Not so long ago:

“It’s a battle of the politicians against the markets. But I’m determined to win the battle.”
– Angela Merkel, May 6, 2010

This represents what is wrong with the markets, which is the audacity of those who think they can change financial history. Often their ambition exceeds their skills and 100 years of intrusion has created a wild financial world.

Merkel would not challenge the financial markets without instruction from interventionist economists. This goes back to Ancient Greece when political leaders would not announce policy without the support of the Oracle of Delphi. If the present is any guide, no doubt some oracles sought to influence policy. It’s an ego thing.

The medieval church picked up on the concept as schoolmen discussed the concept of the divine right of kings. The priesthood grants extraordinary power to the monarchy, which would naturally ask for advice.

In England this reached its peak with the reign of James 1 in the early 1600s. This is important because the government was persuaded to make a huge investment in the clothing trade. In order to improve employment, much of the finishing processes that were available in the commercial capital (Netherlands) were duplicated. All was lost in the prototype of a post-bubble crash. This marked the end of a tyrannical century of experiments in authoritarian government funded by currency depreciation.

The divine right of kings was formally abandoned with the “Glorious Revolution” of 1688-89, which was an important step to the reduction of absolute power. Going the other way, this was also a time when politics began to favour regionalism and individuality.

Eventually the movement reached its height known as 19th-Century liberalism. Unfortunately, freedom and its prosperity became intolerable to ambitious intellectuals such as Lenin, Trotsky, Fabian Socialists and Keynes. Another tyrannical century ensued with massive experiments in brutal politics funded by currency depreciation. The divine right of bureaucracies has prevailed.

This is ending as more and more people are discovering that unlimited government requires unlimited funding. And even with the printing press such funding is not without serious limits. Credit markets continue to indicate ending action. On December 6th, fifteen EU nations were placed on negative credit watch.

“This [Federal Reserve Act] establishes the most gigantic trust on Earth. When the President signs this bill, the invisible government of the monetary power will be legalized…The worst legislative crime of the age is perpetrated by this banking bill.”
– Congressman Charles A. Lindbergh, 1913 (repeat 1913)

That was a time when “trust-busting” was a popular political activity, but it was OK for governments to set up trusts and monopolies.

“The average US household lost $21,261 of net worth this summer, the largest decline in family wealth in three years.”
– New York Post, December 9

This melancholy condition may not be limited to the U.S.

Last week, The New York Times headlined “Rousing Russia With a Phrase”.

A well-known political blogger described government as a “Party of Swindlers and Thieves”. What’s the Russian word for libertarian?

In America it’s Ron Paul and is his rising popularity due to his persona or to his principles?

The next couple of quotes suggest optimism as a Tea Party movement is becoming visible in Russia.

“Tens of thousands of people held the largest anti-government protests that post-Soviet Russia has ever seen.”
– The Washington Times, December 10

The reform that brought the Berlin Wall down in November-December 1989 is being revived, voluntarily.

“There are people standing here who were not recruited by anyone. No one drove us here in buses, no one paid us anything, but here we are anyway, and we have been here for more than a day.”
– Russian protestor, reported on December 9

Chancellor Merkel’s attempts to overwhelm market forces natural to a post-bubble contraction have not been successful. The contraction prevails as it did following the 1618 to 1623 credit crash. The consequent hardship prompted Edward Misselden’s vision that throwing credit at a credit contraction will make it go away. Today’s priesthoods of economists are no more skilled than the Oracle of Delphi.

The harvest of irony continues. President Obama’s legislative program to build the equivalent of the Berlin Wall continues as the Tea Party moves to take it apart. Both brick by brick and the advent of more credit problems next year will advance well-founded criticism of the increasingly dangerous interventions in the financial markets.

*   *   *   *   *

Perspective

Choppy, choppy, choppy and the possible favourable bias has run out of enthusiasm. However, the Dollar Index is becoming overbought and a correction into January could provide a positive tone to stock and corporate bond markets.

Actually these markets have done well in not failing in the midst of the breakdown of the European Community. It has been a bureaucratic artifice that deserved to fail. The best way to have opened European markets would have been each country declaring universal free trade. For budgetary discipline the best system has been a gold standard. But until the control freaks are run out of town commonsense won’t happen.

The reason recent European dislocations have not prompted terror in the markets is that panics in August and September created a significant oversold condition. This was followed by the usually positive season that can run from October to around February or March.

The word terror was deliberately used in the sense of crashing prices which financial historians should not be moved by. Nor should those who have personally been terrorized by Mr. Margin. Both, on good timing, should take advantage of plunging markets.

But, even without falling prices the establishment can’t help but be extremely concerned. They must know that the most massive attempt in history to reflate another post-bubble contraction has not been successful. It’s bad enough that central bankers may be doubting their theories and practices but, worse, the public is beginning to understand that policymaking is a scam.

Then there is the prospect of Euroland actually coming apart.

The downside terrors (DTs) could resume in the first half of next year.

Link to the December 16th ‘Bob and Phil Show’ on Howestreet.com:

http://talkdigitalnetwork.com/2011/12/giving-up-on-gold/

BOB HOYE,   INSTITUTIONAL ADVISORS

E-MAIL  bobhoye@institutionaladvisors.com
WEBSITE:   www.institutionaladvisors.com

David Morgan uses the word “extreme” when he talks about the significant selling pressure that drove gold down a quick hundred dollars to a closing low of $1,565 on December 15th. Where did all that selling come from? David points his finger at the derivatives world. He says most of the selling that drove gold & sliver down to the lows of last September was done in the two main exchange traded funds SLV and the GLD.

After checking with several of the largest wholesalers in the United States, David found that there was very little liquidation going on in the retail market of gold and silver, certainly not enough to drive the markets down as far as they fell. Instead, in the world of instability and unknowns caused by the the mess in Europe and the MF global debacle, he thinks large institutional players were liquidating their ETF’s  because the gold and silver behind these ETF’s is really is nothing more than a paper promise. David also points out that a lot of these sellers did the exact opposite of what a good investor would do. Specifically that they sold their best assets, paper derivative gold and silver, to get cash to make the balance sheets look better because “their Italian bond portfolio is losing more money than ever”.

Regardless, whether the selling came from the derivatives or not David thinks the damage is done. “You’re are probably going to see more pressure on gold and silver to the end of the year, and I think it’s going to be fairly weak through the first quarter of 2012. The normal  historical seasonality that usually occurs in the first quarter of every new year isn’t going to happen this year, instead we are going to see more more base building, more backing and filling for the first 3 months of 2012. It doesn’t mean it’s not a good investment. In fact I think it’s a good opportunity for people who are on the side lines to get in.”

On silver, David thinks that the September 26th 2011 spike low of $26 will probably hold, primarily because that was where the the last major physical purchase occurred. Specifically where Sprott Asset Management purchased 22 million ounces of silver to create the Sprott Physical Silver ETF PSLV.

On the stock side, he thinks that mining shares have underperformed is because money managers who are restricted to buying equities have have chosen to buy exchanged traded ETF’s instead of mining stocks. That said, David “strongly believes that there will be a time when shares will do better than bullion percentage wise.” His reasoning is that people late to the party will be “scared to death” when gold and silver moves back up to the recent highs of over $49 and $1,900 respectively, and that instead  of buying bullion they will move into the equity side.

In short, David Morgan of www.silver-investor.com thinks that investors should be buying the best of the best right now. While he doesn’t mean you can’t speculate in the juniors,  he does mean investors should “make sure what you are buying has value and that your overall portfolio has value.”  Do that and “you are going to do extremely well in my view.”

To visit David Morgan’s website go to www.silver-investor.com

With resource stocks extraordinarily cheap, 321energy.com Founder Bob Moriarty calls them “an opportunity of a lifetime,” in this exclusive interview with
 The Energy Report. However, investors need to steer clear of the dangers of derivatives. Moriarty explains how the hypothecation hobgoblins associated with these instruments can sneak up on investors and zero out accounts in a flash.

Bob Moriarty: It’s both. We’ve reached the peak of oil production, which doesn’t mean we’re going to run out of oil, but we’ve run out of cheap oil. When the Saudi oil fields opened in the 1940s and 1950s, their return on investment was $350 per barrel. When OPEC formed in 1959, they were profitable selling Saudi oil at $0.10 a barrel. The cheap, high-grade, high-quality oil is all gone now, and the days of finding giant oil fields with high-grade oil that was relatively inexpensive —such as Ghawar in Saudi Arabia and the Cantarell off Mexico—are gone. They’re history. 

With the resources in the tar sands of Canada, we’re going to have oil for another 100 years of production, but it’s very expensive. It’s very dirty, with a number of political issues in focus, such as the Keystone XL pipeline to the United States. Production will be problematic.

TER: Besides the tar sands, oil appears to be available offshore both in North and South America.

BM: Yes, but these projects carry ferociously expensive costs. Some of the wells BP was drilling a year and a half ago, going 25,000 feet (ft) deep, cost hundreds of millions of dollars each. 

TER: You mentioned that the Canadian tar sands probably hold enough oil—albeit expensive to extract and dirty—to last 100 years. Meanwhile, the U.S. sits atop some major natural gas fields, and natural gas is unbelievably cheap right now. Why aren’t oil-powered vehicles and other machines being converted to run on natural gas?

BM: Natural gas is handy for some things. It’s used in a lot of power generation. It’s very valuable to replace heat or coal or diesel. But you couldn’t power an aircraft with natural gas under any circumstances; it simply wouldn’t work.

Gasoline and oil are very portable and very cheap. You can go to the hardware store, buy an inexpensive container and carry around five gallons of oil or gasoline. To get the same amount of energy from natural gas probably would cost $1,000 for a container. All kinds of technical and temperature issues make natural gas ineffective as a portable energy source.

TER: So if natural gas is not the solution, we’re stuck with the more expensive alternatives. And if it’s dirty and expensive, what are the economic implications of getting oil from the Canadian tar sands to the U.S.?

BM: Dirty is expensive. And when you start talking about getting the oils from the tar sands to the United States, which is the major market, you run into all kinds of issues. Politicians and lobbyists will spend years delaying the pipeline until their personal agendas are satisfied.

TER: Senator Mitch McConnell called the Keystone XL Pipeline, which is proposed to carry tar sands oil from Canada down through the U.S. to Texas for processing, the single greatest “shovel-ready” project in America. He said it’s ready to go, but Obama doesn’t want to deal with it until after the 2012 elections. In an era when we need oil and people need jobs so badly, why the political slowdown?

BM: Every organization and every government official has an agenda, and not necessarily your agenda. You and I may want the tar sands oil as soon as possible and as cheap as possible. Obama has his own agenda—to get reelected.

TER: There also have been discussions about building a pipeline across Canada to bring it to Vancouver and potentially ship it to China. In terms of an investment opportunity, what does that mean for the tar sands oil producers?

BM: There will be a lot of investment opportunities. The question is when. The longer the transportation issue—a pipeline—is delayed, the more expensive it will be to operate and lower the return on the investment will be. Ultimately, though, I think there’s a good chance that Canada will decide that China and Japan and Asia are better, more dependable markets than the United States.

TER: Over what timeframe do you suppose that pipeline will be built?

BM: We are facing some pretty serious economic issues right now. Should we go into a depression soon, which is my belief, the decrease in energy demand could kill this project and others for years.

TER: But your writings suggest that you’re interested in some Canada-based energy companies based on what you consider their good potential for return. Don’t these companies face the same margin squeeze with the prospect of higher transportation costs?

BM: Not at all. The tar sands are in a pretty inaccessible part of Canada. The junior companies I deal with have access to pipelines, refineries and major markets, so it’ won’t affect them.

TER: Would demand come to them first as lower-cost producers, and help their profit pictures?

BM: Of course. It would be a very good thing for them. Everything that’s bad for one group is good for another.

TER: What are some other companies with good prospects?

BM: Two juniors I’d like to talk about are doing a really excellent job. A few months ago the stock ofAroway Energy Inc. (ARW:CVE) was $0.32 a share. It’s doubled since then, and it’s another easy double from here. It “should” probably be worth $1–$1.20 a share right now. These guys have done a bang-up job. They’re producing 669 barrels a day at Peace River in Alberta.

TER: Is your analysis of what the stock should be worth just based on Aroway’s current production times the barrel of oil equivalent (boe) price in the marketplace?

BM: Yes. Oil fields are actually relatively homogeneous, so people can know on a daily basis what a barrel in the ground or barrel of production is worth.

TER: What’s the other company you wanted to mention?

BM: Blackdog Resources Ltd. (DOG:TSX.V) just finished a well within the past couple of weeks. Its stock is at $0.40 a share and the company has about 26 million shares, so market cap of about $10 million (M). Based in Calgary, Blackdog could be $1 a share easily.

TER: Aroway has projections to increase production over the next 12-months. Is Blackdog producing yet or just drilling and exploring? 

BM: Blackdog is doing exactly the same thing as Aroway, producing and exploring. It’s just a little bit earlier stage. The company is producing something like 150 barrels a day now, but literally has wells coming into production as we speak.

Production is critical, because the world’s financial system is blowing up and counterparty risk is enormous. If you’re not invested in something real, you’re going to wake up and find yourself poor.

TER: Could you expand on that counterparty risk and the concept of investing in something real to minimize investors’ chances of waking up poor?

BM: With the collapse of the major global commodities broker MF Global at the end of October, up to $2.5 billion worth of its customers’ money evaporated. Investors as financially sophisticated as Trends Journal Publisher Gerald Celente went to bed rich and woke up to worthless accounts.

Some very important concepts, hypothecation and re-hypothecation, are involved when it comes to derivatives, which are financial instruments that gain their value from something else. Suppose that you open a commodities account because you expect the price of gold, silver or oil will go up. You deposit $100,000 margin and buy a contract for gold, silver or oil. Let’s say things go wrong because of hypothecation, re-hypothecation and counterparty risk.

Here’s what happens with hypothecation. The broker-dealer usually goes to a bank and borrows money to loan you. But in this scenario you put up twice as much as the margin required, so he doesn’t even loan money to you. Regardless, you are required to sign a statement saying you will allow the broker-dealer to hypothecate the account. This pledges everything in your account to the bank. Broker-dealers borrow money from the bank at, say, 3% and loan it to customers at maybe 6%. That’s how they make money. In this scenario, the problem is that the broker-dealer created a risk for you that never occurred to you. If the broker dealer reneges on the loan, the bank can demand all the assets you have deposited even if they are in your account and you don’t owe anyone anything.

With re-hypothecation, the broker-dealer can take money from a number of customers—let’s say $1B from 10,000 customers—and buy something like Greek one-year bonds that are paying 352% today. The broker-dealer pledges your assets against that bet. That gets really slick, because if the Greek bonds actually pay 352%, he or she pockets that money. But if the bonds blow up—which some people have been predicting for years—you lose all your money.

TER: Is this true on any bank account?

BM: It’s true of any margin account. If you open a margin account with Schwab, put up $1M and buy $500,000 worth of securities, you’re not using margin but you’ve still signed that agreement. You can wake up one morning and find all your money gone.

For years and years I’ve been saying that derivatives of this magnitude are not sustainable in a rational economic system. We have a $64 trillion (T) world economy, and we’re basically up to $708T in derivatives. You cannot have $708T in derivatives unless most of it is fraud.

MF Global was defrauding its customers and its customers didn’t even know it. There could be another 100 MF Globals out there. At the end of the day, a lot of brokerage accounts will blow up and people are going to go to bed rich and wake up poor. The danger today is not buying Aroway or Blackdog and seeing the value of your stock cut in half. The danger is that your broker will blow up.

TER: Is it fraud because investors don’t know about the hypothecation and re-hypothecation? That they don’t know what’s being done with their money?

BM: That’s correct. Literally until weeks before MF Global’s collapse, I think on the books they were showing $70M being used for re-hypothecation when in fact it was $6.5B.

TER: Why such a big gap?

BM: The way they do the books creates that gap. Greece and Italy and Spain got into the EU because JP Morgan and Sachs cooked the books by leaving their assets on the books and moving their liabilities off the books. Jon Corzine moved $6.5B in liabilities off the books and nobody realized they had enormous exposure, and when the financial system in the EU blew up it took $6.5B of MF Globals’ money with it. What’s really scary is that nobody’s in jail is because all of this is perfectly legal—a scam, but a legal scam. If they make money, they keep it; if they lose money, you pay.

TER: This is easy money with no risk for brokers.

BM: Exactly. And the danger is somebody at Schwab or E-Trade or Merrill Lynch or 100 other institutions can go out and do the same thing tomorrow. It’s just as legal. They can speculate on something like Greek bonds paying 352% and some fool will think that’s a good deal.

TER: Wow. That’s a very compelling argument and it certainly underscores your point of buying real assets.

BM: But if you go out and buy shares of Aroway or Blackdog, you may want to get a share certificate in your name in your hands because you can count on some stock brokerage accounts to disappear in the same way the Gerald Celente’s hundreds of thousands of dollars disappeared. You’re at enormous risk if you have a margin account with any kind of a broker.

TER: Do you run the same risk in a non-margined account?

BM: In theory, no; in practice, yes.

TER: And what’s the practice?

BM: The practice is that $708T in derivatives, probably 80% of which is fraud, and nobody but me, Jim Sinclair and maybe Jim Rogers understands the potential risk. In theory, there’s $210T in debt in the world and $150T in assets. I think in practice there’s up to $400T worth of debt and the system is going to blow sky-high. Our financial system is on the precipice of an absolute, total collapse. And it’s going to be catastrophic to the wealth of most people. This is the most serious I have ever been about anything. Derivatives are a giant casino. It’s a crap game. It’s all fraud.

Back in 1997 the head of the U.S. Commodity Futures Trading Commission (CFTC) was extremely concerned at the size of the derivatives market and battled to get regulations in place to control it. The head of JP Morgan, as well as Robert Rubin, who was Treasury Secretary and the head of Goldman Sachs, and Alan Greenspan, chairman of the Federal Reserve, all fought her. She lost. By 2002 derivatives had grown to $100T, and clearly were going to blow the system sky-high. Now—and these numbers are really staggering—the Bank for International Settlements reports that derivatives grew $107T between January and July of this year. That’s 18% in a six-month period, which means derivatives are growing about 40% a year.

TER: Now that you have everybody shaking in their boots, let’s shift gears a bit. One of your articles equated peak energy to peak food. Earlier you reminded us that we’re not about to run out of oil, but cheap oil is a different story. Is it the same with food? That we aren’t going to run out of food, but the days of cheap food are history?

BM: Exactly. And when the cost of food goes up the costs of the additives literally goes down in relative terms. Let me give you a perfect example. It takes 81,000 calories of energy to produce 75,000 calories of energy in the form of ethanol—for a net loss. It has to be subsidized. Regardless of the conditions, production of ethanol is a net loser. The U.S. government has literally been bribed by corn producers and big food companies, doling out subsidies for the production of ethanol that drove corn prices up literally all over the world.

I went to a vegetable market in Guyana, for instance, that was selling four really scrawny ears of corn for $5. That’s a result of these silly practices in the United States. Increases in the prices of corn and wheat throughout the Middle East triggered the Arab Spring. I think three billion people in the world survive on less than $2 a day, so when the cost of food goes up 50%—as it has in the last year—many of those who were marginal before are starving now. That leads to revolutions.

TER: You’ve been big on potash. Because potash in fertilizers helps increase food production per acre, do you think potash is due for another run-up in price?

BM: Potash is a form of energy. Food is a form of energy. To make more food you need more energy and you need more potash. There are enormous potash deposits, basins of sedimentary deposits—basically a variation of salt—that date back tens of millions of years. We know where they are. They’re easy to drill. A lot of people are going to make a lot of money in potash.

You can bet on some things in the short term and others in the long term. I don’t think anyone would conclude the cost of energy is going to go down over the long term, because there are no cheap energy sources. There is no magic bullet. So the cost of food is going to go up.

Real safe investments for 5, 10 or 15 years would be food, potash, water, oil and natural gas. Good shorter-term investments would be anything real—gold, silver, platinum and anything that you can actually hold in your hand.

TER: According to John Williams of ShadowStats, inflation is running around 11% if fuel and food are included. Where’s the upside if you’re looking at investments in potash, oil and such that could play out in five to 10 years and you’re dealing with double-digit inflation?

BM: I love it when something goes down in price. I love it when shoes or socks or coats or boats or airplanes go down in price. I don’t have any particular problem with it when a stock I really like goes down in price, either, because it makes it possible to buy more. So I think the fact that potash is down now in relative terms is wonderful.

TER: So suppose you buy potash on sale at today’s prices. It’s not worth anything unless you can sell it, so when would you expect a return on that investment? Five years?

BM: No, no, soon—three months, six months, a year.

TER: Because your underlying assumption is that the costs of energy and food will go up in the near term, how do you recommend playing the potash market dynamic?

BM: I think any potash company would be a good investment right now.

TER: When we chatted at the Hard Assets Conference in San Francisco you mentioned being intrigued by another potash company in addition to those you’ve been following for some time.

BM: Yes, North American Potash Developments Inc. (NPD:TSX.V; RNGTF:OTCQX; 3OZ:Fkft)just released drilling results this month. It had a 3,450-foot rotary drill and core hole on its Lisbon Valley property in Utah, and reported 15 ft total thickness and 10.4% potash at 2,600 ft deep, which is very good. There were two potash beds; one was 19 ft and one was 24 ft. Two different holes, one was 5 ft at 13%. Those are good results. That’s going to be an interesting story. Because the potash was laid down as water evaporated, it doesn’t take many holes of it to be good.

TER: So this company is basically going after a deep-shaft type of potash versus an open pit?

BM: No. Actually it’s in-situ leaching. The right kind of potash can be leached in place by pumping hot water down, bringing the brine to the surface, spreading it out in big pads to air-dry, and then just harvesting it with scoop loaders. It’s a very cheap way of doing it.

TER: How does that compare to the other companies?

BM: Well, Passport Potash Inc. (PPI:TSX.V; PPRTF:OTCQX) has been doing a lot of drilling and is finally coming out with some results. The issue there is not technical; it’s management and communications. They simply have to release more information. Eventually they’ll start telling the story. I have discussions with management about what they do well and what they do poorly, and what Passport’s done poorly over the last year is communicate.

TER: You said that any potash company would be a good investment right now. What are some more names?

BM: They’re easy to find. Buy the potash companies because they’ve been hammered like gold stocks, silver stocks and other resource stocks. Buy resource stocks, anything in resources—water, energy, food and land. The resource stocks are cheaper in real terms now than they were at the bottoms of the market in both 2001 and 2008. They’re extraordinarily cheap. I think it’s an opportunity of a lifetime.

TER: You’re not the only one to say that. People are talking about precious metals and rare earth metal stocks all being on sale—large ones, juniors, pretty much the whole sector. Would you say the same thing of oil and gas?

BM: Yes. But here’s the deal in terms of the global economy: All these people are swinging at this giant piñata loaded with nitroglycerin. One day soon, somebody’s going to hit the piñata and when that happens, you want your finances under control. I would recommend against having a margin account with any broker under any circumstances right now unless you’re prepared to write off 100% of your investment.

TER: Any other thoughts you’d like to leave with our readers?

BM: We’re at the most dangerous time financially in the world’s history. There are enormous risks. A lot of people are going to lose a lot of money. This is not a time for speculation or borrowing. It’s time to head for the bunker. It’s time to be aware of what’s going on financially. And it’s time to be especially conservative.

Convinced that gold and silver were at their bottoms, and wanting to give others a foundation for investing in resource stocks, Bob and Barb Moriarty brought 321gold.com to the Internet 10 years ago, and later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on relevant current events. Before his Internet career, Moriarty was a Marine F 4B pilot and O 1C/G forward air controller with more than 820 missions in Vietnam. A captain at age 22, he was the youngest naval aviator in Vietnam and one of the war’s most highly decorated. He holds 14 international aviation records, and once flew an airplane through the Eiffel Tower’s pillars “just for fun.”

Want to read more exclusive Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.

If 2011 is going to go down as the year of the risk-off trade, and it very likely will, then it’s no surprise that high beta energy stocks and the relevant ETFs that hold them have struggled. Year-to-date, the Energy Select Sector SPDR (NYSE: XLE [FREE Stock Trend Analysis]) is slightly negative while the Market Vectors Coal ETF (NYSE: KOL) has plunged more than 30%.

The interesting thing about the declines in energy stocks, particularly the mid- and small-cap varietals, is that now depressed valuations could spur a fresh round of deal-making in the energy patch in 2012. It’s kind of flying under the radar, but there was decent sized coal deal announced Monday.

Plus, there has been talk of some oil majors possibly looking to make a bigger deal for a for a U.K. exploration firm.

A recent report by PwC says M&A activity related to U.S. shale plays will remain robust next year and another report by BDO USA said oil and gas CFOs are confident about their access to capital heading into the new year, meaning we could see plenty of energy sector M&A next year.

With that, let’s look at some viable takeover targets across the energy sector.