This past week we spent two days in West Texas studying the oil and gas business. Our goal was to learn more about the operations of energy companies who explore, produce and distribute petroleum and natural gas. We also wanted to understand the current economics and market conditions influencing energy related investments. Our areas of focus were the “upstream” (drilling) and “midstream” (processing and transporting) operations.
West Texas is an area where the advent of horizontal drilling and multi-stage hydraulic fracturing has opened up large reserves for commercial production. This area is now the largest crude oil producing region in the United States, and accounted for 18% of total U.S. crude oil production in 2013s.
Patek Philippe Pocket Watch
Every so often the market for collectables grabs headlines, and what better way to kick off the shopping season this year than with a few notable observations on that market. A Patek Philippe pocket watch traded this month for a record price of $24 million. The watch last traded in 1999 for $11,000,000, and has given that buyer a return on their investment of 118%. Crafted in 1925, the pocket watch contains over 900 component pieces and is made with 24 karat gold weighing in at 0.45 kg or 15.8 ounces. This is no small watch. The gold it contains is worth $18,000 at today’s prices. The ad on TV that offers to buy my old gold might be tempting but what makes up the remaining $23,982,000 in value for this watch?