I a going to be a complete contrarian

I think ORG and STO are going to be okay long term (3 years). Reading the reports in the Australian today and what I have read previously, I believe oil prices will rise over the next two to three years to at least US$60. While not the veritable gold mine once hoped, this should generate reasonable returns on current share price. My reasoning for this are:-

1. current shale oil contracts are hedged. Unravelling of hedges will make some wells uneconomic.

2. Shale oil wells have a short life. They will be cherry picking the most economic, but as production starts to slow, less economic wells will need to be bought online. Unlikely a lot of investment is going to be put into new wells in the short term.

4. operating at a loss for both shale and OPEC is not sustainable long term. Generating cash flow because of sunk costs can only go on for so long, and slowly higher cost producers are going to have to eventually start to cut costs to reduce the bleeding. Because of the size of the investment, it might take three years for this to flow through. OPEC can only use reserves for so long.

4. Even if the oil price rises, interest rates will have risen and the days of easy money will be over, for a period. Who is going to finance further expansion .

5. The current disconnect between iron ore price and coal (neither of which I am expecting a huge rebound in the next three years although the same logic) and the A$ will eventually correct itself. Conservatively I see the A$0.65 in the next three years.

I think this is a huge game of chicken and the last person to blink will do okay. So long as I believe ORG can survive the next three years, I think there will be a long term recovery in share price of 20% pa for the next 5 years. I am still wearing a lot pain from my investment, but I am a long term investor.

Appreciate comments......................................