EV Market Cooling?

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What’s Going on with Electric Vehicles?

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Michael Tanner: [00:00:15] What’s going on, everybody? Welcome into the Wednesday, May 22nd, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, what’s going on with electric vehicles? Then we’ll quickly just jump into the finance segment. With oil falling about 1%, I will cover what that means for the overall markets. And then we have Apache announcing $700 million in asset sales to Wildfire Energy, a mix between, some non-operated, Eagle or, excuse me, some Eagle Ford and Austin Chalk assets and some Midland Basin minerals. And then we will quickly cover the Phillips 66 acquiring Pinnacle Midstream in, you know, and a midstream deal that we don’t necessarily see too much. I will cover all that and a bag of chips, guys, as always, I am Michael Tanner, rocking a solo show today. Stu is out on assignment. He will be back in the chair tomorrow with me to round out the deck. [00:01:12][57.3]

Michael Tanner: [00:01:12] Let’s go ahead and kick this off here, guys. What’s going on with electric vehicles? I’m going to read straight from the article here. 2024 has not been kind to the electric vehicle market, particularly in the United States. Sales are down, Tesla has laid off staff, and EVs have been caught in the political crosshairs. The future of transportation may still be electric, but the recent struggles underscore the market’s role in determining that future. This this article goes on, to highlight one that Yahoo Finance pulled, that we talked about yesterday. They found 50% of respondents were unlikely to purchase a EV. They also talk about another Gallup poll that was actually in March of 2023, that from 41% of adults would not purchase an EV, while only 43% might consider OP. Opposition among Republicans is also much stronger 76% according to that Yahoo poll and 71% according to that Gallup poll respondent. They would not buy an EV. There’s there’s two things that are happening right now. First, it’s just the overall cost assessment. Right now it’s becoming it’s it’s not economical for these companies or not for the companies per se, but for consumers to actually purchase these EVs. I think there was a Department of Energy study that was done by their national laboratory out in Chicago. They did this quote unquote, cost assessment of purchasing. And now I’m going to start reading straight from the article, purchasing and operating electric vehicles compared to hybrids, gas powered cars. You also found that compact car, mid-size cars, and SUV were cheaper than the lowest cost comparable EV, even if owned for 15 years. Even including, some upgraded technology, technological innovation and cheaper commodity prices could make EVs, make EVs owning or owning EVs more economical. But the upfront cost down is critical. Course, the upfront cost is going to be key. Anything. They also point out that beyond the economics, both politics and policies are kind of affecting it. We talked about the tariffs that that Joe Biden has has just implemented. Now. He also he’s following up on what Trump has done, which was, you know, massive tariffs on stuff’s coming in from China. That’s not going to make products here at home cheaper unfortunately, because a lot of the cheap, products that we’re getting do come from overseas. So you’re beginning to see a little bit of, look over here. We love cheap stuff. But we also want to make sure that, we don’t take too much and we don’t enrich China people. You know, this article also points out that the EV tax credits aren’t necessarily, quote unquote, equitable, not a big fan of that term, but they point out that three that households making $300,000 annually can still qualify for this $730 tax credit. Basically, that need to just goes to people that don’t need the tax credit. If there’s any people that need tax credits, it’s the lower cost people. You know. I also love this quote here. Because of price thresholds and domestic content requirements, only 22 of the 110 EV models sold in the U.S qualify for the tax credit. So even if you want to use the tax credit, there’s only about less than 20% of all EVs on the market actually qualify for the tax credit, which is absolutely unbelievable. It goes to show you that, you know, at the end of the day, the consumer will rein in EVs are getting pitch is going to be interesting to see what happens. As we’ve said on this show many times, I am for hybrids. I think hybrids are going to be the future where you have a combination of a combustion engine along with back, a battery storage. I think that’s also where personal consumption will go. So we will be following that quickly. [00:04:36][203.8]

Michael Tanner: [00:04:37] Before I jump over and start covering some of the finance stuff. Guys, we got to pay the bills around here. As always, thanks for checking us out on the world’s greatest website www.EnergyNewsBeat.com. All the news and analysis that you are hearing is brought to you by that website. Still in the team. Do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear. When it comes to the energy and the oil and gas business, you can go ahead and hit that description below. Links to all the articles that we cover here, and check out all of our other great resources. [00:05:08][31.5]

Michael Tanner: [00:05:09] But let’s move over, into the. Overall market skies. S&P 500 actually up about a quarter of a percentage point. Nasdaq up about the same amount, little less than a quarter of a percentage point. Two year yields flat ten year yields fall about half of about a little less than a 10th of a percentage point. Dollar index extremely flat. Bitcoin drops two percentage points. Slightly below 70,000 after last night. It it kind of, careened over there. [00:05:33][24.3]

Michael Tanner: [00:05:34] Crude oil down about a, a little less than a percent, 7866 Brant oil, basically flat down about a 10th of a percentage point 8274 natural gas takes a 3% tumble, $2.67. You know, a couple reasons, you know, oil price falling mainly off the back of what we saw was a build. If we go and throw this image up, miss producer, the EIA, or the, crude oil inventory estimates from the API come in. We’re talking about a 2.48 million barrel build being estimated. So a lot of that, price action towards the latter half of the trading session was due to that. We also are seeing, we are going to wait from the, the, the last policy meeting. We’re going to get the minutes from the fed, that are due to, as you listen to this on Wednesday, along with the crude oil inventory numbers out of the API. Tim Schneider, we love him over at Matador Economics. There’s nothing in this market right now that is pushing prices higher. If we see a little bit of stock drop tomorrow, they may help push prices back into the 7850 to $80 per barrel range. Again, it’s going to be interesting. We had two fed, reserve policymakers say on Tuesday that it was, quote, prudent for the US bank, to wait several more months to ensure inflation is really back on its path to 2% target for commencing interest rate cuts. We also did see comments from Christine Lagarde. She’s the European Central Bank president. In the chat. She’s really confident that eurozone inflation is under control. I mean, yeah, who knows about that? Some of the geopolitical risks going on between, Israel and Gaza right now, as you know, that quote unquote risk premium is, is is not necessarily affecting much. You know, another interesting thing is, you know, the market was also largely unaffected by the death of Iranian President Ibrahim Razavi, who’s basically a, hardliner and was the the potential successor to the Supreme Leader, Ayatollah Khamenei. So going to be very interesting, obviously, you know, kind of the second in command or a very interesting political structure over there in Iran. Luckily, you know, the market hasn’t necessarily reacted too strongly to that, if only because it looks like there was no foul play involved and it could have gotten absolutely insane. Phil Flynn, he’s a price analyst over at Rice Futures Group. You know, he doesn’t expect much change relative to Iranian oil policy after the president’s, death. Now, the only other two things I saw on the finance markets today, guys,. [00:07:57][142.9]

Michael Tanner: [00:07:58] This actually happened on a two or on Monday, late in the afternoon, Apache announce a $700 million in two separate transactions, related to some non-core asset that they had the first up with some Midland Basin, about 24,000 net royalty acres, spread across Midland Basin. These are actually some minerals that they owned in aggregate. Did about two, you know, about 2000 barrels a day. On, on a, on a, on a net assets. And these were, mineral and royalty interest that were primarily non-operated interest. They don’t actually own the physical leases. On top of that, we also did see them divest about 237,000 net acres, in East Texas, both, some Eagle Ford and Austin Chalk, with an effective date of of January 1st, 2024. Net production on that to about 11,000 barrels of oil today. So overall you’re talking about 13,000 barrels of oil a day. Third of that being oil. And you’re talking about. Yeah, 53,000 flowing, you know, on a $700 million, total price you’re talking about. That’s a little over 53,000 per flowing boe. Obviously, some of that there’s there’s development on the upside. But man, talk about a, you know, I, I don’t have great things to say about Apache for a variety of reasons. I do know that this could be a great deal for them, considering it’s non-core. It’s a pretty big price tag you’re talking about over. You know, even if you strip out it, it’s only about a third oil, so we won’t even even get down to following barrel oil price. Absolutely unbelievable. Obviously with some with with that net acreage getting or that acreage getting sold, there’s going to be some, some upside attached to it. But you know, Wildfire Energy was on the other side of that transaction. You know, be very interesting to see how they develop it. They’ve been active recently over the past two years. Good for Apache going in swooping that up. [00:09:40][102.8]

Michael Tanner: [00:09:41] You know we also saw Phillips 66. We don’t really talk much midstream mergers and acquisitions. But Phillips 66 jumps in acquires Pinnacle Midstream from Dallas based PE from Energy Spectrum Capital. quote out of there from Mark Lackner chairman and CEO of pinnacle 66. We are growing our midstream business to the perimeter to further strengthen and expand our service offerings to customers while driving operational and commercial synergies. We love a good A word salad in a press release. To give you guys an idea, it’s an all cash deal of about $550 million. get which gets access to, the dose Picos natural gas processing system. There also is a few other things in there, but really the core of this asset is only about 80 miles of gathering pipeline, 50,000 dedicated acres, which is which is around 60 or 50, which sits on about 50,000 dedicated acres, excuse me. And about 220 million, cubic, million cubic feet of gas per day processing plants. So, they’re also believe they could scale another second, 220,000,000 cubic feet per day gas plan and they claim, integrates really well into the Phillips 66 existing downstream infrastructure. All I will say is this midstream, we’re going to see a big, booming $500 million price tag for about 80 miles of gathering pipeline. Pretty good deal. Pretty good deal. So I think it’s going to be it’s going to be very interesting. You know, we’ve been saying this for a while midstream. If we’re not building new pipelines, the pipelines in are in place are going to go for a premium. We’re seeing that right here. Good for energy spectrum capital local Dallas company here. Getting in on the action and selling out to Phillips 66. [00:11:16][95.3]

Michael Tanner: [00:11:17] We we’ll see how this one plays out. Short show for me today guys. That’s really all I’ve got. As you’re listening to this, please check out the episode seven for the Deal Spotlight. I you know, I released that today with Bennett Williams. Me and him sit down and talk Chevron, Hess and Exxon swooping in and what’s going on there. Highly recommend checking that out. You can check that out again in the description below. I’m gonna let you guys get out of here. Start your day. We appreciate everybody checking us out here on the world’s greatest, podcast Energy News. Beat check us out www.energynewsbeat.com for Stuart. Really I’m Michael Tanner. We’ll see you tomorrow folks. [00:11:17][0.0][657.8]

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