Big Digital Energy

0:00 All right, we're jumping in here. Mark, this is kind of, I don't want to say it's funny because it's not, it's not good. Well, of course I'll hear you would think it was really funny. Kirk

0:10 would think it's hysterical, but run us into the world of wind. So, so Orsted had its call today and there was an announcement this morning or afternoon Danish time. They are proposing or

0:31 launching an emergency rights offering. And like a lot of other wind companies have run into the buzzsaw, not only of cost inflation, higher interest rates and

0:44 supply chain issues Let me do this just real quick, cut you off because I actually worked on one of the rights offering back when I was at Stevens, you know, 30 years ago. A rights offering is the

0:57 financing of

1:00 Basically what a rights offering is, is you are going out to your shareholders, and generally the way it works is, let's say you think you're a stock, and it's usually you're in trouble, you

1:13 can't find anyone else to finance the business, you go out and you think your stock's worth10 a share, you price it at2 a share, and usually you have some large shareholder, in this case it's the

1:30 government that's willing to buy. Yeah, they're the backstop to this thing. They're willing to buy more of it and you're literally putting a gun to your shareholders head and say, get the hell

1:43 diluted out of you unless you cut another check. I mean, this is not something that's good. Well, the

1:50 only one we know who's going to exercise their preemptive rights to not get diluted is the 501 majority owner, the Danish government. Yeah, so this is kind of a taxpayer-funded bailout. Yeah, and

2:09 the real, I guess, trigger project to this is something called Sunrise Wind offshore of Long Island. It's about 30 miles offshore from Montauk Point. And it's even closer to Martha's Vineyard.

2:23 It's only 19 miles from Martha's Vineyard. So kind of wish Kirk was here, but he's often Scotland doing golfy things.

2:32 But the rights offering size that, or targeted at nine and a half billion is more than half the market cap of Orsted today. And - That's like bad wrong. Yeah, it's not just - It's a little bit

2:46 better. Stocks down 30 on the day. And Javier Blas was tweeting quite a bit during the call. And he pointed out one,

2:57 I guess somewhat unfortunate. exchange on the call, the CFO was asked apparently a question about what Orsted's net debt position was. And the answer was paraphrasing a little bit. I don't have

3:10 that off the top of my head

3:14 in a public call. So not a good day for Orsted. It's just really more of the same. And then the, really the kind of the overarching theme here, politically, and from a potential regulatory

3:31 standpoint, clearly the Trump administration and President Trump himself has been very, very negative on wind, whether it's offshore or onshore, certainly in the US. And so a lot of headwinds

3:47 here, a lot of crosswinds for Orsted to navigate. Oh, by the way, one other thing I think it was nine months ago. Ecuador took a position that was

3:58 close to I think it was 398 Danish croner per share. They've lost a billion dollars in that position to date on paper. So, you know, we'll see where this goes. But, you know, given what's

4:15 happened with vineyard wind and the pushback that we're seeing in general, I think there was a lava ridge, which is in Idaho, was a, I

4:28 want to say, 57, 000 acre project that was opposed by everyone. But since it's on BLM land, that was kind of rammed through to approval under the Biden administration, the IRA. And so, you know,

4:44 you've got some friction building here that's going to make it really, really tough for the other 499 of horse-dead shareholders to come in and say, we're going to, you know, we're going to go

4:56 ahead and take the plunge. and exercise our preemptive rights and participate in this rice offering. So it'll be interesting to see, you know, where and how they get that done.

5:10 The rights offering in and of itself wasn't a surprise the size of it was about double what was expected. You know, at the end of the day, I've never been a wind guy. And, you know, my good

5:23 friend, Andy Carsner, who I went to rice with and is now at Google, I believe doing energy stuff and it's on the board of Exxon. He's always been a wind guy. So I need to get him on the podcast

5:37 to actually explain the economics to me. But everything I hear anecdotally is, you build these projects and in 10 years, you gotta go replace all the blades and just cash on cash so take tax

5:55 subsidies out of it. You haven't hit payback. yet, you know? And at the end of the day, it's all government subsidies that get these things built and keep them operating. Well, that's the thing.

6:10 In the comparatives, when we talk about certain classes of renewables being touted as lowest cost, what is lowest total cost over useful asset life or project life? Look at ERCOT. We've got tons

6:24 of solar and wind. We've got 13 gigs of battery storage that has been very rapidly put in the GenStack. I think

6:38 a wind turbine or a PV panel is certainly got a shorter, useful life in terms of replacement than certainly a coal plant, nuclear or even a combined cycle gas-fired generation plant. And so what is

6:52 my total capital cost

6:55 over a 30 to 40 year timeframe, and how does that compare with, you know, the advantage depreciation of an asset like a combined cycle gas plant that can last 30, 40 years, if not more.

7:12 And my fundamental on all this is that

7:19 energy density, which

7:24 wind and solar don't offer competitively with just inherently the BTO content, for example, of natural gas or the capacity factor of nuclear, you consume more land, a significant, significantly

7:39 more land. So they're a trade off type of impacts that, that I think weigh into how people view the total cost. But this is, you know, this is, this is a pretty high profile moment for the

7:53 biggest one player out there. And, you know, we'll see where this goes. And, you know, maybe they get this rights offering done.

8:02 But it's a pretty high profile example of kind of what's going on. Yeah, and I mean, ultimately, and some may disagree with it, but I think where you have gone with this under the Trump

8:17 administration is, hey, we're not opposed to anything. We're just not given special favors Any more to folks, and so markets are gonna win out. Well, I would say the president's opposed to win.

8:33 Oh, yeah, yeah,

8:36 so. Well, but he's opposed to it on economic grounds. It's not a, I just dislike wind and I'm gonna go bash me. He doesn't like the aesthetics either. He talked about health. Well, I think

8:45 he's using that to sell it, you know. 'Cause, I mean, they do kill birds. Let's be fair. Apparently, Antruts has one that's, on the table for Wyoming, and it's even bigger than Lava Ridge. I

9:01 saw, you know, there's a real threat to the golden eagle population in Wyoming from wind turbines, as well as I think they had estimated like it would kill 6, 300 bats a year, something like that.

9:17 I don't, I don't, I guess it's like any kind of simulation or modeling, you kind of make up what you don't know Garbage, garbage out, potentially, but there you go. Yeah, all right, all right.

9:29 So onto Trump and oil prices? Yeah, this, we don't need to spend a lot of time on this, but crude was as weak as it's been this year. I looked at five day price graph for WTI and we've had pretty

9:47 much it down into the right. The entire week, a little bit of strength this morning I had pretty good DOEs on Wednesday, where, you know, production. on the 914 US. oil production held in flat

10:02 relative to the prior month where it had declined 100, 000 barrels a day. But you had an uptick in refining and refinery utilization for this week or for the prior week that was reported on

10:13 Wednesday to an all-time high of 97 increase in exports, decrease in crude imports. And so stocks, at least on the crude side, were counter-seasonally a draw again. But that fundamental support

10:28 wasn't enough to, I think, offset the headwinds were coming to the end of the summer driving season, where, you know, worries about demand are cropping up and then worries about supply, as it

10:40 relates to, at least the way I read it, was, you know, there's this, is it on or is it off, Putin and Trump are supposed to meet in Alaska and saw something yesterday, Zelensky's, you know,

10:52 saying, Hey, me too. I'm waiting on an invitation to this Alaskan summit. You can't make any decisions about Ukraine without me there, which I think is fair, but it's just all part of the, I

11:05 guess the market mindset that anything that indicates that there's going to be some kind of resolution where we see Russian barrels more freely back on the market. I think they've been trading just

11:18 fine Yeah, we just don't, we just don't see much of the, much of the darkly. It's the Casablanca. I'm shocked. I'm shocked to see gambling here, you know. So in conjunction with that, I, I

11:32 characterize

11:38 the earning season that just can. It's essentially over is fairly unremarkable. Drilling efficiencies are showing up, you know, companies on the positive side. I don't know if it's a positive for

11:44 a negative

11:46 holding on to their maintenance level of CapEx Diamondback did say they were going to cut a hunt. another100 million from their budget for 2025. So directionally, rig count still creeping down,

12:01 caution among the producing community. And, you know, the way the TPH note characterized it was, you know, companies surprised to the upside with efficiency gains apparently offsetting lower

12:14 activity and spending. So we're keeping production up. Wait, don't we want production to contract on a macro level? Yeah, so a couple of questions here, and this is, there's probably not an

12:28 answer to any of this, but when I look at oil prices, what is Trump giving OPEC so that they're willing to increase production? I mean, why is that happening? And, you know, you're seeing Saudi

12:45 Arabia come out against Hamas, I mean, you're definitely seeing a warming up to the west. Is it literally just the opportunity to invest here and have normal economic relations? What's going on

12:59 there? We talked about this back when he made the trip to Saudi. I

13:07 think he went to UAE and there was one other. Yeah, it was like the Beatles coming to America. But the headline or the official reason for the visit was to drum up all this regional investment in

13:20 the US and came back with some huge number. I think the Saudis committed by 600 to themselves billion. And at that time, we had predicted that there was going to be some backroom meetings with the

13:37 Saudis as really the de facto leader of OPEC and OPEC plus about, hey, can't we do a little bit more with this accelerated restoration of the first. first tier of cuts. And that's what you've seen

13:52 immediately transpire. You know, I've said it before, I wrote a little bit about it. I think the

14:01 scoreboard points or headlines going into a ramping midterm election cycle, that I've got a five-handle on crude, I've got, you know, in some cases pushing to sub-two-dollar gasoline, that is a

14:18 big campaign win. And so, you know, there are a lot of things that you can - I'm not sure it matters these days. I haven't crunched the numbers in terms of what is oil,

14:34 truly, oil price, truly contribute to the economy, inflation, et cetera. But at the end of the day, it is the daily scoreboard that every American voter deals with, you know? When you fill up

14:48 that, whether it matters what the price of gasoline is or not, you feel it. Whether it's in a Raptor that gets 134 miles per gallon and 36 gallon gas tank or a hybrid that maybe gets 50 miles a

15:03 gallon, you do it with enough frequency that you think about it. But in reality, consumers are getting a bargain akin to what they got 20 years ago It's been one of the best bargains out there.

15:20 And in question. In terms of refined product and gasoline, in particular not being truly inflationary. Now we go through the short-term ebbs and flows or spikes and collapses, but it's just

15:33 something that is so visible on a daily basis. And if you don't think it's that relevant or that important,

15:43 the real downside to this type of

15:48 political tactic, if you will, has created a lot of damage in the domestic industry, particularly for the upstream players in the

15:58 OFS. And so I think Scott was asking, you know, how does this affect the small guys? And it's like, it's shitty on steroids. Yeah, yeah, it also depends on what your kind of financing health

16:14 is And, you know, are you drilling out of cash flow or are you, are you levered? You know, relative to five years ago and 10 years ago when these smackdowns occurred. Starting with the OPEC

16:27 surprise of Thanksgiving of 2014, balance sheets are for the bigger players, the balance sheets are in much, much better shape. You know what my line about Thanksgiving in 2014 was the whole time

16:39 I was fundraising. Usually it's the Dallas Cowboys losing that screws up my Thanksgiving this year it was out back. Have you seen the memes about

16:48 the technology of the cell phones that were out the last time the Cowboys won a Super Bowl. Oh, no. Those big brick cell phones. Ah, that's funny. Ah, it kind of hurts. But yeah, now I think,

17:01 you know, and I don't know that I have a really good solution for folks. I mean, I've kind of been sitting here on the sidelines meeting you on BDE going, guys, we knew Trump was going to do this

17:15 I hope you were hedged and oh, by the way, get your ask ready for any type of activity that can help you because he'll let you do that. But I don't know what I would say to a small operator right

17:27 now other than just hunker down. Yeah.

17:31 I continue to believe

17:35 glass half full on longer term fundamentals I think US production is not going to prove to be.

17:47 the onoff switch that it has been related to shale. And I think the scar tissue that the operators have gotten both from

17:58 a volatility standpoint. And then, you know, when our energy equity is going to be relevant in the market, again, relative to their earnings contribution, say, you know, sitting here at three

18:13 three ish percent of the SP. Now, I know that's hugely skewed by the MAG 7, but at the same time, you know, 2013 energy was 13 of the SP. And we've not been able to get into that. And it may

18:29 never happen. Well, and more importantly, or equally as importantly as the percent of the SP 500, but also it was union jobs in swing states, ie. like Pennsylvania. And so You know, I was

18:45 talking the other day with someone and they were saying, hey, it's political risk. This is a non-energy person, you know, political risk. How does that work? And I said, well, it's kind of a

18:57 crazy story. 'Cause if you go back to the Bush administration, you could arguably say George Bush is the most conservative president we've ever had. And I'm not trying to talk politics here. I'm

19:06 just saying, let's categorize it that way. And his approach was EPA hands off, let the states do it. And we had the Shell revolution We had natural gas. And then the Obama administration came in.

19:19 And you could arguably make a case, Obama's the most liberal president we've ever had. Again, not playing politics, just putting a label on it. And he went with the same way. Sure, the EPA got

19:31 a little more involved and did some tweaking here and there. We're going to talk about one of those in just a second. But for the most part, kind of let it left it to the states. And it was union

19:41 jobs, et cetera. equally as important as the weighting in the SP 500. Yeah, when he started his second term, Obama started his second term in 2013. So 2013 to 2017 was kind of the - Well, the

19:58 go-go day is the real hockey stick on US unconventional growth and the Saudis in OPEC getting surprised and doing what they did in 2014 because they saw it as a real threat and there's still, I think,

20:14 some arguments as to whether that was a market share move or not, but they wanted to keep short cycle as well as long cycle investments by non-OPEC off balance because they are a meaningful supply

20:29 threat over long periods of time. So what happens in Alaska? You got Trump and Putin sitting there. Questions, does Zelensky actually show up? Give me an outcome to we. in the war, no big deal

20:47 somewhere in between. What do you think? I think the likely most positive outcome is you get some limited ceasefire. I don't think the intractable issue of territory, concession or territory

21:09 give back is going to get any kind of traction with respect or resolution. Yeah. And so the best that I can hope for, and I'm not

21:25 expert in geopolitics and certainly in this negotiation have done some reading over the course of the history of NATO and what the issues have been and a little bit about Ukraine and its path and

21:38 the years that have gone by in its independence.

21:43 I think chief among them is that Putin wants one, I do think, I do think he's a throwback empire guy. I also think that having NATO aggressively and rapidly expand to direct Russian borders is

22:08 certainly from the Russian perspective perceived as a threat But I do think it's key that they maintain control of land access to the only ice-free port that they have access to as Russia in the Black

22:24 Sea. So I do think the territorial impasse is going to continue to be

22:33 not getting to full resolution. Yeah, the thing I can't figure out, and again, I'm not an expert either when it comes to

22:43 The one thing I've heard that, at least in my mind, explained a lot of what we've seen to date is, and I wish I could remember her name. She was a Soviet, Russian scholar, studied this her whole

22:59 life. She actually said, starting in the Obama administration, Putin has done a lot to in effect sanction-proof his economy So he built a wartime economy. He sells a lot of energy to finance it.

23:21 People work, et cetera. And so her point was, sanctions aren't gonna work on Putin here, and that's really all we've got. I mean, we're not gonna go to war. We're not gonna put ground troops in

23:35 there. We're not gonna shoot nukes at each other. And so sanctions is all we've got She said, they're not going to work. he has sanctioned proof to his economy. And so that really, you know, if

23:49 that is the case, if that is true, then what's gonna happen in Russia is Putin's gonna say, how much land do I get? That's not enough, see you. I mean, if you're nominally restricting supply

24:02 and we can, I think we can see how effective or ineffective what 18 rounds of sanctions have been in this conflict, the set at time and again, a producer dominated economy like Russia is, the way

24:20 you really hurt them is you flood the market. And so with the market near balance and inventories today, globally or below five-year averages for the most part,

24:33 again, it's more of a demand angst in climbing that wall of worry, but I think physically, the fact that you're spending globally in upstream. capex at such a low rate from where you were kind of

24:46 run rate 10 years ago, depletion is going to come see you. And, you know, projects take longer than you think. We talked about the big BP discovery offshore Brazil last week and our little quick

25:02 hit. But, you know, those types of ads are

25:08 decades in the making Um, but offsetting that, um, Exxon started, it's, it was, it's fourth FPSO and stay broke about four months early. So that adds another 250, 000 barrels a day or they're

25:22 about.

25:24 Um, so what city in Alaska are they meeting in? I don't know. Cause I've been to Homer. The, uh, I've been all over Alaska. So

25:37 it's nice in the summer. Oh, it's great Yeah, you work all night. You know, the only thing that's weird is so I land in in Homer and go to a bar to see a buddy who's playing in a band. I may

25:53 have had too much vodka that night, a recurring theme I think here in on BDE. But anyway, I step outside at 130 in the morning and I literally fell to my knees and said, God, I'm so sorry, I

26:06 will stop drinking because it should not be light outside. That was kind of that was kind of freaky. But yeah, other than 22 hours of sunlight and having to sleep in rooms with in effect boarded up

26:19 windows. Yeah, no, it was gorgeous. That's great. So, well, try, try a winter or two up there. I spent a couple of months up there. Not learned learned what light therapy was all about

26:30 didn't need it. But I thought it was actually kind of cool. But it was only I knew there was an end to this experience. Yeah, wouldn't, wouldn't work for me. All right, jump. to the EPA and

26:43 CO2. Yeah, so this

26:46 is all part of the wave of permitting reform, rollback, streamlining, and really repealing some of the things that

26:59 were embedded in the IRA or codified the IRA, and even before that. And so the EPA is proposing that we repeal

27:16 the 2009 endangerment finding. And what that means is that CO2 along with methane and some other gases were deemed to be an endangerment. And there's another kind of add-on term that doesn't

27:32 come to mind at the moment. But essentially the agency put into effect in 2012, EPA administrator, Lisa Jackson, put into effect the agency ruling a regulation that essentially created

27:51 all the things like the EV mandate, it's the emission standard. So, you know, the opposition to all this is out saying, since that time, we've, you know, we've spent over a trillion dollars in

28:02 compliance and regulatory costs and litigation, et cetera So it's not a trivial amount. And the first step is to release the automotive industry or the transportation industry from CO2 being

28:20 classified as a pollutant. You know, we've talked a lot about it on previous shows, we talked about CO2, it's plant food. It's not a classic or conventional pollutant, but the challenge is being

28:33 made on the notion by the administration that because of the this the science that was used to support classifying CO2 as a pollutant, is that it was classified in a mix of other gases, and the

28:57 endangerment finding relates to public hazard and health. And we all know that that's kind of mushroomed into the broader, very provocative and sometimes religious debate over climate. And so the

29:14 classic definition of a pollutant is something toxic that causes all kinds of public health issues. And what they're saying is, we can't, you presented the findings that are made the determination

29:30 that CO2 is a pollutant, but it was a part of a mix of things, and you can't attribute

29:42 is specifically related to CO2 consistent with what's required by something that is subject to the endangerment rule, if that makes sense. Yeah, no, I mean, this is, the one thing I wish we

29:55 could do, and I know this is a little Pollyanna of me, but at the end of the day, I wish we could sit, everybody could sit down and go, can we not spend a trillion dollars on lawyers? Please

30:07 tell me how spending a trillion freaking dollars on lawyers is helping the environment, 'cause it's really not, you know? There are probably practical solutions to

30:20 a lot of things that both sides could agree on. Again, this kind of gets into the discussion I had with my dear friend, Kelly Mitchell, when she came on the podcast. Remind us who that is So she

30:36 used to be with Greenpeace. She's been arrested, handcuffing herself to cold plants, and it's just delightful. I adore her, she's so cool. And anyway, so we probably don't agree on anything,

30:49 but

30:51 I, and I think, I think I kind of told you the story, I said the story of us meeting as she reached out through Twitter one time and just said, Hey, like, can I just talk to you? And I'm like,

31:04 Sure, I'm driving to tell you ride tomorrow I got 18 straight hours in the car. You can talk to me as long as you want. And we just chatted and to her credit, she was very thoughtful and asked a

31:14 lot

31:18 of really good questions on stuff and it was more curiosity as opposed to, I'm gonna take this and try to beat you over the head with it. And her point that she makes is, or the two point she makes

31:33 are, hey, big oil lied to us. needing to bait that, but there's some truth to that. I mean, we, you know, we weren't, I don't think we were the tobacco industry, but at the same time, yeah,

31:46 maybe we covered some stuff up. Then I think number two, her point is, we have to stop everything today. 'Cause my whole point is, let's just get a little better each day. If we can build a new

31:58 pipeline that gets rid of that old one with holes in it, that's better. And her whole point is, unless we shut it down, we are gonna have this catastrophe. And she truly believes it. It's not a,

32:12 it's not a, you know, something with her that's made up. I mean, she truly believes we're gonna see this if we don't shut it down, so. I mean, have you ever lived by a natural gas pipeline

32:25 right away? No. Okay, some people do. And so the notion that, you know, there's hazardous material in terms of explosion risk, You know, flammability or liquid hydrocarbon, you've got spill

32:39 type, spill type rust. You know, I will say one thing, and Arjun Murti has been very good at, and emphasizing this in a sub stack since he started writing three years ago about the messy energy

32:52 transition is that, you know, the industry is not, is not a victim here. It is, it is accountable for things like fugitive methane emissions There are things that industry should be more

33:04 proactively doing, and is more proactively doing to

33:11 mitigate pollution, and I've said this before, I wish we would, we would kind of reframe the discussion more apolitically and talk about pollution. Nobody likes pollution, right? It's not, it's

33:26 not kind of the carbon singular objective on either side. But the industry is starting to take more proactive steps to be accountable for. Look, if we can

33:39 be incentivized and have good economics on capturing carbon, let's do that. We're pretty good at putting stuff back into the ground, for example. To

33:52 your point about Greenpeace and good people with those organizations, in a somewhat limited experience with the NRDC, they were typically very thoughtful and very good to work with in my past

34:08 experience. Interesting. Hey, real quick, before we jump over to Exxon, Michael Cortez has a question. With all the MA going on, most colleagues are worried about their jobs andor being made

34:23 redundant. Do you think we'll see more people leaving the industry? Do you think we will see more midsize operators grow and create more jobs? What's the career playbook for our job market? So

34:38 first I'd say go watch the Power Hour I did with Yoshi, who was a recent casualty of a major in the Permian, and some of the pivots and some things that she was doing over the last several years to

34:54 expand her own portfolio network and skill set

35:00 I think if we drag along here, I saw, I think downside prediction TPH is making for 2026, before we get back into a more balanced or tighter market, is mid 50s

35:15 crude. So I think that risk is there and companies are going to continue to look for ways at the margin, although there have been some pretty big restructuring and layoff announcements.

35:29 I think looking for areas where you can leverage your skill set because what we're doing here, for example, at Collide, we know very well that there's a lot of need. In fact, it's critical to

35:46 have the domain expertise alongside

35:51 all the digital things that are being built The thing I'm telling my kids and I'm telling a lot of people is AI is a game changer. I mean, it really is. I've seen three technological holy cows in

36:10 my career. It was the internet. It was the shale revolution and now with AI. And I'm also saying, and this is really important, AI is not going to take your job, but somebody that does your job

36:23 with AI will take your job Right.

36:27 Wherever you are in your career, go start playing with Grok, go start playing with Chet and GPT, figure out how you can leverage these tools, 'cause these tools really are gonna be game changers.

36:40 We, anytime there's big new technology, we always overestimate it in the short term, but we way underestimate it in the long term. And this is gonna be a fundamental shift to our lives similar to

36:55 what happened with the internet And I mean, who would have thought back in the late 90s, we'd all have these really smart phones that we all sit around and stare at. I think AI is gonna be so

37:06 embedded in our lives that if you don't know how to use it, if you don't know how to make yourself better with it, you need to do that. I do have a big worry and I'm gonna wrap two big worries

37:20 together. Basically, Michael's big worry is, hey, with all this consolidation downsizing, Are we going to lose all our jobs? I worry about that too because I worry about losing that expertise

37:32 and at the end of the day, energy is the key to life, energy is the key to national security. So we need that expertise in the house, domestic, as much as, and I'm kind of a free market type guy,

37:45 I can get pretty nationalistic when it comes to talking about energy And then the second thing that I'll say is, I really worry about how we're going to create the old crusty folks that know a lot of

38:02 stuff that can put their hand on a machine and go, Ah, here's what's wrong with it, in a world where we're using AI to do the simple task. Because it was building those models, it was

38:15 spreading numbers out of 10Ks and 10Ks that taught me the business. And so I think that's the big challenge for our industry is figure out how do we. maintain the tribal knowledge, how do we teach

38:29 the tribal knowledge in a world where the technological platform for doing that has totally changed. Yeah, and the institutional knowledge that in, you know, in the 40 year expert that walks out

38:41 the door is not transferred, especially if there are fewer succession type roles to follow. I'd say, I'd say, you know, I'd certainly reinforce the point that you need to get as conversant and

39:03 fluency is probably a good goal in terms of what is your proficiency with whatever AI tools to make your the application of your value, your skill set better and faster. Yes. More accurate answers,

39:23 it's grounded with more data. And there's all kinds of training offline online that's available. I'm counseling my son right now and kind of augmenting his business finance skills. He's a rising

39:39 junior in college. And we're looking at things like energy finance and trading. But you ask Grocker or CHED GPT questions about what does the future look like and what kind of impacts are AI going

39:56 to have. And it'll drill down to a certain level of granularity that's useful. And as a research analyst, I think about how we used to do things so manually, like building models. And when you

40:08 picked up a company for coverage, the best way to learn the nuance of the company, both qualitatively and quantitatively, was to sit there and build the five-year quarter-by-quarter history by

40:23 literally transcribing all the line items from from the financials. Yeah. And then you start toggling them on the projections. Right. And that really, that really teaches you stuff. This is one

40:34 of them. But it sounds so cliche to say, but it's absolutely not that back to the point of getting as conversant and ideally fluent doesn't mean you need to know how to code and build all this stuff,

40:49 but understanding, you know, at a pretty deep level, appropriate applications that are within your field of discipline or area of subject matter expertise that can allow you to do the real

41:04 thoughtful value add and do more of it because you spend the last time doing the month down, right? So this was interesting. So in terms of being out, talking to folks, how they're using AI, one

41:21 company who shall remain nameless,

41:25 is very progressive on the AI front and their utilization of it. And the guy that's in charge of it's been really cool. He'll hang out with us, we'll chat. And I went down that rabbit hole with

41:39 him in terms of, I'm really worried about how we train the next

41:45 level of crusty old people. And he had an interesting point. He said, I agree with you, Chuck. I've actually brought it up with HR We need to start figuring out how we train younger folks. But

41:59 there's actually a voice within that company that is saying, to some degree, if we lose all the tribal knowledge and we have young, smart people with AI tools and looking at data, it might be

42:14 better to take a fresh set of eyes to everything. And I don't know that I agree with it, but it's hard to argue that argue that, you know, I kind of see that point. So it's like

42:26 and it's like trying to fix a bad golf swing. Yeah. Right? If you've been doing it that way for 30 years, maybe there were some critical flaws that you won't ever learn in the first place if you

42:38 start with a fresh foundation and launch pad. Because you can, I spend a lot less time doing scrolling now and actually doing curiosity queries on things that are relevant to our scope of stuff that

42:55 we talk about and do around here. And

42:59 having insights faster, having some level of credibility or expertise or insight on subject matter that is increasingly finding its way into the energy conversation. I mean, five years ago did we

43:14 think we'd be talking about ENP's doing off-grid power generation to energize data centers and AI.

43:25 No, but if you know something about, you know, turbo machinery, or you know, something about, you know, the, the complexity and sophistication of what it means for a generation facility and

43:38 all the, all the different protections and equipment that you have to deal with literally millisecond fluctuations in 20 to 30 of your power load, because of the way the chips work in, in certain

43:53 processes, those are important things to know. And so I, you know, from EP, I would look for players that are more progressive and they're thinking forward like that all the way back to your

44:05 original admonition to the EP is go talk, go talk to Silicon Valley. Yeah. You know, I, there's an arbitrage, for example, for, for turning Waja gas molecules into something more valuable by

44:21 generating an electron on site and You know, that has nothing to do with the grid. It's just the value of that power generated by gas is way more than putting it in the pipeline and selling it in a

44:37 traditional way. And so EP companies that are looking for that, you know, kind of learn forward, learn skills forward that are connected to your core skill set. If you're an upstream technical

44:50 professional

44:52 The other thing I would say is, you know, with all the network, you know, are there teams out there that have been displaced in mass that are really good executors that, and this is in your realm,

45:08 you know, bringing a deal to a private equity sponsor. I particularly won that's raised, you know, in some cases, a couple of the big names have had funds that have

45:20 closed at record levels So there's going to be capital. looking for good opportunities. And so if teams of really good professionals can go make it happen, bringing that deal to PE sponsors is

45:39 another pivot. I know it's a different risk threshold

45:43 for a lot of career corporate technical folks in the oil and gas industry, but that kind of risk taking, especially early in your career and at a young age is when you ought to be doing it. That's

45:56 why you're in this freaking business, man, right? We spend all our money drilling a well and then we turn it on and see what we got. So by definition, even if you're an engineer's engineer,

46:06 you're still - You may end up owning a plane. Exactly. Or not. Or losing it. Or losing it and then working to get it back. All right, so we got 10 minutes, let's do this. Let's hit on X on

46:21 next week. when we

46:25 do BDE, we'll go through there 'cause I've actually got a little bit of insight there. We'll do that. Let's jump into Envirus - Yes. Selling, which is a cool story. Why don't you? So, you're.

46:42 No, so our - You're a

46:44 friend of Alan. Yeah, I am a fellow rice guy So, Alan actually Gilmer founded drilling info in 1999 and he actually laid out kind of a tweet. And Jamie, maybe you can put the tweet up on the

47:02 broadcast here. But he basically walks through how he raised a million bucks, what the valuation was. And then later on, brought in various private equity people as he sold all along the way he uh.

47:19 he went on kind of a He started off as just data, right? He was grabbing data, cleaning it up, making it available to clients. Then they went on a software blitz, a buying various software

47:32 companies. All the while cleaning up data, making data better. They've become the indispensable data source to the industry. I think a lot of that is 'cause financing sources,

47:48 investment banks, commercial banks, all trust their data. And so if that's the accepted data source, you just have to use it. Clearly they have a pricing power 'cause everybody bitches about 'em

48:02 in terms of how much they cost. And most recently, Hellman and Friedman sold to Blackstone. It was65 billion, 3 billion of that debt.

48:17 Part of the story that I think school Allen also sent out a email saying that he was always morally opposed to debt, but once they started using some debt, particularly making the acquisitions that

48:30 worked really well and he claims I was wrong about debt. So anyway, fascinating development in our world because I don't, you know, kind of like if someone was going to marry my daughter, hey,

48:44 Blackstone, what are your intentions for, for empress, I would like, I would like to know because, well, I called you last week as a PE guy and said, okay, this is PE to PE, what's really

48:59 what's, why this, why this profile of transaction. Yeah, and, and, you know, so, so one of the things that has been, I think, underappreciated by the market because the historical path for a

49:16 quote unquote tech company was to get venture capital and then go public, right? And what we've actually seen in technology world, given what's her face, Lena at the

49:33 FTC and others is, we've actually seen a lot more in the way of technology platforms getting to a good run rate of cash flow, but maybe not having unicorn type status to be able to go public in a

49:48 big way. And we've seen a lot of private equity just step in and buy and private equity generally buys cash flow. I mean, the whole basis of private equity was you had a company that was kicking

49:60 off, you know, a hundred million of cash flow. And it traded for 500 million in the market You could use 400 million of debt and 150 million of equity to buy the thing. and then pay down the debt

50:18 over time. And that's how you made your return on equity. It was using more aggressive debt and different capital structures. So generally all private equity is about cash flow. Now, as more

50:30 people do it, you have to be able to bring operational expertise to it. Hicks Muse would

50:39 partner up with Clayton, whatever their names were, that were the operational gurus to help. So it's gonna be interesting Long-winded wave saying, it's gonna be interesting to see what

50:50 Blackstone's plans are. They literally just buy a cash flowing business, and they plan to cash flow it up. They plan to raise prices on data until they start losing customers. Or in this world,

51:02 do they have a big, huge AI game plan? I do find it interesting that you had kind of your AI world not showing up as the buyer here to your didn't show up. to buy Microsoft didn't show up to buy,

51:18 so. Yeah, and

51:22 that whole

51:24 continuum of acquisitions to build the original drilling info into something that is a data and really an insight powerhouse. The most notable one to me in those more recent years of acquisitions was

51:43 RS Energy When I worked on the institutional equity side, it was a client of the original predecessor to RS, which was Ross Smith, it's a Calgary-based research, and at one time they had a trading

51:59 relationship, but it was really something you couldn't get anywhere else on Wall Street, and that was a lot of technical depth and expertise A lot of geologists, geophysicists. reservoir engineers,

52:15 et cetera. And then prior to the inverus acquisition of Ross Smith, which turned into RRS, they were backed by Warburg. Yeah. And Warburg spent,

52:30 I think upwards, certainly north of a hundred million during their portfolio ownership of RRS in really building the digital capability of really the original Ross Smith Research franchise. And then

52:46 that folded into

52:49 Invaris more on the, I think the client service from a research using the horsepower of

52:58 better and more data than anyone else out there in the market had. So

53:05 I posted or captured one of Alan's tweets But I didn't.

53:13 find the one you were talking about, which is more of the historical walkthrough, but he talked about bundling, and they were out there accumulating all these very high cost and exotic data sets

53:27 that had extreme value, but to a much narrower set of potential customers and clients, and that they were being advised not to bundle, and they did, and he talks about kind of the multiple

53:43 comparisons and they would sell four bundled data sets for 20x when you could have sold one of them to the perfect client for 100x, but they overcame it with volume. I mean, they now have 8, 000

53:60 clients in 50 countries globally. The risk in the AI world to those guys is just how good AI is at scraping public data. Right. It's gonna come down to proprietary data sets that ultimately keep

54:20 value in

54:24 this world 'cause anything

54:34 available publicly, anyone can scrape. And instantaneous commoditization. Exactly. Yep. That being said, Alan, we'd love for you to come on BDE and tell us all about it. I wanna hear all the

54:39 war stories. Yeah, now Alan's the best Alan and I did, back, gosh, I think it was four years ago, sat down at my table in front of my bar on the second floor and shared a bottle of wine and we

54:53 just taped it and it's on collide somewhere. Nice. There was a bit of a vibe of the two old men muppets that sit up in it, but anyway. All right, collide, hope you enjoyed today. If you want

55:12 us to do them more live, I think we're kind of happy to do it. The only problem, you know what the problem is doing with these live. What's that? I have to go to the bathroom,

55:20 drink, drink, drink too much of this, but, uh, all right, we'll, we'll see you back in regular format next week. Sounds great. Thanks everybody.