsed the Treaty, we believe that the Treaty may have to 1 000 barrels per day within 12 months. The Treaty is the operator in all its sites to keep their (f) and (d) the costs to an absolute minimum and respect their own wells. They own all their own equipment and loans of around 3,800 net acres in Louisiana, Kansas and Texas.

Current gross revenues estimated at $ 9.25 million to 22 million dollars next year and estimated 33.6 million dollars the following year. This means that an estimated net income of $2,356,932 in the current year, next year and $8,742,479 $15,751,024 out in 2013.

Earnings per share during the year is estimated at $; 00393 will $. 01475, will be $. 46 31 2013. With 600 million shares outstanding and a 25 multiple on earnings, we believe true value for this company is currently $. 09 will be $. 36 next year and $. 65 in 2013. All figures are estimated at $ 80 per barrel of oil, and laid down in this article, we believe that prices will nearly double over the next 12 months.

Treaty energy parts currently trading in the $ 5 range. We believe that the risk reward at current levels is very attractive with a 10-20 times the current share price with a limited handicap. Cash flow from continuing operations should also be sufficient to finance their sea applications.

Treaty energy currently has approximately $ 750,000 in net debt down from $ 1.8 million in the first quarter of this year. This reduction of debt is a trend that the Treaty has undertaken to continue. All these factors together make us believe that the Treaty is a major energy investment opportunity.

In addition to their North American sea program owns the Treaty power also a lease in partnership with Princess Petroleum which contains 1.8 million acres offshore and 200,000 acres on the beach in the country of Belize. This corresponds to one of the largest concessions in the country. Treaty energy has revenue from Belize built into one of their models.

Treaty energy has identified eight sea sites by geosensing, geochemistry and radio measurements. There is a private energy companies have drilled 14 sites in Belize, average total production of approximately 7,500 barrels per day. Treaty energy has 200,000 acres, with a similar geological formation located in the same area found commercial pay.

Through different techniques, proximity to a commercial producing area and two years of extensive work by the sea team at Treaty of energy, we believe that there can be a "game changer" for this emerging and production companies.

Level III trading L.P. have a status of the Treaty, the Energy Corporation.

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Bruce Gwyn
Managing Partner
Level III trade

Web: http://www.level3trading.com
e-mail: bgwyn@level3trading.com

Bruce Gwyn is founder and Executive Member of level III Trading, a commodity Trading Advisor. His 25 years of experience in the futures market, the starting point is working on the floor of the CBOT to run his own hedge fund, has enabled him to gain great insight into work in many markets. His commercial decisions are entirely optional, based on technical and fundamental analysis, together with the inter-market and trade-market relationships.

The views expressed in the article guest do not necessarily reflect the views of HedgeFund.net.