Daily Energy Standup Episode #225 – Discussions on Carbon Disclosure, Geopolitics, the Future of Fossil Fuels, Exxon’s Potential Acquisition and Oil & Gas Market Dynamics

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For Oil, It’s Not 1973 Again – But It Could Still Turn Ugly

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:15] What is going on. Everybody, welcome into another edition of the Daily Energy News Beat Stand up here on this gorgeous Monday, October 9th, 2023. As always, I’m your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, joined by the executive producer of the show, the purveyor of the show and the director and publisher of the world’s greatest website, Energy News Beat, Stuart Turley, my man. How are we doing today? [00:00:37][22.3]

Stuart Turley: [00:00:37] Hey, it’s a beautiful day in the neighborhood. We’re going to have fun. [00:00:40][2.3]

Michael Tanner: [00:00:40] Yeah, it’s going to be a pretty crazy show. Lots going on this weekend. Holy smokes. First up on the menu, coming sooner than expected. Carbon disclosure rules coming for US companies. This is something that we know has been coming down the pipeline for a while. The FCC is about to get involved here. So who’s going to talk to everything ESG related to the FCC? Then we got to fly overseas, too. This is probably some unfortunate news that happened this weekend. All of the news surrounding what’s going on with the terrorist attacks in Israel, who’s going to have a comprehensive top to bottom look from an energy perspective. The article he’s selected for this for oil. It’s not 1973 again, but it could still turn ugly. So Stu is going to keep us on top of everything going on out there. Next up, we’re going to talk Shell’s CEO plans company wide meeting to discuss shift back to fossil fuels. All hands on deck in terms of Shell going back to fossil fuels, We’ve been on this one for a little bit. New CEO while in SAM has really marked a shift back to oil and gas and he will meet later this month. Stu will cover all of that. And then next, BP’s 4.1 billion bet on renewable natural gas gets underway. Really interesting topic. I think this idea of renewable natural gas. I love how now we’re branding natural gas as renewable. So we’ve called this three years ago. Steel was on this way before this I think was before COP 18 or 19 back or I think it was COP 20 when we started doing this show, Stu was all over this. So 16, 16 we got 16. Yikes. We will dive into everything from renewable natural gas and what BP is doing and then stool toss it over to me. I’ll quickly cover kind of the horrendous slide we have in oil oil prices. Looks to me to be a little technical. I’ll cover some of my favorite favorite musings from that. And then obviously, the big news in the oil and gas M&A space. ExxonMobil rumored officially to be buying pioneer Natural resources as this is all rumors. We don’t know much. We do know that the asking price may be somewhere around 60 billion. But still and I will dive into all things Exxon Pioneer and what this may look like for the future of large scale consolidation, M&A in the oil and gas space. Before we do all that, guys, remember all of the news and analysis you are about to hear are brought to you by the world’s greatest website Energynewsbeat.com. The best place for all of your energy news. I liken it to if you like to be on the tip of the spear when it comes to energy news news energy news beat is the place for you stewing. The team does a great job of curating that website, making sure it stays up to speed with everything you need to know to again, be on that tip of the spear. You can look at the description below, see all of the links, all of the timestamps. You can skip ahead, pick the articles you want to listen to. You can contact the show [email protected] or via the description below. Connect with Stu and I on LinkedIn. Got a little data news product we’re working on [email protected], go check it out. Give us some feedback on that. We’ve got some stuff we’d like to change up there, but that’s about it. Do we get a big show? I think the big news obviously is what’s going on in Israel. Let’s start there to make sure we have enough time to cover it. Walk us through, start to finish what’s going on there. [00:03:40][180.1]

Stuart Turley: [00:03:41] Okay. It is a horrific thing and our hearts and prayers go out to everybody but Michael with us and taking a look at the energy news beat, this is also about geopolitical and energy. And so when we we have to understand, the attack happened on an anniversary 60 years ago, the Yom Kippur War of 1973, October six to October 25th. Here’s the key. I got this graphic in there and this is off of Twitter crude. Michael went from $5 to $50. Wow. I went to Oklahoma State. But what percentage is that? A bunch interest rates from 6.5 to 18%. [00:04:26][45.0]

Michael Tanner: [00:04:28] It makes me shiver. [00:04:28][0.4]

Stuart Turley: [00:04:29] Gold 40 to 20 2 to 875. Stocks lost almost 50% the following 52 weeks, but ended about even after seven years. So this was the Yom Kippur War. And Yom Kippur is a really big day for the Jewish faith. And so when you go in, take a look at the other things in here. There are several bullet points that I just want to cover these as we outlined them out. The crisis is not a repeat. All of the Arab countries joined in against Israel. This is now not that Egypt, Jordan, Syria, Saudi Arabia and the rest of the Arab world all peg piled in on Israel. This is Palestine and this is Iraq. Excuse me, Iran. And so when you sit back and take a look at Iran, what just happened, Michael? The Biden administration just freed up $6 billion. There is a correlation there. The oil market itself doesn’t have any of the 3rd October 1973. Oil demand was surging. The world had all of its spare capacity just wiped out. Now we have OPEC and we have Russia and we have OPEC, plus balancing out production versus demand. And so, Michael, you and I have been beating our heads up against the wall trying to figure out supply and demand rules have been thrown out. And so this is not the same. And I think the author has a very good point, that, number two, the oil market is not the same. However, they are not. Take a look at this. Aren’t trying to boost prices be beyond a few extra dollars? OPEC and OPEC plus and the Saudi leaders have said they want it at that hundred mark. They don’t want to go below that because their profits are coming up big. [00:06:26][117.0]

Michael Tanner: [00:06:27] So all in this and this plays into the idea of, you know, having as much spare capacity. I think what’s interesting is this. And so the article that you bring up here mentions that this terrorist attack that’s going on right now in Israel is it’s from Hamas, but it’s really led behind the scenes by Iran. And part of this has been a result of the fact that we’ve been allowing and allowing Iran to bypass, quote unquote, export oil bans. And we’ve been sort of turning a blind eye to this. So one thing I find interesting is that in response to this attack, we might now enforce actually start enforcing these sanctions. It remains to be seen, but they might doing it. That alone might push oil prices above $100. [00:07:05][38.0]

Stuart Turley: [00:07:06] I don’t think we will. Okay. I’m going to take the advocate side of the Biden administration, that the Biden administration does not understand where the next bag of depends is going to come from. They have yet to They have weaponized the dollar and they have no way to enforce it. So I, I truly don’t think they’re going to enforce anything on Iran. So I. [00:07:28][21.8]

Michael Tanner: [00:07:28] Love. Javier Blas I’ve read a few books by him, he’s a great reporter from Bloomberg. Yes, the number eight point in this article is key. I disagree with, though I do not believe we have enough oil in the Strategic Petroleum Reserve to deal with another crisis. That was basically his other non comparison to 1973 was that we have an SPR to work with. We’ve got a little bit of it. We don’t have much. He goes global. It had its lowest levels in 40 years. [00:07:52][24.2]

Stuart Turley: [00:07:53] I was going to say. [00:07:53][0.4]

Michael Tanner: [00:07:54] If it’s a big although, you know, although he’s dead, he could maybe help us out in the future. [00:07:59][5.0]

Stuart Turley: [00:08:00] Javier’s a rock star. And I mean, he is absolutely a very, very knowledgeable. But we are in a geopolitical nightmare. [00:08:10][10.5]

Michael Tanner: [00:08:12] One 2% in baseball. You bet you bat, you bat 300%. You bat 33% of the time. You’re the Hall of Fame. [00:08:18][6.0]

Stuart Turley: [00:08:18] That’s right. Now you take a look at who’s going to benefit out of the Middle East war. It’s going to be Russia. Russia and Iran are going to do. But I Iran’s got some cash flow that they’ve unbelievable cash flow. Now you’re going to see that come in, but you’re also going to see the oil from Russia. They’re going to sell everything they possibly can. So the winners out of the war is Iran and Russia. [00:08:47][28.7]

Michael Tanner: [00:08:48] So before we move. [00:08:49][1.8]

Stuart Turley: [00:08:50] On an energy side, I got to clarify that the energy, because. [00:08:53][3.6]

Michael Tanner: [00:08:54] I want to bring it back to the beginning of the article. You talked about, you know, the comparisons to the Yom Kippur War and what’s happening now. You talked about oil prices going from 5 to 50, interest rates from 6 to 18, from gold to 42 to 875. Do you believe that’s going to happen right now, or do you buy this article’s analysis that it is different and we may not see that large of a spike in commodities prices? [00:09:16][22.3]

Stuart Turley: [00:09:17] It is different, but yet the same. And we have a van tastic person out there. What is it? Both of these things can be true. [00:09:25][8.3]

Michael Tanner: [00:09:26] I love Tischler. Both rulings can be true. [00:09:29][2.9]

Stuart Turley: [00:09:30] And this is where I think we’re going to play both sides of the fence here, Both sides. But both things can be true. And that is you take a look at the percentage of 5 to 50 crude. We’re already at 100 at the strike price where Saudi Arabia really would like to keep it at. Russia is making money hand over fist. [00:09:48][18.6]

Michael Tanner: [00:09:49] We’re 80 for Brant, so we’re not quite there yet. [00:09:52][2.6]

Stuart Turley: [00:09:52] But but if you take a look at last week, last week, Russia sold crude Russian crude to India for $20 over over the sanction price. You know, they’re not supposed to sell any Russian oil over $60 a barrel. They sold it at $80. India bought it. They’re buying everything again at 80. So even at a discounted price, it’s their interest rates. I’m sorry. They’re going to look at raising the interest rates again because they are the Fed is looking at. Michael, are you ready? They think that the economy is still going good and they think that three and a half percent unemployment is actually too low. But there you have to analyze and I’m going to go off sidetrack for just one second. The jobs numbers this past week were absolutely horrific. 40% of that, three estimated 300,000 jobs government. The other 40% were part time jobs. So you start taking a look at the real high dollar, high net worth. Those were 10,000 jobs. So the real job number. Federal government does not create any value or jobs to the market. They are a job sucking black hole out of the life of Americans. So think about those job markets. Think about the Fed thinking that they’re going to increase inflation. Will it get to the 18%? I don’t know. Will they get to higher than it is? Yeah, I think you’re going to see two more Fed rate raises. [00:11:36][103.8]

Michael Tanner: [00:11:36] I think you’re going to have to because I think you’re going to I think you are going to see a commodity price, especially when we see natural gas at $3.32. We’re going to see, I think, a commodities boom. So great coverage, energy news. It’s going to have everything breaking down. What’s going on with this terrorist attack in Israel from an energy side still is going to keep us up to speed. We appreciate it. Let’s come back home, though. Carbon disclosures coming forward. [00:11:56][19.8]

Stuart Turley: [00:11:56] Oh, my goodness. Just get Iraq and hit me in the forehead. Will do. Yeah. Treat me like a husband. Coming sooner than expected. Carbon disclosures and rules for U.S. companies. Oh, my goodness. Okay. You and I talk about this every show. Blah, blah, blah. Legislation through regulations now the size of two economies of California as a country, it has the world’s sixth largest economy in the EU as a blank block ranks third. Okay, That means everybody’s got to listen to these two knuckleheads. They are coming, says Sarah Mahaffey, ESG strategist at RBC Capital Markets. She’s up there. And both the California and European Union are poised to approve rules that require companies to do both business there to disclose their emissions. The rules that apply to private as well as public companies and require businesses. Michael, listen to this. To calculate and disclose emissions from their suppliers and customers, which goes what is out of an expected this my head just exploded. If you want to dissect that one line, Michael. How in the heck are you supposed to go out and say, I’m going to manufacture Hershey bar, let’s say a snicker bar? Right. Okay. You got to have oil to get the plastic to wrap it. You got to have coal in order to run your generation of your plant. You got to haul the cocoa from Brazil. You got to then I mean, this is slick. [00:13:38][101.6]

Michael Tanner: [00:13:39] Forget about chocolate. Think about our podcast. I mean, you’ve got the mix. You’ve got I mean, think about the disclosures we would have made. This is this, in my opinion, applying this to both private and public companies is exactly why we’ve been hounding on legislation through regulation. And we do. Sounds like a broken record. I make fun of a boy, but he’s been on this from the beginning and this is, in my opinion, the first hand-waving of, hey, they’re actually going to do this. Devastate small. You’re going to see thousands of private companies reestablish themselves as Nevada corporations or Delaware corporations. [00:14:14][35.8]

Stuart Turley: [00:14:15] That is one of the cool things. [00:14:16][1.0]

Michael Tanner: [00:14:17] The problem is the companies that can’t reestablish, you know, and Nevada Corporation or a Delaware corporation or a corporation somewhere else, guess what? You’re then I mean, imagine the restaurants, the small mom and pop restaurants in California that now would have to do this is a disaster. [00:14:34][16.1]

Stuart Turley: [00:14:35] Oh, yes. And here’s why. Here’s the underlying theme of this article and about four others that I read this weekend. Are you ready? There is a company that is going to be set up that is going to be the gatekeeper for your emissions reporting. They are going to be worth billions. Who owns that? [00:14:55][20.8]

Michael Tanner: [00:14:56] I’m sure Larry Fink and BlackRock. [00:14:57][1.2]

Stuart Turley: [00:14:58] No. Bill Gates. I bet when you sit back and think about who’s going to spend. This is a scam and the politicians who own that. You’re going to see how it ends up. [00:15:09][10.8]

Michael Tanner: [00:15:10] So clearly, this will clearly be fought in the courts. So obviously, what is it like when he signs it this week? It’s going to happen. But this is what they want to do. And it’s an it’s a step in a move prior to an eventual move by the SEC. [00:15:25][15.8]

Stuart Turley: [00:15:26] Correct. Now, here’s the other piece of this ugly baby. And this only baby is got bad teeth like the ugly squirrel we normally talk about. The absolute disgusting part of this is they right now the proposed legislation has Michael scope three emissions. There is absolutely zero rated track scope three emissions. That is like having an MP operator trying to track the emissions from cars. You can’t do it. It is not within your realm so that you’re going to pay taxes on all the cars carbon output is. Here’s the one last thing. 17 states have already laws that allow them to automatically adopt anything Newsom puts in. [00:16:12][46.0]

Michael Tanner: [00:16:13] All right. [00:16:13][0.1]

Stuart Turley: [00:16:14] Let’s go to Shell CEO plans company wide meeting to discuss shift back to fossil fuels. Michael, this is almost a test or a tee up for the the other articles with Exxon because if Shell and BP and everybody else is realizing, hey, wait a minute, fossil fuels is where we’re going in the death of ESG investing, all of this is now leading into it. Shell Chief Executive Officer Well, Swann will meet with employees later this month to discuss bringing a greater share of investments into fossil fuels, quote unquote. We appreciate that our staff are engaged in and have a passion for both the energy transition and Shell, a company spokesperson said. That is important and we welcome an open dialog. Oops. [00:17:07][52.4]

Michael Tanner: [00:17:07] Well, I love I love what he said. He said, you know, remember, he this this while Swan took over from Ben Van Burden earlier this year, I love these two quotes. He said they need to undergo a, quote, fundamental culture shift. I love when I hear CEOs talking about culture. You don’t hear about that enough culture. A big culture guy. I got a whole podcast about how you get a good culture. The the business model will take care of itself, but that’s for another thing. He says they need to do that culture shift to regain investor confidence. Also love this, he said. They need to be ruthless on focusing capital allocation and should only invest in low carbon operations that have a clear pathway to profitability. He’s pulling no punches. [00:17:45][37.9]

Stuart Turley: [00:17:46] No. And though if you read between the lines in this, he says we have to be ruthless to focus on capital allocation that invest in low carbon operations with a clear profitability, that’s natural gas. [00:17:58][12.2]

Michael Tanner: [00:17:59] Well, you want he’s the. [00:17:59][0.6]

Stuart Turley: [00:17:59] Only one out there. [00:18:01][1.2]

Michael Tanner: [00:18:01] Here is a little I don’t want to say inside baseball. I think people realize this, But how do you become elected? The CEO of a publicly traded huge company like Shell was a board of directors and they hire a recruiting firm or you are you, me. And in this case, he was promoted from within. But you are appointed by the board of directors. So when you’re. [00:18:22][20.6]

Stuart Turley: [00:18:22] President, you’re one the president or. [00:18:24][2.2]

Michael Tanner: [00:18:24] That. So when you get appointed the CEO, that means you’ve been selected by the board of directors. And so listen closely to what a new CEO says the moment he gets the job, because guess what? He’s repeating the mandate in which he and the board of directors have agreed upon. Because why do you hire us? What’s a CEO do culture? And sets the direction. So if the board of directors and the CEO are not aligned on the direction, he wouldn’t get this job in the first place. So, you know, the board of directors has been thinking about this for at least over a year now. They now have an opportunity to replace the guy or not replace the guy, but the new person at the top now has the ability to push that. So whenever I hear things like this, don’t just think this is some rogue CEO out there and the board of directors and I know the board is behind this or they would not let this be happening that much. [00:19:13][48.8]

Stuart Turley: [00:19:14] Exactly. I thought it was very good. But this is also telling in to BP. I think also this has another story coming along. The next one here, Michael, and the BP’s 4.1 billion bet on renewable natural gas gets underway. Michael, it’s our energy. We have LNG, which is liquefied natural gas. Then we have our energy which is renewable. And some of our best podcasts have been with Deborah Wald, who we talked about this a year ago, and that is taking waste and turning it into pipe ready natural gas. And I applaud this in the small town of Medora, where is it? Southern Indiana. The facility will start taking landfill and turning it into into. Our goal is to make large material business that’s going to be a strong profit center for BP. I applaud this. R&D or renewable natural gas is absolutely what let’s. Take our landfills and let’s absolutely turn them into power plants. [00:20:16][62.5]

Michael Tanner: [00:20:17] Yeah. And I mean, I think this is also basically what you’re doing is you’re capturing the emissions from landfills and being able to sell it back into the pipeline. I think we need to be honest that you’re not getting the same premiums is what I would call that sweet, sweet American natural gas. No, it’s not wet BTU gas. There’s it’s not it doesn’t go that high premium. But what it does do is, again, lower the emissions. The interesting part and I think why people why environmentalists are not for renewable natural gas is they still believe that when you burn the renewable natural gas, all of the emissions that you’ve captured, their claim is you’re emitting them in the first place. But I disagree because what you’re emitting from natural gas is less than the landfill is taking in. So there is a drop in overall emissions still. And that’s where the pushback comes from the environmentalists. So it’s why you haven’t seen them this getting push much. Remember, BP purchased Arcadia Energy earlier this year and are dumping about again 4.1 billion images of this orange. We like this we’ve heard Toby Reiss over at IQ. We love them talking about responsibly sourced natural gas. This is a new a new feeling, renewable natural gas, which is probably more closer to what should be happening. And one day, hopefully, we see this in every landfill. [00:21:27][70.6]

Stuart Turley: [00:21:28] Oh, I agree. Except the landfills with wind windmill blades, because they don’t produce methane, they just sit there and rot and destroy. [00:21:36][8.1]

Michael Tanner: [00:21:37] So just a good point. [00:21:38][1.0]

Stuart Turley: [00:21:38] Okay. All right. That’s it for me. And the next one. Oh, real quick. Oh, yeah. Going on to Exxon. So back off to you, too. [00:21:46][7.6]

Michael Tanner: [00:21:46] Yeah, we’ll cover that here quickly. But first, give a quick glance at what happened in the overall markets. S&P on Friday was actually up about 1.8 percentage points. NASDAQ trades up 1.7 percentage points. Dollar index actually drops a little bit. I did see Bitcoin drop about a quarter of a percentage point. Crude oil stays fairly flat after absolutely getting pounded this week. Brant crude oil trades down 80 for 94 on crude oil that West Texas intermediate 8279 really close out the first down week in about four months or in about four or five weeks. And I if you didn’t have a chance to see Paul Sankey, we love him he’s one of our favorite research analysts at Sankey research dot com. He went on CNBC on Thursday to kind of talk about what happened specifically this week in the oil and gas space. I mean, if you’ve been hearing us pound the table for fundamentals are now becoming what is driving oil prices up. You wonder why prices this week are down. Well, in his opinion and I would recommend go watching the segment you can find it on energy news beat his analysis. And then the prevailing wisdom on the street is the current trade right now among baked along among large hedge funds. And the machines are long oil short bonds. While when you unwind that position, say you have to sell bonds because the bonds are getting so, so cheap or you have to roll that contract over, you have to unwind that entire position, which includes a long on oil. So when you have a large hedge fund having to unwind their position to basically rewind it up with the new rollover contracts, the machines then who are watching just overall trading volumes begin to then have a cyclical cycle that rolls into it. So in in his opinion and I probably agree with this, this is much more of a technical spill in terms of oil prices, then this is a fundamental switch in the overall dynamics of supply and demand. So I wouldn’t be too concerned that oil prices have dipped so far. I think Stu’s crossed out $100 oil, especially with what’s going on in Israel. And now I do think that’s still possible. I think the more interesting note, Stu, is natural gas, $3.33 with really no end in sight. We’re seeing cooler weathers come in as we see right fall come in. This could be something where four or $5 natural gas in the short term. And when I say short term, I mean 2 to 4 months could be possible and that could really kick start a lot of a lot more natural gas development, which we’ve been teed up for. We’ve talked a lot about LNG. This could get a lot more natural gas projects approved. I mean, big ones, I’m not talking about a couple of docks in East Texas. I’m talking about large scale LNG projects specifically like Saudi Arabia and the Middle East is dealing with that. You could see a kickstart in those as you see natural gas prices continue to rise here. [00:24:26][159.8]

Stuart Turley: [00:24:26] Oh, I agree. [00:24:27][0.3]

Michael Tanner: [00:24:27] Yeah. So I think the next thing we got to just talk Exxon here. So, I mean, as we listen to this on Monday, obviously you’ve heard the rumors and as you listen to this, you know, we’re recording this on Sunday. So if if the rumors actually become true, we’ll try to throw in a new segment. But at the time of recording this, it’s just rumors. Right now. The rumor is right. ExxonMobil is is looking and on the verge of purchasing pioneer natural resources for an estimated $60 billion. Pioneer is an exclusive Permian operator and was one of the first companies to do really take the Permian horizontal in terms of large scale developmental. Scott Sheffield, the long time CEO there since 1997, after their combination, after the combination with Parker and Parsley, he takes over. CEO set to retire at the end of this year and turn over operations to CEO Richard Daley. But I don’t think that’s going to happen. Do I think this is a deal that I think when you look back there, you know, multiple people in the past six months have said this is probably going to happen. Exxon is going to go buy somebody. They’re going to buy. They’re going to buy Pioneer. They’re going to buy EOG. They’re going to buy Oxy. They’re going to buy somebody. And, you know, and, you know, yes, buying, you know, someone for five or $10 billion does good. But we knew that in this new age of M&A and consolidation, we knew something like this was going to happen. And I think the real question and the real the real analysis point from this is exactly and Steve brought up brings a great article here. Exxon investors ready to embrace buying existing oil over new drilling. This is a topic I love because this comes back to the idea of, well, if ExxonMobil has the ability and has all of these premium locations that they could drill, why do they go need to buy Pioneer? Basically the number two Permian player for 60 billion is that because their pioneers locations are better? Interesting. So now what you’re seeing is your ex you know, this is always what people say. Don’t listen to the words that I say. Listen to my actions. Listen to my actions. They have all these crazy locations in thousands of double premium locations. We got to get some merch that says that and everybody’s got these accretive locations yet. What is the what is what are people actually doing? Exxon says we’re just going to go buy you. We have to go buy that 700,000 BOE a day for $60. Got to go buy it. What is right. We can’t why would we drill when we can go acquire? And I think that absolutely has been proven true. We’ve seen the rig count drop tremendously. I mean, I don’t have the rig count. Let me pull up the rig count here. But because we had that drop from Michael that dropped on Friday. [00:27:00][152.7]

Stuart Turley: [00:27:01] That the business models that you and I have talked about for, it’s well. [00:27:04][3.2]

Michael Tanner: [00:27:04] Prices have been up year over year. Oil prices are up about 50% and the rig count has dropped by 143. It’s due as it’s watch what I do not do what I say. [00:27:15][11.2]

Stuart Turley: [00:27:16] Right. Michael, the best investment deals do you and I have been working on. And when oil companies ask us to evaluate deals and we take a look at this, some of the best deals for investors end up with a split between drilling new wells and buying PDP. And when you take a look at that, that’s exactly what the big boys are doing. [00:27:39][23.3]

Michael Tanner: [00:27:40] Well, it’s a little I would say it’s a little bit more nuanced with that. Every company has a few good locations. The problem is nobody has it. Everyone claims they have 1000 good locations and that’s a scare. So what you’re seeing is Exxon may have some good locations, but in their macro analysis, they want to grow, They have a target and growth. They see that target for growth is easier and quicker by using M&A to just acquire that missing body per day instead of going out and drilling it. So what does that tell you? The risk off play is acquisition. So for me, what this says going forward is you’re going to see a lot more of this. Chevron is squarely on the clock right now and they’ve got EOG, Oxy, Diamondback. There’s a few others out there that are, in my opinion, I’m sure, hard at work talking to the ConocoPhillips, the Chevron’s and probably the Shell’s of this world to say what next. [00:28:28][48.5]

Stuart Turley: [00:28:29] Right. And I think you’re going to see more and more of it. [00:28:31][2.3]

Michael Tanner: [00:28:31] So who do you think? I mean I have my opinions but who do you think is the next company? Give your prediction right now, because everyone’s going to be throwing out the predictions. Let’s get us on the record. Who do you think the next M&A combo is? [00:28:43][11.8]

Stuart Turley: [00:28:44] Well, that’s a big open ended question. They’re almost all in play. And the reason for that is you’re going to take a look at does a company like Exxon or BP or anybody else actually want to come in and say, I want end of the bargain? Do I want to get into the Eagle Ford, Eagle Ford on the way down in M&A activity? So I think that it’s going to be you take a look at, you know, Continental’s coming back and it went back private. You take a look at is it a Haynesville play or is it a marcellus play? It’s going to be play driven, I believe. [00:29:20][36.6]

Michael Tanner: [00:29:21] No, you’re absolutely right. You’re you’re absolutely right. And that’s why I think there’s one company that I think I’m going to take off the table. I don’t think Oxy’s going to sell. No, I think they could sell their Colorado assets. But I don’t think Warren Buffett is necessarily looking to cash out per se. And I think he’s going to be very picky and probably doesn’t want to own Chevron stock because I think that’s the other end of the deal with this Exxon pioneer. We don’t know whether it’s going to be a we don’t know what the final value is going to be. I mean, 60 billion on a market cap of 50 billion for four Pioneer seems a little light seems to be that they’ve got to get a you know, 6570. I don’t know what their corporate models look like. We’ll have to plug the numbers in but seems to be that’s a little light for Pioneer. So the question will be, is that a mix of cash stock or, you know, currently as of 2020, you know, their last quarterly report in 2023, they got about 30 billion cash on. So are you going to finance the rest to pay all in cash or are they going to finance that with a mix of stock? And I think that will tell me what happens with Oxy, because, remember, Warren Buffett is still the largest shareholder in Oxy and has a lot of control and a lot of say and I wouldn’t say control, I would say a lot of gusto to be able to say, hey, no, I if we’re going to sell, I want all cash. And if he wants an all cash offer, I doubt anybody but Exxon’s going to be able to do that. And Exxon just took themselves off the table by acquiring Pioneer. So I think the less Warren Buffett is looking to take Chevron stock, and I think Chevron or BP are probably the only two companies that could buy Oxy unless he wants to do that, which I don’t think he does, because he could do that right now. He could do that if he wanted to, but he’s not. Why? Because I think he wants to large into Penny. I don’t think he wants the large integrated company because I think he sees that they’re not as tied to the commodity price, which again, he’s playing a commodities boom year clearly, and he’s playing off the macro theory of energy is going to become more scarce, which means those things are to become more valuable. So I think I don’t know what the next is. I think EOG is probably the next one off the table. Chevron, EOG makes sense. The problem is EOG is a little bit spread out. They don’t they have their core Permian operations. I think you’re right. Still the plays are going to be extremely helpful, but I’m taking Oxy off the table. I think they’re going to stand tight and not and if anything, they’re going to try to scoop up some of the smaller guys in order to prop themselves up. And maybe two years from now they look to sell. But I think Warren Buffett’s holding out right now. [00:31:45][144.1]

Stuart Turley: [00:31:46] I would agree. But let me throw this prediction out there. I think that Oxy has teed itself up for carbon capture, and I think that it has done an outstanding job getting into that multitrillion dollar market. We’ve seen the, quote unquote, supposed death of ESG investing. I call for a great awakening in that last year. I think that within the next the next two years, you’re going to see the lack of funding being able to go into carbon capture. Oxy is teed up right now for success as long as the gravy train for funding keeps going because you’re going to see the market now coming around and they’re saying, is the regulatory issue going to start coming in and saying, are the mandates going to be on declaring your carbon output? Well, then you got to buy carbon credits or you got to do carbon capture. Carbon capture is a market that is solid today. I think that if it goes in a certain way, carbon capture market is going to follow the way of wind. How many years from now? I’m not sure, but wind is becoming unsustainable and I think carbon capture market is going to be unsustainable. So Warren Buffett, I think is on track now with Oxy. I think Oxy for the long term is not a good play. Makes sense. [00:33:17][91.3]

Michael Tanner: [00:33:17] Now. I agree. I think again, it’s it’s crazy so I think not that this is a you know we will obviously if we will we will probably once this actually happens, we’ll probably have to do a separate almost breaking news podcast to probably break down all the details in there. We may have to do a little deal of valuation. I think it’ll be interesting to see what what the what the value comes down. But there’s so much that goes into this, this valuation. I mean, Pioneer is is stripping Lithium out of their water and selling by selling that lithium on the open market. So there’s a lot more that goes into it than just some PDP in some pot. So very interesting. Break this all down. What should people be be worried about? Do I mean, I know this whole thing this week is going to be all eyes on Israel. Why Give us a prediction? [00:33:59][41.5]

Stuart Turley: [00:34:00] I think that we’re going to see a fairly we’re not going to know any impact on oil and gas until we see the retaliation or the response from Israel. The tanks are all lined up and I believe they’re just going to totally annihilate Palestine and I mean the Gaza. So it’s going to be horrific. Don’t know. I do pray that everybody in the country stays safe. There are several demonstrations being scheduled today. Stay safe, pray and watch what happens to energy. [00:34:34][33.7]

Michael Tanner: [00:34:34] Yeah, no kidding. So you can keep it here at Energy News me for all of your latest breaking news. But with that, guys, we’ll let you get out of here. Start your week. You appreciate. We know you got a lot going on in this Monday. A lot of meetings. Probably most of those meetings are worthless. But fight stay strong. Thank you for checking out Energy News Beat for Stuart Turley, I’m Michael Tanner. We’ll see you on Tuesday, folks. [00:34:34][0.0][2020.3]

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The post Daily Energy Standup Episode #225 – Discussions on Carbon Disclosure, Geopolitics, the Future of Fossil Fuels, Exxon’s Potential Acquisition and Oil & Gas Market Dynamics appeared first on Energy News Beat.