Kimmerdige vs. SBOW Round 4!!!!

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Daily Standup Top Stories

Tesla Partners with Baidu for Full Self-Driving Rollout in China

Highlights of the Podcast

00:00 – Intro

01:32 – Tesla Partners with Baidu for Full Self-Driving Rollout in China

04:02 – Growing Shadow Fleet Makes Oil Price Cap Impossible to Police

09:01 – Markets Update

11:30 – North America Posts Fresh Rig Losses

13:50 – Exxon stock falls as earnings miss on lower natural gas prices and squeezed refining margins

15:58 – Chevron Corp (CVX) Reports Q1 2024 Earnings: A Close Call with Analyst Projections

19:11 – Kimmeridge Releases Presentation Outlining the Urgent Need for Board Change at SilverBow

22:48 – Outro

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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’s going on, everybody? Welcome into the Tuesday, April 30th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, Tesla partners with BYoD for full self driving rollout in China. It’s official Tesla is getting full self-driving in China. So we will cover what that means for Tesla. Next up. Growing shadow fleet makes oil price cap impossible to police. I will then jump over and cover really is a stacked finance segment for us. First, oil does fall by the dollar, mainly based on those Middle East peace talks. US rate cut doubts. I will then talk quickly about what happened with drop in North American rigs. We actually lost six, which is unbelievable. Well then jump over and look at Exxon and Chevron earnings. Some interesting telltale signs in there. And then finally we will cover Cambridge silver boat round for Holy smokes there. They’re coming back strong. So we will get to all of that in the bag of chips guys. As always I am Michael Tanner rocking a solo show today. Stu is out on assignment. We were be flip flop and solos. I’m actually out in the field tomorrow, so Stu will be, a solo show tomorrow. He will then be back. We will both then be back in the chair, for Wednesday. So we appreciate you guys pulling with us, but I’m going to go ahead and kick things off here. [00:01:32][77.1]

Michael Tanner: [00:01:32] Tesla partners with BYoD for full self-driving rollout in China. I’m reading straight from the article here. First, bullet point. Tesla’s full Self-Driving, what they call FSD system, has been approved for use in China. They went ahead and partnered with the aforementioned Chinese tech giant, by Uber mapping and navigation software to support the full Self-Driving within China. This approval within China is seen as a major boost for the company, which has been facing multiple challenges due to the worsening EV price war and high interest rate. It’s actually caused Tesla shares to drop, jump in the pre-market trading after it was reported in Bloomberg that Beijing Beijing had went ahead and give that green light to roll out its full self-driving. You know, in a separate report by the Wall Street Journal, it a backtracked a little bit. You know, Beijing has tentatively approved the company’s plan to launch full Self-Driving. This does come, as I’m reading straight from the article here. Come one day after Elon Musk unexpectedly visited Beijing on Sunday and met with Premier Lin Cao, who was Communist Party chief in Shanghai when Tesla was setting up its automobile manufacturing plant. They all go on to say that, Musk also met with Robin Zhang, chairman of Tesla battery supplier contemporary Amperex technology, which is in Beijing. Analysts are out in full force, Wedbush Securities senior analyst told Bloomberg. Quote, this is a watershed moment. This could open up full self-driving in China. This is his quote, which I view as unlocking what could be a golden opportunity for them. And again, they read this earlier in the article, but I think it comes down to the inevitable price war again, as China does what they do, everything is going to be a race to the bottom on price. So Elon Musk and Tesla’s trying to figure out exactly how are they going to compete in China. If they’re going to be charging a premium price? Well, they means they probably got to have self-driving, because if you don’t have self-driving and you’re charging $80,000 per car, it’s going to hard to compete with another EV that’s got better battery life, longer range for a lot cheaper because it’s manufactured in Chinese. It’s exactly what you know why we buy Chinese products all the time? Because they are able to offer the lowest price. So I think this I agree with the analysis here in terms of this is a boon for Tesla. And then it’s clear and their stock ran a little bit today mainly off that back. So great. For right now. You have to remember there was a lot of security concerns that they had to I you know this is a I were reading straight from the article. Sources say Tesla will partner with the BI you to support the navigation and mapping. Here we go. Okay, here’s the real quote here, folks. Tesla also has multiple data security and privacy requirements that satisfy the country’s regulators. That’s a one sentence. It’s very ominous. I’d love to see the source code behind that Tesla. Hey, how do you know this? Are they sharing this data with the Chinese communist regime? Who knows? I think that’s an interesting question. Is anytime you’re in a Tesla, at least the United States, we don’t. They’re recording you in the test suite. If you’re driving around a Tesla, I don’t think they have cameras looking at you in the car. You’re an idiot. But that being said, what do they do with that information in China? Do they have to share that with the Chinese Communist Party? Interesting note that I love how they just one little sentence in there. Obviously, you know, they’re trying to make Tesla look good. Yeah. We you know, we they’re you I’m with you Tesla is great but could be interesting to see what their their data privacy stuff is on that. So we will make sure to follow up with that. I’d be interested to know what stew knows about that. [00:04:42][189.8]

Michael Tanner: [00:04:42] But let’s jump to the next auto. We’ll growing. Shadow fleet makes oil price cap impossible to police. I’m going to read a lot here from the article. UK based international group of key and I clubs, which are global and global insurance companies, says the growing shadow fleet is making it less and less viable to police the G7 price cap on Russian oil. This, according to Bloomberg News, citing a briefing to the UK government. This UK based insurance group notes that about 800 oil tankers, have been, that it used to ensure have switched. Over to the Shadow Fleet to support sanctioned Russian oil being sold above the $60 price cap. Stu would be freaking out right now because we’re talking about his favorite thing, the Dark Fleet. But this day, 800 people, 800 tanks, part of the Dark Fleet. Unbelievable. Next up. Furthermore, the group goes on to say here in this article, it is impossible for an insurance company to determine whether traders are adhering to the G7 price cap, noting that the policy, quote appears increasingly unenforceable as ships and associate services move into this parallel trade, Bloomberg quoted the group as saying, adding that it is concerned that the increasing responsibility and obligations on companies in the G7 coalition will further risk or will result in further migration of trade activities and ancillary services outside of the G7, which is absolutely unbelievable. Article also points out three weeks ago Argus Media, which is a I love how they have Argus Media. They’re a data company. They have a nice little, media companies kind of like us. We we have a little media company and really do much. We do other stuff in between. But Argus Media, they released a bunch of data cited by Bloomberg and said, the Russian Euro grade crude is being exported for about $75 a barrel, which is again $15 above what the $60, quote unquote, G7 price cap is. So you can, I can hear Stu on the other side saying sanctions don’t work. It’s true. Especially when the insurance company based out of UK is saying that we’re insuring at all. What’s crazy is 800 papers. That’s not just that’s the Dark Fleet is not small. It’s a big, big, big number and and absolutely unbelievable. You know, citing this UK government briefing, Bloomberg said the insurance group was critical of London’s efforts at enforcing the price cap, subjecting it. The onus has been failed on insurance groups whose members should not be expected to be an extended arm of enforcement for sanctions. Ooh ooh. Wouldn’t want to work a little bit too hard. Insurance companies wouldn’t want to have to put up too much on your plate. I hope you find that funny. Private industry. It’s not our job to do that. We we we will if we don’t ensure we lose money. So I love it. The the anti spin is well wait you you’re making money ops. So unless you want to illegally be making money by trading Russian crude, maybe you should abide by it. And maybe the onus does fall on you, the insurance company and not us, the government. But there’s two sides that buy side, sell side. If I’m sitting at an insurance company, of course the government should come in. And regulators, why was it my job to figure out who’s abiding by the sanctions and who’s not? I’m just trying to make money on the other side to counter that point. Yes, you are trying to make money. So you’re incentivized not necessarily here per se about where it’s coming from. So it’s a little bit of he should seize that. But again, the big thing out of here, 800 tankers in the Dark Fleet. [00:07:52][189.9]

Michael Tanner: [00:07:53] Unbelievable. Still would be freaking out right now. We’re definitely going to have to talk about this a little bit on Wednesday in terms of it’s the Dark Fleet is no longer small. It’s a significant portion of the market. And we’ve seen that right now. We know India and China are taking advantage of it. Let’s go ahead and quickly move into finance before we do that guys. As always check us out. World’s greatest website www.energynewsbeat.com the best place for all your energy and oil and gas news in the team. Do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear. When it comes to the energy and the oil and gas business. You can just check out the description below for all of the links to the articles that I cover here. You can also go ahead and find timestamps if you want to jump around. I think on Spotify there there iTunes. It’s a little bit iffy. You got to buy some third party software or whatever. We’ll figure out. We’ll get it rolled out on there YouTube as well. Thanks, everybody. For all the reviews we’ve, I’ve actually, you know, seen a bunch of new ones popped in. So I appreciate everybody who’s done in who done that. Also in the description to the podcast you can check out dashboard.energy newsbeat.com the best place for all your data and energy news combo. We appreciate everybody there. You can also connect with Stu and I on Linked in there. All right. [00:09:01][68.1]

[00:09:01] Let’s jump into the finance segment here. We got oil down about $1, mainly due to Middle East peace talks and some doubt on US rate cuts. Before we dive into that will quickly kind of cover some of the, top line numbers here. We’ve got S&P 500 news up about 3/10 of a percentage point today. Nasdaq about 3.3 percentage points as well. We saw two and ten year yield fairly flat dollar index down about a half a percentage point. crude oil fairly flat. Was down early in the session. Currently closed here. About up about a 10th of a percentage point 8273 at the time we are recording this. Brant oil 8857 natural gas. Nice little pop today over $2. Great to see, natural gas pop over $2 again. Why is oil down? We’re seeing a little bit of the residual effects of what should be noted as a great thing. The relaxing of the tensions in the Middle East. That’s good. If I always am a little sketchy when someone says, oh, war! Yay, oil price is going up, it’s like, why do we want war? Though? I don’t know what the the balance is between that. But what we do know is this, that there also has come into question now that the continued U.S inflation data doesn’t look good, but it. Also could impact what oil prices go off. We’re just going to see a rate cut. That does mean prices may not necessarily run because again if prices are cut there’s going to be a lot more things. So you know, if interest rate cuts, while they may be good for the economy and definitely good for oil prices, if that inflation continues to stay high, we’re not going to see those rate cuts. And it’s going to continue to be a little bit of what, quote unquote, is a drag on prices. John Cutcliffe, he’s a partner in capital. I’m just reading from the article here. You’re seeing a the geopolitical risk premium leak out again today because no new escalation in the Israel-hamas situation. I mean, it’s just fabulous quotes here, folks. And I say that with absolute sarcasm. The geopolitical risk is leaking out again because of no new escalation. It’s like, dude, like, yeah, let’s up your war mark right here. It’s good thing. It’s a great thing. A ceasefire. And this is his next quote, a cease fire or hostage negotiate. Our negation release would take out even more risk. Well, hopefully your risk premium goes to zero in that case, because I don’t think this will be. You know, I don’t we don’t need to go to war with Iran here. So, you know, we’ll let Israel and Hamas do what they want to do. But I’m more worried about the general conflict there. And I think that’s, again, what he’s referencing there. So I don’t mean to pick on that, but it’s always had a bone there. And again, if with with inflation data being up in March, it doesn’t we don’t necessarily know, you know, to kind of back that up. [00:11:30][148.6]

Michael Tanner: [00:11:30] We did see North America post fresh big losses week over week. We were down six from the prior week. And we’re still down 142 rigs year over date. Canada also saw a drop of nine rigs while we saw internationally plus 13. I mean it’s pretty incredible. We also saw the frac frac count spread drop. It’s currently sitting at 200, a little over 250 or 230, right now, which is again in a, you know, as completion rigs and drilling rigs continue to drop. Obviously, we know natural gas prices have a lot to do with some of those, completion rigs going on now, $2 natural gas. We never know it. It’s becoming an interesting conundrum here as we continue to see prices go. You know, oil prices continue to stay high. Katie Price is with me. We’re over 84, $83 right now. I do think that the, the biggest, you know, kind of hurt right now is the fact that, you know, I think people it tells me something. $85 oil. We’re losing rigs. This tells us something. What is it telling us? I think people are. It shows us that the quantity of of tears, in my opinion, for one acreage is slightly diminishing. And this is the first, in my opinion, a sign of things to come of that we may not have as much tier one acreage as we think. And in terms of U.S onshore production, obviously growth is where the offshore is going to come, and I think that’s where you’re going to see rigs possibly start picking up. I mean $85 oil, a good offshore. It should pay out. I think this is an interesting conundrum though. When we look at where rig counts are going, I think people have talked in the past. Again, I’m not saying anything crazy. Oh, we’re out of two acres. Many people are saying that. But if there’s ever cracks and, you know, threads to their argument, it’s things like this $85 oil. Yet we’re shedding rigs for weeks now. This is not just a week over week thing. This is a multiple week. We’re down 142 from last year. What. There’s something to this. And maybe it’s the inflation. Maybe it’s service costs are still inflated due to that price. And you know I know you know a lot of the economics I run, it’s the CapEx that kills it. And it’s not the production’s there. It’s does the CapEx fit. And that’s when people say, are we running out of oil? No, we’re running out of cheap oil. You know, just that’s what we’re running out of. So I think there’s a little bit of but you know, this this brings up a super interesting point. I want to pop over now and cover, two earnings real quick, Exxon and Chevron, because I think they they tell two different stories here. [00:13:49][139.7]

Michael Tanner: [00:13:50] So first Exxon Mobil, their stock actually on Friday falls relative to to their current stock price. They were down about one two percentage points after an earnings miss on lower natural gas prices and squeezed refining margins. And I’m going to read straight from the article here. Exxon Mobil reported first quarter earnings that missed expectations as the industry came under pressure from eroding refining margins and collapsing gas prices. This is something that we’ll see both in Exxon and Chevron. Here’s what Exxon reported. They went they were about, earnings per share was about $2.06 versus a street guidance of about $2.20. Revenue was 83.8 billion, which is higher relative to the expected 78.35 billion. But that net income, which is a much better proxy for how the the quarter went 8.22 billion, which was actually decrease about 28%, quarter over our year over year from the same time last year, 11.3 billion. So it’s about, again, 28%. While revenue did beat expectations, it was lower than a year ago, at 86.5 billion. Kind of the quote coming out, you know, the sentiment coming out from Exxon CEO Darren Woods. They were in line. You know, the results were in line with the company’s plans attributing much of the earnings to non-cash and inventory adjustments. You know, all of us, quote, in some cases, we outperform 11% are free cash flow from operations, which exceed consensus by billion dollars, again, non-GAAP number. I’m all about free cash flow. You know, I think the one thing that gets brought up here is the squeezes, refining margins. Natural gas prices plunging. We’ve lost about 30%, 37% this year, but also lower refining margins, refining. We I didn’t this story didn’t quite make the cut, but shell came out and said they make $1 billion a year off trading. Not that this is exactly what Exxon’s doing, because they’re not an active trader, but you can see the downstream effects on how margins can make or break you, and being on one side or the other can really be helpful. So tight, tight market companies like shell can make money because they have trading operations. You as the refiner get squeezed when those margins come down. Specifically, Exxon does have Guyana, which is going to continue as an offshore development, going to continue to kind of stabilize what they’re doing. We know they are locked currently in a dispute with Chevron over that acquisition. I will be recording most likely next week. Well, with a friend of the show, Bennett Williams, on specifically what’s going on in our next deal spotlight. Super interesting there, he said. Mainly they’re not looking to buy gas, but they want to know if they want to retain the Guyana rights, which would probably negate the entire Chevron deal because Chevron is buying has to get access to Guyana because Hess is sitting on a pretty valuable, valuable position right now. So Exxon is, you know, if we want to get an idea, the stock opened about, you know, $3 lower. You know, it was trading at $121. Even on Thursday, earnings release comes out, traded all the way down to about 1/16 squat. It’s way back here as you listen to this, on Tuesday, up to about $119 still down about $3 from its peak yesterday. So trying to climb out of a hole here. And that the other one I want to bring up is, is Chevron. They went ahead and released their earnings as well. You know, they had about you know, they did relatively adjust. You know, they were relatively similar adjusted earnings were about 5.4 billion. That was down about 13. Yeah, about 13 to 15% from 6.7 billion last quarter compared to last year. While they did see about a 12% boost in worldwide production, that again, that’s mainly attributable, to PDC energy, which owns stuff in the Permian and the DJ basin. That basically worked out to a net equivalent production surge, about 35% relative to the previous, year. The other part that that really kills them, again, is that lower refining margins on the refined product sales and decreased natural gas prices. So what I wanted to really point out with both Exxon and Chevron is that you can see how these big integrated companies, they are a big profit center for them is the refining sector. And if it continues to get squeezed as it has been, that’s what happens now. The reason why Chevron hasn’t necessarily lost as much. Let’s go back to the stock price. Your Chevron opened, stock price was trading about $165 a share, only dropped about 163 at the end of the day. Was trading above 166 and currently sits, today a little bit, just shy of 167. So they’ve outperformed relative to what Exxon has done based upon this earnings report. And part of it has to do with their their their massive increase in new upstream volume. And that’s really what hit their because remember that pioneer acquisition Exxon still waiting to close that. It’s one of the reasons Exxon wanted to buy pioneer is because they’re seeing exactly what Chevron is realizing with PDC, which initiated them to go try to buy Hess, and now they’re in the industry. So all this stuff is interconnected as you, as you, as you go on to see, Chevron also, noted that they had a strong balance sheet with the net debt ratio by 8.8%, which showed really great management cash flow from operations at about 6.8 billion. That was a decrease from 7.2. You know, they, they they claim they spend a little bit more outlays and then they kind of go on in their air, at least to talk about all their strategic initiatives. They throw some carbon management in there, which they’ll never get to. But hey, point is again, these big, large national companies, they’re going to the, you know, these integrated companies, they’re they rely a lot on those big refining profit centers to, to to bulk up a lot of money when they can’t replace their inventory. Chevron’s done a good job of it. It’s why they’ve continued to surge here and have kind of outpaced relative to the earnings release of Exxon a little bit. So, Exxon, very much looking forward to closing that pioneer deal. [00:19:10][320.6]

Michael Tanner: [00:19:11] Let’s quickly close here with Kimmeridge. They released a presentation outlining urgent need for board change at Silver Bowl. This is round four. You know, ding ding ding ding ding. We can get a little live. What’d you wanna call it? A little boxing ring going here. Jim Ridge is has, you know, holding about 12.9% of Silver Bow shares has basically fired back round for, you know, really the biggest you know, we’ve talked about this at like Silver Bow is trying to hold off a corporate takeover by Kimmeridge. They say they’re trying to basically launch a takeover proxy war with the company. So that Silver Bow would buy Texas Cambridge Gas, which is formerly Laredo, at a valuation that they don’t think is right. They think that, they’re over that, Cambridge is overvaluing ATG and wants to merge with Silver Bow and basically take over Silver Bow so that they can use silver bows balance sheet to buy Texas Cambridge Gas, which they believe is overvalued. They walk through for claims here quickly for Silver button. This is Cambridge’s rebuttal to what? Came out to me. Do you ever follow the song, guys? I think we need to do a deal. Spotlight on this person gets a lot of crazy stuff going on with this. Here’s the first no claims that Cambridge locks a proxy fight to facilitate a path to change. This is silver bows. Claims Cambridge launched a proxy fight to facilitate a path to change control of the company without paying a premium to silver shareholders. Cambridge then kind of fires back and says they haven’t bought shares in over six 650 days. They were engaged with them for over two years and asked for a specific thing. Silver bow then says Cambridge directors that they nominated because remember, in this proxy battle, Cambridge is trying to nominate new board members. Silver bow claims these Cambridge directors are conflicted with and would not look out for shareholders in the best interest, Cambridge or Cambridge back, she said. They’re highly qualified, independent. And in the third quote, that, Silver Bow claims is that Super Bowl strategy has proven to be resilient through market cycles. This is where the fireworks Cambridge fires back says that quote specifically they go silver was generally negative for TSR since CEO Sean Wolverton tenure and 2.6 annualized TSR over a year and Warriors lengthy tenures. Ooh hit him with a cheap company, trades at the lowest valuation multiple out of its peers at on a five year basis. Espo has stock has underperformed the blended commodity group by 58% highlighting the lack of alpha generated from leadership. Ooh. So the rebuttal from Cambridge goes at the three key points that round three silver bow claimed in their, you know, the future of silver bow.com or whatever website they put out. So they’re going right at it. Where do I stand on this? We’ve talked about this much. I think there’s, you know, there’s there’s room in the middle. Is Cambridge overvalued? Cambridge is probably what does any company who owns something will do that? I’ve been part of numerous organizations who you ask what we you know, internally, they much more value their asset than what they do on the street. The reason why they do that is because they so own that. Because if somebody valued that more than you do, you would transact with them. So there’s there’s a reason for that. So too, I think they’re trying to force it. You also agree the fact that Silver Bow has underperformed relative. Absolutely. I mean that’s you know, common I mean everybody knows that it’s something that hounded Silver Bow for years Cambridge just trying to step on an opportunity. It’s interesting that there’s this claim that they that you know, six months ago they couldn’t get financing silver Bow fired back in one of their rounds. That hey, you had a we had an agreement, but you couldn’t find financing. And they were using that to say, oh, watch, because you was a bad investment. I don’t quite know if I know that for sure, but I do think, it it’s it’s it’s pretty obvious that silver bow management has underperformed relative to the market. So it’s going to be interesting to see where this thing goes. I’m sure they’ll be around five guys, but we’re gonna we’re gonna go and leave it there. [00:22:48][217.1]

Michael Tanner: [00:22:48] I appreciate you hanging with me here on this packed finance segment. Stu again will be in the chair tomorrow rocking a solo show. I’m out on assignment myself. Get to go. I’ll play oil Man for the day. We will both be back in the chair Wednesday. And and get you guys that episode for Thursday. So appreciate everybody checking us out. World’s greatest podcast energy news be or Stuart Turley I’m Michael Tan. We’ll see you tomorrow folks. [00:22:48][0.0][1350.9]

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