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Upshot of State of the Union on Oil

This was originally published on RealMoney in Columnist Conversation on Jan. 31 at 3:53 p.m. EST. It's being republished as a bonus for readers.

So, lots of questions about how to think about the State of the Union address tonight, especially as it relates to energy. Here are some quick thoughts:

1. President Bush will stress energy independence and the need to work harder to supply more of our own energy. That should, in a macro sense, benefit the independent exploration companies like Chesapeake (CHK), XTO Energy (XTO), Devon (DVN), EOG Resources (EOG) and others.

Those names will benefit even more if Bush refers to "resource plays" -- areas such as the Barnett Shale or Fayetteville Shale -- that are "unconventional" in nature. That would also benefit a company like Southwestern (SWN).

If he talks of Alaska companies like Conoco (COP) and Nabors (NBR) might find a trade as they are important players there.

2. Bush may also talk about the importance of relaxing restrictions and providing incentives to return to the Gulf of Mexico after Rita and Katrina. That would benefit the offshore companies like W&T Offshore (WTI), Energy Partners, Ltd. (EPL), Petroquest (PQ) and ATP Oil & Gas (ATPG) among others.

If he talks of deepwater, that would benefit the majors, but it would also benefit the service providers that traffic in that business, especially sub-sea completion companies -- the name there is FMC Technologies (FTI).

3. He will talk about the importance of technology advancing the ball in environmental processes that will make coal a viable fuel in the future. If so, this will benefit companies focused on clean-coal technology -- names like ADA-ES (ADES), KFx (KFX) and Rentech (RTK) all are speculative but emerging plays on various aspects of clean-coal applications.

4. He may talk about alternative sources of energy as well. While there are a number of choices in the alternative energy space, investors are likely to look for a name that is relatively liquid, has working projects and is in the mainstream of alternative energy. If correct, one name that fits the trade is FuelCell Energy (FCEL).

There are certainly a host of plays in the space and it is not my area of expertise, so I will leave that to others. That said, Fuel Cell Energy has some very nice demonstration projects (e.g., Starwood) that, if they turn into commercial contracts, would provide a nice base for future growth.

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