Daily Energy Standup Episode #102 – A Weekly Recap
Exxon eyes potential purchase of shale driller Pioneer -WSJ
(Reuters) – Exxon Mobil Corp (XOM.N) has held preliminary talks with Pioneer Natural Resources Co (PXD.N) about a possible acquisition of the U.S. shale oil producer, the Wall Street Journal reported on Friday, citing people familiar with the matter. Discussions […]
The Biggest Losers Of $100 Oil
Oil at $90 and $100 will hit the economies of the large oil importers. Triple-digit oil will complicate central bank efforts to quell inflation. The biggest losers will be Asia’s developed economies heavily dependent on […]
Lessons of the energy crisis
Energy policy is national security policy. So when political leaders get energy policy wrong, they get national security policy wrong. An obvious example: Germany for years eagerly increased its dependence on Russian oil and gas. […]
How Washington plans to spend money from the new carbon-cap law
This article was originally published by Crosscut. As Washington state lawmakers and Gov. Jay Inslee put the final touches on a trio of budget deals this legislative session, they are set to make big […]
UK: Nuclear Power Classified As Environmentally Sustainable In UK’s Green Taxonomy
On March 15, 2023, the UK’s Chancellor of the Exchequer, Jeremy Hunt, announced that nuclear power will be classified as “environmentally sustainable” in UK’s green taxonomy, “giving it access to the same investment incentives as renewable energy.” […]
Follow Stuart On LinkedIn and Twitter
Follow Michael On LinkedIn and Twitter
Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.
Michael Tanner: [00:00:07] What is going on? Everybody, Welcome to a special edition of the Daily Energy News Beat Stand Up here on this gorgeous Friday, April 14th, 2023. As always, I’m your humble correspondent, Michael Turner, coming to you from an undisclosed location here in Dallas, Texas. You made it, guys. It is the end of the week. We appreciate you hanging with us this long as a special treat we’re going to bring you our top stories from the leak. [00:00:31][23.9]
Michael Tanner: [00:00:31] Week as selected by our editors so we appreciate them putting this together. Without further ado guys, again, we’re going to turn it over to the top stories of the week. Again. EnergyNewsBeat.com where all the stories come from. Hit the description. Below. You will find it all. I’m tossing it over. To the round up. We’ll see you guys on Monday. Y. [00:00:51][19.2]
Michael Tanner: [00:00:51] Ou know, it’s it’s industry wide. Speaking of buying oil and gas ExxonMobil eyes potential purchase of shell driller pioneer. Dun dun dun. This was an article that the Wall Street Journal broke on Friday. ExxonMobil has held preliminary talks since the first paragraph with Pioneer Natural Resources about a possible acquisition of the U.S. shale oil producer, according to the Wall Street Journal on Friday, citing people familiar with the matter both obviously Exxon and Pioneer declined to comment. [00:01:22][30.8]
Michael Tanner: [00:01:22] The report said that, quote, Exxon views pioneers, a top target to put its, quote, windfall profits to use that’s a strategic quote, windfall profits. The ad that I love that. That keeps me going because that’s a shot. [00:01:36][14.1]
Michael Tanner: [00:01:37] That’s what that’s what they want Biden’s administration to really be like. And they just want to get because there’s nothing nobody can really do all. It just stirs them up because they know there’s not much the Biden administration can do realistically in the short term to hurt them. [00:01:51][13.8]
Michael Tanner: [00:01:51] So this is a shot to the heart. I love that, quote, windfall profits to use, adding that the talks may not lead to formal negotiations and Exxon may target another company. Ooh, we’re going to get back to that stew because I think there’s a couple other interesting companies. [00:02:06][14.1]
Stuart Turley: [00:02:06] The next one, they’re 55.7 billion on sky high is what they earned last year. Wow! [00:02:14][7.8]
Michael Tanner: [00:02:15] Yeah. So and that’s really all this article talks about there’s not much more other than there consider somebody. So as always, what we do with with these articles is we have to sit back and think about who leaked this. [00:02:26][10.9]
Stuart Turley: [00:02:27] Right. Oh, good point. Yes. [00:02:28][1.0]
Michael Tanner: [00:02:28] Who leaked this? Because both of them declined to comment. So obviously, neither of them really want to confirm it. So obviously, there’s there’s four parties, there’s Exxon, there’s Pioneer, and then there’s the representatives for each of them. [00:02:40][11.5]
Michael Tanner: [00:02:40] I always throw out the representatives because I don’t they’re not in the business of leaking this stuff because if they start leaking this stuff, they get no business. Like there’s these there are so many of these M&A deals that happen that never even make it to this point where if they make it to this point, there’s huge contemplation on some side. [00:02:55][15.4]
Michael Tanner: [00:02:56] Because they’re not leaking to The Wall Street Journal if they’re going to do something, if they’ve not already decided or have gotten to some comfortability with either doing it or they want to confirm one way or the other with public sentiment. [00:03:06][10.7]
Michael Tanner: [00:03:08] So let’s throw out whoever their advisors are and let’s look at Exxon and Pioneer. Well, you know, you could make a case for either if you’re on Exxon side, you could be trying to drive the price down a little bit because maybe, maybe not. Maybe there’s competition or maybe Pioneer is considering do we sell higher or do we acquire and try to become an Exxon. [00:03:28][20.8]
Stuart Turley: [00:03:29] Right. [00:03:29][0.0]
Michael Tanner: [00:03:30] Maybe Exxon saying, hey, we need to get this out there, that we want to do this and we want to put pressure on pioneer and pioneer shareholders to take this deal so that pioneer doesn’t go out and use its windfall profits. [00:03:41][11.0]
Michael Tanner: [00:03:41] Because think about it, pioneers described in the article the full Wall Street Journal article of, you know, 930 years of premium drilling inventory available, 900,000 acres of premium drilling inventory. That’s a lot that’s a lot of inventory. You know, they’d like to we just talked about Exxon diving headfirst into EMP. Why would it not want to go acquire some of the most prime acreages in the Permian? Very interesting your pioneer, the uniqueness. [00:04:10][29.1]
Michael Tanner: [00:04:13] That one’s a little tougher for me to see. Put myself in pioneer shoes. Exxon wants to buy us. Or are we shopping ourselves? That’s the other question. Are we shopping ourselves? Are we trying to leverage? Exxon against itself. [00:04:28][14.9]
Michael Tanner: [00:04:29] Now, I think what’s interesting about this is what was the other quote in here? Exxon views Pioneer as a top target to put its windfall profits to use. And the talks may not lead to formal negotiations and Exxon may target another company. So this this would tell you that it looks like this is coming from an Exxon side. So I think we can clearly say that. But I think it’s also interesting, may target another company ooohhh spicy!!! [00:04:53][24.1]
Stuart Turley: [00:04:54] Right. [00:04:54][0.0]
Michael Tanner: [00:04:56] Okay, so this is probably a negotiation to bring the price down. Their probably this is probably negotiation excellence like the leak this had drive the price down. We want to buy you, but we’re also targeting other people. [00:05:09][12.7]
Stuart Turley: [00:05:10] Wow! So this is the advanced level of going to a car dealership and having them sit there and listen to your conversation with your spouse. I like that. [00:05:21][11.0]
Michael Tanner: [00:05:22] A little bit. A little bit. Okay. The real question is, do we believe there are other companies involved or not? Now, if you believe the first article that we went over, which was, remember, they’re pivoting out of high cost, low profit chemical business into exploration production. Well, they’ve got to do something with all that money. [00:05:40][18.6]
Michael Tanner: [00:05:41] So where are the two places that are growing? We just one of them that they mention in their development deck, Guyana offshore and they’re not even a full partner in that. Okay. [00:05:50][9.0]
Stuart Turley: [00:05:51] Right. [00:05:51][0.0]
Michael Tanner: [00:05:52] What’s the next? And so that would tell you that offshore oil is probably where if you’re going to dive headfirst into if you’re a supermajor, where can you see the biggest growth? That’s probably number one. Number two, the Permian is just obvious. Like it’s the. [00:06:06][14.7]
Michael Tanner: [00:06:08] The acreage and the ability to easily acquire large amounts of acreage and drill wells fairly quickly. No other place in the pyramid to see the type of return that you’re going to get. There’s just a high level. You could break down all of the different areas in it. But I do want to go there. [00:06:24][15.6]
Stuart Turley: [00:06:24] Right? [00:06:24][0.0]
Michael Tanner: [00:06:26] So this this move why they like pioneer because they’re solely based in the Permian. So if you’re going to look at who are these other companies, they’re going they’re looking at buying. I would just look at Permian operators. I got Diamondback. I look at the Diamondback. Now, Diamondbacks only sitting here at about a $30 billion market cap, pioneers, about $50 billion market. So a little bit different you could get a discount but Diamondback doesn’t have the infrastructure in terms of the acreage that Pioneer has. [00:06:52][26.1]
Stuart Turley: [00:06:53] And and the locations. [00:06:54][0.8]
Michael Tanner: [00:06:55] And locations, you could you could say, well, Hess is the lead operator in Guyana. Could they buy out Guyana? Maybe they’re not going to buy Hess they don’t want to go up and operate in the Bakken. It’s not what Exxon wants to do they’re smarter than that. So they can cross Hex off Hess off the list. The real question is marathon. [00:07:11][16.4]
Stuart Turley: [00:07:12] Wow. [00:07:12][0.0]
Michael Tanner: [00:07:14] Well, no. Excuse me not marathon Oxy. The real question is the other company, Oxy. I mean, think about it. [00:07:21][6.8]
Stuart Turley: [00:07:21] It. [00:07:21][0.0]
Michael Tanner: [00:07:22] Oxy is a in a credibly advanced Permian acreage position they’ve been shopping Colorado for years, trying to get it off their hands. Warren Buffett is buying heavily into Oxy and would love nothing more than to see a little bit of a return on his investment. When you look at the difference of market caps, I mean pioneers, 48 boxes, 56. That’s negligible. Negligible. So if they can buy Pioneer, they can buy oxy. [00:07:51][29.2]
Michael Tanner: [00:07:52] I personally think if there’s another company they’re talking to, it’s oxy and maybe there’s a deal to be made to buy Oxy and immediately sell Colorado and you sell it at a discount and sell it for four or 5 billion versus the 89, which they really want, which I’ve heard. [00:08:07][14.8]
Stuart Turley: [00:08:09] The biggest losers of $100 oil. Michael. Who do you think would be The biggest losers of $100 oil? Would be. [00:08:19][10.5]
Michael Tanner: [00:08:21] The poor. [00:08:22][0.1]
Stuart Turley: [00:08:24] You got that? The poor always the I’d call it anybody you know, actually has to work for a living. Triple digit oil will complicate central bank efforts to quell inflation. The $90 and $100 will hit the economies of the large oil importers. The biggest losers will be Asia’s developed economies, heavily dependent on oil imports. Oh, that doesn’t sound good, Michael. [00:08:55][31.1]
Stuart Turley: [00:08:56] Here’s the critical thing. And if we’ve seen what the Fed has been doing with, you know, everybody is saying, in fact, you’ve mentioned it a bunch, and that is they let the interest rates go for so long that they have hampered or caused inflation by it through their policies. If you take a look at printing money and then their policies. [00:09:20][24.3]
Stuart Turley: [00:09:22] The only way we’re going to be able to solve inflation is by solving the energy crisis. That’s why this is part like part one of the article here. You sit back and say the United States will see higher gasoline prices, but it will not be the biggest loser, not financially from the OPEC. Plus, cuts in the U.S. is the biggest loser. [00:09:47][25.7]
Stuart Turley: [00:09:48] The biggest loser is the Biden administration, which has spent the year and I’m quoting out of the article here, to persuade Americans that the president has helped lower the prices at the pump, which hit a record high in June. [00:10:03][15.3]
Stuart Turley: [00:10:05] Okay, Michael, he took out all the money or all the money, all the stuff out of the SPR in order to do to lower the pump. Gasoline at the pump. You know, and in the SPR. Mm hmm. So, what are you thinking? [00:10:27][23.0]
Michael Tanner: [00:10:28] Yeah. I mean, I think, you know, obviously, as you like to say, the poor always take it in the drive through and with these higher gas prices, they they do take it in. I mean, you know. I saw this really funny meme the other day. It was like how people think oil and gas executives fill up their gas tanks and it was like this dude dancing at the gas station, like filling up his gas. He was really funny. I’ll try to find it and put it in the description here. [00:10:53][24.5]
Michael Tanner: [00:10:53] But I mean, the poor always lose you know, I also think, as this article mentions, these oil importers, I think you’re gonna see countries like Japan, it’s going to hit them really hard they’re a primary importer of oil they’re going to get there. That’s unfortunately not going to be good there. I know they don’t have the strongest currency over there to begin with. [00:11:14][20.8]
Michael Tanner: [00:11:14] So now all. Of a sudden rolling over and having to to to pay more for for oil imports. Not good. Not good. Europe clearly is going to obviously be hurt. So that, you know. It’s it’s not too difficult to kind of figure out the, you know, second order thing and figure out who the players are. But I would not want to be Japan right now. I’ll tell you that much. [00:11:33][19.4]
Stuart Turley: [00:11:34] No, but, you know, you sit back and take a look. I know you get tickled every time I say the Darkfleet, but right now, India is paying I believe it’s around $64 Russian oil. And so, you know, it’s they’re not paying the oil. [00:11:53][18.3]
Stuart Turley: [00:11:53] Lessons learned of the energy crisis. Michael, this article is absolutely phenomenal. When you sit back and take a look at the number one problem, just like I mentioned a second ago, is the only way to solve the financial crisis is to you know, I hate to say this, but go back to near zero inflation or interest rates to get the capital moving again and then actually fix the global energy pricing structure won’t happen otherwise. [00:12:28][34.4]
Stuart Turley: [00:12:29] So just over a year ago, the Russian tanks rolled into Ukraine. Russian hydrocarbons stopped flying to Europe. But you started taking look also on Europe, got into their problems by looking at long at just saying, hey, we don’t need long term contracts, long term contracts caused Putin and a weak U.S. strategy to jump in to and go start the war in Ukraine. [00:13:01][32.3]
Stuart Turley: [00:13:03] Guess who’s learned from that? China. China is so in the UAE. Was it 27 years, Michael? We just talked about it a little while ago. So you sit back and go, China took a note and then you take a look at the next piece of the energy crisis that we’re learning on is ESG and ESG funding. Find that spot in here. [00:13:30][27.0]
Stuart Turley: [00:13:33] And also there’s a wake up call, Michael, in this other paragraph in here about energy. The vehicles, the electric vehicles require vast amounts of electricity that can be generated by renewable, that cannot be generated by renewables alone or distributed. The other piece of this puzzle also is China is building one coal plant per week, and they are currently using more so than the rest of the world combined. [00:14:04][31.6]
Michael Tanner: [00:14:06] That’s insane a coal plant a week. [00:14:08][1.7]
Stuart Turley: [00:14:08] Yep. And they are burning more coal than any place else combined in the world. [00:14:15][6.2]
Michael Tanner: [00:14:16] So making coal great again. [00:14:18][2.1]
Stuart Turley: [00:14:19] Making coal great again. So what in the world is the United States going to do in order to help solve the climate crisis? Not a thing. There is nothing that we can do that can save the global problems. [00:14:34][14.9]
Stuart Turley: [00:14:35] How Washington plans to spend money from the new carbon cap law. Michael, This is kind of like me trying to write a headline. It’s actually misleading, but I liked it. It’s not Washington, D.C., it’s Washington State. [00:14:51][15.4]
Stuart Turley: [00:14:52] So so when you sit back and take a look the Climate Commitment Act out of Washington state, the was expected to generate 500,000,001 billion annually in the coming years. Here’s the systemic problem this is really bring it up, Michael. And that is once lawmakers get a budget and they get extra money coming in, they’re going to spend it. And there’s really important things that here. The new law has gotten a boost since it was signed because the Federal Inflation Reduction Act included big investments in climate change that included matching federal funds. [00:15:40][47.8]
Stuart Turley: [00:15:41] So here’s where it come down in to another part we want to make sure that this money is used to tackle climate change, because there’s many things that are good projects in the state of Washington. But we’ve made a commitment to Washington’s to reduce our carbon pollution. Let’s come on down to one other line in here, Michael. [00:16:03][22.3]
Stuart Turley: [00:16:04] And it says. As Washington works towards a green future, we must be mindful of the impacts that these transitions have on our communities. Our farmers are critical contributors to our economy and they are being unfairly targeted by big oil companies. [00:16:25][20.8]
Stuart Turley: [00:16:26] This is totally wrong. It was always our intention to exempt their fuel from the CCR guidelines. This legislation affirms our commitment to them as we transform into a cleaner, greener economy. [00:16:42][15.7]
Stuart Turley: [00:16:44] And then he says, as he describes it, as the dark underbelly of the issues that has not yet surfaced in his urging to the grid. This article is hugely impacting of what is in actually Washington, D.C. Michael, from the standpoint is A, money comes in B, they want to spend it on all these other things other than what it’s supposed to be for. And then you see the regulations and everything else, even those in Washington state. I was I thought that I was sitting here looking at this and it was Washington, DC. [00:17:22][38.7]
Michael Tanner: [00:17:25] You got catfished. I found this interesting. It’s like a fourth or fifth pair ground down. In March, the State Department of Ecology sold its first round of credits at an auction, which will take place four times a year, raising a total of 300 million. Ooh. So, because you see what’s happening here in this carbon cap and invest program, they’re dealing out credits but what they’re doing is they’re holding an auction for the credits. That’s genius! [00:17:49][24.3]
Michael Tanner: [00:17:50] It’s a genius way to make money off incentivizing people to pollute, because the more people are polluting, the more people need to buy credits and the more credits you have available to buy the more money you make. This could take place four times. It’s only $1,000,000,000 just to the bottom line. [00:18:04][14.4]
Michael Tanner: [00:18:05] Now, you should be investing that in infrastructure and grid sustainability, but that’s not going to go there. But that’s a crazy thing to think about that they’re just they just auctioned. They’re going have these four times a year, just boom, clear, 300 million, boom, clear, 300 million. [00:18:18][13.7]
Stuart Turley: [00:18:20] You know what? And this is you’re going to find this is just like Colorado. When you and I worked on the Colorado, Colorado legislation and everything else in our and helping other oil companies there. It’s the same thing. They’re going to take a state law they’re going to go, hey, that’s a great way to steal money. I mean, excuse me, tax without representation and that’s exactly what they’re going to do. [00:18:44][24.7]
Michael Tanner: [00:18:45] Okay. Nuclear power classified now as environmentally sustainable a new green taxonomy code. We have a march 15 UCS, chancellor of Esquire. I don’t know what that means, but his name is Jeremy Hunt. He announced that nuclear power will be classified as, quote, environmentally sustainable in UK and UK’s green taxonomy. [00:19:04][19.1]
Michael Tanner: [00:19:04] Quote, giving it access to the same investment incentives as renewable energy. He stated that, quote, Because the wind doesn’t always blow and the sun doesn’t always shine, we need another critical source of cheap and reliable energy, and that is nuclear. The inclusion of that nuclear power within the UK green taxonomy mirrors a similar move that is been included in the. EU green taxonomy last year. [00:19:27][22.7]
Michael Tanner: [00:19:28] I love the quote, he said, the quiet part out loud because the wind doesn’t always blow and the sun doesn’t always shine. That’s a cogent argument about why we should probably have nuclear, because it’s, again, the baseload energy. [00:19:40][12.3]
Michael Tanner: [00:19:40] You’re talking about renewable energy you have to think about it’s dispatch, it’s not dispatchable. You can’t just dispatch renewable energy or wind energy or hydro. I mean, hydro is a little bit dispatchable, but you have to be next to it. [00:19:52][11.6]
Michael Tanner: [00:19:52] Let’s talk about wind and solar that again, when the sun doesn’t shine, when the wind doesn’t blow, you don’t have energy. So you have to figure out a way to store it so if you’re really going to make if you want to talk about investments in wind and solar, that technology is fairly solid. [00:20:04][12.3]
Michael Tanner: [00:20:05] Invest into batteries so that we can those batteries can then become the dispatchable power that we do, because right now, clearly coal and natural gas are very you could turn a coal pack on. You can start burning more natural gas. It’s very easy to increase the base of energy, hard with renewable energy. [00:20:21][16.2]
Michael Tanner: [00:20:22] I think another interesting quote in here we have is on that challenges of attractive capital to fund these climate initiatives. This green technical paper, Green Technical Advisors Group said in a paper, argued that significant progress must be made by the UK to attract global capital commitment suggested the UK adopt the same broad concept methodology metrics as the EU taxonomy where possible. The UK. Edition of Nuclear Power The Green Taxonomy still is under. Consideration, follows similar steps in the EU last year. [00:20:51][28.9]
Michael Tanner: [00:20:51] So as the EU goes, so will Britain. Britain. It’s great to see EU come around on this too, because I think Stewie’s, you know, he’d be pounding it. I know he would love this article. It’s why I wanted to cover it, because it’s this can really help become the bridge to a much actually clean, sustainable future and that’s coming from an energy guy. [00:20:51][0.0]