Big Digital Energy

00:00:03 [Speaker 1]
What's up, Collide?
00:00:05 [Speaker 1]
We're live again.
00:00:06 [Speaker 1]
I'm Kurt Coburn, your cohost....
00:00:08 [Speaker 1]
This?
00:00:10 [Speaker 1]
Former Longhorn.

00:00:11 [Speaker 1]
I'm still a Longhorn, but, man, is it...
00:00:14 [Speaker 1]
I had to watch hours and hours of film this week just to process what happened.
00:00:21 [Speaker 1]
What happened?...
00:00:22 [Speaker 1]
Funny, Mark, because I texted you about how bad the Aggies are.
00:00:27 [Speaker 1]
And then an hour later, my wife says, in the middle of the game, there's no way Texas can lose this game, and here we are.

00:00:37 [Speaker 1]
So what happened?
00:00:40 [Speaker 1]
I mean, I've I've had...
00:00:42 [Speaker 1]
I've watched film breakdown.
00:00:44 [Speaker 1]
It is two issues in my mind.
00:00:48 [Speaker 1]
The head coach needs to stop being the offensive play caller hands down, And I think Sark has his own issues.

00:00:57 [Speaker 1]
He might be a genius, but if you look at the at the data, the data is clear that his offenses suck.
00:01:04 [Speaker 1]
They're terrible.
00:01:06 [Speaker 1]
Number two, Arch.
00:01:09 [Speaker 1]
I don't know what to do with Arch because this is what the experts say, and they said exactly what I was thinking.
00:01:14 [Speaker 1]
His his highs are high, but his lows are so low, and no one knows what to do with that.

00:01:22 [Speaker 1]
I think Sarcz in his head.
00:01:24 [Speaker 1]
There's too much...
00:01:26 [Speaker 1]
He's not necessarily the brightest and the quickest.
00:01:29 [Speaker 1]
And if you break the film down, I've been saying this, by the way, since I've watched him from the very first orange and white game.
00:01:36 [Speaker 1]
He doesn't process quickly, so you can't build an offense around a guy that can't read too many things at one time.

00:01:44 [Speaker 1]
He's a gut guy.
00:01:46 [Speaker 1]
You just gotta give him the ball.
00:01:47 [Speaker 1]
Let him try to make plays.
00:01:49 [Speaker 1]
That's the issue.
00:01:50 [Speaker 1]
Oh, we already got...

00:01:52 [Speaker 1]
Do we have...
00:01:52 [Speaker 1]
Oh, never mind.
00:01:53 [Speaker 1]
So what do you think, Mark?

00:01:56 [Speaker 2]
Well, I'm I'm just a little surprised he's not running more.

00:02:01 [Speaker 1]
Yeah.
00:02:01 [Speaker 1]
It's a Sark issue.
00:02:02 [Speaker 1]
I think that's a Sark thing.

00:02:04 [Speaker 2]
Yeah.
00:02:04 [Speaker 2]
And I think the, you know, obviously, the interceptions were killers, especially the pick six, but the light one, even more so.
00:02:14 [Speaker 2]
But not to be outdone.
00:02:17 [Speaker 2]
We had to we had to generate our own controversy after getting...
00:02:22 [Speaker 2]
Yeah.

00:02:22 [Speaker 1]
What is going on over there in...

00:02:23 [Speaker 2]
Well, now out in in Missouri.
00:02:25 [Speaker 2]
Well, as you probably saw, a little Twitter traffic got whipped up on Saturday because during his postgame press conference, a clearly frustrated Mike Elko basically called out Billy Lucci and texags.com and saying that that's not the, you know, that's not the fan base that we're concerned about.
00:02:47 [Speaker 2]
In fact, called it the quote, unquote, cesspool.
00:02:52 [Speaker 2]
So that that was the, that was kind of the lightning rod comment.

00:02:57 [Speaker 1]
You can't do that to your fan base.

00:03:00 [Speaker 2]
No.

00:03:00 [Speaker 1]
Can't do it.
00:03:02 [Speaker 1]
And, by the way, he's getting larger every game I see him.
00:03:09 [Speaker 1]
What is going on there?

00:03:10 [Speaker 2]
Physically larger?

00:03:12 [Speaker 1]
Physically.
00:03:13 [Speaker 1]
Like, his belly is getting bigger....

00:03:16 [Speaker 2]
That stress eating, but, you know, he does not look healthy.
00:03:19 [Speaker 2]
And he's only 49 years old, right, which surprised me a little bit.
00:03:26 [Speaker 2]
Last season when I looked up, how old is Elko?
00:03:28 [Speaker 2]
He's...
00:03:29 [Speaker 2]
He was 48 then, obviously.

00:03:30 [Speaker 2]
But, yeah, it was, boy, something else.
00:03:38 [Speaker 2]
You know, pour gasoline on the fire.
00:03:40 [Speaker 2]
And, I have a good friend who played for A and M back in the day.
00:03:44 [Speaker 2]
He was one of the great Port Arthur bunch.
00:03:48 [Speaker 2]
And he always cringed at the term bowl eligible.

00:03:52 [Speaker 2]
So I texted it in this...
00:03:55 [Speaker 2]
I texted him this weekend.
00:03:57 [Speaker 2]
It was a minor point of irritation.
00:03:59 [Speaker 2]
Hey.
00:04:01 [Speaker 2]
Your favorite term, bowl eligible, is returning to prominence in College Station.

00:04:06 [Speaker 1]
Well, let...
00:04:07 [Speaker 1]
Let's let me give it to to all of those Oklahoma fans on this broadcast that are listening.
00:04:15 [Speaker 1]
Congratulations.
00:04:17 [Speaker 1]
Great.
00:04:17 [Speaker 1]
What a great come from behind victory if you're OU.

00:04:21 [Speaker 1]
I was...
00:04:22 [Speaker 1]
I'm a fan of Mateer, by the way.
00:04:23 [Speaker 1]
I'm like, I think he is playing under his abilities.
00:04:27 [Speaker 1]
I think he's got a confidence problem, and this might have just got him back in.
00:04:32 [Speaker 1]
And I like to see good guys, like, get get on it, but I think the the star of the game who probably had ladies running after him was the kicker for OU.

00:04:46 [Speaker 1]
Man, what a way to win a game.
00:04:48 [Speaker 1]
You know?

00:04:48 [Speaker 2]
What a way.
00:04:50 [Speaker 2]
Anyway, speaking of someone or something that could have used more interceptions, we'll jump into our subject matter.
00:04:59 [Speaker 2]
Certainly, the Saudis could have used more interceptions over the weekend.
00:05:01 [Speaker 2]
You had the unfortunate strikes on...
00:05:04 [Speaker 2]
Ballistic strikes on airports in Saudi Arabia, both the, Aba and the airport in Riyadh, King Khalid International.

00:05:13 [Speaker 2]
Several people lost their lives.
00:05:15 [Speaker 2]
And, basically, what the Houthis are doing is trying to shut Saudi airspace, which is not, you know, not helpful to what, you know, certainly what we're trying to do and what the Saudis are trying to do.
00:05:30 [Speaker 2]
They issued a final warning to airlines, the Houthis did.
00:05:34 [Speaker 2]
Basically said, don't use Saudi airspace except for flights over Mecca and Medina.
00:05:41 [Speaker 2]
And people should stay away from oil targets, or oil facilities calling them targets.

00:05:49 [Speaker 2]
It's not really clear, you know, there were there were unconfirmed reports over the weekend coming out that they had struck, Gowar.
00:05:59 [Speaker 2]
Not anything that I've seen that that talks about specifics or an extent of the damage.
00:06:06 [Speaker 2]
But, you know, you have this in conjunction or right ahead of the, WPC Energy Congress, which is scheduled to run through Thursday of this week, and it's at a conference facility that is right on Airport Road.
00:06:27 [Speaker 2]
So...

00:06:28 [Speaker 1]
Yeah.
00:06:28 [Speaker 1]
I don't think so.
00:06:29 [Speaker 1]
I don't think so.
00:06:30 [Speaker 1]
You know?

00:06:30 [Speaker 2]
Yeah.
00:06:31 [Speaker 2]
25,000 delegates....

00:06:32 [Speaker 1]
Be there.

00:06:34 [Speaker 2]
100...
00:06:34 [Speaker 2]
A 100 ministers and 500 CEOs.
00:06:37 [Speaker 2]
And I saw some things on Feet popping up yesterday, specifically talking about the CEOs, not confirmed whether all of these canceled at the last minute.
00:06:48 [Speaker 2]
But Darren Woods, Patrick Pouillon from Total, Lyle, of course, Meg O'Neil, and Baker Hughes' Lorenzo Simonelli, the Italian energy minister apparently joined via video.
00:07:04 [Speaker 2]
And the big conundrum here is, you know, we certainly don't want to offend the kingdom, but when missiles are raining down on arrival airports, that's probably something you want to keep your your highest value executives or anyone away from.

00:07:23 [Speaker 2]
So just more chaos on top of of the ongoing, disruption that is The Middle East and the Strait Of Hormuz and Saudi Arabia as things, you know, apparently are increasing in friction.
00:07:37 [Speaker 2]
And what's The US going to do?
00:07:39 [Speaker 2]
We've talked about this before in terms of, helping the Saudis, in their in their pushback and and retaliation with the Houthis.
00:07:49 [Speaker 2]
But the big big thing that came out of the first day of the WPC was what Aramco's CEO, Amin Nasser, said, which was we we are in a world of hurt on the crude side.
00:08:02 [Speaker 2]
We've lost 3,000,000,000 barrels.

00:08:06 [Speaker 2]
You've got 6,000,000,000 barrels left in commercial stocks, and only about 10% of that's usable because it's, you know, tank minimums and pipe fill.
00:08:19 [Speaker 2]
Also said that we're looking at about...
00:08:21 [Speaker 2]
If the straight was back to normal today, we're looking at about two years to rebuild inventories.

00:08:30 [Speaker 1]
At a minimum, Mark.
00:08:32 [Speaker 1]
I mean, at a minimum.

00:08:34 [Speaker 2]
So so is Aramco talking its book?
00:08:37 [Speaker 2]
Or are they sounding......
00:08:41 [Speaker 2]
Project.
00:08:41 [Speaker 2]
Or or are they projecting and sounding, you know, an alarm that should be heated with respect to crude supply?
00:08:47 [Speaker 2]
We've been spending a lot of time talking about diesel over these past few weeks and what's going on in the physical tightness in diesel markets and refinery damage and export bans on the part of Russia, etcetera.

00:09:00 [Speaker 2]
But if you've got, you know, if you've if you've got a...
00:09:03 [Speaker 2]
An accelerating treadmill on crude supply and you've already dug yourself a 3,000,000,000 barrel hole, what does that imply for kind of the workout of all this?
00:09:14 [Speaker 2]
Certainly not going up in...
00:09:16 [Speaker 2]
For November 3.

00:09:18 [Speaker 1]
Oh, well, yeah.
00:09:20 [Speaker 1]
I mean, let's...
00:09:21 [Speaker 1]
I think we've called it, but I'm like, Trump has totally misplayed this for our election cycle.
00:09:28 [Speaker 1]
I mean, what a disaster.
00:09:30 [Speaker 1]
And I don't know what could he have done differently.

00:09:33 [Speaker 1]
I'm I'm...
00:09:34 [Speaker 1]
Let's get some caller input.
00:09:35 [Speaker 1]
I'd love to hear what what people think there.
00:09:37 [Speaker 1]
But the Saudis, if you just go back and look at sort of the OPEC records, the Saudis are always...
00:09:43 [Speaker 1]
They're really good at projecting a narrative.

00:09:46 [Speaker 1]
So I don't necessarily believe that they are communicating absolutes.
00:09:51 [Speaker 1]
I think they're projecting a narrative.
00:09:53 [Speaker 1]
That's that's what I believe.
00:09:55 [Speaker 1]
And, man, I'm sure they've been calling people like us and others saying, hey.
00:10:00 [Speaker 1]
We need help here.

00:10:01 [Speaker 1]
We gotta stop this.
00:10:03 [Speaker 1]
Because the Saudis need cash.
00:10:04 [Speaker 1]
Remember, like, not only did they pull out things like live and all these other major big decisions because they've got an issue that they need to keep cash flowing because the country is expensive to run.
00:10:20 [Speaker 1]
And every individual in the country, how much do they make?
00:10:23 [Speaker 1]
Everyone...

00:10:24 [Speaker 1]
Just being a Saudi citizen, you make, what, $30 a year?
00:10:28 [Speaker 1]
Is it more than that?
00:10:29 [Speaker 1]
Is it $50?
00:10:30 [Speaker 1]
Who knows?
00:10:32 [Speaker 1]
I'm sure someone listening knows that that number, but but they have a lot of...

00:10:35 [Speaker 1]
Their their burn rate is super high.
00:10:38 [Speaker 1]
So this 3,000,000 doll...
00:10:39 [Speaker 1]
This 3,000,000 barrel strike is causing a lot of pain, a lot of pain.
00:10:46 [Speaker 1]
And it's rippling across the world because they are...
00:10:50 [Speaker 1]
You know?

00:10:50 [Speaker 1]
We always said that we were the swing...
00:10:52 [Speaker 1]
At one point, you know, The US were always vowing to be, like, the swing barrel, but the Saudis are the bay...
00:10:59 [Speaker 1]
Are baseload, man.
00:11:00 [Speaker 1]
And without that, trouble.

00:11:04 [Speaker 2]
And and we're seeing, you know, crude come under pressure as a result of the rhetoric or the narrative that we've got, you know, close to normal restoration of flows, which if you also offset that against what's happening to, you know, certain tankers that have hit mines even in the southern route, We're spending a lot of money, on on the part of the US military to ensure this this very inefficient kinda shuttling operation to move to move barrels through a, kind of a hot war zone still.
00:11:45 [Speaker 2]
So it's adding cost to landed crude and, you know, I read something over the weekend that, you know, you gotta tack on thirty to thirty five dollars a barrel to get crude from the straight to to China.
00:11:59 [Speaker 2]
And so we're not back to normal despite the numbers being arguably much higher in terms of just the daily flows out of Hormuz.
00:12:11 [Speaker 2]
It is a it it is a very band aid and barbed wire operation at this point from from what I can tell.

00:12:18 [Speaker 1]
By the way, Mark, we renamed it Hormuth.
00:12:22 [Speaker 1]
So, by the way, Marigold Train asked a question.
00:12:26 [Speaker 1]
Does hitting King Khalid Airport hurt the Saudi investment pitch more than any refinery strike?
00:12:35 [Speaker 1]
I mean, good question.
00:12:38 [Speaker 1]
What do you think?

00:12:43 [Speaker 2]
You know, that...
00:12:44 [Speaker 2]
That's a tough one, but I I think, you know, those are those are headline events, and certainly the loss of life is is is tragic and horrific.
00:12:54 [Speaker 2]
But, you know, have they, you know, have they done any material damage to what have historically been very well protected and operationally reliable assets.
00:13:06 [Speaker 2]
You know, the game's changed for sure.
00:13:08 [Speaker 2]
We just...

00:13:09 [Speaker 2]
We don't have a good window in...
00:13:10 [Speaker 2]
Into kinda what the resolution of this relatively new resumption of of hostilities between the Saudis and the Houthis.
00:13:18 [Speaker 2]
So, you know, on balance or on the margin, any kind of strike, causing havoc in the kingdom is not good from from an investment standpoint.
00:13:29 [Speaker 2]
So which is which is more important?
00:13:32 [Speaker 2]
I would argue that, you know, if you're getting at and really hurting critical infrastructure and operations disruption, in their, you know, on their primary assets, which are fields like, then then, yeah, that...

00:13:46 [Speaker 2]
That's going to have, certainly a chilling effect.

00:13:51 [Speaker 1]
Well, I I I think that's a really If

00:13:53 [Speaker 2]
I if I understood the question.

00:13:55 [Speaker 1]
I mean, we don't know the real...
00:13:56 [Speaker 1]
I mean, I'm re...
00:13:57 [Speaker 1]
I read the question, but I think what's interesting, Mark, is is they moved it from infrastructure to we're gonna go out...
00:14:06 [Speaker 1]
We can go after you anywhere, anytime, anyhow, and it's unsettling.
00:14:11 [Speaker 1]
And I love the whole, like, we're not gonna touch Medina or Mecca, the Holy Land, but, you know, that...

00:14:19 [Speaker 1]
That's a probably a given if you're of that faith.
00:14:23 [Speaker 1]
So I don't know.
00:14:24 [Speaker 1]
Great question.
00:14:28 [Speaker 1]
It definitely doesn't make me feel any more comfortable about the situation and and having the...
00:14:35 [Speaker 1]
The Saudis have have traditionally been really good at brokering piece.

00:14:40 [Speaker 1]
But in this case, they're on the firing line, and I think it just means a longer run back to normal.
00:14:50 [Speaker 1]
I think this just makes it even worse for United States, makes it worse for diesel expectations.
00:14:58 [Speaker 1]
I think this is a...
00:14:59 [Speaker 1]
Not a great sign.
00:15:01 [Speaker 1]
That's what I'm saying.

00:15:02 [Speaker 1]
And I know that's a master of the obvious, but this is not good news.

00:15:06 [Speaker 2]
Well, US equities are certainly shrugging this off in terms of things are getting better.
00:15:12 [Speaker 2]
You know, Valero is almost four fifty now.
00:15:14 [Speaker 2]
It's up almost 3% today.
00:15:17 [Speaker 2]
The XOP is once again knocking on the door of 200.
00:15:24 [Speaker 2]
A lot of strength in the complex, either crude or product levered.

00:15:29 [Speaker 2]
You know, a few days trading is hard to call a trend, but I think the fundamentals and the physical situation are increasingly supporting, the investment case.
00:15:43 [Speaker 2]
So I think, I think there's gonna continue to be a lot of opaqueness between now and November 3, and and maybe as soon as the the polls close, we're jumping in to to to help the Saudis, more actively.
00:16:00 [Speaker 2]
But in the meantime, a lot of confusion, and and I think the markets are are betting tighter and more problematic for longer.
00:16:09 [Speaker 2]
And I know Dan Pickering has been on record here lately in some interviews talking about, you know, we're we're we're gonna be in this chaotic, uncertain state for a while.

00:16:22 [Speaker 1]
You know, Quiet Kettle, love that name, Quiet Kettle.
00:16:27 [Speaker 1]
If the Houthis hit Ross to Neuro next, how much risk premium does Brent add overnight?
00:16:37 [Speaker 1]
Mark?
00:16:37 [Speaker 1]
That's a your...
00:16:38 [Speaker 1]
That's a Mark question.

00:16:40 [Speaker 1]
What do you think?

00:16:41 [Speaker 2]
Ask the question again.

00:16:45 [Speaker 1]
If the Hooties hit Ross Tenura next, how much risk premium does Brent add overnight?

00:16:56 [Speaker 2]
This is a Wagner, which we used to sneak into our consulting slides when we had an ambiguous source.
00:17:04 [Speaker 2]
It's a wild ass guess, not easily refuted.
00:17:10 [Speaker 2]
I I think I think significant damage to Ross Tenera, on the order of what happened in in, Cutter.
00:17:19 [Speaker 2]
Again, not knowing, the facility layout at Ross Tenera's as well as our downstream and marine experts do, then, you know, I I think it's good for a 10% pop in in Brent.

00:17:33 [Speaker 1]
You know, big Texan, I I said that Japanese, not Texan because I don't like how it's written.
00:17:42 [Speaker 1]
But, hey, I'm cool.
00:17:44 [Speaker 1]
He just commented...
00:17:45 [Speaker 1]
Or she commented...
00:17:46 [Speaker 1]
It's a couple interesting posts.

00:17:47 [Speaker 1]
Number one, Trump thought he could control an economy but forgot he was fighting a religion.
00:17:54 [Speaker 1]
It is pretty interesting when you think about this.
00:17:56 [Speaker 1]
And I'm almost wondering, like, when you when you have a president like Trump who kinda doesn't believe in anything except the art of the deal, that's a great point.
00:18:06 [Speaker 1]
Like, Trump doesn't really look long term.

00:18:09 [Speaker 2]
Purely transactional.

00:18:09 [Speaker 1]
Maybe...
00:18:10 [Speaker 1]
Say again.
00:18:11 [Speaker 1]
He's transactional.
00:18:12 [Speaker 1]
That's a great point.
00:18:13 [Speaker 1]
I...

00:18:13 [Speaker 1]
The great comment, big Texan.
00:18:16 [Speaker 1]
Second comment, Saudis are firing firing back at the Yemeni oil companies, Al Sabatha station escalation from both sides.
00:18:26 [Speaker 1]
Well, if you're the Saudis, you've gotta...
00:18:29 [Speaker 1]
I mean, if you if you see them on the side...
00:18:32 [Speaker 1]
Yeah.

00:18:32 [Speaker 1]
If you're the Saud family, by the way, who great book.
00:18:36 [Speaker 1]
There's a great book written in the seventies about them, but they are brilliant at navigating the politics of the Middle East region.
00:18:43 [Speaker 1]
And by the way, they're they're they're Bedouins like everyone else in in country.
00:18:51 [Speaker 1]
They have to be...
00:18:52 [Speaker 1]
Bring the biggest stick.

00:18:53 [Speaker 1]
You have to.
00:18:54 [Speaker 1]
Otherwise, you just, you know, you invite more bullies.
00:18:58 [Speaker 1]
You've gotta punch hard, really hard.

00:19:02 [Speaker 2]
Yeah.
00:19:02 [Speaker 2]
And and that's, you know, that...
00:19:03 [Speaker 2]
That's how they've survived, through all this and and certainly prior, conflicts that we've had in the region, which have been numerous over the past century plus.
00:19:16 [Speaker 2]
And when when you've got as much to hold on to and protect as they do, you're gonna fight to do so.
00:19:25 [Speaker 2]
It's just a delicate, geopolitical dilemma or or problem with respect to what does The US do given the political situation domestically that that this administration is in, again, right in front of the midterms.

00:19:44 [Speaker 2]
I wanna go back to the point, that the previous question was, was making, which is...
00:19:50 [Speaker 2]
And we talked about this.
00:19:52 [Speaker 2]
Post Venezuela, snatching of Maduro, you know, quick and surgical, very successful.
00:19:59 [Speaker 2]
And then the launching of of of this initiative shortly thereafter.
00:20:06 [Speaker 2]
Big difference in in terms of what that means for...

00:20:11 [Speaker 2]
I forget who called it this regime adjustment.
00:20:13 [Speaker 2]
And I I think it was Constantine Keeson.
00:20:16 [Speaker 2]
I heard he and his partner on their podcast use, you know, really what we got in Venezuela and why why was it successful.
00:20:25 [Speaker 2]
It wasn't regime change.
00:20:26 [Speaker 2]
It was regime adjustment because Delsea is, you know, a relic of the Maduro administration.

00:20:33 [Speaker 2]
This is a totally different animal with...
00:20:36 [Speaker 2]
On the IRGC, the supreme council, dating back all the way to the revolution in seventy nine.
00:20:44 [Speaker 2]
And so, there there is a completely different motivation and really intrinsic, spirit to to resist and continue to fight.
00:21:00 [Speaker 2]
We're...
00:21:02 [Speaker 2]
Just thinking back to the revolution.

00:21:03 [Speaker 2]
I remember it as a kid, and, you know, that was, what, '79?
00:21:10 [Speaker 2]
Would it have been...
00:21:12 [Speaker 2]
Hindsight's 2020.
00:21:14 [Speaker 2]
Would it have been in ours in the West's best interest to go in and smash that in its early days, instead of giving it fifty years to fester and grow and entrench?
00:21:30 [Speaker 2]
And and now we've got, you know, certainly an emboldened IRGC.

00:21:35 [Speaker 2]
We've talked about

00:21:37 [Speaker 1]
Yep.
00:21:37 [Speaker 1]
You

00:21:38 [Speaker 2]
know, how much how much havoc they can wreak with their decentralized structure, their autonomy among the different units of the IRGC.
00:21:44 [Speaker 2]
And no one should ever forget who's actually making the decision.
00:21:48 [Speaker 2]
So any pronouncements you hear at the diplomatic level or the government of Iran, foreign ministers to the president, you gotta take with a grain of salt.
00:21:57 [Speaker 2]
Because if anything's backing off of what is a a, kind of a divine demand, then, you know, you you...
00:22:10 [Speaker 2]
You've gotta you gotta kinda look behind the veil of who's really making decisions and how this all gets resolved.

00:22:18 [Speaker 2]
And it's gonna be messy.
00:22:19 [Speaker 2]
It's gonna be violent, and it's gonna be very, very tricky, diplomatically.
00:22:24 [Speaker 2]
And and certainly, from the standpoint of if we get to a workable truce or stand down, can we trust them to to follow through?

00:22:37 [Speaker 1]
Never.
00:22:38 [Speaker 1]
But that's sort of what diplomacy...
00:22:40 [Speaker 1]
I mean, that's sort of the diplomatic perspective of The Middle East in general.
00:22:46 [Speaker 1]
You've got a clash of of ideology.
00:22:50 [Speaker 1]
You're not gonna fix that.

00:22:51 [Speaker 1]
It's kinda like trying to convince someone that grew up Catholic, you know, to to change their...
00:23:02 [Speaker 1]
You know, to change...
00:23:03 [Speaker 1]
To to become a Protestant.
00:23:05 [Speaker 1]
You just don't...
00:23:05 [Speaker 1]
Like, people just don't do that.

00:23:07 [Speaker 1]
You're not gonna ever ideal...
00:23:08 [Speaker 1]
Ever agree ideologically, so you're gonna have to come to some sort of common ground.
00:23:13 [Speaker 1]
The...
00:23:14 [Speaker 1]
And and I think the only way to get to common ground is through force.
00:23:17 [Speaker 1]
But we have a lot of news here, Mark.

00:23:20 [Speaker 1]
There's a couple comments I wanna get to.
00:23:23 [Speaker 1]
Mike Nelson, everyone forgets that OPEC would increase prices when the rig count fell below a certain number and drop prices when the rig count reached a high number to discourage US drilling in seventies and eighties.
00:23:38 [Speaker 1]
Absolutely.
00:23:39 [Speaker 1]
But that's the...
00:23:41 [Speaker 1]
That...

00:23:41 [Speaker 1]
That's the whole point of why OPEC...
00:23:44 [Speaker 1]
You know, they created a cartel in the first place.
00:23:46 [Speaker 1]
They wanna control the price.
00:23:49 [Speaker 1]
Absolutely.
00:23:50 [Speaker 1]
That's a great point, Mike.

00:23:51 [Speaker 1]
And then Yeah.

00:23:52 [Speaker 2]
I don't know.
00:23:53 [Speaker 2]
Some would argue they did it in the, you know, in the middle of the twenty tens, the 2014 Thanksgiving surprise.
00:23:58 [Speaker 2]
You know, there was a lot of debate about that, but I recall, you know, we showed very aggressively our ability to to grow US production because of the the shale miracle and the shale revolution.
00:24:09 [Speaker 2]
And I would, you know, I would engage in a lot of debates with folks back then when I was in the analyst business.
00:24:18 [Speaker 2]
And, you know, what they, you know, what they wanted to continue to do, because the threats to, OPEC market share back in the seventies, eighties, and and nineties were mostly conventional large project, long cycle type things.

00:24:34 [Speaker 2]
And then shale showed up as a bit of what some people believe is an on off switch.
00:24:40 [Speaker 2]
And, you know, we we, we aggravated the problem in the mid twenty tens through the end of that decade and end of the twenty twenties with, you know, a pretty willing debt market enhancing, too much growth.
00:25:01 [Speaker 2]
The, what the potential is and, you know, why do you think why do you think The UAE is...
00:25:07 [Speaker 2]
Has got, you know, a strong interest in in development...
00:25:12 [Speaker 2]
Developing its own unconventional, via, you know, EOG being there blown and gone, and, you know, their their early results have been have been pretty positive.

00:25:23 [Speaker 2]
And so, I I do think, structurally, there has been an underlying market share, concern or angst on the part of OPEC, particularly Saudi, as it relates to the emergence of of shale over the past fifteen to twenty years.
00:25:42 [Speaker 2]
It's it's just a different flavor.
00:25:44 [Speaker 2]
And and what these what these big downdrafts do is they really push out the FID, the major threats on the conventional side.
00:25:55 [Speaker 2]
I mean, they're looking at Guyana.
00:25:56 [Speaker 2]
They're looking at Brazil.

00:25:57 [Speaker 2]
They're looking at Ivory Coast, kind of the, resurgence of the turbidite stuff off of West Africa Mhmm.
00:26:05 [Speaker 2]
The users have been talking about, you know, growth is is something, you know, we'll ultimately get back to, but you gotta have both to move the needle.
00:26:17 [Speaker 2]
And, you know, I think we'll continue to see this type of, rhetoric behavior out of OPEC, particularly out of Saudi to to keep, to keep the, the Western market share threat off balance.
00:26:29 [Speaker 2]
Nothing's really changed.
00:26:31 [Speaker 2]
We've just moved from unconventional being a new player on on the stage.

00:26:36 [Speaker 1]
No doubt.
00:26:37 [Speaker 1]
No doubt, Mark.
00:26:40 [Speaker 1]
No doubt.
00:26:41 [Speaker 1]
I'm just looking...
00:26:43 [Speaker 1]
Man, we got some great comments today.

00:26:47 [Speaker 1]
Let's keep going.
00:26:47 [Speaker 1]
I say we...
00:26:48 [Speaker 1]
Let...
00:26:49 [Speaker 1]
Let's move over to Russia.
00:26:51 [Speaker 1]
We'll come back to this.

00:26:54 [Speaker 1]
We'll come back to The Middle East, but what's going on in Russia?

00:26:58 [Speaker 2]
Well, apparently, we cut a deal, and treasury issued a license for Russian diesel supply in four tranches.
00:27:12 [Speaker 2]
And pardon my lack of of conversion capability, but tranche one was 300,000 tons immediately.
00:27:22 [Speaker 2]
Two is another half million tons by November, whenever that is.
00:27:28 [Speaker 2]
And then tranche three of a million tons immediately thereafter, and then tranche four, 3,000,000 tons for a total of 4,800,000 tons.
00:27:42 [Speaker 2]
It's only about 2,200,000 barrels in the first tranche, so that's plus or minus half a day of U...

00:27:48 [Speaker 2]
US distillate demand.

00:27:52 [Speaker 1]
And And if you

00:27:52 [Speaker 2]
take the full measure of the 4,800,000 tons, that's about 36,000,000 barrels.
00:27:57 [Speaker 2]
And so you're at plus or minus nine nine days of US demand.
00:28:02 [Speaker 2]
This is this is kind of sentiment driven, and not surprisingly, this deal was cut, a few weeks before election day, yet diesel continues to, to push higher.
00:28:16 [Speaker 2]
I saw a, I think I shared it yesterday in our internal thread.
00:28:21 [Speaker 2]
I saw a, post by Patrick Dehhan.

00:28:29 [Speaker 1]
Patrick Dehudahana.

00:28:31 [Speaker 2]
GasBuddy guy.

00:28:33 [Speaker 1]
GasBuddy.
00:28:34 [Speaker 1]
Okay.

00:28:35 [Speaker 2]
So if you look at wholesale gasoline, up nearly 15¢, while diesel is up nearly 27¢.
00:28:45 [Speaker 2]
This is Great Lakes focus.
00:28:47 [Speaker 2]
You know, we've had some refinery problems in that area, not the least of which was Exxon's Juliet.
00:28:54 [Speaker 2]
But those are big moves in spite of a, you know, kind of a relief package in a in a in a backroom deal with Russia.

00:29:06 [Speaker 1]
And and...
00:29:07 [Speaker 1]
I mean, this is...
00:29:08 [Speaker 1]
Go ahead.

00:29:09 [Speaker 2]
Go ahead.

00:29:10 [Speaker 1]
No.
00:29:10 [Speaker 1]
Get on...
00:29:10 [Speaker 1]
Go on that string.

00:29:12 [Speaker 2]
So we're trying to squeeze Russia.
00:29:15 [Speaker 2]
We've we've sent a lot of money to Ukraine, And, you know, there are those who came out of the woodwork again this weekend when that deal was cut saying, we're kinda pissing on on Lindsey Graham's grave.
00:29:29 [Speaker 2]
You know, he was one of the biggest supporters and one of the highest frequency visitors to Ukraine.
00:29:36 [Speaker 2]
What are we doing cutting a deal with Russia when they ban their own diesel exports?

00:29:42 [Speaker 1]
I mean, well, you know what I think about Ukraine.
00:29:45 [Speaker 1]
That's been the biggest boondoggle of, you know, money laundering to US politicians.
00:29:53 [Speaker 1]
It...
00:29:53 [Speaker 1]
It's ridiculous.
00:29:54 [Speaker 1]
So I I don't even...

00:29:55 [Speaker 1]
There...
00:29:56 [Speaker 1]
There's been...
00:29:56 [Speaker 1]
There's no reason The United States needs to be involved in Ukraine.
00:30:00 [Speaker 1]
Like, there's no real strategic reasons, and I know Ukraine has an oil company, blah blah blah.
00:30:06 [Speaker 1]
And I actually know some people that worked in Ukraine in oil and gas.

00:30:12 [Speaker 1]
I'm sure some...
00:30:13 [Speaker 1]
Many of us have.
00:30:14 [Speaker 1]
But the point is is that's a boondoggle.
00:30:18 [Speaker 1]
But the fact that that we're buying diesel from Russia is is is interesting because it's only for the election.
00:30:28 [Speaker 1]
And who are we stealing the diesel away from?

00:30:30 [Speaker 1]
Like, who who did we outbid for Russia's diesel?
00:30:35 [Speaker 1]
That's my question.
00:30:36 [Speaker 1]
It could have been a strategic move of, like, trying to not only lower prices in The US, which, I mean, will it really make that big of a dent?
00:30:44 [Speaker 1]
But But also who's it taken away from?

00:30:46 [Speaker 2]
We know who needs it more, and that's the Europeans.
00:30:50 [Speaker 2]
Right?

00:30:51 [Speaker 1]
You're right.

00:30:52 [Speaker 2]
Oh, by the way, they're closer.
00:30:54 [Speaker 2]
So what kind of a deal did we get to take, you know, seemingly inconsequential volume?
00:31:00 [Speaker 2]
Optically, it's a big deal.
00:31:02 [Speaker 2]
It's a headline.
00:31:03 [Speaker 2]
Hey.

00:31:03 [Speaker 2]
You know, Russia's engaging in a deal.
00:31:06 [Speaker 2]
They're gonna lift some portion of their export ban on refined product to help us.
00:31:13 [Speaker 2]
And, of course, political opposition is all over this because, you know, it's it's long been purported that, Trump is a is a Putin ally and an operative, etcetera, etcetera, etcetera, all the way back to the twenty sixteen elections and the Russia...
00:31:32 [Speaker 2]
Russiagate hoax and all that.
00:31:33 [Speaker 2]
I don't wanna go over all that.

00:31:35 [Speaker 2]
But

00:31:36 [Speaker 1]
let's remind everybody that the Russian economy is smaller than the state of Texas.
00:31:42 [Speaker 1]
It's like...
00:31:42 [Speaker 1]
Let's put it in perspective.
00:31:44 [Speaker 1]
Texas is a big economy, by the way.
00:31:46 [Speaker 1]
Now c m watt CDS one, whoever that is, we've been trying to build storage and refineries and investors just won't commit to investing.

00:31:58 [Speaker 1]
That's a good comment, but if you have drum strikes, across the Gulf Coast, I'm sure we'd come up with emergency dollars to build some new refineries.
00:32:10 [Speaker 1]
But, you're right.
00:32:11 [Speaker 1]
We're a we're a free market economy.
00:32:13 [Speaker 1]
So and...

00:32:15 [Speaker 2]
Well, how about how about we start with trumping, pun intended, what California has been doing essentially lost 17% of its refinery capacity in a very short period of time with Valero and then the Southern California refineries going offline.
00:32:32 [Speaker 2]
How about, you know, is there a path?
00:32:35 [Speaker 2]
And I I saw something that I couldn't verify, but there was contemplation apparently, using the Defense Production Act to restart Venetia, for example.

00:32:46 [Speaker 1]
Right.

00:32:46 [Speaker 2]
Is that something that politically is going to happen?

00:32:53 [Speaker 1]
I mean, I...
00:32:54 [Speaker 1]
Politically, it may happen.
00:32:56 [Speaker 1]
My view is if the if the opportunity is big enough, someone is going to fund it.
00:33:03 [Speaker 1]
I mean, let's not...
00:33:04 [Speaker 1]
Like, I...

00:33:05 [Speaker 1]
I'm not really that...
00:33:07 [Speaker 1]
Yeah.
00:33:08 [Speaker 1]
I'm not concerned about The US refining capacity and the fact that investors won't do it.
00:33:14 [Speaker 1]
If it's a big enough opportunity, someone's gonna invest in...
00:33:17 [Speaker 1]
Into it.

00:33:18 [Speaker 1]
So...
00:33:19 [Speaker 1]
And there's so much private equity dollars.
00:33:21 [Speaker 1]
I know they're probably...
00:33:22 [Speaker 1]
It's not necessarily their appetite, but it sure looks good at this point.
00:33:27 [Speaker 1]
Could be.

00:33:28 [Speaker 1]
But, again, we've talked about it.
00:33:30 [Speaker 1]
Like, we...
00:33:30 [Speaker 1]
There's...
00:33:31 [Speaker 1]
There...
00:33:32 [Speaker 1]
We can buy it from other places in the world, and this is the worst it could ever get.

00:33:38 [Speaker 1]
May...
00:33:38 [Speaker 1]
It might get worse.
00:33:39 [Speaker 1]
I don't know.
00:33:40 [Speaker 1]
I know we have Jacob coming in.
00:33:41 [Speaker 1]
Jacob, did you wanna come in?

00:33:43 [Speaker 1]
Our producer, I think he wants some airtime maybe to give it...
00:33:47 [Speaker 1]
Make us make us look bad or what.
00:33:49 [Speaker 1]
What's up, Jacob?

00:33:50 [Speaker 3]
No.
00:33:51 [Speaker 3]
Actually, this is a great way to segue into a Collide shout out because there was actually a post today in relation to this topic.
00:34:00 [Speaker 3]
I'll pull it up now.
00:34:02 [Speaker 3]
So here on Collide, which is our social media for, oil and gas community, we We have one of our users, Chris, shared a chart from Bloomberg, about the same topic.
00:34:14 [Speaker 3]
And, essentially, in the comments, someone asked that's, you know, in relation to the show, is there any data on how diesel is impacted during the q four, q one twenty twenty seven?

00:34:25 [Speaker 3]
If y'all wanted to, wrap on that...
00:34:26 [Speaker 3]
On this topic.

00:34:31 [Speaker 1]
Is there any data on how diesel is impacted, Mark?

00:34:37 [Speaker 2]
Well, inventories don't matter until they matter.
00:34:41 [Speaker 2]
So I I...
00:34:42 [Speaker 2]
You know, if we make progress quickly in getting US distillate inventories, starting to rebuild, although you're kind of at peak as in, you know, those remains tight, prices continue in certain pads and regions to be, you know, continuing an upward trend.
00:35:04 [Speaker 2]
But, you know, if we if we, for some reason, start to see strong builds in US refiners are playing ball, as as part of the arm twisting or diplomatic campaign.
00:35:22 [Speaker 2]
I don't know.

00:35:23 [Speaker 2]
I I I I I I don't think we have enough runway to, you know, kinda have a meaningful, price relief.
00:35:31 [Speaker 2]
And I think, we're getting closer and closer to having the demand lever being being pulled as as a means of of bringing prices down.
00:35:39 [Speaker 2]
What do you think, Kirk?

00:35:42 [Speaker 1]
I mean, let's ask the traders.
00:35:44 [Speaker 1]
I don't really...
00:35:45 [Speaker 1]
I mean, I'm...
00:35:46 [Speaker 1]
Again, this is all forecasting.
00:35:48 [Speaker 1]
And the Saudis are planners.

00:35:51 [Speaker 1]
They're not forecasters.
00:35:52 [Speaker 1]
They plan what they wanna do.
00:35:54 [Speaker 1]
I don't know the real answer.
00:35:56 [Speaker 1]
It's a great question.
00:35:58 [Speaker 1]
You know, let...

00:35:59 [Speaker 1]
Let's make predictions now.
00:36:01 [Speaker 1]
I'm sure Clyde could help us with that.
00:36:02 [Speaker 1]
Right, Jacob?
00:36:04 [Speaker 1]
Why don't we make predictions to see where we end up in in, the first q one of next year?
00:36:13 [Speaker 1]
He's gone, by the way.

00:36:14 [Speaker 1]
And I have a question.
00:36:16 [Speaker 1]
Jacob, are you still, like...
00:36:18 [Speaker 1]
Bring yourself back in for a second.

00:36:22 [Speaker 2]
Hello.

00:36:23 [Speaker 1]
This is...
00:36:24 [Speaker 1]
I need everyone's input on this one.
00:36:27 [Speaker 1]
At what age...
00:36:28 [Speaker 1]
Like, I think your mustache looks really cool, but I'm not, like, my...
00:36:35 [Speaker 1]
People that that care about me say, I can't pull off a mustache, and I'm like, I think the mustache is back in.

00:36:41 [Speaker 1]
What do you think, Mark?

00:36:43 [Speaker 2]
Oh, definitely for Jacob.

00:36:46 [Speaker 1]
I mean, look how cool that is.
00:36:48 [Speaker 1]
What do y'all think, audience?
00:36:49 [Speaker 1]
I'm I'm thumbs up.
00:36:51 [Speaker 1]
Yeah.
00:36:51 [Speaker 1]
That's right.

00:36:52 [Speaker 1]
That's a strong mustache, man.
00:36:55 [Speaker 1]
And you don't even use any, like...
00:36:56 [Speaker 1]
Have you ever thought about using wax?

00:36:59 [Speaker 3]
Never.

00:36:59 [Speaker 1]
Oil and gas product, by the way.
00:37:01 [Speaker 1]
What's the wax market doing?
00:37:03 [Speaker 1]
Mustache wax pricing.
00:37:05 [Speaker 1]
We need to do a mustache wax index.
00:37:09 [Speaker 1]
Look that up, Jacob.

00:37:10 [Speaker 1]
Type that into Clyde.
00:37:12 [Speaker 1]
Let's see what, let's start tracking that as a byproduct.

00:37:16 [Speaker 2]
Good call.

00:37:18 [Speaker 1]
Alright.
00:37:18 [Speaker 1]
Thanks, everyone.
00:37:20 [Speaker 1]
On to the next subject.
00:37:21 [Speaker 1]
Oh, and by the way, IG, arca or arc alpha four twenty.
00:37:28 [Speaker 1]
Nice.

00:37:29 [Speaker 1]
Testing the latest weapons is the reason we're in Ukraine.
00:37:32 [Speaker 1]
Hey.
00:37:33 [Speaker 1]
Alright.
00:37:35 [Speaker 1]
I mean, don't we do that?
00:37:36 [Speaker 1]
Can't we do that in, you know, other places?

00:37:40 [Speaker 1]
But maybe maybe we can.
00:37:43 [Speaker 1]
I guess live rounds.
00:37:44 [Speaker 1]
You know?
00:37:45 [Speaker 1]
You you get live action in in Ukraine.
00:37:47 [Speaker 1]
There you go.

00:37:48 [Speaker 1]
Good good feedback.
00:37:50 [Speaker 1]
What's next on our agenda?
00:37:52 [Speaker 1]
I know we have we have a lot of questions coming in.
00:37:55 [Speaker 1]
I know we have some quick hits, Mark.
00:37:58 [Speaker 1]
We've covered Russia.

00:38:00 [Speaker 1]
We've covered the Saudis.
00:38:02 [Speaker 1]
Elko should be fired.
00:38:04 [Speaker 1]
Sark needs to give up his offensive coordination duties.
00:38:08 [Speaker 1]
Arch needs to just play simple.
00:38:11 [Speaker 1]
What else do we need to tackle?

00:38:13 [Speaker 1]
There's some good stuff here.
00:38:15 [Speaker 1]
Enerflex?
00:38:16 [Speaker 1]
Interesting.

00:38:17 [Speaker 2]
Back...
00:38:19 [Speaker 2]
Off the...
00:38:21 [Speaker 2]
Onto the the...
00:38:23 [Speaker 2]
Back to the BTM pulpit, I guess, is is really the way it's

00:38:27 [Speaker 1]
Standing for behind the meter

00:38:29 [Speaker 2]
Behind the meter.
00:38:30 [Speaker 2]
For you.
00:38:31 [Speaker 2]
Mostly gas fired power.
00:38:33 [Speaker 2]
So Enerflex, on the October 1, announced that it had won a contract to build about 450 megawatts of BTM gas generation for an unnamed North American data center developer.
00:38:48 [Speaker 2]
Who's the customer?

00:38:49 [Speaker 2]
Who knows?
00:38:51 [Speaker 2]
But, you know, we're we're seeing at the margin, things that are pushing growth in BTM predictions and forecast up, not the least of which are things that are happening in places like our Cotton, Texas with moratoriums, with pauses on regulatory permits, etcetera.
00:39:14 [Speaker 2]
And, oh, by the way, when we talked about this a few weeks back when the, TCEQ, permit issuance moratorium was set after the stop audit, that governor Abbott issued in August.
00:39:28 [Speaker 2]
I think you you posited, Kirk, that this wasn't going to affect behind the meter while it does.
00:39:36 [Speaker 2]
And yet we're still seeing significant growth in behind the meter, capacity.

00:39:43 [Speaker 2]
Goldman raised its BTM outlook.
00:39:47 [Speaker 2]
This is a 2030 outlook from 40 to 67 gigawatts.
00:39:55 [Speaker 2]
That's a lot in percentage terms.

00:39:59 [Speaker 1]
I mean, what's interesting is going back to Enerflex.
00:40:02 [Speaker 1]
It's a 450 megawatt project, which is basically the size of a half a nuclear reactor.
00:40:12 [Speaker 1]
So it's probably at some hyperscale data center.
00:40:17 [Speaker 1]
I think this is an interesting trend because the Global Energy Monitor says there's a 189 gigs of gas projects for data centers up from 97 at year end.
00:40:29 [Speaker 1]
That's doubling in six months.

00:40:31 [Speaker 2]
Not all those are BTM, but I would say the majority of them probably are.
00:40:35 [Speaker 2]
Or do we know?

00:40:37 [Speaker 1]
I mean, behind the meter is just an easier way to to run around regulatory approval.
00:40:42 [Speaker 1]
Right?
00:40:43 [Speaker 1]
It's just a faster way to power.
00:40:46 [Speaker 1]
And in some ways, is it cheaper?
00:40:48 [Speaker 1]
Probably is cheaper because you never know when the grid and the government's gonna turn around and change the deal, which they can, and then file for imminent domain.

00:41:00 [Speaker 1]
So there's a lot of risk going to the grid.
00:41:03 [Speaker 1]
There's a lot of risk going behind the meter, but at least behind the meter, you control your own destiny.
00:41:10 [Speaker 1]
And so it's an interest...
00:41:11 [Speaker 1]
Interesting loophole.
00:41:14 [Speaker 1]
And the question that I that I have, especially in the Goldman forecast, is how much of this is actually real?

00:41:23 [Speaker 2]
Yeah.
00:41:25 [Speaker 2]
Well, I I think the, you know, the the example that's close...
00:41:31 [Speaker 2]
Or the situation that's closest to us is what I just mentioned with the stop audit and then TCEQ moratorium is what happens after November 3.
00:41:42 [Speaker 2]
Right?
00:41:44 [Speaker 2]
I don't think any jurisdiction, any political affiliation, including both Democrats and Republicans in Texas, want to see the money try and go elsewhere in terms of how this all plays out for their own political self interest.

00:42:03 [Speaker 2]
And we're talking about major capital.
00:42:07 [Speaker 2]
Now the local...
00:42:08 [Speaker 2]
At a local and a county level, you you do have real issues to be dealt with.
00:42:13 [Speaker 2]
And a lot of that is the genesis of this populist push...
00:42:18 [Speaker 2]
Pushback, but there are a lot of opportunity...

00:42:20 [Speaker 2]
Opportunists that are really forcing, you know, forcing these political campaigns to really reconsider and do things that are out of character, like moratoriums, like stop audits, etcetera, for those who are otherwise out there shouting from the rooftops that Texas is open for business.
00:42:42 [Speaker 2]
It's easy to build here.
00:42:43 [Speaker 2]
Well, hold the phone.
00:42:45 [Speaker 2]
You know?
00:42:46 [Speaker 2]
Now all of a sudden, you know, we're doing things that look like straight out of the playbook from the other side of the aisle.

00:42:53 [Speaker 1]
Well, I think the quieter story here is the permitting reform bill is real interesting because we have oil and gas as well as the big tech supporting this same reform bill, which will help pipelines and data centers.
00:43:15 [Speaker 1]
So this is an interesting one.
00:43:17 [Speaker 1]
I don't know what the the impact is.
00:43:19 [Speaker 1]
Have you been following this?
00:43:21 [Speaker 1]
I think we probably need to to make this one of our top lead stories.

00:43:26 [Speaker 2]
Yeah.
00:43:26 [Speaker 2]
We'll talk about it next week.
00:43:28 [Speaker 2]
It...
00:43:29 [Speaker 2]
It's something that popped back up a few weeks ago as if, you know, we're going to get congressional movement on legislation and energy permitting reform.
00:43:38 [Speaker 2]
Recall we talked last year about the, unfortunate circumstance that Joe Manchin was leaving because he and Barrasso had put together a bipartisan bill that came out of subcommittee at the senate level.

00:43:52 [Speaker 2]
And I read the whole thing.
00:43:53 [Speaker 2]
It was 70 pages long.
00:43:54 [Speaker 2]
It was just common sense in terms of not allowing administrative agencies to hamstring these projects.
00:44:02 [Speaker 2]
Now you've got litigation risk on the other side that that can create havoc with timelines, But you...
00:44:09 [Speaker 2]
You've got to find a way.

00:44:10 [Speaker 2]
And, one criticism of the, of the Mansion Barrasso bill was that it was pretty light on nuclear.
00:44:19 [Speaker 2]
And I think one of the biggest problems that we've been dealing with for the last fifty years is the whole creation of the NRC and how the NRC is basically set up as an agency that says no a 100% of the time or makes it untenable for us to be building any kind of conventional or SMR type new technology reactors, which, you know, had we been about the business of building out nuclear like the French were over the last fifty years, we'd be in a much different place from a a grid capacity, grid stability, and grid reliance standpoint and from an emission standpoint.

00:44:58 [Speaker 1]
So just a few interesting headlines as I'm looking at my live feed over here.
00:45:05 [Speaker 1]
Trump just was interviewed and is saying that that we're still feeding information to Ukraine, which he's playing both sides.
00:45:15 [Speaker 1]
And the headline in BBC says, diesel will be released to the world.
00:45:22 [Speaker 1]
So Trump's buying all the diesel so he can negotiate.
00:45:26 [Speaker 1]
Of course.

00:45:27 [Speaker 1]
That's ridiculous.
00:45:28 [Speaker 1]
Secondly, I don't know if you've been following the story, and my former, boss is on CNBC.
00:45:35 [Speaker 1]
He's everywhere now.
00:45:36 [Speaker 1]
Michael Dell.
00:45:37 [Speaker 1]
He's everywhere.

00:45:40 [Speaker 1]
Man, I thought his wife got unnecessary shade on social media after being, on all the public news for being in the White House, but that's unfortunate.
00:45:53 [Speaker 1]
I'm calling that a foul.
00:45:56 [Speaker 1]
Off limits.
00:45:57 [Speaker 1]
You should stay off limits.
00:45:58 [Speaker 1]
Even if you're on national TV, man, show some respect.

00:46:02 [Speaker 1]
But, here's sort of, here's my thought here.
00:46:07 [Speaker 1]
And here's the irony of our show.
00:46:10 [Speaker 1]
We'll get to comments after this.
00:46:12 [Speaker 1]
But the world cannot fill a billion barrel hole in oil inventories.
00:46:20 [Speaker 1]
We cannot get Russian diesel to market even though it sounds like we're buying it all.

00:46:26 [Speaker 1]
We cannot fly CEOs into Riyadh, but we can find a 189 gigawatts of new gas generation for AI training.
00:46:37 [Speaker 1]
The capital goes where the returns are.
00:46:41 [Speaker 1]
So the energy crisis and the energy build, the build out, all this behind the meter are the same story.
00:46:50 [Speaker 1]
It's super interesting.
00:46:53 [Speaker 1]
See how I tied all this together, Mark?

00:46:56 [Speaker 2]
Yeah.
00:46:58 [Speaker 2]
If you have any data points on what, surface acreage prices are doing in West Texas, they're, if you think back to an an analog, it would be something akin to what was being done when the wolf camp took off ten, fifteen years ago.
00:47:18 [Speaker 2]
Is...
00:47:18 [Speaker 2]
Oh, one one thing one thing on the...
00:47:20 [Speaker 2]
I I read, I read a bit of East Dailies latest kind of macro report, and, you know, they're they're among the best on flows and know know really what's going on in gas markets.

00:47:35 [Speaker 2]
And the numbers were pretty astounding.
00:47:37 [Speaker 2]
Between now and 2036, there's eight and a half BCF a day of...
00:47:45 [Speaker 2]
And we I I think this was cited in the the Matt Smith modeling, podcast and that whole analysis and conclusion.
00:47:56 [Speaker 2]
Eight and a half BCF a day of incremental gas fired power generation demand for 80, for data centers.
00:48:04 [Speaker 2]
I was a little surprised that...

00:48:05 [Speaker 2]
I think the number was something on the order of two and a half BCF a day of that would be in Texas.
00:48:11 [Speaker 2]
I thought it would be bigger than that.
00:48:13 [Speaker 2]
And 75% of that demand is going to be in basin, so building it out where the gas is.
00:48:23 [Speaker 2]
And there's a lot of gas coming.
00:48:25 [Speaker 2]
I don't know if you saw the, like, the Permian.

00:48:29 [Speaker 2]
So we we just had a...
00:48:31 [Speaker 2]
We resumed our record, record high March on, US gas production, 137 BCF a day.
00:48:43 [Speaker 2]
And from June to July, Permian gas grew 1.7 BCF a day.
00:48:51 [Speaker 2]
That's a combination of, you know, increased activity, turn in lines.
00:48:57 [Speaker 2]
But I also think there's a structural thing that we've cited before too is that...

00:49:01 [Speaker 2]
And, Brad Olsen just put out a piece.
00:49:04 [Speaker 2]
I've gotta read the whole thing that the Permian oil economics going forward, and this makes a ton of sense as we've talked about the upward march of gas oil ratios, your BOE becomes more gas sensitive as we move forward because GORs

00:49:26 [Speaker 1]
are going.

00:49:28 [Speaker 2]
So to justify and create the types of returns, gas prices matter more and more going forward.
00:49:35 [Speaker 2]
So in basin gas prices, we've been through years where there have been long periods where Waha gas is negative.
00:49:42 [Speaker 2]
And so does that, you know, does that create issues, if we can't get enough egress built quickly enough with a rising GOR?
00:49:53 [Speaker 2]
And and, you know, the big pipe additions and the capacity expansions come online and fits and starts.
00:49:59 [Speaker 2]
And, oh, by the way, at some point, you're gonna need to build more processing capacity because all that associated gas is pretty wet.

00:50:12 [Speaker 1]
So I'd I'd recommend everybody......
00:50:13 [Speaker 1]
Mark.

00:50:14 [Speaker 2]
I'd I'd recommend everybody go on and just take a look.
00:50:16 [Speaker 2]
It's a pretty short piece that that Brad Olsen shared.

00:50:19 [Speaker 1]
Can we can we, add that...
00:50:22 [Speaker 1]
Do you have a link to it, Jacob, that you could put in put in on the screen?
00:50:25 [Speaker 1]
I didn't

00:50:25 [Speaker 2]
I didn't put it in the in the base so I can

00:50:28 [Speaker 1]
find it.
00:50:29 [Speaker 1]
He can find anything.
00:50:31 [Speaker 1]
Have that mustache find it, Jacob.
00:50:34 [Speaker 1]
On paper lantern 42,

00:50:37 [Speaker 2]
Steve is,

00:50:40 [Speaker 1]
Mark, tell him the piece.

00:50:42 [Speaker 2]
Brad Brad Olsen.

00:50:44 [Speaker 1]
Twitter?

00:50:46 [Speaker 2]
LinkedIn.
00:50:47 [Speaker 2]
Got it.

00:50:49 [Speaker 1]
Paper lantern 42 says, is behind the meter gas a real loophole for data centers, or does it get closed fast?
00:50:57 [Speaker 1]
Well, it's a state...
00:50:58 [Speaker 1]
I mean, this is kind of a, you know, a state issue.
00:51:01 [Speaker 1]
So It's good question.
00:51:03 [Speaker 1]
State you're talking about, but a great question.

00:51:05 [Speaker 2]
Yeah.
00:51:06 [Speaker 2]
I think, I think behind the meter is not a loophole, per se because you're now...
00:51:14 [Speaker 2]
You now have state leaders and even federal leaders saying, look, you gotta bring your own power in some way, shape, or form even if you're grid connected

00:51:25 [Speaker 1]
Yeah.

00:51:27 [Speaker 2]
Along with water use plans, etcetera, noise, all of these things.
00:51:34 [Speaker 2]
The notion that behind the meter out in an unincorporated outside of municipal water district is, you know, kind of the the wild west, and you could do anything you want, isn't the case because you still have to have...
00:51:51 [Speaker 2]
Like in Texas, you still have to have stormwater permits that are issued by the TCEQ.
00:51:58 [Speaker 2]
You still have to have to to to stay clear of utility designation, which you don't want as a behind the meter generator.
00:52:10 [Speaker 2]
You're not you're not providing that power...

00:52:12 [Speaker 2]
Generating that power for the public.
00:52:14 [Speaker 2]
You still have emissions limits that you have to comply with based upon your specific type of generation equipment.
00:52:22 [Speaker 2]
And so, yeah, private landowners can pretty much do what they want, but there there are still permitting and regulatory issues that, play into, you know, how fast you can how fast you can go out and build this stuff and how much you can build in a single location.
00:52:42 [Speaker 2]
But but speaking of blue...
00:52:44 [Speaker 2]
Speaking of loopholes, the the Colossus case is is instructive because they started out in Memphis, and I saw over the past week or so...

00:52:56 [Speaker 2]
Go go check out what's happened with the most recent Memphis city council meetings.
00:53:00 [Speaker 2]
There have been fisticuffs, and people are getting banned from, politicians are getting banned from, attending the next city council meeting.
00:53:09 [Speaker 2]
The real issue at hand is voting on a data center moratorium in Shelby County in Memphis.
00:53:15 [Speaker 2]
And that...
00:53:15 [Speaker 2]
That's all precipitated by what what, XAI, SpaceX, whatever they're called now, is done with Colossus.

00:53:21 [Speaker 2]
If you remember, they moved in and started all these Solaris, temporary turbines to get under the EPA exemption, which allowed them for less than three hundred and sixty days if that generator was going to be in place and was mobile or temporary, that they they were exempt from, EPA rules.
00:53:48 [Speaker 2]
Well, EPA closed that loophole last January.
00:53:51 [Speaker 2]
And so Tennessee is stepping in and saying, you can't do this.
00:53:55 [Speaker 2]
So they moved across the border into Southaven, Mississippi.
00:53:58 [Speaker 2]
And even though the EPA loophole was closed, miss...

00:54:01 [Speaker 2]
Mississippi said we have jurisdiction here.
00:54:03 [Speaker 2]
So they've got something like 46, gas fired turbines running on that site where they're building a permanent, I think, 1.6 gigawatt power facility to to, run an extension cord from Mississippi into Tennessee to run all those, Colossus data centers.

00:54:24 [Speaker 1]
Good good perspective.
00:54:25 [Speaker 1]
Cobalt snee...
00:54:26 [Speaker 1]
Oh, Bradley Olsen on screen, everybody, if you wanna read that drill, baby, drill.
00:54:33 [Speaker 1]
Recurrent investment advisers, But Cobalt Sneaker, which...
00:54:39 [Speaker 1]
Send a pic.

00:54:40 [Speaker 1]
I wanna see those sneakers.
00:54:41 [Speaker 1]
Heading into November 3, our data center moratoriums forcing campaigns to take a side on power.
00:54:50 [Speaker 1]
I mean, is this a real issue to voters' data center?
00:54:53 [Speaker 1]
I mean, if you're a landowner, if you're a community member where a big data center's going in, you care.
00:55:01 [Speaker 1]
So it might matter more to local elections, maybe.

00:55:08 [Speaker 1]
And then when you think about these federal or bigger elections, you know, people in the big cities, they love to care about, you know, issues that really have no impact on their lives.
00:55:22 [Speaker 1]
So I don't know.
00:55:23 [Speaker 1]
I'm sure campaigns are.
00:55:25 [Speaker 1]
I've seen it definitely in the senate race in Texas.
00:55:28 [Speaker 1]
This is a real issue, especially, you know, when you got Paxton versus, Tallerico, they're talking about it.

00:55:38 [Speaker 1]
So maybe it does.
00:55:40 [Speaker 1]
OrbitPancake says, is Trump playing both sides signing Russia sanctions in September then buying their diesel in October?
00:55:48 [Speaker 1]
I think the rule on Trump is, Mark, and you tell me, he has no side.
00:55:52 [Speaker 1]
He's just the side of a deal.
00:55:54 [Speaker 1]
He just wants to be in a deal.

00:55:57 [Speaker 1]
He'll take any side.

00:55:59 [Speaker 2]
What do you think, Mark?
00:56:00 [Speaker 2]
I I...
00:56:02 [Speaker 2]
I've got nothing to add there because you're spot on.
00:56:06 [Speaker 2]
I I'm not sure if there's

00:56:08 [Speaker 1]
Pine Cove

00:56:09 [Speaker 2]
There...
00:56:09 [Speaker 2]
There's no there's no side I'm on other than the one that gets the deal done.

00:56:13 [Speaker 1]
That's right.
00:56:15 [Speaker 1]
Pine Cove underscore Dave, as Permian BOE economics get more gas sensitive, does Waha pricing now decide who keeps drilling?
00:56:24 [Speaker 1]
Yes.
00:56:25 [Speaker 1]
What do you think, Mark?

00:56:27 [Speaker 2]
Well, I I...
00:56:28 [Speaker 2]
If if I read read it as quickly as I did and and got to the main conclusion of what Brad Olsen's piece was about, yes.
00:56:38 [Speaker 2]
It...
00:56:38 [Speaker 2]
It's it's no longer a throwaway is really his point.
00:56:42 [Speaker 2]
So is Waha gas pricing

00:56:45 [Speaker 1]
Bring it up, Jacob.
00:56:47 [Speaker 1]
Bring that piece up.
00:56:48 [Speaker 1]
There we go.
00:56:49 [Speaker 1]
Alright.
00:56:49 [Speaker 1]
Keep going, Mark.

00:56:50 [Speaker 2]
And the and the problem with, you know, the protracted episodes of negative Waha pricing or very disadvantaged Waha pricing, and you don't have firm transport, you don't have long term contracts, and you're not realizing, Gulf Coast pricing on your associated gas production, and it now is a bigger part of the BOE, is that it...
00:57:13 [Speaker 2]
It's really hard to set capital plans.
00:57:18 [Speaker 2]
And this is this is more true of of smaller producers because they're more sensitive to that.
00:57:24 [Speaker 2]
And the more south you are, for example, in the Midland Basin, the Wolfcamp, the Gaskier, situation you've got.
00:57:32 [Speaker 2]
But then I look at things like the Woodford Barnett starting to creep up into, hey.

00:57:36 [Speaker 2]
This is the next leg of growth for the Permian.
00:57:40 [Speaker 2]
Those GORs are double what, mainstream Permian is in, you know, out of the Wolfcamp in Bone Springs.
00:57:48 [Speaker 2]
So you're talking from just over 4,000 GOR to 8,000, and and some as high as low to mid teens thousands of SCF per barrel.
00:57:59 [Speaker 2]
So, yes, it it it...
00:58:03 [Speaker 2]
I I think I think there's going to be no steady kind of of of resolution to where too much gas runs up against too little egress or enough in basin demand to reduce this variability involved, volatility.

00:58:26 [Speaker 2]
Do I think, you know, as you're more reliant upon selling your molecules at an economic price in addition to your barrels, does that, you know, is that helpful to your to your planning, to your valuation, to your ability to, you know, generate appropriate returns, your cost of capital, all of those things?
00:58:49 [Speaker 2]
So

00:58:51 [Speaker 1]
we gotta wrap this up, Mark.
00:58:53 [Speaker 1]
I've got the White House calling me.
00:58:56 [Speaker 1]
I don't know what I did this time, but, let's, let's close this out.
00:59:02 [Speaker 1]
Been a great hour to spend with you, Mark.
00:59:08 [Speaker 1]
Good day.

00:59:09 [Speaker 1]
We'll miss Chuck.
00:59:10 [Speaker 1]
He'll...
00:59:11 [Speaker 1]
Will he be back next week?

00:59:15 [Speaker 2]
Never can tell.

00:59:16 [Speaker 1]
Alright.

00:59:17 [Speaker 2]
Game time is closing like it was last night.

00:59:19 [Speaker 3]
He's just an amazing guy.

00:59:21 [Speaker 1]
Everyone post your comments.
00:59:23 [Speaker 1]
Send us follow ups.
00:59:25 [Speaker 1]
What do you wanna talk about?
00:59:27 [Speaker 1]
Let's let's keep this going so that as we roll into next week, we know more about what's on your mind.

00:59:35 [Speaker 2]
And and if we want to see the elusive and enigmatic frack slap make a return guest appearance.

00:59:41 [Speaker 1]
Yeah.
00:59:41 [Speaker 1]
No doubt, man.
00:59:42 [Speaker 1]
There's so much great shit talk that we need to do with him and against him and for him and by him.
00:59:52 [Speaker 1]
So until next time, guys.

00:59:56 [Speaker 2]
In the meantime, I'm gonna play...
00:59:57 [Speaker 2]
Pay even closer attention to Holly Coburn's Twitter feed.

01:00:03 [Speaker 1]
Dude, it's it's really off, man.
01:00:05 [Speaker 1]
It's gone off.
01:00:07 [Speaker 1]
So it's hilarious.
01:00:08 [Speaker 1]
We'll talk about it next week.
01:00:10 [Speaker 1]
Sounds good.

01:00:11 [Speaker 1]
Cheers.

01:00:11 [Speaker 2]
Take care.

01:00:12 [Speaker 3]
Yes.
01:00:13 [Speaker 3]
If you wanna join the conversation, keep it going.
01:00:16 [Speaker 3]
We're across all these platforms you may be watching, but YouTube is home base.
01:00:21 [Speaker 3]
That's where we we we can form our most active chat.
01:00:25 [Speaker 3]
And if you wanna comment after the fact, bring it up the next week, YouTube is the place to aggregate all those comments.

01:00:32 [Speaker 3]
So let's build a community there.
01:00:34 [Speaker 3]
Let's keep the conversation going.
01:00:36 [Speaker 3]
Boys, until next time.