Big Digital Energy

00;00;00;02 - 00;00;31;17
Unknown
Welcome to party, everybody. We have the reigning anchor back, Marc Meyer, chucks out. I'm still here. What say you, Marc? Good morning. That got yanked away. He's a he's a salesman. His time is not his own. So he's off on, enterprising pursuits. A good thing. Sorry I missed you boys last week. That was a good show.

00;00;31;19 - 00;00;55;20
Unknown
Yeah. It was. We enjoyed it, but we missed you. So what's back? Lots has happened, right? Lots has happened. And we got a clip. Right? More of the same. Yeah. This 1AI picked up, I think it was on Friday on squawk. Your favorite in mind? Former speaker of the House Paul Ryan commenting on the, seriousness of policymaking.

00;00;55;25 - 00;01;21;26
Unknown
So Jacob Roll, that clip is the Overton window in our politics is open for all these crazy ideas, but it's closed for like, things like debt reduction. So our politics are just fundamentally unserious right now. And they used to be better, frankly, when I was budget chair in the early 2000 and in the tens, I passed four budgets that paid off the debt, that balanced the budget, that reform Medicare and Medicaid and all of these things.

00;01;21;29 - 00;01;39;25
Unknown
And no one lost their seats over those votes. We we showed, you know, out of Congress. We passed out of the House these budgets that did this. And today you you can't get that. What changed? What happened? Our politics changed. We became populist. Both both parties are populist parties. Most grievance politics, I would argue, is what is being pushed.

00;01;39;25 - 00;02;00;18
Unknown
But we became populist parties and populists believe things like debt reduction. Entitlement reform is unpopular. Therefore, we don't have anything close to the politics we need. But then you will get this stuff done. But I mean, Paul Ryan said our politics are fundamentally unserious, by the way. I looked him up. Do you know what he's doing now? No.

00;02;00;21 - 00;02;32;05
Unknown
Paul Ryan, the equity. Yeah. He works for Mitt Romney's son, Taggert. And they have some private equity fund based out of Boston. This is a man who was speaker of the House during the 2017 tax bill that added $1.9 trillion to the debt. He's not wrong on the diagnosis. He's just an odd choice of doctor. Yeah. And what is what is the total debt curve done since then and since before then?

00;02;32;09 - 00;03;05;19
Unknown
I mean, we're at 40 trillion now. I don't think the Overton window has been open to anything rational and fiscally responsible for two decades. I mean, Congress is the worst kind of reality show. And I go back, I go back to my favorite, Milton Friedman, because he said nothing is so permanent as a temporary government program. Ryan saying something adjacent, by the way, nothing is so bipartisan as fiscal irresponsibility.

00;03;05;21 - 00;03;39;08
Unknown
Biden added 4.7 trillion. Trump added 3.8 trillion. So far, we have so far. So neither party has a debt reduction plan. Neither party wants one. The Overton window is open for Taco diplomacy. The Hormuz tolls Venezuelan oil concession. I mean, we've got so much going on here, Mark. You can't take another week off. I don't know if I can take another week on this.

00;03;39;09 - 00;04;15;27
Unknown
It's just it gets more bizarre by the the day and the week. You know, now it's, you know, kind of launching into our, our first segment. It's Trump's bit of a tantrum over the Fed's intransigence, if you will. And I don't think it's intransigence intransigence. It is it is the bond market reading what's ahead. Right. And so threatening to cut off trade with any country with which the US has a trade deficit, including Canada, we would save $90 billion immediately.

00;04;16;00 - 00;04;42;13
Unknown
Never mind the fact that we get most of our oil sands and heavy oil, which is critical input for Gulf Coast refining, to then produce the best yield for the products that we need that are now in physical scarcity, not shortage, but scarcity. And we've seen what's happened with product pricing, particularly diesel. I mean, Harris I mean, I have a few issues here and we'll get into them first.

00;04;42;15 - 00;05;07;20
Unknown
The fed doesn't take instructions from Truth Social. That's not Norm. I'm not I'm not I'm not a big fan of the fed in general. But they are supposed to be independent. And it's one guardrail. I'd rather we dismiss it overall, but the problem is what Trump is proposing is opposite of the rules. Like he's trying to control the fed.

00;05;07;21 - 00;05;48;02
Unknown
That's a big issue. We know that he's trying to. Second, he wants rates at 1% or half a percent. And inflation is still above target. But inflation is not something you control. And everyone that's try to control it. We talked about this last week. In a week before makes big mistakes. Well and I think you know I think what's ahead if we don't get relief particularly on diesel prices as it starts to propagate, as I've been saying lately in response to a number of things, including, Brian Sullivan last night talking about gasoline prices.

00;05;48;02 - 00;06;21;02
Unknown
You know, we had a record on Labor Day. Doesn't think it's really going to matter to the consumer. What's going to matter to the consumer is diesel. And that touches everything. And then a follow on, if, you know, we have any kind of cold weather in the northeast, the distillate prices are, you know, are starting, coming into the shoulder season ahead of winter at elevated levels, as our, you know, stocks, conversely, are at, at, at least contemporary history, low levels.

00;06;21;05 - 00;06;45;18
Unknown
I just don't I don't see the combination of things, certainly not before November 5th. That is going to make any kind of radical adjustment to this trajectory that we're on. I mean, what's the crux, Fred, is is still 100. I mean, it's it's it's a of norm. So again, I haven't looked in a couple of days, but yeah, let's just say it's around 100.

00;06;45;18 - 00;07;20;19
Unknown
Gasoline is above $4. We've been talking about grocery prices because, I mean, every single thing that we eat, whether it's grown from the soil or it's the beef eating the grass of the soil, all runs on diesel. And it takes six months for crops or in sometimes years. I mean, for for beef, for those, you know, young little cows to grow up to be slaughtered, all that's going into prices and that's October.

00;07;20;21 - 00;08;11;06
Unknown
So we're heading in to a bloody looking October, which is going to be super interesting for elections. But but worse off for us, the consumer. What say you. Yeah, I mean it's a bit of an outmoded or unrealistic lens through which at least Trump's comments are seemingly emanating, which is why we've got the leverage from, domestic ability to produce all the things that we rely on, like Canadian heavy oil and other heavy industry products manufacturing, because we've, over the last 3 or 4 decades, have pivoted hard from a an industrial economy to a service based, consuming economy.

00;08;11;08 - 00;08;27;15
Unknown
You know, I had a professor in college warned, I mean, I was a freshman in college at the University of Texas, and I had a professor warned us about the services economy, and I wanted to debate him, but I think he was right.

00;08;27;17 - 00;08;49;26
Unknown
But we are headed there. I it's going to take every job. We're all just going to be sitting on the front porch eating popcorn. I is not going to take your job. Somebody who knows how to use I will take your job. Thanks, Mark. I just I didn't even I didn't, I didn't I didn't say that tagline as eloquently as Chuck always says it.

00;08;49;27 - 00;09;25;16
Unknown
So anyway, it's, you know, you wake up every day and it's just chaos. There's something new and chaotic in the news flow, whether it's financial, certainly energy, global relations. Certainly. What's going on in Iran, which is now seven months and counting? When it was initially, the secretary of defense, excuse me, Secretary of War Department, scoffed at the notion that we're heading into a quagmire.

00;09;25;16 - 00;09;55;26
Unknown
Well, it may not be a quagmire in the conventional sense, but in terms of political life, the the desperation is starting to creep into the rhetoric. As the end of the runway defined as November 5th, approaches and things, things that should be outside the Overton window in describing what's going on and talking about rational policy that actually addresses some of these issues, all that's out the window.

00;09;56;01 - 00;10;24;24
Unknown
So it's, you know, it's rhetorical barrels, as I used to call them, all of Venezuela. It's, you know, it's just the notion that that we can strong arm interest rates where we want them to go, that the kind of the ambient factors here or the underlying factors and forces are really going to drive us higher towards more inflation.

00;10;24;27 - 00;10;56;29
Unknown
And that's, you know, that's just kind of a unstoppable force that talking about it and suggesting that things are practically doable outside of really what's physically realistic to do, I think you're just going to continue to grind away. And we're just along for the ride for sure. Here's, our favorite libertarian on Twitter. This is her. I said I need a Paul Ryan take from you here.

00;10;57;00 - 00;11;20;02
Unknown
Here it is. Total Rino. He try to be new wave of the old guard. Luckily MAGA movement put an end to him. I don't like MAGA either, but Ryan hedged to start a Romney and they both have politically crashed and defeat as old Bush types. He only ran on being fiscally conservative but pitch new spending programs. That's incongruent.

00;11;20;04 - 00;11;55;13
Unknown
Funny how he hitched his wagon to Mitt Romney and now works for Romney, his son. I mean, see how this works in politics? Yup. See how they're looking out for the people. I did meet him once he came. He came through Houston in the late summer of 2016, when Rhino Fear was peaking about Trump's candidacy. And they were, you know, they were trying to, promote some of the, Texas candidates that we're going to hang out in an attempt to hang onto some seats when this.

00;11;55;13 - 00;12;20;06
Unknown
Yeah, when this kind of MAGA wave really first started building, it was a fascinating conversation. And you could you can really see the fear and the size and hear it in his voice. And Laura and one other around that. We had hosted a conference immediately before the 2016 election, and there were a number of, you know, big mutual fund guys, big private equity guys.

00;12;20;06 - 00;12;43;07
Unknown
It was a bit of a roundtable happened to be around the CMAs, the National, which was really cool. And a lot of the discussion outside of, you know, core energy things and investments that we were there to talk about was just the undeniable and the UN ignore thing that was that was building and going on around us.

00;12;43;09 - 00;13;12;20
Unknown
And I remember one founder of a big private equity fund, when asked, you know, what do you think? And at that time it was still, I think at least conventional wisdom was that Trump was a long shot and he ended the meeting, said, you know, who could possibly win? Which doesn't seem all that insightful now, but back in, you know, kind of call it early November.

00;13;12;20 - 00;13;48;14
Unknown
No, late October 2016. Yeah. You know, the media was spinning it hard that it was still a joke. And, you know, here we are ten years later, the I guess the 3.8 trillion and counting for the second term surprised me a little bit. But when you think about what we're doing, and have been doing since February 1st of, of this year, defense spending is absolutely the fastest way to, to to add to that, that total.

00;13;48;14 - 00;14;27;25
Unknown
And we've got a whole supply side economics thing we've seen in our lifetime. It's but here's the the prophetic piece from our favorite libertarian on Twitter. She says he's a lot like Paul Ryan. He's a lot like Vance of accepting spending already allocated, even though he tried to slash budget on social programs. So maybe we should start watching Vance because he is the most likely Republican candidate for the next president, and we'll see what he ends up doing, because he's right there with him signing those checks, even though he didn't sign anything.

00;14;27;27 - 00;15;11;09
Unknown
You don't think the Republicans find a way to slot Rubio and or C take the number two spot on the ticket? I think Vance has got a strong I don't know. We'll see. We need we'll see. That's a good, good point. Speaking of spending. Chevron being in a class of one so far among the super majors, said that they're going to step up and invest 7 billion through a couple of JVs in Venezuela with some pretty exciting, if not aggressive targets to grow their in-country production.

00;15;11;11 - 00;16;03;07
Unknown
You know, out touting. 600,000 barrels a day by 2031. That's that's not it's a little more than double from where they are today. And they believe that they're all in production costs will stay below $20 a barrel. Last week I said Venezuela is a Venezuela is a layaway plan with no pickup date. And I'm going to say that what I'm thinking right now, I mean, how this is $7 billion, that is complete hearsay because nothing's f ID like you can all that means, is there some team inside of Chevron trying to figure out how to spend 7 billion in Venezuela?

00;16;03;10 - 00;16;38;15
Unknown
But we all know that nothing happens until that project gets greenlit and we're years away from that happening. What do you think? Yeah, I, I I've been saying there's more to do and it has more to do with upgrading the upgrading capability in Venezuela, a Canadian heavy barrel is very different than a Venezuelan heavy barrel, which is routinely mostly just spiked with diluent, which, oh, by the way, cost money.

00;16;38;17 - 00;17;17;11
Unknown
I mean, we're talking about essentially condensate to be able to get it to stabilize and flow and transport. And so since 2012 or 13, when Maduro took over, you've kind of had that wedge of historically Venezuelan imports coming into the Gulf Coast, pretty much displaced by Canadian heavy. The spec is, you know, incredibly good for the Gulf Coast refining complex to be able to, to maximize, yields and, and optimize the slate.

00;17;17;11 - 00;17;40;13
Unknown
And so that's not something that's going to happen overnight. And, you know, I think, Shygirl has pointed out, look, we're talking about stocks when we when we talk about the 65 billion barrel reserve number that we've got our hands on and nobody really knows what proved reserves in Venezuela are, they're just touted as the largest in the world.

00;17;40;16 - 00;18;06;04
Unknown
Most of it's in the Orinoco Belt. Heavy. How do you think every every fracking horizontal play ever talked about proven reserves? I mean, that's the float. That's the plug number to get to get financing. Right. And and so, you know, how do you value that. What's the timing of actual flows and growth in those flows. Is the real question here.

00;18;06;06 - 00;18;31;25
Unknown
And I'm just saying that it's not going to happen without multiple tens of billions and multiple years of surface capital investment, meaning all the pots and pans and pipes that you have to build to affect that upgrading that will then make it competitive with Canadian crude. I don't know the difference between the two. I just know Canadian is superior because of the upgrading technology and processes that they use.

00;18;32;01 - 00;19;00;04
Unknown
Venezuela's more more kind of like a, you know, a a garage operation where you've got some diluent to spike and you put it on a boat. And so even though the water and floating in through the Gulf of Mexico into the Houston Ship Channel or on the coast is 90 degrees, it's still not warm enough to warm that slush slug that is rolling out of Venezuela to the refineries.

00;19;00;06 - 00;19;30;07
Unknown
And then crude is much higher sulfur content then, than Canadian upgraded crude. Here's my question, though. I'm I'm pretty sure like we took a few arrows, we threw a few arrows at Mike Wirth and Chevron's kind of like at the bottom of our respect list. And I know Mike listens to our show. So here's my question. Did we just date him into making this investment?

00;19;30;07 - 00;20;00;15
Unknown
Because here's what's interesting. Exxon Words called it UN investable. ConocoPhillips has 12 billion in claims. Total's not their shell's not their BP's leaving Britain. So they definitely don't want to go to Venezuela. Chevron's alone in this I mean this is kind of the first mover advantage or could be last man standing, but are they kind of seeing that they had no opportunity?

00;20;00;15 - 00;20;23;05
Unknown
They were getting too deep into the LA story. Trying to go to green even though they never really did. Is this actually the big play for Chevron to say, we've got to own something and this is the opportunity? Well, I don't think it was necessarily a first mover situation. I think it was a more or more of the fact that they never left.

00;20;23;07 - 00;21;08;05
Unknown
They, they, they accepted Chavez's terms and have been in country ever since. And so this is, you know, not having what's already on the ground and in the ground there turning into a complete sunk cost. You know, we'll see. But you've got rystad out there saying the aspirations of the kind of growth rates in terms of the target of ultimately, the total country returning to its pre 1999, 3 million barrels a day peak, that's going to take a decade, and 7 billion on 183 billion is a start.

00;21;08;05 - 00;21;34;04
Unknown
But it's not much. And I think one of the yeah keep going keep going. One of the one of the interesting things to watch is kind of who's next. And every time I say that, I always think of the famous who album cover. But yeah, I have we heard any pronouncements out of Exxon and during woods in particular saying, wow, you went in there and changed things.

00;21;34;04 - 00;22;05;22
Unknown
Now it's investable. I mean, they they've got plenty to do. Exxon and quite frankly, Chevron to now that they're in Stabroek, they've got plenty to do in a much higher quality situation and regime in Guyana. And now that you've you've kind of put a handcuffs on the Venezuelan regime, you know, you're you're not as threatened by things like, you know, vans invading a ski bow and, and claiming two thirds of Guyana as theirs.

00;22;05;22 - 00;22;31;04
Unknown
And, you know, making harassment runs offshore to, to threaten Stabroek operations. You know, Chevron through House has got a pretty big piece of that. I do think it has a lot to do with the fact that Chevron has always been there throughout all this, that we've got to try and make a go of it. What do you know about the infrastructure in Guyana versus Venezuela?

00;22;31;07 - 00;23;04;15
Unknown
Totally different. I mean, we're talking about deepwater episodes or offshore. You know, you've got you've got, you know, somewhere in the 30s API type crude, you got a lot of gas. Right. And so there's there's a very stable regime in Guyana. If you remember the Guyanese president, we talked about this probably a couple of years ago, the one that got absolutely lectured by the BBC reporter or journalist, and he turned it around on him.

00;23;04;18 - 00;23;32;26
Unknown
This was all about, you know, how dare you produce these billions of tonnes of CO2? And he said, look, we've, we've we've maintained 98% of our forestation and created one of the world's in the Amazon's most helpful carbon sinks. Meanwhile, in the UK, you've deforested the country by two thirds in the past, in the past 50 years. We need to pull up that clip.

00;23;32;27 - 00;24;11;05
Unknown
So, Jacob, we're going to do that. Let's pull that clip up and play it. That's perfect. Over the next decade, two decades, it is expected that there will be $150 billion worth of oil and gas extracted off your coast. It's an extraordinary figure, but think of it in practical terms. That means, according to many experts, more than 2 billion tons of carbon emissions will come from your seabed, from those reserves and be released into the atmosphere.

00;24;11;08 - 00;24;35;03
Unknown
I don't know if you, as a head of state, went to the cop. Let me double right there. Let me stop you right there. Do you know that Guyana has a forest forever? That is the size of England and Scotland combined? If forest restores 19.5 gigatons of carbon, if forests that we have kept alive, a forest that we have kept alive does not give you the right.

00;24;35;08 - 00;24;58;21
Unknown
Does that give you the right to release all of this carbon from that? Give you the right to lecture us on climate change? I am going to lecture you on climate change because we have kept this forest alive. The stories 19.5 gigatons of carbon that you enjoy, that the world enjoy that you don't pay us for, that you don't value, that you don't see a value in that the people of Guyana has kept alive.

00;24;58;23 - 00;25;26;20
Unknown
Guess what? We have the lowest deforestation rate in the world. And guess what? Even with our greatest exploration of the oil and gas resource we have now, we will still be, net zero and will still be net zero. So on, on Venezuela, the you know, the you've got Delsey who is part of the of the Maduro politburo, if you will, one of the cronies.

00;25;26;23 - 00;26;03;12
Unknown
You've got her under your thumb. My question is, what's really changed in terms of how the the Venezuelan leadership conducts its business? You know, there was a tremendous amount of corruption and criminal activity. Did that just go away overnight? And oh, by the way, a lot of these assets that we're talking about have for the last 25 years, been maintained air quotes and operated by Russian and Chinese parties.

00;26;03;14 - 00;26;28;27
Unknown
And, you know, we're kind of nudging those two out of a stronghold in the Western Hemisphere. And we've talked about this before, too. And something we should have been paying more kind of international attention to in terms of international relations and geopolitics. When most of our focus has been and now necessarily on the Middle East and Russia, you got you got China and Russia setting up camp in your own backyard in Venezuela.

00;26;28;27 - 00;26;57;10
Unknown
And they've been there for, you know, since since Chavez took over. So, yeah. What kind of play this the whole what is it, Silk Road or what's the Chinese term for, for for going and investing in all these different countries. But but the reality is, if I'm the Venezuelans, I want to own my infrastructure, I want to own the assets.

00;26;57;10 - 00;27;24;04
Unknown
But the reality is that they're not good at operating. Like they just really don't know what they're doing. They don't have the latest technology, they don't have the best people, not because they're not smart. They just like how many Venezuelans are oil and gas trained and I've been working in other fields, etc., etc.. Yeah, but they're going to they're going to have to trust and go out, at least for the next 10 to 20 years.

00;27;24;07 - 00;27;49;11
Unknown
Operators that are the best in class. Yeah. And they have a legacy though because PDVSA pre Chavez was arguably the best industry in the world and there were a lot of technically and operationally competent people who left the country because they could. They're gone. Yeah. So they can do it. They just need to rebuild that same culture and capability within PDVSA.

00;27;49;14 - 00;28;22;26
Unknown
Yeah. The other thing, you know, back in the, I guess, the recasting of the Bolivarian Constitution, the reserve assets in Venezuela are owned by the people. They're owned by the Republic, very similar to Mexico, which has never even broached turning over foreign ownership of the actual in-ground barrels. Right. And so you've got a regime that has made a deal with the US, apparently for 65 billion barrels.

00;28;22;26 - 00;28;54;27
Unknown
So what is that? You know, pick a number of what their total reserves are, but call it 10%, maybe 15% of what's actually technically recoverable. That's you know, that is a big kind of work around the Venezuelan constitution as it stands today. Yeah. So, you know, who knows. And, you know, we've seen it before where, host, host governments and national oil companies will just change the rules in the middle of the game.

00;28;54;29 - 00;29;21;28
Unknown
And so, you know, you're exposing 7 billion going forward in this first tranche, like Chevron's doing, under, I would assume fairly favorable terms relative to what they've been experiencing, during the years that they were there under Maduro and Chavez, after the I don't know what you call it, a renationalisation, probably their third in the country's history.

00;29;21;28 - 00;29;45;21
Unknown
And Exxon got burned a couple of times, and they're going to be very they Exxon and others are going to be very cautious about a brand new entry or reentry. Chevron is different. And so I think one of the most interesting things to watch here is how long the Chevron go it alone. They can't do it by themselves.

00;29;45;23 - 00;30;17;19
Unknown
No way. So I think this is a good hype story. It's it's a good distraction for Wall Street for Chevron just to kind of stay off the radar and keep their ads down. But there's this story is not over. And the good news is, on BD, we have years to tell this story. I mean, moving on. What's happening on the other side of the world?

00;30;17;22 - 00;30;40;13
Unknown
Well, we've got a war going on. Yeah, this about this. Well, the Secretary of Energy was out over the weekend on the Sunday news shows, which I'm sure you watch with rapt attention every Sunday. Meet the Press, Face the nation. I used to actually. I used to watch it, but it's it's got crazy political on so many levels.

00;30;40;13 - 00;31;03;03
Unknown
I can't do it. Yeah. I'm. I'm getting unlike. It's too old for me. Yeah, I think I think I quit watching after Tim Russert passed away. Although I catch a snippet or two. I didn't see the Secretary's comments, but saw some highlights, and he's out there explicitly saying that we may never reach a negotiated nuclear deal with Iran.

00;31;03;04 - 00;31;34;13
Unknown
Now, why is the Secretary of Energy commenting on on nuclear and Iran deals and not Secretary of state, because the Doe has oversight of the nation's nuclear right to business right? They don't they don't they don't set production targets for the oil and gas industry and force them to spend capital, increase rig count, despite the fact that that's how drill baby, drill first got interpreted by most of the public.

00;31;34;13 - 00;31;43;22
Unknown
So yeah. Is this a this kind of a.

00;31;43;24 - 00;32;17;22
Unknown
Kind of throwing in the thrown in the towel because I thought Midnight Hammer obliterated things. And I think, you know, we're, we're now in the intractable position that we know they've got stuff hidden elsewhere. And if we're going to follow through on what is consistent, consistently been the only consistent thing in the objective for this war, and that is completely eliminating Iran's, capability to produce and possess a nuclear weapon.

00;32;17;24 - 00;32;48;14
Unknown
Yeah. I mean, think about it. What's in our best interest as a nation if Iran sort of defunct, while we suffer in some ways higher prices for diesel ultimately, which is going to make everything more expensive, we're squeezing the rest of the world and making it much more difficult. I think it what and ultimately what it does is gives, gives us negotiation power.

00;32;48;16 - 00;33;18;15
Unknown
I think that's what this whole comment by Chris Wright was, is that we may never reach a nuclear deal with Iran. Well, who has the which country can wait the longest? We can China, Russia, they all of them. And I mean, when you think about Russia doesn't want Iran, but, you know, they have their own issues with Ukraine, but Europe and Asia is reliant upon the Middle East for oil.

00;33;18;16 - 00;34;06;03
Unknown
We are too. We are too. But if Iran's out of the picture, we've got Venezuela. We got Guyana. We, the Saudis will continue. In some ways it might benefit us the most. So I can see the long term player. Yeah. And basically saying that, you know, negotiated outcome maybe up to whoever is in the next administration, which tells you that, you know, that diplomacy is kind of dead and we knew from the outset and from past iterations on this stuff that the IRGC being in control is not going to cross that line that we've drawn in the sand.

00;34;06;06 - 00;34;31;21
Unknown
Yeah. It's leverage. I see this only as leverage. And by the way, whoever blinks first is going to bring us back to the table. So again, I think Europe is the one that's going to have they're going to have the biggest negative impact in Asia as well. Like they're those countries that require cheap energy has to go to the Middle East.

00;34;31;22 - 00;35;00;15
Unknown
So what are you going to do? I think I think all that does is, is maybe in some ways keep some of these projects and the rest of the world more interesting and potentially profitable, because that's I mean, what brought the Canadian oil back? You know, it was dead, remember, like in and it was like, I don't want to hear Canada again because it's too expensive to mine out on the ground.

00;35;00;15 - 00;35;26;14
Unknown
But I think in some ways, who knows what's pushing why the US is doing this, but is definitely making more projects more interesting and gives us more leverage. We don't have to come to the table, right? And, you know, while we're continuing to tighten the grip economically on Iran, it's just a game of, you know, anybody can hold their breath underwater for a minute.

00;35;26;14 - 00;35;56;15
Unknown
Let's see who can do it for ten, Ryan. And because we don't know what's going on in the ground in Iran, it's as opaque of a situation for the everyday citizen. So we have no real idea. But this has got to be hurting a lot with the blockade and months and months of constriction and their export revenues. And I can I can see this being a Trump sort of Trump weighing in on this.

00;35;56;17 - 00;36;29;14
Unknown
It gives us purpose to be in that, in that strait and watching activity and controlling it, which I'm never I'm not a fan of doing that, but it definitely gives our Navy the right to be there because we're still unsettled. There's still no plan. I all of this sort of makes sense from a leverage perspective. Yeah. And Senator Kennedy, who's usually good for comedy and a good quip or two when he speaks, he did say something.

00;36;29;16 - 00;37;04;24
Unknown
I don't forget the actual set and the actual setting, but, I think a news interview over the weekend, they said, look, oh, Hezbollah is has been tamped down. Hamas is in disarray. You've got all kinds of proxies in Iran themselves, you know, are we safer? Seven plus months into this, because of the action that we took and the and the squeeze that we're putting on Iran's ability to to to fund and and execute terrorism through its proxies.

00;37;04;24 - 00;37;36;11
Unknown
I think the answer to that is yes, but at what cost? Right. And so, I think the administration and people in Congress are saying things squarely with the focus on November 5th and whatever rhetoric they can get people to believe, like all of a sudden we're going to refill the spro with Venezuelan crude. For sure. You're on to something here.

00;37;36;13 - 00;38;13;02
Unknown
$40 oil is imminent. Yields are going to come down. Interest rates are going to come down. None of the factors, none of the fundamental factors are pointing in that direction. And they're just fighting for every piece of mindshare and opinion change they can. Because the longer this has gone on and the closer it gets to November 1st, the the tougher the believability is, because we don't see it at the pump, we don't see it in terms of any kind of diplomatic resolution.

00;38;13;04 - 00;38;37;27
Unknown
The other thing is that, you know, some way we got to keep, we got to convince the Ukrainians, quit blowing up Russian refineries. I mean, you're right, Mark. You summarize it so well. This is just one big political exercise. Yeah. What it is. Because all roads are pointing to high inflation. I asked prices and November 5th people vote with their pocketbooks.

00;38;37;29 - 00;39;14;05
Unknown
It might be a bloodbath for the Republicans because of what's happening and what what is what is accompanying all this is either poor policy making decisions or no decisions that really, truly help or impact positively upon long term energy policy. I argue that over the course of my career, we've never really had good national energy policy. It's lurch from administration to administration, election cycle to election cycle.

00;39;14;08 - 00;39;42;20
Unknown
And you had a you had a back and forth on Twitter this week on talking about, I think, staying out of the way. Right. And so maybe a little sidebar discussion on that, before we go to the next segment. But if you remember back last year, John Barrasso and Joe Manchin had co-sponsored the Energy Permitting Reform Act.

00;39;42;23 - 00;40;10;24
Unknown
That was 70 ish. Pages. I read the whole thing, and it was simple and streamlined. It was putting, agencies and regulatory, decision makers on a on a tight clock where if they didn't respond, it was taken as approval and there was no recourse. And so getting out of the way was, was really at the at the foundation of that EPA aura.

00;40;10;26 - 00;40;35;27
Unknown
And, of course, Manchin left the Senate or left Congress altogether, and we haven't heard anything about that other than through the early days of the administration, the executive orders that were designed to roll back a lot of what President Biden had put in place. So I think that's one of the most important things and actually is a casualty of what this is devolved into politically.

00;40;35;29 - 00;41;02;28
Unknown
And so your your comment was to someone, I forget the Twitter handle, but really Paxton or Talarico, who's got the who's got the wherewithal to go into Congress and do the real coalition building that you would need to get something like, an energy permitting reform act out of subcommittee to a vote in full Congress, and then pass in the legislation for the president to sign.

00;41;02;28 - 00;41;25;05
Unknown
I, I happen to think it was one of the most effective pieces of legislation that I've ever seen, certainly in this day and age. But the getting I mean, the getting out of the way is that is at the root of it all. Yeah. And so you you definitely someone I was taking sort of a libertarian approach and neither one of them.

00;41;25;08 - 00;41;53;04
Unknown
But but Paxton historically would be a much better person because Republicans are more pragmatic about energy versus Talarico. You know, what was his comment about? We should shut oil off or, you know, like he he's gone after sort of the nut jobs on the left that just have no bone in their body of logic. And so that's not going to work.

00;41;53;07 - 00;42;34;02
Unknown
So but that the ultimately the government needs to get out of the way. And that's where the Manchin bill was actually interesting. At least it kind of cut through some red tape. But, you know, I'm not going to we're not going to see that anytime soon. I believe. Yeah. No, I actually think we're doing a lot of damage to the ability to reconcile across the aisle and come up with a pragmatic framework for energy policy and more specifically, permitting reform, which is what is needed to really kick things into high gear.

00;42;34;02 - 00;43;04;29
Unknown
Now we're seeing it on the on the data data center side, where we've got a lot of Nimby populism that is turning, as we've talked about before, that is turning historically free market, almost libertarian, governors into something like progressive populist, right, because they're trying to win an election. And that's unhelpful for kind of a long term energy policy future of the country, and quite frankly, for the world, because we ought to be leading that.

00;43;05;01 - 00;43;36;04
Unknown
All right. Our last topic is an interesting one. Mark Citadel's hunt for physical shale assets. What are the stories? What's coming out? Well, they're they're on the hunt for oil assets, whereas before, you know, they successfully entered the, shale gas game with the acquisition of Paloma from Ncap. They also lost out on the wildfire deal to Magnolia.

00;43;36;04 - 00;44;09;00
Unknown
So they are looking for oil. Obviously Citadel's got both paper and physical trading. You know, I think the Haynesville play through Paloma is all about LNG and data centers stating the blindingly obvious, with a much more, integrated control of the molecule, being able to time things, with respect to those assets and having physical control and operational control of those assets.

00;44;09;03 - 00;44;38;05
Unknown
So, you know, the the oil side is, is a bit more interesting. I think the gas side is fairly straightforward. You sat in an organization and, you know, a bunch of the the commodity traders as well. What does this mean from a I don't know, a or does it mean anything from a hedging standpoint for those, those houses that have got these big physical trading organizations?

00;44;38;08 - 00;45;07;10
Unknown
You know, I mean, I can only speak for shell, but it seems to me that the big operator, the big traders that own assets are, are, are just trying to balance the books, like they're not taking a lot of extra risk because I can speak at shell. Our CFO hated the trading group. It was a lot of risk, a lot of capital.

00;45;07;13 - 00;45;41;01
Unknown
And and there was no asset underneath it. And it's a drag on your multiple. Yeah. Oh and oh definitely. And it drags your multiple down. Good point. But we opened the show a few weeks back where I talked about the difference between financial commodity traders and physical traders, and we talked about John Arnold, Andy Hall, Marc Rich, the men who made generational wealth, who know where the molecules are but also had control over the molecules.

00;45;41;03 - 00;46;26;20
Unknown
So I think what we're seeing here, it's knowing that the barrels are the edge. Owning the barrels is the ultimate edge. And for a company like Citadel, they ultimately can take a lot of risk. And and really in some ways control. They're not ever going to control pricing. But when you own the asset you can like especially today if you own molecules, I mean, everyone's betting and if we and if citadel's in the ear of our Secretary of energy who just said, hey, the table Iran, we're never going to get to a deal, what do you think that does for Citadel?

00;46;26;23 - 00;46;51;03
Unknown
It just unleashes their ability to print money and have a lot of opportunity. So in many ways, they have lost out. And they're, I mean, desperate to get out. And it almost I mean, does it really matter the price? Of course it does. But they just need to get it. Yeah. Let me say and, you know, I think it makes a ton of sense.

00;46;51;03 - 00;47;53;00
Unknown
And in my direct observation, the traditional producers are not as good at as sort of managing risk. And so the, the very sophisticated active risk management that Citadel is about and all of its books, all day, every day, I think is highly applicable here and have been through dozens, if not hundreds of internal hedging debates. When you look at, a one dimensional MP, for example, that produces and sells oil and gas going completely exposed into a higher volatility environment, whereas, you know, I think back to when I covered Xto, for example, like didn't hedge as a, you know, as a that wasn't a primary objective was to clip premiums on good hedging

00;47;53;00 - 00;48;22;10
Unknown
decisions. It was setting a floor to their operating cash flow so they didn't have to whipsaw their activity all around, which, you know, creates a lot of, friction in the organization and can ultimately, you know, have cost creep in because you are always going up and down in terms of your size and your organization. It's it's it's just a really inefficient way to run the business.

00;48;22;12 - 00;48;51;05
Unknown
So I, you know, I think they were kind of early in what I believe producers ought to be in terms of actually running the business and using hedging as a tool to set the floor. On the downside, to maintain, operational continuity, because, you know, as a, as a public company, at least in the old days, your production targets were your quarterly bread and butter and any misses really hurt you.

00;48;51;05 - 00;49;16;01
Unknown
So if you know, if you've got that production where you have surety around operating cash flow because you've hedged systematically. Yeah, it's costly. You're you're buying insurance. It's kind of like business interruption insurance in my view. And I think Citadel's a little bit different. I think this is more of their their framework and philosophy of how they manage risk and all of their different, different flavors of books that they, that they, that they run every day.

00;49;16;03 - 00;49;48;19
Unknown
They're already they already spent almost 1.5 billion on gas production via a tax. They bid on wildfire and lost a magnolia. They're talking to multiple PE firms about oil weighted assets. This is not nibbling. I mean, this is a systematic acquisition program in my mind. And the fact that they lost wildfire is interesting because that tells you the strategic still value of the barrels more than the traders do at current prices.

00;49;48;19 - 00;50;29;24
Unknown
But Citadel keeps bidding, which means either they think the strategic are underpricing the geopolitical hedge value, or they think the next year will be cheaper. I don't know which one it is. What do you think, Mark? I think they're underpricing the value. Of hedging. And so, and maybe, maybe in Citadel's mind, it is enough of a physical control addition or enhancement to their hedging mechanism, whatever that is in their, in their physical trading.

00;50;29;27 - 00;50;58;05
Unknown
That's now in play on the oil side. Again, I think the gas side is a lot more straightforward because you are backstopped by long term LNG contracts and take or pay on things like, gas to power. And go and gas is easier to turn on and off so to speak. Activity levels maybe even bring on a lot of gas and Haynesville a few rigs and hurry, you can burn it.

00;50;58;07 - 00;51;30;06
Unknown
You right off the pipeline. You can use it. I mean, it's interesting the the here's my question. I wish Chuck was here, but I'm going to ask it to you. Is this smart money calling a bottom and shell valuations or is PE exiting and the trading gas are the buyer of last resort because Warburg Pincus and Kane Anderson just sold wildfire in cap sold Paloma.

00;51;30;09 - 00;51;52;20
Unknown
The PE guys are taking money off the table, which might mean they have to pay back their investors and they're going to raise another fund, or it means they think its price is high and the trading desks are the ones writing the checks. So when the builders sell and the traders buy, who is right about where the valuations are headed?

00;51;52;22 - 00;52;27;28
Unknown
I don't think it's a PE exit. I think the balance that we had with PE walking over and saying, we're going to get into alternatives and you know, all the new green tech and setting up portfolios around that. And I think one of the PE had said back then that something akin to we're entering the last days of the age of oil, which was what, and who's Arcos old CEO, who said that right before the big bounce in 99, basically threw in the towel and sold to BP.

00;52;28;00 - 00;52;53;12
Unknown
I can't remember his name. But I think the opposite for the way PE looks at it, I think I think the world believes structurally things are changing, at least for the next 10 to 20 years, just given what's happened. Yeah, yeah. And so there's a play there as inventory and core and tier one get a little skinnier in places like the Permian.

00;52;53;14 - 00;53;24;29
Unknown
And the best PE firms are very adept at putting together very attractive packages that the strategic are going to need to keep the plate spinning, for their, you know, their market share of, of the equity market, which is still laughably low relative to kind of the earnings contribution, the overall S&P 500. But, you know, they've got to keep they've got to keep that kind of ten year runway as as we move forward.

00;53;25;01 - 00;53;46;08
Unknown
And that's getting harder and harder to do. And they've historically been a pretty good source. PE has been a good source of kind of an inorganic bolt on of inventory over time. So I don't I don't think that game is nearly up. I just think we've got a new a newer type of entrant that has maybe slightly different objectives and motivations.

00;53;46;10 - 00;54;09;08
Unknown
But I think there's I think there's still going to be a tremendous amount of competition across those two channels for these assets. I think the wildfire case was pretty interesting. You know, Magnolia coming in there, we got to have this and we took it away from Citadel. Well, we have we have weeks to discuss and watch.

00;54;09;08 - 00;54;34;12
Unknown
It's going to be fun. It's going to be fun. This is going to be actually a real interesting fall for us. There's a lot of things happening. You've got you've got crack spread at 100 box. And what's interesting is rig count is just whispering gas rigs down to oil rigs up to I mean, it's just noise for one week, but interesting.

00;54;34;14 - 00;55;02;17
Unknown
You think we've had relative or relative strength here in the last several weeks. And gas directed rig dot and so is that more of the the signal in the building wave of we're you know, we're seeing more for example behind the meter deals get good struck. So we we're going to we're going to grow into that. Fantastic Mark great seeing you.

00;55;02;17 - 00;55;27;00
Unknown
What a good week to have you back. Are you going to be back next week just so we can get all the people excited. We'll be live again next week when we yeah, we will. Not our fault that we weren't whoever the internet provider in Houston is. Jacob said that I guess there have been a lot of system outages this week.

00;55;27;00 - 00;55;59;25
Unknown
I haven't experienced any. Of course, I'm way over here. Oh, is that more a issue? Maybe we should. We should investigate and and report next week before we sign off. Three days from now is the 25th anniversary of nine over 11. And I know you probably remember exactly where you were. And I'm seeing a lot of social media traffic from those who are fighting hard to turn the tide of, you know, never forgetting.

00;55;59;27 - 00;56;20;28
Unknown
And there are just a lot of incredible stories and a lot of tragic stories that I think we need to be reminded of. It's 25 years has gone by in a flash, and a lot has happened, but that was absolutely a transformational moment for this country. And certainly for you and me and everybody else. And in our circle.

00;56;21;00 - 00;56;52;08
Unknown
Man, thank you for bringing that up, Mark. Definitely sobering. And I think the words are spend time thinking about the people that work so hard to try to save all those lives and what happened. And what does that what does that mean? Do we do we feel stronger about this republic? Should we I think regardless of whether we feel about the Republic, we should think about the individuals that lost their lives and were in terror's way.

00;56;52;08 - 00;57;20;28
Unknown
And that should be maybe this week's thought and reminder. And and it's and is still impacting lives today in terms of of health matters. There are tens of thousands of people, among the first responders and the community around there that are being afflicted with nine, 11 related cancers. Yeah. To this, to this day. So, never forget, Mark, thank you very much.

00;57;21;00 - 00;57;27;16
Unknown
All right. Wake everybody. Enjoy your short week and we will be back next week. So tune in.