Daily Energy Standup Episode #71 – Great for Tesla as they produce 4,000 cars per week in Germany – Net Zero is impossible without a “Ballanced Diet of Energy.”

The sun is about to get more active than it has for a decade — and it could lead to power outages, grounded flights, and stunning auroras

Daily Energy Standup Episode #71

Michael Tanner [00:00:14] What is going on, everybody? Welcome into another edition of the Daily Energy News Beat Stand up here on this gorgeous Wednesday, March 1st, 2023. As always, I’m your humble correspondent, Mike Tanner, coming to you from an undisclosed location here in Dallas, Texas, joined by the executive producer, three other purveyors of the show, the director and publisher of the world’s greatest website, energynewsbeat.com, Stuart Turley, my man, how are we doing today?

Stuart Turley [00:00:39] Beautiful day in the neighborhood appear in bear country. It is a great day.

Michael Tanner [00:00:42] Yeah. You had the water company out here all day. Did you finally get your water leak fixed?

Stuart Turley [00:00:47] Nope. They need a backhoe. It is so bad that it’s bad. So the answer is no.

Michael Tanner [00:00:53] While. Well, you keep attempting to survive out of the middle of nowhere, I will enjoy indoor plumbing here in Dallas. You do have a great show for us lined up today. I highlighted the stories we’ll cover first. Tesla’s Germany plant is producing 4000 cars per week, three weeks ahead of schedule. That is awesome news for any Tesla shareholders. They like to know that. Next, substantial doubt. Hydrogen truck maker Nikola on the brink of collapse after racking up $2 billion worth of losses. I know Stewart will just speak specifically about the hydrogen aspect, but that’s an absolutely incredible story. Next, we’ve got China’s coal power plant approval surge challenging climate pledges. China is just cranking out those new coal plants. So Stu will dive into what’s actually happening over there in the east. Next up, radical but durable paradigm needed for the delivery of low carbon energy infrastructure in a race to net zero. This, the story of Stew says, weaves on into everything we’ve been talking about from a grid standpoint on, you know, if we want to get to net zero, obviously these low carbon solutions are going to be needed, but the infrastructure needed to get there is critical. So Stu will cover what the race to net zero looks like there. And then finally, Stu will talk about Atlantic LNG to lay off staff. That’s not good whenever you see that, but it’s a sign of the times, I guess, which is pretty interesting. You’ll kick it over to me. I’ll talk quickly about what happened. The natural gas and crude oil markets. Some good news out of both at then we’ll quickly cover the bay Texas Ranger oil M&A deal that dropped well, really last night. Reuters had an article that dropped late and this morning the press release dropped that Bay Tex. Energy will be buying Ranger Oil and a very interesting Canadian company now dipping its toe into the Eagle Ford Shale. So I’ll cover some of the highlights in and my initial reaction there and then we’ll let you get on out of here. So I think we’ve got a great show lined up before I kick it over to Stu Guys, just again, check us out online. www.energynewsbeat.com The best place for all your oil, gas and energy news. We’re hard at work at our new dashboard, so check us out. Dashboardenergynewsbeat.com That’s our combo news data. I’ll get hard at work at V2 Will. We’ll see how it goes, but still I’m out of breath. Where do you want to begin?

Stuart Turley [00:03:08] Okay, let’s start with Tesla’s Germany plan. I’m actually quite happy about this because I do like Elon and I’m very happy for the Germans with this. Might as well make it off of the American company. Tesla’s Germany plan is producing 4000 cars per week, three weeks ahead of schedule. This is pretty amazing. Michael Tesla will be compelling $25,000 electric vehicle that is also fully autonomous. Elon said this time, Wow. After an ugly start to the 2023 campaign, Tesla shares have now more than doubled off their lows this year. It’s kind of cool.

Michael Tanner [00:03:50] Yeah, I mean, it’s pretty incredible what Elon Musk has been able to do. You know, first off, I think, you know, I don’t think the autonomous driving really gets enough. Doesn’t get talked about as much about test. I think everyone talks about the electric, they talk about the batteries clean it right. I mean, really what’s going to make Tesla valuable is will they will they achieve what would be considered full self-driving or FSD and who knows. But if they do but if they do, it’s Licensable Software that can be licensed to any other company and all you need. And they really become a software company. And I think Elon knows that. And I’ve been I’ve listened to enough podcast with him. I’m surprised in the Lex Friedman show where he’s basically gone so far as to admit that Tesla is a software play and eventually might even be outsourcing and not even produce cars, but just produce software that goes into cars. But for now, they do make an incredible car. It’s clearly not $25,000 for a for a electric vehicle. That’s that’s a lie. I think it’s a 4550 now. It’s at least double that.

Stuart Turley [00:04:52] Oh, it’s way more than that. But the original idea for affordable Tesla was announced by Elon back in 2020. Tesla will make a compelling $25,000 electric vehicle. That’s also it was leaked from the company’s California plant. So, you know, nice. Let’s go to the next one. You know, Michael, I hate it when you’re right. And I really even hate it worse when I’m wrong, but I’m admitting that I was wrong. I’m a hydrogen fan. I think hydrogen on a ideological standpoint would be good. The title of this article is Substantial Doubt. Hydrogen Truck maker Nikola on Brink of Collapse after racking up a $2 billion loss. What’s a few billion between friends? Unless you’re printing money. But if you’re a business, it’s really a problem. Here’s a quote. We incurred net loss of 707 784 million and a 690 million for the year ended December 31st, 2022 and 2021, respectively. We’ve accumulated a deficit of 2 billion from the inception. You can’t hang on with that. I mean, that is absolutely horrific. Here’s the problem. The ability to access the equity distribution and agreement. Second common stock. That’s not it.

Michael Tanner [00:06:19] I’ll tell you what the problem is. The problem is that the company was founded by Trevor Milk, who has been convicted of fraud for lying to Western investors specifically about Nikola. So there’s tells you all you need to know, Stu.

Stuart Turley [00:06:35] But the part of the problem is, from the technology standpoint, it would not work. So fraud probes there.

Michael Tanner [00:06:44] So but what is is fraud there from an underlying technology standpoint or is fraud there? Because what Trevor Milton did, which was claim something existed when it didn’t. That’s fraud does. Then working on the underlying infrastructure. No, I think it’s bad business. I think they’re going to they’re going to they’ve incurred $2 billion of debt. We read in here that it expects to spend between 580 and $705 million of cash in 2020. So you’re looking at 2.7 billion and no prospects of future revenue, because remember, Ernst and Young, who did this audit, said specifically we believe we will continue to incur operating and net losses each quarter until the time at least we begin to generate significant margin from our trucks. They obviously say, which may not happen, but they know these trucks are high margin. So big expense upfront. Hopefully we can then kick it in with some high margin stuff. I mean, clearly, I don’t think this is going to work.

Stuart Turley [00:07:41] No. Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.

Michael Tanner [00:07:50] You think put it all in equal, a baby. What’s next?

Stuart Turley [00:07:53] Okay. But part of this is also because of the problems with hydrogen. A lot of things came out, will go into that later on a different show. China Coal Plants Approves Approvals Surge Challenging Climate Pledges. Michael, this is actually a van tastic story on a horrific topic. And how can I get to that kind of a paradigm? It is really sad. Let me get to the number here. And it is approvals were given to build 106 gigawatts of new capacity, roughly nine times Singapore’s total power electricity. That’s the highest number of permit approvals since 2015. Listen to this. The new capacity, if it was all built, would equate to 106 power plants, a one giga gigawatt each. The average site, the coal plant capacity. It started construction in 2020 to total 50 gigawatts. This is six times as much for the rest of the world combined, and it is also more than a 50% increase from 2021. They’ve been fast tracked. Here’s the thing. China is by far the largest producer and consumer of coal. It is also the top greenhouse gas polluter. For example, a new one gigawatt coal plant averaging the utilization rate of Chinese plants will emit. Michael, are you sitting down? 3.2 million tons of CO2 per year. The annual emission rate of 695,000 cars. And that’s what they’re charging their electric cars with.

Michael Tanner [00:09:50] But it’s clean, right? Clean energy.

Stuart Turley [00:09:53] Man. Here’s the thing, okay? We have spent trillions around the world trying to go greener. We’re trying to get to carbon net zero. We’re trying to do this. And there’s absolutely no way the world can get there with China.

Michael Tanner [00:10:08] Know I mean, it’s it’s.

Stuart Turley [00:10:10] Insane.

Michael Tanner [00:10:10] If you think the United. AIDS can cut emissions enough to impact. Quote unquote, climate change.

Stuart Turley [00:10:18] Nope, not it. We’re not even in the top ten.

Michael Tanner [00:10:21] What’s next?

Stuart Turley [00:10:23] Yeah, as you commonly. That’s one thing that our fans on the podcast heard was your head hitting the desk. Atlantic LNG to lay off some staff and this is sad. We hate anybody getting laid off. As recent global events have been demonstrated, the LNG industry is dynamic. They shut down one of their trains, they have four trains and they are now down to three. And it’s because the limitations of the exports that are going on right now. Atlantic is one of the largest producers of LNG and is owned by the National Gas Company of Trinidad and Tobago and Shell, BP and the Chinese Investment Corporation. Michael, here’s a tidbit. Guess who? Boston and New England. The story we had yesterday on New England Power. They buy from this company.

Michael Tanner [00:11:20] Yeah.

Stuart Turley [00:11:23] And they do. Oh, yeah. I just thought I’d share that. A little bit of laughter. Okay, I’m going to the next one here because that was that little nugget cracked me up. Radical but durable. Paradigm needed shift for delivery of low carbon energy infrastructure in race to net zero. This article is trimmed with hypocrisy. Part of it is because it was based off of the IEA’s findings and their doctors and everything else. And the head of the IEA is absolutely, I’d like to say smoking crack. Can I say smoking crack on the podcast?

Michael Tanner [00:12:09] I just have to admit that you smoke crack, too.

Stuart Turley [00:12:12] Oh, okay. Well, anyway, that Princeton University.

Michael Tanner [00:12:16] Joke.

Stuart Turley [00:12:16] Beat here. Yeah. No, I don’t buy. Reinforcing the extent of the challenge, Worley and Princeton University and Langer Center, Center for Energy and the Environment provide a new set of net zero numbers using data from a net zero Australia. This is a much smaller energy economy than the U.S., but with greater energy exports requiring up to 3000 gigawatts of renewables by 2050. Replicating the world would be a renewable current fleet up to one gig gig. Guitarist ID gig where of CO2 sequestration. Bill Hockey. Anyway, the reason I went through this was because people are fabricating numbers, and when you read something like this, it goes into the bull hockey category. And I just wanted to give a shout out to the IEA as investor running Potential Investor of the week. This is bull.

Michael Tanner [00:13:23] Yeah. I mean, I just this whole report, what they’re basically saying is oil and gas companies should take all the money that they know how to deploy in oil and gas and deploy it in an industry that they have no idea how to actually build and as seen by BP. So they want oil and gas to fund the transition to eventually bring them all, bring them down. I mean, it’s it’s insane.

Stuart Turley [00:13:45] But they also gave some horrific numbers, Michael. They said that the oil and gas industry had $2 trillion worth of subsidies to the oil and gas industry. They are smoking ban on that one.

Michael Tanner [00:14:03] I mean, globally, 2 trillion. And I don’t doubt that number if it’s globally still oil and gas. You know this better than anybody. There are some great tax benefits to investing in oil and gas. Do you think they’re just available to the retail investor?

Stuart Turley [00:14:21] Hang on. But they didn’t print any money. There’s a difference between tax credits and printing money.

Michael Tanner [00:14:30] But a company that an oil and gas company has significant tax savings because when you go to a capital.

Stuart Turley [00:14:38] Not all over the world, they don’t have tax credits.

Michael Tanner [00:14:42] Well, here they do. Here in America, they do.

Stuart Turley [00:14:45] We’re not at your risk. We are the only one in the united in the world in that has tax credits for and also says.

Michael Tanner [00:14:54] That in the article here, it says 4 trillion of tax subsidies. Does it say.

Stuart Turley [00:14:59] That I said to.

Michael Tanner [00:15:00] You truly to say that here in the article. Yeah, I got to go. Let me find that because that is crazy.

Stuart Turley [00:15:06] I’ve already closed it. Let me go.

Michael Tanner [00:15:07] Look, I’m looking at it right now. I’m not finding it. I’m just saying, like and I. Agree with you. But to say there are no tax advantages to oil and gas globally?

Stuart Turley [00:15:18] No, there are tax advantages. That’s different than subsidies. The infrastructure bill is a subsidy.

Michael Tanner [00:15:26] Okay. Yes, right there. Another recent analysis shows that fossil fuel consumption subsidies rose to a record of over 1 trillion as governments acted. Blah, blah, blah. So that’s interesting. But a lot of the times what they’re doing is is a slight is a sleight of hand by by saying subsidies when really what they mean is tax benefits, which.

Stuart Turley [00:15:45] Is the rest of the world does not take advantage of tax benefits like the U.S..

Michael Tanner [00:15:50] I’d be interested to read that analysis. But when you say subsidies, you’re you have to you got to generalize it a little bit. So you’re right.

Stuart Turley [00:15:58] We’re both right.

Michael Tanner [00:16:00] Yeah, I’m just I’m just making sure because there are some benefits to investigate oil and gas. Speaking of endlessly, holy smokes.

Stuart Turley [00:16:06] Not globally.

Michael Tanner [00:16:07] You’re not global. You’re right. What’s this last story here? I’m done. Oh, we’re good. Well, you know, after.

Stuart Turley [00:16:15] You.

Michael Tanner [00:16:15] Talk to me, we don’t have any any tax subsidies in this segment. Unfortunately, only in Stu’s segment.

Stuart Turley [00:16:22] I only said subsidies. I didn’t say.

Michael Tanner [00:16:24] No. I’m just giving you a hard time. Overall, markets down. The S&P 500 dropped about 3/10 of a percentage point. NASDAQ tumbles about a 10th of a percentage point. Again, markets are just oddly waiting for the Fed to drop its latest STI rate increase. Street thinks it’s going to either be 25 or 50 basis points. Me, personally, I think it’ll be 50. I think they’re really going to try to. With unemployment continuing to stay low, I think the housing market is still a little bit higher than what they originally want. And I think they’re to take one more swing at it and we’ll we’ll see what happens there. Crude oil traded up to almost $78 today, currently now 7651, which is about 1.2 percentage points higher than it opened on the day. I think you see a lot of conflicting news. You’re going to you know, on days that oil, crude oil goes up while it’s Chinese demand or day goes down. Oh, well, it’s interest rates. You know, I do think there are investors expecting some strong Chinese manufactured data which drops in two days. Again, the IEA coming out with this report, amongst others in sort of their monthly end of the wrap, has sort of buoyed the demand on on China’s side. But, you know, again, when you’re reading these articles, guys, you got to be mindful of the fact that, you know, you know, you’re they’re going to pick a narrative depending on which way crude oil went. I mean, it’s the last day of the month. You could easily say people are just settling up. You know, contracts roll over on a month to month basis. You know, is this anything that people just covering up their positions, you know, that’s probably more likely what happened? You know, we you know, in terms of what’s going on. So but I do think on the on the China side, there are you know, traders are really eyeing that report to see, you know, how that manufacturing data looks. Again, the same thing really over on natural gas, $2.75, which is actually a little bit higher than it had initially been trading at as of the market open. We record this here about 649 on the night before. I think, again, you know, while it’s been a little bit warmer in the short term, we do see a long term front coming in again, wish with the end of the month contract coming up. I think you’re seeing a lot of just quick covers again, what’s the long term outlook really, you know 3 to 6 weeks looks like for natural gas? I don’t know. Again, this cold front does seem to be moving in, which will which will help with prices. But again, with Freeport beginning to ramp up, it has done really nothing to support prices here. So I doubt getting even that Bcf on line is going to do much. We’re still very oversupplied on storage, which is going to be interesting. And what happens this summer when we go to theoretically fill and what do we do if we can’t put away? I mean, it could be a very interesting the a very interesting summer. Sue.

Stuart Turley [00:18:59] It is. But China just put out a notice that or there was an article yesterday that LNG China is going to change the paradigm this summer with them buying as much LNG as they can possibly get I.

Michael Tanner [00:19:15] Think Can’t ship it, though. We can’t ship we can’t ship it in. Not like yes, we can send them some LNG, but what I’m talking about is in the summer we’re going to have so much abroad that we might have to do some crazy or not abroad at home due to the fact that we don’t use as much natural gas in the summer. So we’re going to still be still storage in the summer. Well, we haven’t drawn down as much as we normally do. Demand is still lagging behind what we expected to it, at least here domestically and maybe not lagging, but not, as you know, we’re still slowly increasing from where we were pre-COVID levels. I could argue there’s a situation in which we run into a oh, my goodness, we don’t know where to put all of this gas. And you see regional gas prices like Appalachia and West Texas specifically really get tight and really get to the point where things get some you know, I don’t want to go you know, I don’t you know, I’ve gone from extreme bull telling you is going to be $12 to now I’m. Now I’m going to one doctor. Don’t believe anything I say. You know, it’s.

Stuart Turley [00:20:15] Like me and.

Michael Tanner [00:20:15] Hiding somewhere in the middle. I’m couching it.

Stuart Turley [00:20:17] Yeah, It’s like me and hydrogen, dude.

Michael Tanner [00:20:20] Yeah. Hopefully none of us get accused of fraud.

Stuart Turley [00:20:23] Oh, but, well, two years ago, I was a big hydrogen dude.

Michael Tanner [00:20:28] Yeah, no kidding. You know, we also see U.S. crude stockpiles projected to rise 6.2 million barrels. That’s what according to the API you’ll know tomorrow will Wednesday, as you guys listen to this exactly what that EIA report will make sure to cover it on tomorrow’s show specifically and if the only other finance deal I think it’d be interesting to to cover is is bay tax energy announced which really leaked late late last night that they were going to go ahead and acquire a ranger oil which is a U.S. Eagle Ford company. And this morning here on the 27th, they went ahead and and made it official. I’ll read you some of the transaction details to give you an idea, including the assumption of a debt. It’s about $2.5 billion. To give you guys an idea. It’s a it’s I don’t know what the mix is. Oh, here’s the mix of basically Ranger shareholders. It’s a completely stock deal. It’s pretty interesting, actually. A you know, and we’ll get into what I think about it. But I mean, you’re looking at an all stock deal. Rangers shareholders are getting 7.49 B tech shares plus 1331 cash. Excuse me. Not this, not all cash. It’s a mix of cash and stock for a total consideration of about 44 and 36 here, which is only a slight increase or, you know, multiple on their current share value. So it’s a pretty I don’t want to say meager valuation, but it there’s not you know, if you’re just looking at a per vet pure valuation play they tax is getting a deal considering where their stock is trading at relative to the $44 and considering that it’s only 13, you know only you know a little less than you know, it’s basically about 30% are cash, 70% stock. So, I mean, from a cash perspective, if you’re basically able to keep a lot of the cash and really shift a lot of that, you know, obviously equity, but that’s a again, a non cash transaction to kind of give you guys an idea they’re going to go ahead and increase their share because of this. They’re going to do to introduce introduce a quarterly dividend. This is something that Bay tax which is a Canadian company has not done before, comes with about 741 net on drilled locations somewhere between 12 and 15 years. We’ll see how one of the key highlights they put in here is creates a more resilient and sustainable business. Who got that put in there? Who got that put in their.

Stuart Turley [00:22:43] Air guy The way.

Michael Tanner [00:22:45] They exactly, you know, want it increases their exposure to the US Gulf Coast pricing because remember what is where’s Ranger located There you go first. So I mean this this is this is a this is a the latest Eagle Ford plane. It’s very interesting. There have been all of these deals that we’ve seen. We saw the Chesapeake deal, Chesapeake getting out of the Eagle Ford. We’ve seen multiple deals now happen of big oil players. You know, Veritas came in about a year and a half ago and really kicked off the X Felix team. They really kicked off the Eagle Ford with their $800 million acquisition. The Eagle Ford has flipped hands multiple times. This is the latest in a string of deals. You know, my initial reaction is, again, bay techs was obviously looking to get into the U.S. oil market clearly because of whether or not they believe it’s the next place to create value for their shareholders or they know something about Canada that we don’t know. And I think the truth may be somewhere in the middle there. X CEO who’s now the chairman of the board, Ed LaFleur, Mines alumnus. So he’s clearly knows what he’s doing. Trust everything that’s going on. I’m just kidding.

Stuart Turley [00:23:47] I mean, Trudeau is a bad guy for Canada.

Michael Tanner [00:23:51] That’s I mainly say that facetiously and is initially. I think Bay Tech’s gets a little bit better of the deal, you know, depending on obviously Ranger has been you know, Reuters announced in November that they were exploring a sale, so they obviously shopped themselves around and felt like this was the best deal for them. So I guess the question is, you know, because Ranger was backed by Juniper Capital, who is you know, they were looking maybe for a more equity style deal than cash. Maybe a lot of the deals they had in front of them were cash. And maybe the cash was a little bit more maybe attractive because the multiple might have been a little bit higher. But the goal on the back end for Juniper was and if you read the press release, Erica guys are chairman of Ranger’s board and managing partner of Juniper Capital. This transaction represents a leap forward in shareholder value creation. Potential accelerates both shareholder return strategies. Oh, what does that mean? Yes, they really wanted a stock deal because what does this do? This adds another layer that they can use in order to, you know, who whatever their partnership structure looks like. Clearly, equity was something they’ve either pitch to their client base or is something that they see as a huge component to diversify themselves from just looking at, say, a large cash outlay. And then. Figuring out what to do with it. They maybe they don’t want to have the problem of what to do with all this cash. They want to they want to be able to sit back and cashflow these dividends. And maybe part of the deal was, you know, we sell to you, you start a dividend now and we collect that very. Most likely. You know, again, this deal just happened, that’s probably where this deal’s headed. So again, this is where, you know, you could say it’s a great deal for bay tax but in the same breath say it’s a good deal for Ranger. Maybe that makes a good deal overall. You can make an argument for both sides. I think it’ll be interesting to see how this deal plays out specifically for Bay, Texas. I mean, now they’re in charge of operating the Eagle Ford asset. They better hope that a lot of these Rangers guys stick around and they’re not just cashing out. But exactly the other part with these full M&A deals is what happens to the staff. There is a lot of them going to stay. I mean, they’ll probably offer a lot of the jobs. You’re going to, you know, migrate your headquarters down from Calgary. Probably not. But, you know, I think a lot of those decisions are going to be critical to how this asset gets developed. And, you know, again, that will only know in two years. So we’ll know you know, we’ll know in two years. So stick around then and we’ll we’ll fact check us then. That’s all I’ve got. Stu, do you got any thoughts on this deal?

Stuart Turley [00:26:17] I personally think that the employees would stay here because of the Canadian work issues going back and forth. If we try to go work in Canada, you got to have somebody from Canada standing there looking over your shoulder. So I feel good that the Ranger employees would be here.

Michael Tanner [00:26:35] It’s a mountie. He’s going to be on a horse with a Labrador Blue.

Stuart Turley [00:26:38] I got to do what I got to do.

Michael Tanner [00:26:40] Baby, baby. All right. Anything else they need to watch out for today, Tomorrow, this week? Well, talk about Agile.

Stuart Turley [00:26:47] I got a few leads, but I’ll shock people tomorrow.

Michael Tanner [00:26:51] Your sources. All right, Well, with that, guys, we’ll let you get out of here. Get back to work, finish up your day. We appreciate you checking it out on the world’s greatest podcast, Energy News Beat Daily Standup for Stuart Turley. I’m Michael Tanner. We’ll see you tomorrow, maybe.