Our top two stories today were about OPEC and whether they can meet their production quota increases, and, more importantly, whether they are considering market share gains. Stu raises a valid point about Syria’s newfound interest from the UK’s Shell and BP.
The second big issue was about “What is next for ExxonMobil after losing Hess?
We are breaking the videos and podcasts apart to make it easier for people to read or listen to the parts that interest them the most. Please let us know if you like the format changes and if you have any suggestions. We want to hear from you.
1st Critical Story
The question remains where OPEC stands, and it is not a matter of market share, but rather cash flow and revenues. Saudi Arabia has a substantial budget tied to oil production and is attempting to diversify its revenue sources; revenue is still needed, even at lower oil prices. We saw Saudi Aramco looking to sell its natural gas power plants for several billion dollars to help improve its balance sheet and maintain its payments to the royal funds.
And if it were about Market Share stealing from the United States, we would see a different activity than having Shell and BP in Syria, as Syria’s crude is a light sweet crude that competes with the Permian Basin.
OPEC is Looking for Market Share While Playing the Long Game
2nd Critical Story
Michael breaks down the difference for Chevron and Exxon. Chevron gains new access to the Bakken and the Delaware, operating in the United States. In addition to Guyana, it will help the United States achieve Energy Dominance as a service exporter.
Where does ExxonMobil go now? They lost. Well, they could look at Diamondback, but how does Diamondback look at this? Or they could look at Occidental Petroleum. Michael then reviews their past purchases of Anadarko, and Stu and Michael discuss one advantage for Occidental being on the selling side of the equation. There would be an advantage for ExxonMobil in pursuing CCUS and doing business with the EU. This is going to be a huge topic, and we are working on stories.
Stu also points out that ESG, Carbon Taxes, and regulations emerging from the EU, UK, and even California are going to be impactful.
Chevron closes Hess acquisition after winning Exxon legal battle
HOUSTON, July 18 (Reuters) – Chevron (CVX.N) closed its $55 billion acquisition of Hess (HES.N) on Friday after winning a landmark legal battle against larger rival Exxon Mobil (XOM.N) to gain access to the largest […]
Other Daily Standup Top Stories
Natural Gas Has Achieved Dominance and Is No Longer a Bridge Fuel
In the evolving global energy landscape, natural gas has undergone a profound transformation. Once positioned as a mere “bridge fuel” to facilitate the shift from coal to renewables, it is now recognized as a cornerstone […]
EU Lowers Russian Oil Cap to $47.60 in New Sanctions Package, but Will It Do Anything?
In a bold yet unilateral move, the European Union has rolled out its 18th sanctions package against Russia and Belarus, slashing the price cap on Russian crude oil from $60 to $47.60 per barrel. This […]
Trump Interior Department Moves to Dismantle ‘Regulatory Favoritism’ for Wind, Solar Projects
In a significant policy reversal, the Trump administration’s Department of the Interior (DOI) announced new measures to eliminate what it calls “regulatory favoritism” toward wind and solar energy projects. This initiative includes an enhanced oversight […]
U.S. Rig Count Up: Weekly Update and Global Overview
The U.S. drilling industry showed signs of revival this week, with the total rig count rising for the first time in 12 weeks. According to the latest data from Baker Hughes, the active rig count […]
Full Podcast Video
Highlights of the Podcast
00:00 – Intro
00:04 – Natural Gas Has Achieved Dominance and Is No Longer a Bridge Fuel
02:43 – OPEC is Looking for Market Share While Playing the Long Game
07:30 – EU Lowers Russian Oil Cap to $47.60 in New Sanctions Package, but Will It Do Anything?
11:33 – Trump Interior Department Moves to Dismantle ‘Regulatory Favoritism’ for Wind, Solar Projects
17:17 – Markets Update
19:01- U.S. Rig Count Up: Weekly Update and Global Overview
19:26 – Frac Count Update
19:31 – Chevron closes Hess acquisition after winning Exxon legal battle
31:23 – Outro
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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.
Michael Tanner: [00:00:00] For the 18th time, sanctions don’t work. Next, on the Energy Newsbeat Daily Standup. [00:00:06][6.2]
Stuart Turley: [00:00:14] Natural gas has achieved full dominance, is no longer a bridge fuel. This is incredible. When you sit back and take a look at the evolving global energy landscape, natural gas has undergone a profound transformation. Michael, this used to be, oh, by the way, natural gas is the bridge fuel for wind and solar. It is no long considered a bridge. It is now considered, oh by the way, if you want a data center, you’re going to have to have natural gas. The United States remains the undisputed leader producing, listen to this Michael, 100 BCF per day in 2024, accounting for 25% of the global output. And showing a 5.4% year over year increase in dry gas production. Russia follows with 60.8 BCF per day, rebounding 7%. You take a look at some of the other ones. Michael, I went and took a look at the different key companies, major basins and year over years increases. You have Russia, United States, Iran, China and Qatar. Then you take a at this as it rolls around. I didn’t even have China up in there as far as the amount of production and they still are importing a ton. They’re just an energy hungry market. [00:01:35][80.2]
Michael Tanner: [00:01:35] Well, I think they understand that as they can drive the cost of energy lower, it’s going to increase prosperity throughout the country. I mean, it may or may not be working because of other things that they’re doing with that capital, which we can get into later, but truly, if you can drive that marginal cost of energy down as low as you can, it how really a society becomes absolutely prosperous. So I’m not surprised that China is taking this approach. I just think they have huge demand for energy in this 23 BCF that they’re producing every day isn’t necessarily quite quantifying that. It truly goes to show, and I think what this article shows to is why the push to LNG has been so critical over the last five to 10 years, we’ve seen all of these different LNG contracts been brokered these 30 year deals between Qatar, Saudi Arabia, and all of really the Western world. It’s why I think part of what you’re seeing in the United States is a push to deregulate specifically from an energy and an LNG infrastructure standpoint. So, it’s… It really is crazy. I didn’t think China was up that high, but I knew they produced a lot of natural gas. It’s just because they have a huge consumption for it. [00:02:40][64.5]
Stuart Turley: [00:02:40] Oh, absolutely. Hey, let’s go to the next article here, Michael. Let’s take a look here. OPEC is looking for market share while playing the long game. This is a critical story when you sit back and take a look at everybody’s asking whether or not OPEK can actually make the additional product increases that OPECK Plus has been allowing. Overall OPEC production rose by 220,000 barrels per day in June. Driven primarily by the increases of Saudi Arabia, 173,000 barrels per day, and the UAE by 83,000. Looking at the rest of the year forecast, the international, the IEA, projects global oil supply to rise by 1.8 million barrels per day to 1.49 million barrels per day with non-OPEC producers. Now, Michael, this is the same IE that the secretary right has threatened to get out of and stop funding 20 to 30%, whatever our number is that we fund of their agency, because they do not support real numbers, they support all leaning to the renewable side. [00:03:50][70.2]
Michael Tanner: [00:03:51] No, I’m absolutely with Secretary Ryder the fact that we need to get out of the IEA or at least stop funding it from our standpoint. I do think OPEC, as you mentioned, this article is, is struggling to figure out where they fit in this like long game approach. I will disagree with the headline of this article though, is I don’t believe this is a market share issue. I believe this is attempting to one in the short term, bring their countries like Kazakhstan, Iraq. Countries that are overproducing relative to where the caps are, bring them in line. We all know how oil prices work. When supply outstrips demand, well guess what? Prices go down. When demand is higher than supply, prices go up. So what they’re doing is attempting, in my opinion, to increase supply in order to decrease prices and therefore punishing that next marginal barrel that their other OPEC brethren. Producing. Now I think from a long game standpoint, I think what what they’re trying to do is establish. So on one breath, you say lower prices brings in less marginal revenue for the next barrel, but I say marginal next barrel because if you produce five more barrels than you did yesterday, even at lower prices, you still make more money than you yesterday. So increasing and bringing back barrels onto the market does increase revenues at the top line level. And we know this. OPEC is in Saudi Arabia. When you think of OPEP, really think of Saudi and then think of everybody else. So from Saudi’s perspective, they’re… Budget is 90 to 95 percent wrapped up in oil and gas. You know, I’m not a big fan of talking about, oh, they need $120 oil to balance their budget. Let’s just look at from their economy standpoint, their economy is 90-95 percent wrapped-up in oil-and-gas. That’s never good for a portfolio allocation. We work in the oil- and-gas business too, and we don’t even have all of our investments in oil, in gas specifically, because you want to have a diversified portfolio. So part of what I think they’re doing is they can both lower prices to hurt their brethren in OPEC who’ve been overproducing while also bringing back more barrels to increase top line revenue, which eventually will help them diversify away from energy and into all this other stuff. They really want to be a leader in AI. They’re investing heavily in the U S sports market. We’ve seen it with live. We’ve see them with trying to start soccer and other tennis leagues. I think The move here is less about market share and more about two goals, one in the short term, one in long term, that are actually both different, but you can walk along the same yellow brick road and eventually get and accomplish both. [00:06:28][157.7]
Stuart Turley: [00:06:29] You bet. Let me go through two points here. If they were wanting to take market share from the Permian, because I want to make sure this is clear. If, they were willing to take market share, from the Permian it would be through Syria, because Syria has the light wheat compatible with the Permian oil in the. Shell and BP have won those contracts to do that because the Bank of London actually needs the oil revenue because it’s facing its financial crisis. So for OPEC plus, not OPEc, you have Syria in there and that’s how that one’s going to play in for that one. And OPECs pursuit of market share through the strategic production heights align seamlessly with external pressures like sanctions, but we all know sanctions don’t work. [00:07:16][47.6]
Michael Tanner: [00:07:17] Well, we know that for a fact. No, I completely agree. So I’m trying to look at who actually wrote this article here. That was me. Oh, you wrote this article? Well, I was going to say it was actually Clark Savage and I disagree with Clark Savage. [00:07:28][11.5]
Stuart Turley: [00:07:29] I know him well. Hey, let’s go to this next story here. Speaking of sanctions, the EU lowers Russian oil cap to $47.60 in new sanctions package, but will it do anything? Michael Irenislav, the great energy writer from Bulgaria I get to talk to every Monday morning, has always said it best, sanctions don’t work as intended. In a bold unilateral move, the European Union has rolled out its 18th sanctions package against Russia and Belarus, slashing the price cap on Russian crude from 60. To $47.60 a barrel and I went and started nosing around what are people actually paying for for Russian crude and they’re paying a little bit more than the $476. They’re paying in the $50 to $5 to $60 range. So they’re actually making a big deal out of this and it really means absolutely wait for it. Wait for it, nothing. This is absolutely a joke. Projections for 2025 indicate a slowdown around 1.4 to 1.5 as overheating risks emerge from inflation and labor shortages in Russia, but inflation is because they’re growing, Michael. They’ve actually had two years in a row of a growing economy and Germany is facing its third year loss. And when you take a look at the old adage, so goes Germany, so goes the EU’s economy. I mean, this is absolutely amazing. [00:09:04][95.2]
Michael Tanner: [00:09:05] I mean, I think it’s, it’s if, if, what do they say? You know, first time, shame on you. Second time, shame on me. A third time. You’re an idiot. Well, we’re on the 18th go-around at all this, so I don’t know what, how that phrase rolls out to the 18 one, but it can’t be good, and it can be good for the one who’s putting the shanks on. It’s clear, if these sanctions were working, we wouldn’t need to have more of them because it would be sufficient enough to bring Russia to the negotiating table, which is all they’re trying to do right now. Trump would love nothing more than to settle the Russia-Ukraine war because then he looks like a hero in Art of the Deal. So, it’s, you know, we could get into the politics of that, but that’s not really what we do here. We talk about this specifically from an energy standpoint. So what does this do? This just makes it more difficult for countries who are trying to buy energy to have to go around. You embolden intermediaries who you because you think Russians not being able to sell The Royal. No, they’re using intermediaries. They’re using countries that don’t mind doing business with people that are sanctions. And what does it do? It artificially drives the price up. Cause the reason why Russia has a strong demand for its crude is because it’s a good quality crude. I love how they say this price cap production. 4760 is paired with a quote dynamic review mechanism allowing for regular adjustment to the keep effective to keep the pack effective and in line with fluctuating global prices that now they’ve just said we’re setting it up for the 19th the 20th and the 21st sanction because we’re gonna continue change this I mean I we’ve talked about the set nauseam stew I love this order from Irena slough sanctions don’t work [00:10:39][93.9]
Stuart Turley: [00:10:40] And you sit back and take a look, the shadow fleet, there’s roughly 1,500 tankers in the shadow fleet, depending on, you know, mix and all that. Russia has about 700 of those tankers. And so they are now up to a total, bringing the total of 444 sanctioned tankers that they have on there. Michael, what happens to a sanctioned tinker that can’t unload? It gets sold and buys another one. So it’s just a, it’s a big it’s a gigantic what’s the where you have a cup and then you have to find the pee under the cup you know all he does is move a tanker over here not a pee that you a pee the eat a green pee you know how you try to okay wrong pee for our podcast listeners michael was like stuart you just cross the line no it’s at green pea under the shell game you know you’re playing the shell game now this is absolutely the biggest shell game in the world and they’re just doing with tankers. Let’s go to the next story here, Michael, Trump interior department moves to dismantle regulatory favoritism from wind and solar projects. Michael, I saw this clip of secretary Chris Wright in the cabinet meeting, and it was phenomenal. I absolutely loved it. And then a follow along in this cabinet meeting. I saw him interviewed on Fox. Secretary Chris Wright on Fox. And I absolutely want to give Chris Wright, again, another shout out. It’s not like I’m over here going, go Chris, it’s because he understands business. American energy dominance is driven by U.S. Based production of reliable baseload energy. Not regulatory favoritism toward unreliable energy projects are solely dependent on taxpayer subsidies and foreign sourced equipment. Let me say that again, foreign source equipment. There is a gigantic problem with the grid and the amount of gear that has back doors in it, in a grid security problem by removing these artificial Department of Energy to promote grid stability, job creation, and energy security. This is absolutely critical and marry this up with last week’s discussion of the Department of energy’s grid security. Let me just go through those numbers. We have 20 gigawatts of nuclear and natural gas, but they have 200 gigawatte on the books for projects coming on. That’s 180 gigawattes of natural solar and wind that won’t help the grid out. So he’s got a horrible backlog and a horrible problem they’re trying to fix. That’s exactly what he’s talking about. [00:13:26][166.1]
Michael Tanner: [00:13:26] Absolutely. It’s truly incredible. I think we have the right leadership, though, in the White House from Secretary Wright on down to be able to make this happen. I’ve been a little bit, I don’t want to say on Secretary Wright’s case. This is coming from a guy who used to work in oil field services, and now he’s talking about drill baby drill. I wonder how all his former employees feel about that as Liberty is getting their contracts slashed left and right. It’ll be interesting to talk about that with Ron Geist, who’s their new CEO who’s coming on your podcasts do very soon. [00:13:57][30.4]
Stuart Turley: [00:13:57] Yes, and he is a cool cat. [00:13:59][1.7]
Michael Tanner: [00:13:59] We love Ron, we love Ron. But no, I think it’s interesting. I love this quote, like you said, by removing these quote, artificial advantages. And that’s exactly what you have to call these things. Artificial advantages designed to subservient the. [00:14:11][12.4]
Stuart Turley: [00:14:11] Yep. And I am very happy that we have real leadership. And that’s what I took away from that Fox interview was the fact that Chris Wright can articulate business issues that Fettergram could not actually do. [00:14:26][14.1]
Michael Tanner: [00:14:26] Say that anymore now, Federer, you can’t say that anymore. [00:14:28][2.4]
Stuart Turley: [00:14:29] Yeah, Granholm. I even called her Fedder Graham. Sorry. That’s funny. That said, for me, man. [00:14:34][4.7]
Michael Tanner: [00:14:34] Let’s jump over and quickly cover oil and gas finance, guys. But before we do that, let’s quickly pay the bills. As always, thank you for checking us out. World’s greatest website, dnrgnewsbeat.com hit the links in the description below. You can see all the timestamps links to the articles. You can also subscribe to our sub stack, the energy newsbeat.substack.com the best place to stay up to speed daily in your inbox. A unique analysis based upon what Stu and I are seeing in the marketplace right now. I’m going to be writing a story this week that’s actually going to be talking about. One of the stories that we’re going to be covering, which is the Chevron Exxon mobile debacle and where I think Exxson goes from here, but you’re going to have to sign up for the sub stack to get that a great way to support the show is by signing up for a paid subscription there that really helps us keep doing what we’re doing. Also shout out to friends of the show. Reese energy consulting guys, if you have all have to deal with, if you’re an upstream company and you have midstream problems, call Reiss Energy Consulting there. The R. Favorite midstream consulting firm, you know, their executive Steve Reese, who is the CEO and founder of that company has been on our podcast multiple times. We love everybody over there. They have the absolute top top business folks when it comes to the midstream space to help solve all your problems, whether you’re upstream and you need help with, with, and anything when it comes to marketing, you’re thinking about building a new pipeline or, or trying to negotiate with. Energy Transfer to get tied in to your new drilling pad. Reese Energy Consulting can help you there. If you are a midstream company and you need any backup support or any projects you’re doing, you need a third party opinion. These are the experts to talk to you guys. ReeseEnergyConsulting.com. They have clients that range everywhere from two guys in your garage all the way up to the largest publicly traded companies. So if you’re wondering if you are right fit for them. You are. And finally, guys, check them out, reeseenergyconsulting.com. Last but not least, if you guys are considering investing in the oil and gas space or you’ve been hit up about investing in oil and the gas space and you don’t know what to do, invest in oil.energynewsbeat.com, fill out our oil and gasoline portfolio survey, and then we will send you a great e-book which walks through. Really the nuts and bolts of what it looks like to invest in the oil industry. Obviously, if you are in the Oil and Gas business, it’s going to be extremely obvious to you, all this stuff in the e-book. But if you don’t come from the Oil and Gas Business and you’re looking to dip your toe in and diversify your portfolio a little bit into the energy space, it is a great, great overview on how to… Get started and things to look for on questions to ask. And also depending on how you answer that formula, we might go ahead and shoot you and point you in the right direction. Guys, that’s invest in oil.energynewsbeat.com or hit the link in the description below,. [00:17:17][163.0]
Michael Tanner: [00:17:17] Stu. But let’s go ahead and look at some top line indices still. It was a wild, wild Friday from an oil price standpoint, up, down, left, right. Top line indices from S&P 500 and NASDAQ, they were basically just flat. Two and 10-year yields dropped 9 tenths of a percentage point and 7 tenths percentage point dollar index dropped about 16 tenths of a percentage point Bitcoin up pretty pretty flat on the weekend hundred eighteen thousand dollars crude oil dropped about two dollars or excuse me about a dollar fifty two point two percentage points all the way down to sixty six oh five Brent oil dropped itself about a $1.10 on that down to 69.28 I mean natural gas actually jumped about six tenths per percentage point to three dollars and fifty six cents you know I think really Stu what we saw from oil Pricing pricing and why they dropped it had really nothing to do with the sanctions per se the oil price cap because we know that Doesn’t affect anything what really happened was the threat and this is where I think it gets really interesting is Trump not only said we’re going to now have this new oil price cap we’re also going to put tariffs on everybody who buys your crude oil which could be devastating to demand specifically China and India who buy majority of that Russian crude that, as Stu pointed out, ends up through Syria. So I think that’s really what we saw market action wise. Why is crude oil prices down $2? I think for that reason specifically. So it’s going to be absolutely, in my opinion, it’s it’s, it’s gonna be a pretty crazy day. Basically, what he’s doing is, is, you know, he’s going tariffs all around. And we also did see that US consumer sentiment improved in July, but we also didn’t see inflation continue to decline, which is actually. Really what we want to see, you know, we’re talking about tariffs all around, but really interesting. The other things we saw was, was rig count. We saw us rig count come on. It actually was up seven, seven rigs week over week. Now I love how we got to dive into those numbers a little bit more Stu oil rigs actually dropped by two gas rigs, actually jumped by nine. Tell that with the reflection of where the markets are. So yes, rigs are rising. It’s where are they rising? So where are you natural gas bulls? Now’s your time to shine. We also look at the U S frack count spread. We lost about six frack rigs last week, which is pretty interesting, but I want to close with covering Chevron closes Hess acquisition after winning Exxon legal battle guys, this is something that’s been in the works now for over a year. We’ve done multiple podcasts on this. I’ve did a really great long form podcast with good friend of the show, Bennett Williams, when it comes to this. But finally, we have the answer Chevron. Will close its acquisition with Hess after winning a pretty long-winded and I think what this article rightly describes as a as a landmark legal battle over ExxonMobil to kind of back up here guys so Exx on mobile you know the Chinese national oil company Chinook as we like to call them shook or whatever you want to call him and Hess were the three companies that owned the working interest in Guyana, which has basically become the largest oil discovery over the last 15 to 20 years and holds more than 11 billion barrels of oil and has truly turned Guyana into probably the fastest growing oil state in the entire world. Chevron attempted to purchase has all the way last year at the beginning of 2024. Exxon and Chinook actually decided to basically file arbitration saying that in the joint operating agreement that they had with HES, they had a first right of refusal or what’s called a rofer in order to bid on Guyana’s assets before they got sold. Chevron said, well, we didn’t bid on Guiana assets. We bid on all of HES and this is a merger and this is not us buying the acquisition or just us buying Guiana. And, you know, Exxon said, no, the way we wrote these agreements has everything to do with You know, we’ve carved that out. The quote that came out from Exxon is this, and we disagree with the international chamber of commerce ICC panels interpretation, but respect the arbitration process and dispute resolution process, given the significant value we’ve created in the development of the Gaona resource. We believe we had a clear duty to our investors to consider our preemptive rights to protect the value we created through our innovation and hard work at a time when no one knew just how successful this venture would become. And I think they’re absolutely right. They go on to say that they feel no ill will towards Chevron and are looking forward to continue with working them throughout this prospect. But I see both sides here. I think Exxon feels like they feel like they wrote the agreement. They feel like, they knew what the, let’s just say the sentiment or the, they, they know what they thought they wrote down. I think what Chevron said is you guys, you may have feel one way or the other, but that’s not what’s written down on paper and obviously the ICC courts agreed. Hi! You know, I think there’s, there’s two things going forward. What does this mean for Chevron and what does this mean for Exxon? Let’s start with, what does this mean for Chevon and Hess? Well, clearly this gives Chevron now access to Guyana, which was what they were looking for all along. And probably why the premium was applied to Hess, but I also think what this does is this, is this gets Chevron into the pocket. And I think this is what a lot of people. Are missing about this. Chevron has never had a large presence in the Bakken. Yes, they have some Bakken production, don’t get me wrong, but Hess is one of the largest Bakken operators, and I think part of what this deal in Chevron’s eyes was getting access to a large contiguous acreage block in the bakken, which continues to be one of the most oily regions. In the United States. I also think has has some stuff in the Delaware, which is, you know, really establish yourself as the number one basin in the United States, really overtaking even the Midland Basin when it comes to breaking it down in the breaking it, down in The Hermian Basin. But clearly, like I said, the prize was Guyana. I think this is a great, great acquisition for Chevron and is really, I think it’s going to be extremely accretive to their thing. The real question I think is I’m going to write a larger substack article on this too, because I’ve been thinking about this and where does. Exxon now go okay, like Exxons clearly interested and is been is still sniffing around the M&A market I mean, what’s kind of funny is you you you’ve had Scott Sheffield and we didn’t really talk about the stuff That’s going on with Shefffield and Exxson mobile this week He’s Exxxon Scott Shefill is basically just taking a massive dump all over Exxion and saying even if you want me on the board I have no desire to do that. We know three months ago. He came out and basically said that yeah pioneers is actually out of inventory by 2028. Basically. Tanking there that not tanking the acquisition but really putting a sour note on that acquisition i think the interesting part about this okay so where does exxon go from here i think there’s two companies that come to mind if i was exxson and i was still sniffing around the the m&a and acquisition market where would i look well i think There’s two obvious choices i think you have diamond back and oxy let’s look at diamond back obviously exxons mobile would love to buy Diamondback, they probably have some of the most core Midland and Delaware basin inventory left. They’re one of the lowest cost operators. They’re one of the, the few pure play independence that operate right now. They also have an extremely, extremely robust minerals portfolio with Viper energy, they’re extremely well run from a management standpoint. And I go back to, they have great inventory. Now, I don’t think Diamondback is terribly interested in putting themselves on the market. They feel like they should be a buyer in this scenario. Now the question is, is there anybody for Diamondback to buy? Cause Exxon and Diamondback whatever you think of Diamondback’s inventory, they are on a completely different level when it comes to financial resources. Dioxon’s on here, we love Diamondback, but Diamondback is all the way down here. So the real question is where does Diamondback see himself in all of this? They also just did a management turnover. Does, you know, new CEO, case van hoff, does he really want to, you know, six months into taking CEO, sell the company, I think it’s going to have to take a big, big number. And I also think they feel like if they continue to develop a lot of this inventory that they have, they might even be able to get a higher premium two, three years down the road. I think Occidental to be honest, is a really interesting choice here. A really interesting choice. And to be honest, I could see it happening. Let’s look back at Occidental’s last two acquisitions. Okay. Let’s first start with Anadarko. I mean, that was a bust. I pulled the numbers, basically. Their market cap, since buying Anadarko in 2019 for $55 billion, really about $37 billion, and then assuming they’re dead, their market cap has dropped 15%. I mean on all levels, a disastrous, disastrous purchase. Yes, they got some inventory, sure. Okay, but where’s the accretive nature? To use a fancy finance term, where, where’s, where is the boost you got? Now let’s look at their next acquisition, CrownQuest. I mean, it, it’s no secret around the oil field, Stu, that the, the acquisition of CrownQuests has gone pretty horrible for Occidental. They A lot of that inventory that was laid out and a lot of the inventory they paid for maybe wasn’t the top tier inventory. There’s a lot rumors floating around that there’s kind of a stylistic difference between how Crown Quest would operate and how Oxy operates. And I… In my opinion, I think it’s a little bit early, but I would say that that merger is going to end up not being as accretive as I think is again was originally pitched. So the question is now if you’re Occidental and now you’re you’re entering this land of no man’s land, if you’re the board of directors, let’s take Vicki Hollub out of this because clearly she’s kind of maybe messed up these last two and she hasn’t messed them up, but you’re on the board of directors. Let’s take the CEO out of it. Do you find yourself on the buy side or the sell side in this And it’s my contention that I think Occidental’s board will come to the conclusion that they actually need to be on the cell side And I think ExxonMobil is a natural partner if they, it’s one of the few companies they could sell to. I mean, their market cap sits at about 43 billion. They’re about, the premium you could get is maybe 20%, which puts them at 55, 60, maybe 70 billion dollars, which is right within that fairway that ExxOnMobil could get, you know, I don’t want to say we’re reporting any here because this is a lot of speculation, but I think if you were, if you’re sitting in strategy for ExxONMobil, you have to think… Occidental could be a great next prize. The question is, does Oxy want to be sold? And it would be my contention that if you look back at over their previous M&A deals, their board of directors will say, we’re actually maybe better off being on the sell side of this equation than we are on the buy side. Stu? [00:27:33][615.8]
Stuart Turley: [00:27:34] Interesting concept and let me let me tell you why I think you just hit it out of the park. Oxidol and petroleum was ahead of the curve on the carbon capture and trying to get to the net zero delivering oil and gas product at net zero. The only way they could do that was with funding from the government and all of the carbon capture, carbon taxes, subsidies and everything else. Now, if the department, Secretary Chris Wright and the Department of Energy do not help get legislation drafted and set up, the EU is about to go with UK and Canada and hammer the United States for trade, for Scope 3 emissions, for all this other bool-hockey around it. And quite honestly, the only one that will be able to survive would be an Occidental Exxon Mobil selling products into them because they would be able to take advantage of it. I think that if The legislation is passed, Occidental value drops by 40%. If they don’t Occidental is going to be needed by an American company to try to do business with Europe. [00:28:48][73.8]
Michael Tanner: [00:28:48] Yeah, to be honest, I don’t even think about any of that. I don’t even think their CO2 or their carbon capture or whatever ESG stuff they’re doing has any thinking on this deal. ExxonMobil and Chevron, and let’s even take Chevron out of the equation because they just closed in Hess, you know, Exxomobil makes their money selling oil and gas. Let’s be very clear here, yes, when you go on their website, they’ve got, you know, of their 300 web pages they have on their web site, 900 of them are ESG related. But that’s like when you go to Altria’s website and 900 of their 300 web pages have to do with how safe their product is. You’re selling cigarettes, guys. So not that I’m trying to conflate tobacco and oil, but they’re confusing what their main moneymaker is. It’s selling oil and gas. So yes, do I think those are nice things to put in a press release? Absolutely, but remember, the press release does not. Fall back to eventual financial accretion when it comes to the bottom line. Nobody cares about how the press release was written when first quarter earnings come out. [00:29:49][60.9]
Stuart Turley: [00:29:49] I agree, but the bottom line is going to be impacted by the nutty legislation putting out by the EU and all the fines and tariffs and everything else. And so how much money it’s going to be absent, you haven’t been following how bad it’s gonna be, dude. So either you leave the EU as ExxonMobil and have no products go there. Or you figure out a way that you deal with their bull crap coming. And I’m just saying it’s something to be considered. [00:30:17][27.8]
Michael Tanner: [00:30:18] Oh, it’s a nice to have, I’m not like disagreeing with you and that, but like that’s a, that’s a nice 10% of the overall reason why this acquisition, in my opinion, makes sense. I would say the overwhelming majority of the reason is Exxon is still looking for growth and clearly developing new acreage, as we’ve seen with Guyana, takes years and billions of dollars in time and exploration. And if you want to immediately give yourself more growth… It’s through the M&A market. So yes, I don’t disagree with what you’re saying. I would just argue that I don’t think it’s the main reason this deal should happen. [00:30:51][32.8]
Stuart Turley: [00:30:51] I agree. [00:30:51][0.3]
Michael Tanner: [00:30:52] So, well, this is my favorite segment of the show for the week. Stu, what should we be worried about this week and what are you watching for? [00:30:59][6.8]
Stuart Turley: [00:30:59] Oh, I’m watching for more things, more insanity coming out of the EU. When you talk about some of the things in our earlier segments, what is the definition of insanity? It’s doing the same thing over and over again. And what do we see now? We see the 18th package of insanity from the EU, so you can’t buy this kind of entertainment. [00:31:22][23.2]
Michael Tanner: [00:31:23] Well, all right, guys, well, with that, we’re going to let you get out of here, get back to work. Thanks for checking us out here on the World’s Greatest Podcast. For Stuart Turley, I’m Michael Tanner. We’ll see you tomorrow, folks. [00:31:23][0.0][1863.2]
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