Big Digital Energy

0:01 Hey everybody, welcome to BDE Live. I think this is the energy podcast equivalent of the Van Halen Reunion Tour. Everybody wondered if David Lee Roth remembers the words. That's why they showed up.

0:18 That's kind of why you're here. Hey boys, how are y'all? Good to see you Chuck and Mark Okay, so before we get started, Mark put together a great run of show and the greatest thing about this

0:36 Kirk, he actually put time limits on thing. No fucking irony there. I did. Wow, because I rant forever and ever and no one cuts me off. I didn't do that. I'm just kidding. I'm just kidding.

0:53 All right, kick us off Mark. What are we talking about this week? Well, I think, you know, the running show It started off as Trump's weekend taco, but I think we'll expand that to call it

1:06 Trump's tacos and tantrums. And so let's hit the taco first. You know, over the weekend, we had another slam on the brakes. There was evidently a major strike coming. And apparently the Saudis

1:23 called Saturday night and said, please hold off. And then, you know, it starts to trickle out that they're in the final stages of the peace framework. Well, Iran on Monday morning immediately

1:37 responds to that saying, we're not talking to you.

1:41 We and the Omanis are talking amongst ourselves. And part of that, you know, the, I guess, the

1:51 relief in the market when crude open Sunday night, it was down like 7 bucks right at 6 pm. And so kind of here we go again, but, you know, came, started to crystallize yesterday that, you know,

2:07 there was, as we've been talking about, who are we actually talking with? And so the elements that, at least on the Iranian side, know that, you know, the biggest lever that they have is the

2:21 Strait, you know, we're looking for ways to kind of coexist with our, across the Strait neighbors, if you will, the Omanis. And you guys stay out of the discussion, at least that's the way I

2:36 took it.

2:39 I don't know, Kirk, what do you think? Well, I was getting confused whether Mark was saying, We're not gonna taco about it. I kind of say taco stands for Trump announces, cancels a few skates.

2:57 Taco, I'm trademarking that, if I could say it. I just can't say obfuscate very, say it three times in a row.

3:05 I don't know what's going on, but the Trump taco thing, I mean, traders are getting rich off of him creating all of this turmoil. And I think what's interesting is the Omanis in Iran are building

3:22 a basic temporary safe corridor with voluntary transit fees, managed bilaterally by two countries. What's interesting is the shipping range still mined, but gas prices, oil prices actually dropped.

3:41 So there's something going on here where we just don't really believe what's happening where it doesn't seem to be a big deal. What do you think? I kind of think we're now trading rumors of

3:54 cancellations, of strikes that never were of officially confirmed. It kind of feels like my daughter's friend group, uh, group chat that they do. I mean, it's just, I don't even know what to,

4:07 uh, to make of it. And then the other snarky line I have is I wonder when, uh, I decide to drive through the straight if, uh, Iran's going to take my easy pass tag. Cause

4:23 it feels like that feels like that's what we're setting up here. So the, uh, you know, at some point the world does have to realize that we just don't have any oil and it's not coming out. I mean,

4:36 I don't think the world has figured that out. This is not a trading thing. This is potentially a big fundamental shift. And I kind of feel like, uh, like, you know, the old man peeing outside,

4:49 getting caught with his pants down in the backyard. I think that's where we're headed And just a reminder. It's products, not crude.

4:60 True,

5:02 here's my question. Does each taco cycle compress the market's reaction further? Because if it does, we're building a spring and every time the market shrugs off a threat and prices in diplomacy,

5:21 the snapback when the talks fail get bigger So the risk premium is not disappearing. It seems to be being deferred and deferred risk premiums collect compound interest, by the way. So BMI and Fitch

5:39 raised their escalation odds to 35 from 25. I mean, these are the people whose job is what, go ahead? That's a big move. Well,

5:51 I think this is basically what you're saying This is the third margarita telling you, it's okay to go ahead and just drive home.

6:02 So true. I wonder what Gopher 27 says about that point. Thank you, Chuck. Thank you very much. Tip your wait staff, drive them. Which we like better. We like Gopher 27, whoever he is. This

6:15 is always different than the first. Are we at the point where we have enough significance in the sample set to add a cycle characterization to global oil and gas cycles. There's the old up cycle,

6:28 the down cycle, and now the taco meme cycle.

6:33 Yes, sir.

6:36 So

6:37 continuing with Trump, and we're now within a couple of days, or maybe tomorrow, yeah, tomorrow is the three month marker out from the midterm elections And I've always thought a pretty overt sign

6:51 of

6:55 desperation is lashing out. And so a good familiar target from the Trump administration and from the president himself. He took to social media in the airwaves yesterday, basically saying on the

7:09 heels of Exxon and Chevron's reports last Friday, they're making way too much money. They made way too much money. And I don't know if Jacob has the clip

7:23 that shot across my bow that I saw, but basically going even further and saying, they ought to give some of those profits to the public. And I thought, if I didn't have video and I was just

7:36 listening to audio, I

7:39 thought I would be listening to Elizabeth Warren doing her best Trump impression.

7:46 Sounds like Mondami, I mean, not Trump.

7:51 And I even hate to sound like a broken record here, but let's go ahead and just do this. And I stole this point from a very smart person who's a dear friend, Mark Meyer. If you truly have

8:03 purchasing power, if you truly have the ability to demand what you want and gouge people for your product, it should show up in net income margins. When we look at the most recent quarters for

8:17 Chevron and Exxon, I think Chevron's net income margin was 17. Exxon was 12 and a half percent. The SP 500 average company has a net income margin of almost 17. So these are right at average or

8:35 below, compare and contrast that with Google, Nvidia, all the high tech companies that are all up in the high 20s and high 30s in terms of net income margin So again, the story that, people are

8:51 being gouged. The reason they have billions of dollars of profit is they've spent billions and billions of dollars developing a resource we all want. Period. Risk adjusted returns for a

9:03 price-taking industry. And the comparative that I looked at, I always do that margin search when in comparison, when the quarterly numbers start rolling out, the bottom or near the bottom of the

9:20 group that I look at was meta, and that was 26. So you're almost 1, 000 basis points in an industry, like oil and gas with maximum tailwinds in the quarter, and there's still

9:46 1, 000 basis points, shy of meta who had a very cost-impacted quarter. Meta typically runs quarterly net income margins, north of 50. Google had one, or Alphabet had one at 94 Now that was

9:49 impacted by the fact that that a big SpaceX markup.

9:54 My go for 27 comments, I have two comments here. Number one is you guys need to apologize. You could never talk about Silicon Valley and the West Coast and those tech firms in a negative manner.

10:09 Shame on you, they're untouchable, that's wrong. Secondly, when I started my first company and we hit, I remember hitting north of 10 million and revenue,

10:26 all my employees thought I was rich. And what they didn't realize is we were burning more cash than we were making, so I was poor. I just think most people do not understand what net income is,

10:43 they just see top line, billions of dollars and they think mean bad oil and gas,

10:50 to pay 'cause they're doubting everybody. When we have the most volatile commodity in the world, which is power, but these are volatile commodities, and everyone's chasing each other, trying to

11:03 make a little bit of money. So it's really interesting. But people do not equate profits. They think about top line only. All right, I got

11:15 two takes on this. Number one, Trump starts the war, so oil prices shoot up 20 Chevron winds up making12 billion, and Trump gets mad at Chevron, is

11:25 that kind of like getting pissed off when your neighbor's house catches on fire and you bill him for the marshmallows. So that's number one. Number two, I am actually gonna compliment our

11:41 commander-in-chief. I'm giving Trump big props for this because this is the most bipedal. partisan man, Nagamis,

11:52 whatever, I'm

11:55 gonna go with off-use skate or whatever Kirk was saying earlier. Very gracious of President Trump in a show of bipartisanship to adopt the Biden windfall tax 2022 from

12:09 in a display of unity across all Americans. We have the Republicans and the Democrats coming together. Who says this man's an authoritarian? He's a United.

12:24 I mean, let's move on at that. But first, we have, from our sponsor, Clyde and Chuck, what is the one-liner? Because we have to read it in fairness or sponsor. Oh, okay. Hold on. Let me

12:39 pull it up to make sure I get it right The

12:43 correlation is cheap, causation is you, it's Clyde AI.

12:50 Thank you. Did I get the point in? Yeah, the point. Let's button up this segment with a couple of things.

12:58 And they're, I believe the original source is truth. Social media posts, one said.

13:06 You know, it was admonishing. Big oil to get your retail prices down now and we'll just use our. Common refrain that There are 150, 000 plus or minus retail outlets. Across the US retail fuel

13:23 outlets and less far less than 05 are owned and controlled by the majors. The second.

13:34 I guess tangent that he went off on was focused on Venezuela and basically setting up the notion that he's done Chevron great favors And that they got back in because the brilliance of the Trump

13:46 administration in Venezuela. Well, I got news for you. Chevron is the only one that never left. They took on Chavez as originally in the Maduros de facto confiscation and taken minority interest

14:04 in operational control away. So,

14:08 you know, let's get the facts straight. And I think, I think you see kind of the last shop factors is ramping up and getting more strident and more and more random words get capitalized in his

14:24 social media posts, which I find hard. Shepron's from East LA, man. So, I don't know, are they a blood or a crepe? Which one would they be? But no one in Venezuela can push those dudes around.

14:37 You know what I mean?

14:40 Yup, that's why they never left, they're tough. There you go, I like it. All right, Mark, take us to Shepron and Kilby.

14:49 Yeah, they had the most, it's the most detail they've,

14:55 they've released talking about it in the Q and A on Project Killby. And that was the

15:07 notion of we're, you know, we are probably going to be FIDing Project Killby, which is the big three gig-a-lot data center power project and a 20-year PPA off-take agreement with Microsoft. And

15:27 they went so far as to say, you know, really kind of mid-teens type of return. And so, you know, as we've seen here, in fact, just yesterday, Governor Abbott issued kind of a stop audit on all

15:47 the data center queue. which then starts to get, I think, more favorable for behind the meter solutions, which is what

16:00 Kilby is.

16:02 It's for lack of better term using Chevron's equity gas and the Permian in generating power on site and energizing a giant data center for Microsoft And so we've got, I think we have the kind of

16:19 economic framework or at least the implied economic framework. You know, there's been a ton of work done to analyze it. It's been announced and you're still equivocating about, maybe we'll get to

16:32 FID by the end of 2026.

16:36 This stuff's hard.

16:39 Brothers, we have, by the way, we're taking questions live from the audience And we have one that's queued off the. But first, let me respond to what's going on here. I mean, they had a blowout

16:54 quarter and the actual headline, 12 billion in earnings is impressive. That was the headline, 154 billion in free cashflow. I mean, that's sort of where you see the Trump administration sort of

17:11 talking out loud, even though let's talk about net income But the Kilby comments are really interesting for multiple reasons. First,

17:22 Chevron told Wall Street, we're not just an oil company anymore, we're an infrastructure company that happens to sit on top of the fuel. Now, that's a different animal because infrastructure

17:37 companies come with different multiples. And this is what strikes me.

17:45 data center deal we've covered on the show has been speculative to some degree. Continental, Macurian, Pecos, no PPA, merchant economics, a bet on our caught scarcity pricing, slumber chain

17:59 liberty, an alliance, a capability, not a signed contract, but kill these different. This is a 20 year take or pay. Microsoft is the counterparty Mid teen returns, FID this year, that is not a

18:18 growth story. That's an infrastructure underwrite. I mean Chevron is pricing this like a pipeline, not like a well, and that distinction matters because pipelines get infrastructure multiples and

18:33 wells get commodity multiples. So if Wall Street starts valuing Chevron's power business at infrastructure multiples, that's a real re-pricing of their stock. I mean, YL over who was bold enough

18:50 to move shell from the Hague over to London. He's probably, if this turns out to be true with Chevron, I mean, moving to the US is a no-brainer. But that's what's real interesting. I'd love to

19:06 hear your comments on that before we take questions from our audience

19:12 I love that we spend all this time energy and effort worrying about the molecule and how to produce it and the shale revolution. And hell, now we're gonna throw a fan blade on there and all of a

19:25 sudden we're trading at 15 times even. Ah, I love it. But you know - See, that's right in your wheelhouse, Chuck. I know, had I only thought of this, maybe I would still have a job But anyway,

19:40 no, we've been saying this on the podcast on the podcast. Oil and gas companies need to sit there and realize they are not selling natural gas anymore if they can sell electrons. That's where the

19:52 future is. They have all those core components and their skill sets to be able to deliver on this and to Mark's point. This is really hard stuff to do. I mean, to say this is repeatable is kind of

20:06 why I haven't been married for the second time yet, you know?

20:11 So, I mean, repeatability is hard, but these are the things that engineers do really well. And the one thing we have in this industry is a lot of really smart engineers who can deliver these type

20:25 of solutions. So,

20:29 as much as I hate to say this, well done, Chevron. Well, the one thing going back to your great joke about repeatable, They said they're in quote advanced discussions with existing and

20:41 prospective customers. which is code for, we're talking to Google, Amazon, and Oracle, but here's the, so I mean, we know who they're talking to. So the question is, is where does the

20:56 molecule come from? And, you know, last week, what did we talk about? Matt Smith, gas shortage thesis. And my counter was that Permian has an ocean of stranded associated gas that producers are

21:11 literally flaring because there's not enough pipeline takeaway capacity. But let me put Kilby in that context because the numbers are pretty instructive. The Permian produces roughly 25 BCF a day of

21:30 associated gas. Kilby alone is roughly 80 million cubic feet a day. It's like 03 of Permian production So. you could put five kilobes in the Permian

21:46 and it wouldn't even make it dead. But what's interesting is that's right there in the Permian. If you look at other basins, that dog's not gonna hunt because they're not flaring associated guests,

22:01 they're piping everything out. So this is another one of those. This is a power play as we always talk about utilities or local, because you generate your power locally. And this is a local story.

22:15 You can't just find ass everywhere that's in such high demand that it's cheap enough to power a data center. Thoughts?

22:26 I've been doing quite a bit of research and surveillance on

22:31 the growing tension between a decision of do I wanna be on the grid with all of its complexities and NIMBY and everything else. from an execution standpoint, timeline, or behind the meter. And you

22:51 bring in things like badge zero, you bring in things like Abbott's executive order yesterday, which creates a lot more inertia in the process. And I had a cynical thought that, you know, is

23:09 Microsoft maybe looking to retrade the power pricing itself, because I've witnessed a bit of, you know, off-takers looking to come in and wanting, you know, power generators to commit to behind

23:27 the meter for essentially a bridge period. And that is a very asymmetric risk sharing And so I think what we're going to see is that the generators who are behind the meter like Chevron are going to

23:45 have more and more price leverage in those PPAs. And so, we'll see, I think, following Kilby along and what gets FID and what doesn't and more release of the terms. I don't think they'll ever

23:59 talk about the base terms of the power purchase agreement, but I think there's still a lot of naivete or maybe lack of perspective on what the kind of grid macro is in the state that I think most

24:14 everybody believes, well, we're just open for business. Just go get it done in Texas. Well, the

24:23 way I wanna phrase how you just said this, and I'm kind of hesitant to do this because I don't wanna spike a football before we've seen it, but at the end of the day, Chevron just became the

24:35 landlord and Microsoft became the tenant. And if we know anything about landlord and tenants, Tenen is always the landlord's bitch. So I think you're right, Mark. I have a take on this in its pop

24:51 culture. It's like when Denunzio shows up to the catty shack after lugging the heavy old bag around and he asks for a coat, puts a quarter, or he gives them a dollar. He said, Hey, that's 50

25:05 cents. Yeah, I know. Lou had to raise the price of coke 'cause he's been losing at the track. And Denunzio said, Well, I ain't paying no 50 cents for no coke. Know what I'm talking about? So

25:17 he takes the coke back, throws it with his dollar back, and then he punches the safety screen in the boot, so. Yeah, I do love the pop culture reference from 1978. But anyway, probably

25:32 targeting our audience. Hey, we have a

25:38 question from the audience This is sponsored by Netchats. Be free and fly. Look them up today. Thank you, NetJets, for that sponsorship. Here's the question for you, boys.

25:50 XLE is up 21 year today. Mark hit that refiners are killing it with the refiner ETF up 21 in July. Talk about products and demand. Mike worse said demand destruction quote, is not obvious at any

26:08 significant scale end quote What are your thoughts?

26:13 Yeah, you know, look, refiners inherently are going to make hay while the sun shines. But those operations and those capital investments from a refining standpoint are not made on the promise of

26:34 super elevated 3-2-1 crack spreads, for example, or refining margins We're multiples of where we have been. on a normalized basis for the last couple of decades, which is right at 20. I mean,

26:47 the 3-2-1 crack has, I think, pushed up over, I haven't looked lately, but it's

26:55 pushing four times that. And so you're seeing deferred maintenance, you're seeing high rates of utilization, kind of mid-90s as we've gone through the summer season. And so

27:06 they have got to opportunistically attack those opportunities to be repetitive or redundant. But that's, you know, it's the

27:21 toughest part of the business. As an origin said in our podcast a few weeks ago, refining used to be the dog business of oil and gas or of the integrateds. It is now the best business as indicated

27:36 by the performance of the refining heavy index in the XLE, obviously a smattering of majors in there who mostly dominate refining but you got Valero, you've got

27:50 PBF, you've got, you know, the other refining only or pure replay down streamers like PSX etc. So yeah, they came through really a cathartic period in the early late 90s, early 2000s when they

28:06 had to retool for, you know, both regulatory reasons and they thought the crude slate was going to be heavy sour. And, you know, shale slipped that, flipped that on its head. And so it, you

28:22 know, running in a refinery at razor thin margins day in and day out is a daily knife fight

28:34 Well, and, you know, the, I had to go back to praising Chevron on this, but if you think about it, The question we just got asked was basically, tell me about Chevron's customers, right?

28:48 Refiners, airlines, fickle consumers and their driving demand. And those are the type questions Chevron would get. Now you got Microsoft there. Nobody's saying is anybody gonna use Excel or

29:04 Microsoft Word next week? I mean, they've changed their customer base and I mean, even if it's only a one-off thing. And maybe they don't get these types of questions if they make the full

29:18 transition. So I know they got a lot of wood to chop before they do that, but that's what struck me is, we'll never get a question about a software company. End of

29:29 demand. End of demand. I think worst comments are interesting. Demand destruction is not obvious at any scale. He's right today4 gas is annoying.

29:41 It's not behavior changing. Five to6 gas is behavior changing, and we're not there yet. But here's what he's not saying. People are still buying the gallon, but they're not buying the dinner

29:55 afterward. So the barrel count holds while the household budget is rearranging around it. That is, in many ways, hidden demand destruction, and it doesn't show up in his data, but it does show

30:08 up at Applebee's So that's what we need to be following and watching. So the real test is October. Harvest diesel, we talked about this multiple times on the show. Heating oil, jet fuel, all

30:22 spike into a product market that is already running hot with no slack. So that's what we need to wait to the fall. We might have a lot of I told you so. So in some ways worth is right.

30:41 We're not seeing the demand destruction that's hidden at this point. Although we do need to point out to all our listeners, the Dan Pickering test of next time you fill up with oil, go check the

30:56 other pumps and see how often it's stopped at a round number, like10 or15, and that that's indicative of people

31:06 not filling up, but actually just putting the amount of money they have in their pocket into their tanks. And last time we had a spike, I ran around and did it, and it was pretty interesting. I

31:18 saw the change from2163, which was

31:24 a fill up and then boom, next time it's like naps, just10. So kind of

31:30 a canary in the coal mine, if you will. It reminds me of

31:36 22 Jump Street. We're laughing about this, you know, We're the two. Narks show up to high school and in the gas guzzler and then the new nerd, cool kids are like, no man, like my car runs on

31:51 vest boil.

31:56 You know what we're gonna have to do for our audience? We're gonna have to like go out and watch current movies just so that our pop culture references aren't as dated as a. No, but that's why we

32:08 have listeners is because the old guys are right there with us. The young guys get a kick out of how dated we are. And by the way, if I keep seeing more news articles about how the Odyssey is

32:23 crushing it at the box office, blah, blah, blah, it's gonna force me to see it. I'm gonna watch it anyway, but I'm waiting for it to go to prime. Ah, there we go. All right, Mark, you wanna

32:36 go to the North Sea? Yeah, and on the subject of when and how fast do the Euro majors ultimately move to Houston?

32:49 BP's out signaling a North Sea exit, which I think is delicious ironies since they've been in the North Sea for 60 years, but the reality of, you know,

33:08 an uninvestable asset, at least from a gross standpoint,

33:12 decommissioning liability is real and gigantic in

33:18 the North Sea. I think the one that has activated a decommissioning plan is Apache with its barrel field fairly recently. And, you know, they've got a headline and effective tax rate of 78 with

33:32 the VAT.

33:34 And so, you know, kind of what's at play here is

33:40 What does the transition to the Consolidate Tour or Consolidate Tours, what is it about? Well, it looks to me like it's more about an Arab related to maybe tax shelters and ultimately the

33:56 decommissioning liability. Apparently, there was a stall in the conversation that BP had going on. I'm sorry, I forget the name of the big player out there that was, I believe they're still in

34:08 talks with, but

34:12 that's not from a source but my head. But the breakdown in the negotiation was over decommissioning liability. These are not trivial. So back, Mark, tell us what's the headline? What's the

34:28 headline here? The headline is just the spectacular irony of a company that is the flagship, that used to be called British Petroleum is leaving

34:43 a legacy centerpiece basin even in the midst of a UK government leadership change and Trump singing the praises of the UK and urging the Brits to get on with returning to the North Sea and doing

35:02 things for European and their own energy security by getting back to growth there And so, you know, the flagship company, the legacy player in the North Sea for 60 years is saying we're out. Now

35:21 it's pithier than that, Mark. 78 effective tax rate bad. Period. Milton Freeman said - Correlation. Correlation.

35:34 Say it again. Yeah, that's exactly right Conversations you. Yes, causation is you. Yes, 78 effective tax rate is not just correlation. It's causation. Nah, nah, nah, nah. Hey, hey, hey,

35:50 goodbye. The great Milton Friedman said that if you put the federal government in charge of the Sahara Desert, in five years, there would be a shortage of sand. Labor, the Labor Party put itself

36:03 in charge of the North Sea. And in two years, there's a shortage of oil companies willing to operate there. And Friedman was generous in his timeline. What's interesting is the North Sea is just

36:15 not, is not dominated solely by the UK. The Norwegians are across the water, bumping away. So it's crazy. Yeah, they're absolutely, they're absolutely crushing it. So yeah, no, the, we've

36:34 got three things going on here. wants more North Sea barrels. The UK wants more North Sea taxes. And I think BP wants a one-way ticket to Houston. And I think we know which one's gonna happen.

36:51 I mean, if BP moves,

36:54 and not at first I was like, Do they move to the New York Stock Exchange? But you know what just launched in Texas? The Texas - The Texas - The Texas, the Texas Exchange So maybe they list in

37:08 Texas, and that would be the last major integrated oil company listing in London, which is a big deal for, I mean, that's as old, I mean, they've been there as long as they've been alive. So

37:25 that's a real interesting move. I think it's an easy decision. Much easier decision with the true outsider coming in and taking over the decision-making. Meg O'Neill.

37:37 I will say we didn't get to use my one line that I had written last night when I was working on this. A 78 effective tax rate. At that point, you're not a shareholder. You're an unpaid intern for

37:49 his majesty's treasury. I kind of like that. I like that. All right.

37:58 We have so many questions, I can't get through them all, but I'm trying to cherry pick the ones that are pertinent And so stay tuned. Oh, fire away, or do we want to go to

38:11 Mr. Woods? Let's go to Woods. All right, Marcus, kick us off on there. Is that a read some of these? Staying in Europe. Darren Woods

38:21 was on CNBC on Friday and addressing the EU's looming corporate sustainability and corporate sustainability due diligence directive, which is very methane regulation focused.

38:36 coming into being in 2027. And so the Qataris have already sounded off on this repeatedly. And what it really boils down to is that there is not only supply chain that is integral to these companies

39:01 bringing product and doing business in the EU, but also extraterritorial. So they're subject to conforming with the regulations, much tighter regulations on methane with the penalty being 5 of

39:19 global revenues for violations. And so Darren Woods is basically saying, nobody in

39:26 the industry can meet the laws. It stands, I think he called the

39:32 5 stipulation stipulation Bob.

39:36 Bone crushing, and so among other things, there are requirements that globally, you have to meet Paris Climate 15 degrees C net zero

39:55 targets.

39:59 Brussels sounds a lot like my ex-wife's divorce lawyer.

40:07 That's kind of what that 5 feels like, I'm just saying. So,

40:14 and while we're talking about my dating life, let's just go right ahead. I think what Darren Wood is doing in Europe, I think 19 European operations have been sold, shut, or exited, so he's not

40:29 just pulling out, he's doing what most women do to me, He's just flat out ghosting him.

40:41 That's all I got.

40:46 Well, there's European elites have made climate regulation the moral center of their political project. I mean, I've spent so much time in the Netherlands, I can't tell you how ridiculous it is.

40:59 So Darren is just waving because, just remember, Exxon went through a pretty dark period when climate was on the rise. And was it, I forget that what's the activist firm, Fire Engine, 13,

41:18 whatever, got on the board of Exxon. This to me is really interesting. Is it Darren Wood sort of taking a victory lap here?

41:31 I think it's a big standoff and my question is, just given the increasingly dire nature

41:40 I mean, if you go look at European gas towards refill, things are

41:46 potentially setting up very tight coming into the winter, but really who blanks? Because the absurdity of

41:56 just the absolute penalties in the exposure and the

42:02 arrogance of bringing in a company's worldwide business and revenues and just assigning an arbitrary 5 of it, I think there was,

42:20 you got Exxon, I don't know what they posted last year in terms of revenues, but it's hundreds of billions. Let's take it off the top line, right? Those are not trivial numbers.

42:37 So I'm gonna go out on a limb here Brussels blinks quicker than Trump does on the next Kirk Coburn, Coburn, Trump Taco trade. So

42:50 I think they fold. I mean, this is ridiculous. I mean, let's face it when Exxon and Cutter Energy agree on something, holy cow.

43:02 Hey, I've got some great questions from the crowd. One is, I mean, this is gonna, that hurts my brain to read it The forward curve says350 gas forever. Chevron is

43:17 locking in 20-year PPA's. Somebody

43:21 is wrong. Which one do you want to bet your electricity bill on? Boys? I bet, and I don't know that we have details on this, but I bet there is a variable rate to the 20-year contract would be my

43:38 guess I can't imagine. that it's a fixed rate, but Mark, please correct me if

43:46 it's different.

43:48 Yeah, I think maybe the initial stage is based on, and I don't know what that chunk of time is in that 20 years is based on some fixed price that relative to say, Waja prices is going to provide a

44:06 big boost to overall kind of well economics. And so what is that number? Is it a buck 50? Is it two? I have no idea.

44:17 But I think, you know, given the conversation last last, our conversation last week on the Michael Smith analysis and kind of guest Super Bowl call, we're running out of natural gas. I think,

44:31 you know, we have enough of a ceiling type of element that,

44:38 you know, from a macro standpoint,

44:42 Global gas is not, in my opinion, is not going to, at least in the US, is not going to clear sustainably above four to five for meaningful periods of time, because we have too many levers to pull,

44:56 the Haynesville being certainly one of them. And as we talked about last week too, million barrels a day of the 67 million barrels a day, and the Avalon, Klein, Barnett, and excuse me, Dean,

45:11 Barnett Woodford, sports a GOR of 8, 000, so.

45:15 So,

45:18 you know, it's interesting. I just, I just googled, you know, what's the, what are the terms of the contract? And it, it says that not disclosed, but that basically the tea leaves seem to say

45:34 that it's fixed costs with escalators So back to the listeners question, you know, take. this out of like corporate finance 101 and go to VC world. Basically Chevron is spending some money to get

45:49 into a new business line. Microsoft is spending some money to guarantee power. To some degree, who gives a shit if they misprice the contract? They're kind of charting a new course here. I mean,

46:04 so in startup world, you do that all day long So, hey, can I create revenue out of this new line of business, I'll figure out profitability later.

46:16 And some of these behind the meter arrangements are contemplating the notion for the off-taker, the ultimate customer to treat gas as a pastor. So the pure power purchase agreement is separate from

46:32 that, which then, you know, if you don't have captive gas and completely control the supply like Chevron does in this situation. you're having to deal with pipelines and marketers and gas plants

46:44 and things like that, then you've got a real significant risk management

46:52 task that you're taking on. If you are treating gas as a pass-through, you're taking on that gas supply and certainly that gas pricing risk over time. I'm sure a Microsoft can figure that out with

47:07 a lot of expert help, but it's just a different structure than I expected to see. I don't got a comment that - Hey, hang on, Kirk, just real quick and then bring this comment up. If you own Waja

47:20 gas today and you got paid anything for the next 20 years, you'd probably sign that contract faster than anything out there, so. Dude, we need to start printing Waja memorabilia for sure. Chuck,

47:34 one of the audience or participant people listening tuning in have asked, This is a comment, not a question. Then I'm gonna get to the question, which is really good. Chuck, can you show us the

47:45 rest of your chest? They wanna see all the change you got wearing. Oh, the bling, okay. I used to call myself the Mr. T of private equity. So Jacob's gonna come in with a close up. Let's get

47:60 the mic out of the way.

48:05 They got my cross They got a chain from the ex-girlfriend that I still wear. And then the colored ring, it's about 50 cents. And unfortunately, the cross

48:21 I bought in Bethlehem when I was there fell off this necklace and I gotta go get it fixed. So there we go. Thanks, Chuck. I have a little add-on anecdote. Uh-oh Back in, I believe it was 2017.

48:38 I was at a security as a TPH and we had run a couple of national conferences and I'm sitting at the bar arrival night with one of my analysts. And I knew Chuck brought the client or an LP with him.

48:56 And Chuck and my interactions over the preceding decade were fairly infrequent, he being on the private side, I was covering public stocks But I knew Chuck pretty well,

49:10 certainly not what I consider to be one of my best friends today. But I kind of knew the whole persona. And Chuck comes kind of waltzing through the lobby and my analyst turns to me and says,

49:24 who's that guy that looks like he wants to be a lead singer and a Christian rock band?

49:34 Oh, that's the greatest slam I've ever seen. Heard no longer. Not a slam. Not a slam. I took it as a compliment. Not a slam. So do we not have any groupy questions? I've been talking about my

49:47 dating life this whole time. I've now shown off the chain. I do, but I have to. This is a serious audience question. I figured it's sponsored by

49:60 Bucky's. Here's the question. Bucky sells gas at three to seven cents, margin per gallon Same as every other retailer in America. Warren and the White House want to haul oil companies in front of

50:14 Congress for windfall profits. Meanwhile, the guy actually selling you the gasoline makes less per gallon than Bucky's makes on a single bag of beaver nuggets. So my question is, when does

50:29 Elizabeth Warren send a letter to Bucky's demanding they explain their brisket windfall?

50:37 There is such a great Elizabeth Warren beaver joke here, but I've lost my fastball and I can't make it. So I'll just go to Mark on those. Three to seven cents a gallon. Let's translate that to net

50:54 profit margin, which we talked about earlier. That's about one to 2

50:59 that if that's a gouge at all, it feels like a gouge with a spoon

51:07 Well, and if I'm gonna be gouged, I'm gonna be gouged with a clean bathroom when I'm on the road. So gouge away, guys, if the toilet is clean when I sit down, so. Absolutely. Yeah, there's

51:20 definitely something to that experience. I don't know if y'all got the Freudian slip here, but you just, you know, Mark mentioned that Chuck looks like he wants to be in a Christian rock band,

51:35 But earlier, Mark was the one that instead of saying Matt Smith, he said Michael Smith, who is Michael W. Smith, speaking of Christian artists, so it comes full circle. Wow. You're welcome for

51:50 the reference. I like that. We're pulling our references from the '70s now into the late '90s. Oh, we're good. I was actually working in Nashville for Gaylord Entertainment And I was - this is in

52:06 1999 when the internet, like - I think Napster was getting crushed, and Emiel was stealing everybody's songs. And Gaylord owned the largest number of Christian and country music labels. And they

52:23 owned the Riven Auditorium, the Grand Old Opry, WSM Radio I mean, they're. They started country music television before they sold it to CBS. And I'm part of the new internet group. And

52:41 someone says, Hey, Kirk, Fernando Mendoza, I think was the name. So I'm still, like Fernando Mendoza is on the call for you. I'm like, Who's Fernando Mendoza? They're like, Oh my gosh. He's

52:56 like one of the top selling Christian music musicians I was like, I'll call him back. Like, I first need to go figure out who this guy is. I knew nothing about Christian music, but I was in it

53:09 for a brief time till I got fired. There you go, there we go. Wow.

53:16 Jacob and Artworks love him. Amazing.

53:23 Oh, that was great. Way to go, Scott.

53:29 All right. One more question, boys. All right. This is a good one. BP is leaving the UK. Exxon's threatening to lead Europe. Saudi tankers are going around Africa. Is there anywhere left that

53:46 wants oil companies questions?

53:54 Yeah, it's about to say, obviously, yeah, use in Texas, we're open for business, we'll take it. And we'll build, you know, I don't care what Abbott says, we'll build data centers all across

54:05 West Texas because it's the ugliest place on the planet. So we might as well just put a bunch of concrete down and still reinforce it and run a bunch of air condition to cool all the computers. So

54:16 we're in.

54:18 Yeah, I almost expected calling to come crashing through the studio doors and and on the ugliest place in the world comment. Well, that would assume he's actually watching us, which

54:34 I don't think he's done for years. Oh, by the way, we should get our audience to hear this news. And maybe I'll set it up and Chuck, you can tell more, but we've been approached to be on the

54:51 next landman series. because our show gets listened to by the cast and crew to be in the show. I know that Chuck is being a hard-ass and as our agent negotiating,

55:07 where do we stand on that, Chuck? Well, I asked for a couple of diet doctor peppers and some buckies, beaver balls, and they said no. So.

55:22 But don't worry, guys, I'm holding tight to this. I am holding very, very tight to this. I'll get us a deal at some sort. And we'll do

55:35 the show in West Texas. Oh, yeah, happy to do it there. Or, you know, they film a lot in Fort Worth. We could clearly go to Fort Worth and do the show. We could have Billy Bob come on in

55:48 character, out of character, however they want to play it.

55:56 So, well, boys, this has been fun. I know we had some lightning around stuff to do, but I think we've run out of time. And quite frankly, my old man bladder is to the point where I need to see

56:09 the bathroom. So we want to throw the last words to Mark? Absolutely, absolutely. But just real quick, Clyde, thanks for joining us. And Crystal always appreciate you putting this together.

56:22 And Jacob, Yeah, no doubt Thanks for talking to the net jets for sponsoring the show. Exactly, exactly. Yeah, Jacob, leave it on the split screen. Bit of personal reflection here and really an

56:37 expression of gratitude. I've been reflecting a lot over the past week and I'll start with going all the way back to the spring of 2020 when

56:49 Chuck and I were exiled in pretty rapid fire succession. It was obviously much more high profile. And, you know, there's a lot of fear, especially at the stage of your career, a lot of

57:03 uncertainty. And I forget who reached out to who, but it ended up being a Friday night Zoom call, wine drinking Zoom call over about three hours. And it chucked out an idea. He said, you ought

57:21 to come up to digital wildcatters and just hang around, which I did was introduced to Colin. And it really gave me a

57:31 lot of confidence or restored some confidence. Because at that point in my career, I'd been in well over three decades. I reached my

57:42 kind of brass ring. I was a C-suite CTO, building some exciting new things. And like most oil and gas companies, when the shit at the fan back in. you know, February, March of 2020, you start

57:58 throwing everything off the plane in desperation, capital, non-discretionary costs, those things. So, you know, that ultimately grew into a community of professionals that

58:12 were a new lease on life, just being around learning on a day-to-day basis and a lot of just very solid relationships, those that were at Digital Logcatters before and collide now and a lot of

58:29 others in the community. And so I thought I knew fear when that happened to me in 2020 but about a week ago, a

58:41 seemingly routine urgent care visit turned into a devastating preliminary diagnosis for someone in my family, I won't go into details.

58:54 I thought I knew fear before. I have never experienced fear and panic like that.

59:03 And after a very short period of that, I started to lean into the reflection on what I have outside of my family network. And the first people that I thought of were the people that collide And my

59:24 co-host especially, and especially you, Chuck and Kirk, and Colin has reached out. Colin has been through a lot of

59:36 family health issues recently, recently lost his dad. And the strength that I get from that and the,

59:51 I think you guys know I'm a music guy.

59:55 somewhat tongue-in-cheek talk about my one and only music role record producing career, executive producing, no talent, but I wrote the check. And it just so happens that one of the artists who

1:00:07 was part of the group of the and they're all the singer songwriters are very close friends of mine. He's going on to do some things with a solo career and a lot of collaboration with real star in the

1:00:22 independent scene Cody Jinx. His name is Ward Davis. And on William Merl's last record in I believe it was

1:00:33 2015

1:00:36 called Dejango and Jimmy, Ward got a cut that they put on the album and it's called Unfair Weather Friends.

1:00:46 So that's,

1:00:48 go listen to the song, contemplate the lyrics, and, you know, through a crisis, you find out, there's a Tracy Lawrence song, find out who your friends are, and that's, it's been immeasurably

1:01:07 valuable to me these last few days,

1:01:11 and we don't know where this is going, but it is, you know, it is

1:01:17 a, it's the most devastating and serious thing I've ever faced in my life.

1:01:23 And to have, you know, this group, this opportunity to have the fun that we have, has been a godsend. So, thank you from the bottom of my heart, both of you guys, everyone in the in the

1:01:39 collide ecosystem that I've come to know and love.

1:01:45 I think those sentiments are shared by me and Kirk, as well as the whole collide community. And please, please know that thoughts and prayers are with you guys. And obviously, if there's anything

1:01:57 we can do, just, you know, the answers, yes, tell us what we signed up for. You already done.

1:02:07 Thanks for sharing that, Mark. Thanks for sharing. Sorry to end on the somber note, 'cause this show was fun. This show was a lot of fun, but I appreciate you sharing it too. I think, yeah, I

1:02:24 mean, Mark, I'm Chuck and any of the guys in Clyde, I just push play on the end of this episode for any time you walk into a customer to tell people this is our community, to any investor, anyone

1:02:42 that's part of this community.

1:02:45 That's what Clyde is. Man, thanks Mark for sharing what the Clyde family has been to you. 'Cause that's pretty inspiring to me and to everyone else that's listening. Amen. Well, let's do it

1:03:02 again

1:03:03 next week, boys.

1:03:06 Absolutely.

1:03:09 Look forward to it. Absolutely. Thanks, everybody Jacob, take us home.