Daily Energy Standup Episode #242 – ExxonMobil’s Outlook, World Bank Warns of $150/barrel, Fossil Fuels’ Resilience, Cummins’ Growth Forecast and Oil Price Enterprise Products Expansion

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ExxonMobil CEO sees tight world oil supplies for next few years

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:15] What is going on, everybody? Welcome to another edition of the Daily Energy News Beat Standup here on this gorgeous Wednesday, November 1st, 2023. As always, I’m your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, joined by the executive producer of the show, the purveyor of the show and the director, publisher of the world’s greatest energynewsbeatcom, Stuart Turley My Man how you doing today? [00:00:40][24.1]

Stuart Turley: [00:00:40] Is a beautiful day neighborhood, but it’s kind of cold. [00:00:42][2.3]

Michael Tanner: [00:00:43] Just a little bit cold. Luckily, there’s no wind here in Dallas, so it’s not as bad. But I did have to throw a hoodie and sweats on again for the second day in a row, so that makes me excited nonetheless. Rain, sun or snow or snow. We are here delivering the news. We have an excellent menu lined up. First up on the show, why fossil fuels are here to stay. Next up, word out of ExxonMobil. Their CEO says three world oil supplies over the next few years fresh off their pioneer acquisition. Probably a good move for them if that’s what they think. Next. The World Bank warns oil price could soar to around 150 a barrel. What if Exxon Mobil CEO has anything to say about it? He’d like to see it go there, too. Next up, Collins predicts huge growth in natural gas engines. I think that’s pretty obvious because they sell natural gas engine, probably bullish on it. But I think this is interesting coming from an actual manufacturing section, somebody that’s not maybe intertwined as much with the upstream segment as you want. So while this article coming out of Cummins, they’re predicting huge growth in natural gas and then finally sticking on that natural gas band enterprise products double down on gas liquids with pipelines and processing plants fuel. Then toss it over to me. I’ll quickly cover what happened in the oil and gas markets today. You saw natural gas prices up on oil prices down. We’ll make sense of it all to earnings. We’ve got some gas players, Chesapeake and Comstock both announcing earnings a little lackluster, but due to down real realized pricing, it’s nothing that anybody didn’t necessarily expect. We did get the API crude oil inventory guesstimate of the crude oil storage numbers that will drop as you listen to this on Wednesday. So we will cover that. And did you prep for everything you need to know and then we’ll finish up with a quick back in book segment on really cool event going on that we will touch on at the end, guys. But before we do all of that, as always, the stories and analysis you are about to hear are brought to you by the world’s greatest website www.energynewsbeat.com the best place for all of your energy news. You can also check us out Dashboard.EnergyNewsBeat.com it’s kind of our data news combo. Give us a shout of what you like and don’t like out of work Hard at work at V2. You can get in contact with the show [email protected] Go ahead. If you’re watching this on YouTube or on Apple Podcasts, Spotify, you hit the description below. See all the links jump ahead to any one of the stories I just mentioned or get their back in the book segment where Stu is going to breakdown things that he’s looking for in terms of board, record level things in terms of R&D. So you can jump around, do whatever you want. We love that the team does a great job of curating that, making sure everything stays up to speed with everything that you need to be tip of the spear. When it comes to the energy business, I’m out of breath tho Stu. Where do you want to begin? [00:03:28][164.2]

Stuart Turley: [00:03:28] Hey, let’s start with our buddies over there, the Exxon Mobil CEO who says tight world oil supplies for the next few years. You know, I think this is pretty, pretty sharp when you sit back and take a look at the fossil fuels, the industry, quote unquote, the industry is still recovering from the impact of the pandemic and the lower levels of capital that have been going on across the industry to offset the depletion that has been happening, CEO Officer Darren Woods said in an interview with Bloomberg. I’ll tell you what, it’s pretty cool. Here’s one other quote that I want to yell at, and here it is really a function of where does the global economy go? Gas for the next couple of years. It’s going to take some time to get additional capacity coming on. And, Michael, you’ve been hitting on this for a long time, that it’s the fiscal responsibility and it was the only probably in one of the few good things that the ESG movement brought in was fiscal responsibility on the oil companies. So I think this is actually fairly good that they are still. [00:04:32][64.1]

Michael Tanner: [00:04:33] Yeah, I’m glad he’s the CEO of an oil company, not the U.S. chief economist, because he goes on to say that the US economy is, quote, in reasonably good shape. I wonder what data he’s looking at to come to that conclusion. We got inflation of dollars being devalued. So I’m I’m glad he’s the CEO of an oil company and not necessarily in charge of chief. I need from his perspective the economy is a great shale oil they just bought pioneer Why lauded the US economy being great? [00:05:03][30.1]

Stuart Turley: [00:05:03] Well I think I think Janet Yellen may be his cousin. I don’t know. [00:05:08][4.5]

Michael Tanner: [00:05:08] A great CEO doesn’t need. You’re a great economist. That’s okay. We love what they’re doing over to you. [00:05:13][4.9]

Stuart Turley: [00:05:13] But hey, let’s. World Bank warns oil price could soared $150 a barrel. Why don’t I kind of get tickled at this story. It was just kind of crazy. And it starts out describing about the Hamas, the Israeli Hamas conflict going over there. And it says oil prices could slow to a record high, more than $150 a barrel if the war between Israel and Hamas leads to the full scale conflict. However, Michael, we’re all sitting here scratching our heads, but they take it one step further. They’ve got a little oh, one of those decoder rings that you used to get in Cracker Jacks here. Let me go through these. A small disruption scenario which the global supply would be reduced by 500000 to 2 million barrels a day, roughly the equivalent equivalent reduction seen during the first Libyan War. The oil price would range to $93 to one or two a barrel. You know, at least they backed it up with some data. So now let’s go to the medium disruption. 3 to 5 million barrels a day. If the global supply and oil prices would rise by 21% to 35%, taking in between 109 and 121, the large disruption would be let’s see here. Kind of like the Yom Kippur War that just at the on the 50th anniversary of the Yom Kippur War would result in 56 to 75% increase between 140 and 157. [00:06:59][106.0]

Michael Tanner: [00:07:00] Man For Darren Woods, the economy would be doing great then. [00:07:03][2.7]

Stuart Turley: [00:07:04] Oh, it’d be really good, especially in his his house. So my thought process on this article is that they never actually they do they get a crayon out better than Oklahoma State University’s. And it was they had some thought behind it. Now, do I agree with it? [00:07:20][16.5]

Michael Tanner: [00:07:20] No. I mean, here’s the thing. I think, you know, 500000 to 2 million barrel disruption, that’s a pretty big wide range for a small disruption. I think what’s interesting is the fact that what do we need to get to get to these disruptions, which, you know, is the real question, because if we looked at what oil prices did today, seems to me that this small disruption scenario might not even come true. So we’re talking about a P90, P50, P10. What’s the the P 99 look? Because that may be where we’re headed in terms of in, you know, do I see the large disruption scenario 56 to 75% increase in prices to 140 157 or below. I mean that seems to me we’re going to need take we need there’s going to be need to see some escalation quickly and maybe the World Bank might know something we don’t. Is that coming? Who knows? I do think they’ve probably laid out a great range of scenarios, though. I do think the the the as is scenario, which is we’re kind of in an ambiguous position, in my opinion is the one I’d vote for. [00:08:24][63.3]

Stuart Turley: [00:08:24] Right. One thing on these numbers, when I was looking at it, the medium disruption at 109 to 121 is based off of a 3 million to 5 million barrels a day cut in supply. And Iran, when Trump was in office, was doing 500,000 barrels per day. They’re now doing 3 million barrels per day. So if Kelcy Graham goes out and has his way and we bomb, he bombs, I don’t want to say the U.S. bombs, but he bombs. Boom. There you are. There’s that one item in that range. Does it go to the higher price? I don’t think so. For a long time. Yeah. [00:09:07][42.7]

Michael Tanner: [00:09:07] I just ran a 23. And me, Lindsey Graham and Darren Woods are actually related. So now I see a no way joke. That’s a joke. It’s a joke. [00:09:15][7.9]

Stuart Turley: [00:09:16] Yeah. I bet they’re still related to Janet Yellen. [00:09:18][2.0]

Michael Tanner: [00:09:19] Inflation is chart. [00:09:20][1.1]

Stuart Turley: [00:09:21] Inflation is transitory. Okay. All right. [00:09:24][3.4]

Michael Tanner: [00:09:25] Same here. What’s next? [00:09:26][0.8]

Stuart Turley: [00:09:26] We had two stories that have already kind of teed this story. You know, following the energy news beat thread today, why fossil fuels are here to stay. Okay. This article really is pretty pretty cool is because it let’s go down here and it says those I love this part. Those who think the world will soon be doing without fossil fuels need to get real far from terminal decline. Fossil fuels is set to scale new heights. Even the most ardent environmental zealot will soon have to reckon with the new geological reality. After all of the Greens in Germany, our governing governing coalition can be convinced to defend coal plants. There is every chance the American politician. It will soon be encouraging fracking and drilling from Alaska to Texas. [00:10:18][51.8]

Michael Tanner: [00:10:21] I absolutely love to see that. [00:10:23][2.0]

Stuart Turley: [00:10:23] Oh, I think it’s a hoot. But I did have a call come in after this, ran on energy news beat my goal, and it was actually Crocodile Dundee called in and he was like, oh, so I’m going to play this 42nd clip. This 42nd clip is worth every bit of it. [00:10:42][18.7]

Michael Tanner: [00:10:42] It’s I’m running it right now. [00:10:44][1.4]

Stuart Turley: [00:10:45] Yeah. This guy from Australia is sitting here and he’s talking about this a long. [00:10:51][6.2]

Michael Tanner: [00:10:52] Way. [00:10:52][0.0]

Stuart Turley: [00:10:54] Because this is a news generator. I bet it’s a diesel generator. And he goes, This man’s 27 and there’s only two charging stations and a kangaroo sitting out here. He’s not really going to save the planet. [00:11:09][15.2]

Michael Tanner: [00:11:11] What I love is that is anything is funnier with an Australian accent. Exactly. I’ll turn this off here. I think it’s about time. I love anything with an Australian accent is absolutely funny. But you know, this is the type of energy hypocrisy that we that we that we cover. Hear me talking about natural gas powered electric vehicles. Can’t make this stuff up. [00:11:32][20.6]

Stuart Turley: [00:11:32] Well, no here’s Cummins predicts huge growth in natural gas engines and I love this this author because it was he forgot to mention compressed natural gas which is CNG has been around a while but it does burn cleaner it burns this market will let’s see there’s some number. Cummins builds huge diesel engines and there’s some numbers in here that we want to go over of. 15 liter offering expands the addressable market for natural gas. Natural gas traditionally accounts for 2% of the heavy duty trucks and now that it could go up to 10% of the truck market. But you know what, Michael? When you try to consider 10% of the truck in the semi market, that single move could have more impact than all of the heavy truck combined on the road. And there’s a couple of reasons why that, to me is a huge significant number. Does it make sense? [00:12:40][68.0]

Michael Tanner: [00:12:41] Yeah, no, I mean, if if there’s anybody who actually has a pulse on and needs to know what the demand will be for natural gas, it’s somebody like coming. So I’m going to trust their analysis is at least biased, if only because they’re trying to make a dollar here. Yet the world was shifting to EVs. You’d think they would dive into EVs more. You’d think. [00:13:03][22.0]

Stuart Turley: [00:13:03] Yeah, it. Here’s a good quote from Spiro. And yesterday Diesel was fully dominant, Spiro said. But as we get later into the decade, into the 2030s, it’s going to be a multi technology environment where people are going to choose not only what’s best for their operators, but also what’s best from a sustainability perspective. You know, as we visit with CNN X CEO over there, Nick, I’ll tell you what, he’s got it right. CNG is dead on the way. It should have been. And as a CEO running a natural gas over in the oh shoot, the Marcellus over there, he’s got it right. I would rather go to a CNG car if it is it’s cheaper to put in than a TV and we’re not abusing the kids. [00:13:55][51.9]

Michael Tanner: [00:13:56] So yeah, it’s absolutely true. So what do you got next? [00:13:59][3.3]

Stuart Turley: [00:14:00] I got a nice story here. Enterprise Products doubles down on gas liquids with pipelines and processing plants. It’s encouraging when people sit back and go, people are going, Wait a minute, natural gas is here to stay. We need LNG and we need everything else. Let’s go in Enterprise Products Partners will expand its natural gas liquids NGOs into adding a pipeline from the Texas Permian Basin to new plants to process gas. That’s huge. The new pipelines that have come in over the last three or four years from the Permian have really cut down the flaring. So this is an outstanding way to continue reducing the emissions out of the Permian Basin. This pipeline, which is good NGOs in the past years, has been shipping crude oil since 2019, and they repurposed the one down there. I, I like the idea of repurposing a pipe. There’s a lot to be said for that. [00:15:03][62.9]

Michael Tanner: [00:15:03] Well, because I’m sure the permitting is a little bit easier. You’ve probably got a bunch of the environmental impact studies done in. It’s probably half the price to go ahead and repurpose in considering these investments are. Billions of dollars. It probably there makes sense to at least look to repurpose. So now, I mean, we’re going to need all the pipelines we can get. If we can’t get new ones permit, it might as well repurpose. [00:15:24][21.1]

Stuart Turley: [00:15:25] Oh, absolutely. So it was a fun day looking at the news. [00:15:28][3.1]

Michael Tanner: [00:15:29] Yeah. No, a lot of oil and gas stories today which which I got to like. We’ll go ahead and kick it over to your finance segment, guys. S&P 500 up about 6/10 of a percentage point. NASDAQ up about 5/10 of a percentage point. Not much movement, mainly reacting to a few earnings here and there. We saw a few a few health care things on the Nasdaq side drop that really kept prices laggard relative to the S&P. But we will find out about the Fed’s decision tomorrow to raise rates. You know, before I dive into the oil and gas industry, what do you think the Fed’s doing tomorrow? You think they’re going to raise rates? [00:15:58][29.6]

Stuart Turley: [00:15:59] It’s kind of like me asking whether or not my cat would absolutely like scratch. I don’t know. But my opinion is they will. [00:16:06][7.4]

Michael Tanner: [00:16:07] Yeah, I’m I’m, you know, blink twice if the cat scratches. So I that I think that I agree I think we’re going to see a rate increase and you’ll see that reflected. I think an oil price is a strategic drop today 8146 off the back of what we thought was a fairly chill day yesterday, even though we did see early morning tumbling again. We dip on global supply. You know, as Reuters would tell you, there’s less supply concerns than we saw last week. Well, I mean, they’re probably right. Again, Hamas is continuing to release foreign characters. OPEC crude supply did rise in October, which is interesting relative to the stuff we’ve been hearing. We also did see U.S. crude oil output rises to a two month record in August. That comes out of the EIA. You know, for what it’s worth, your euro did see a two year inflation hit this October. And the Chinese PMI data did miss that forecast and falls below 50 which again is only going to help somewhat support prices. Prices were relatively eased on the natural gas side by a crude inventory build of less than the forecasted of only 1.3 million. There was a forecast that 1.6 million barrel build of the Strategic petroleum or crude oil reserve excuse me, you will hear about that tomorrow about 10:30 a.m. Central Time. If you’re recording this, I think there’s two interesting things to note, Stu. On the earnings side, we saw Comstock and Chesapeake, two natural gas heavy players. I’ll go ahead and report their financial results. COMSTOCK Right out the bat, says continued weak natural gas prices weighed heavily on third quarter results. They had about net natural gas sales of about 330 $360 million. Operating cash flow was about $0.60 per diluted share, or about 167 million adjusted EBITDAX. Of course, it was a little higher, 269 million and adjusted net income 17.7 million is pretty crazy. Stu. They got they got 18 wells drilled with an average production of 29 million cubic feet per day, and their average production on their latest two western Haynesville wells was 34 and 35 million cubic feet a day. So holy smokes, they’ve signed a new venture to go ahead and build out their western Haynesville Midstream support, which is going to only help their realized prices because you have to remember that’s really all that matters in the natural gas players. How good is your marketing contracts, how good your take away and really how how online quickly can you get these wells? If you’re waiting three months to turn these wells online, prices can swing on you dramatically and obviously, low lifting cost Chesapeake a little bit better in terms of their their cash provided by operating activities. That’s 506 million net income of 70 million or about $0.49 per diluted share adjusted EBIT of 560 million. They did about 200 million of shareholder by of shareholder improvements through base dividend and share buyback. They went ahead and announced the quarterly dividend about $0.57 per common share that’s going to be paid in December of 2023. They end the quarter with about 1700 or 713 million cash on hand. Hey, our you know, we’re open for sponsors, Chesapeake, if that’s what you’re trying to say. They did. Interesting to do. They went ahead and entered a new heads of agreement with vital to provide gas division to produce 1mt pay. I don’t know what that’s a lot of it’s a lot of LNG to be netted back to Japan Korea maker for 15 year or so Chesapeake get into the LNG long term game which is absolutely great to see. You can tell natural gas prices being down both of those companies with net incomes in the in the six figure or in the hundreds of millions but only net incomes of the tens of millions. So you can see what lower natural gas realized pricing does them nothing too interesting other than those different things we’ll both be able to read. There are reports tomorrow as things drop. But before we get out of here, still really interesting. Coming up here, I saw this. You’re actually trying to get down to this. It’s an event. That’s the event. The best Pdg See s Business Development Study Group a in d workshop. This is an event sponsored by by some of our favorite people, including our friends. Over at combo curve. You know, this is in a pretty interesting event you’re trying to get down there. Basically, what they’re going to be doing is they’re going to have a bunch of different workshops. One of them is an R&D workshop where you’re going to have contestants come and pitch deals to a prospective board of directors. And I thought it’d be interesting to pose this question to you. You’re you you spend your time talking to C-suite people, board of directors, all day, left, right, up and down. You’re the one that’s always holding me back. I’m throwing things at you, trying to move it, be the light you’re real me mean because you really take again that that executive swishy board of directors. You know I’m somebody that would be on the panel arm of somebody to pitch in this panel. I’m coming to you and trying to pitch my deal. If you’re on this panels do what are a few things you’re looking at. You know, you’re sitting on the board of directors of Chesapeake or let’s take an oil and gas operator. Right. You know, let’s take any oil and gas operator. Let’s take Devin, for example. You’re on the board of directors that David comes to you with an M&A opportunity. What are some of the things that you’re thinking about to contextualize whether or not you think it’s a good deal or not? [00:21:15][307.7]

Stuart Turley: [00:21:15] Well, there’s a fantastic long 35 question thing you just threw at me. But I’ll tell you what are the key points in an M&A deal And oil and gas is the fact that, Michael, you’ve said this a bunch, and that is everybody’s claiming they’ve got tier one assets, right? And then you have Exxon and you have everyone else saying, but we have new technology. So the tier two may be the new tier one. How do you judge between a tier one and a tier two? It’s by having the tools, being able to say, wait a minute, we’re already producing this amount in barrels per day in that square section. Great. How many wells can you then put into that formation? How many can you do that? But more importantly, what’s the economically of being able to have the take away? What are the economics? And I need to see that on one pane of glass in a report. [00:22:11][55.6]

Michael Tanner: [00:22:12] I think a lot of it is they throw a lot of Fugazi numbers out there. So I’ve convinced you that there’s no more Tier one acreage available. It’s all Tier two. All those US pitchers aren’t going to like that. Stu. There’s a thousand premium locations out there. [00:22:24][12.6]

Stuart Turley: [00:22:25] But the technology’s getting better. And I think the new Tier two will become the new Tier one. When you take a look at the amount of production that is going on in the Permian. But I still want to see the numbers. I want to see. [00:22:39][14.3]

Michael Tanner: [00:22:40] You prefer where would you prefer to acquire? Are you looking to get into the Permian at all costs? Are you looking to have assets elsewhere? Where would you like to be if you were if you if you could play both of the day. [00:22:51][11.8]

Stuart Turley: [00:22:52] To day to the answers? BP announced, I believe yesterday that they are trying to acquire some B, Permian assets. They are now sitting there trying to play catch up. So you have even BP trying to get into the Permian. You also have those two gigantic deals with Chevron and Exxon buying into the Permian. So I think with the geopolitical problems going on, the Permian becomes the single biggest national asset that the U.S. has. [00:23:27][35.1]

Michael Tanner: [00:23:28] Well, good thing for our friend Darren Woods. We talked to the beginning of the show. He now kind of owns the Permian Basin. So he’s the top dog down there. [00:23:36][7.5]

Stuart Turley: [00:23:36] Yeah, well, he should call it Call us first for an opinion. [00:23:39][2.8]

Michael Tanner: [00:23:40] Well, this is awesome, guys. Remember the SPDC as Business Development Conference? They’re doing a bunch of stuff, including this Andy Workshop Door prizes, monthly sponsors, of course, our friends over at Combo Curve Opportune and Triple R Energy Partners will be awarding the sponsor. We hope to see everybody there. But with that, guys, we’re going to go home and let you get out of here. Get back to work. We appreciate you guys sticking with us here on this Wednesday. We will be back tomorrow for the final episode of the week and then we will let you get out of here. So for Stuart, I’m Michael Tanner. We’ll see you tomorrow, folks. [00:23:40][0.0][1373.4]

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