Daily Energy Standup Episode #117 – A Weekly Recap

Battery-powered cars seem like the next big thing, but a growing portion of Americans aren’t ready to give up internal combustion. The percentage of Americans who say they’re “very unlikely” to buy an electric vehicle […]

Highlights of the Podcast

00:00 – Intro
00:58 – Financing the energy transition – we need a plan to provide the lowest kWh along the path
05:02 – Market Rally Shakeout May Be Bullish Signal; JPMorgan Eyes First Republic After FDIC Takeover
09:18 – Energy ‘better positioned’ for any kind of recession, analyst says
12:38 – Louisiana O&G still has a place in the future of energy
14:55 – Ford Loses Nearly $60,000 for Every Electric Vehicle Sold
18:13 – More and more Americans don’t want electric cars
21:09 – Outro

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

Michael Tanner: [00:00:14] What is going on. Everybody, welcome into a special edition of the Daily Energy News Beat Stand Up here on this gorgeous Friday, May 5th, 2023. As always, I’m your humble correspondent, Michael Tanner, coming to you from an undisclosed location here in Dallas, Texas, bringing you our weekly recap man, we had a jam packed show this week. [00:00:32][17.3]

Michael Tanner: [00:00:32] We pretty much had the entire gamut of stories between Jp morgan buying First Republic crude oil prices tumbling from $76 all the way down to where we’re currently trading, about $69. Lots of stuff going on in the EV markets we’ve got a great weekly recap. [00:00:46][14.5]

Michael Tanner: [00:00:47] Appreciate the team for putting this together as always, guys these stories are available via the world’s greatest website, www.EnergyNewsBeat.com. Let’s go ahead and get to it, though. Let’s team up. [00:00:57][9.8]

Stuart Turley: [00:00:58] Financing the energy transition, follow the money. We need a plan to provide the lowest kilowatt per hour along the path. The cost of moving the energy sector toward net zero is huge, but new research reveals that companies are increasingly prepared to invest and funding is increasingly available. Let’s find out those sectors. Michael. [00:01:22][24.9]

Stuart Turley: [00:01:23] Coming around the corner, What are energy companies a like? Where are energy companies out allocating capital? 42% of energy companies are investing in energy transition initiatives 11 per hour. [00:01:40][16.5]

Stuart Turley: [00:01:40] 28% now is in returns to investors and shareholders it used to be 11%. Oh, wow. All right. Capital investments in traditional businesses and oil and gas. Michael, this is critical. It used to be two years ago, 32% now it’s down to 20% . [00:02:07][26.8]

Stuart Turley: [00:02:08] 3 years ago, Michael, you and I had on our show, we could pull the tape. We needed trillions of dollars just to meet the decline curves. If demand lay, just remain flat. The IEA, the International Energy Association Agency, said just recently, two weeks ago that energy demand will remain constant for a while. [00:02:31][23.1]

Michael Tanner: [00:02:32] The international energy crime syndicate, you mean? [00:02:34][1.8]

Stuart Turley: [00:02:34] Yeah. Okay. Well, we’ll leave my true thoughts alone on that and the EU and the EU. I mean, excuse me, the. [00:02:41][6.3]

Michael Tanner: [00:02:42] Yeah, the IEUN. Yeah, yeah, yeah. [00:02:44][2.3]

Stuart Turley: [00:02:45] Yeah. The U.N.. Okay. How will they fund this? How will energy companies finance their energy transition initiatives? Private equity, 40% existing balance sheet or. Michael, I’m assuming this would be free cash flow, 32%. [00:03:04][19.0]

Stuart Turley: [00:03:05] Equity capital markets, 29% dated capital markets,. [00:03:10][4.7]

Michael Tanner: [00:03:12] Debt Capital Markets. [00:03:12][0.1]

Stuart Turley: [00:03:12] Oh, thank you thank you. Old Moses Me friends Bank lands 19% export Credit Agency 40%. Hey, I went to OSU but that is a lot more than 100%. [00:03:25][13.1]

Michael Tanner: [00:03:26] I know what’s going on I was asked the same thing I was like, It seems like ah… [00:03:33][6.4]

Stuart Turley: [00:03:34] Is this printing money? I got to go do some research. [00:03:36][1.6]

Michael Tanner: [00:03:36] This is this is this is this is how you start inflation. [00:03:39][2.9]

Stuart Turley: [00:03:40] This has got to be printing money. [00:03:41][1.3]

Michael Tanner: [00:03:42] I think there’s two things. Stu I mean, it’s clear I think it’s clear I think the the the bigger shift is this. You mentioned it in the big exhibit where energy companies allocating capital returns to investors and shareholders up from 11 to 28% in capital investment in traditional businesses, down about the same amount, 32 to 20. [00:04:01][19.0]

Michael Tanner: [00:04:02] So it’s just a flip. People are saying, okay, instead of spending all of this money in putting it into the ground, just give it back to me. Because think about it, the track record of oil and gas spending capital from 2012 to 2018 was terrible and it’s still kind of is terrible. [00:04:19][17.8]

Stuart Turley: [00:04:20] Right. [00:04:20][0.0]

Michael Tanner: [00:04:21] Knowing is a tough business you know, actually spending capital and spending it wisely is a tough business. So I’m not surprised it is flip. I think, you know, this whole 42% investing in the energy transition, are we sure about that? Like define energy transition? Like, are we talking about like. [00:04:37][16.3]

Stuart Turley: [00:04:38] I got to find out if it includes nuclear and natural gas now, because I mean, if it is these this this article,. [00:04:45][7.4]

Michael Tanner: [00:04:46] Please then going green. [00:04:46][0.8]

Stuart Turley: [00:04:47] Yeah. You know so funny article. I was like, okay, if you put out the act coming from the bank balance sheet, that might make a little, but who knows? Okay, I got to go do some research on that article sorry about that. [00:05:01][14.0]

Stuart Turley: [00:05:02] Market rally shakeout may be bullish, maybe a bullish signal. Jp morgan Eyes First Republic after FDIC takeover. Michael, This concerns me a bunch. The FDIC scene taking over First Republic banking giants including Jp Morgan Chase and PNC Financial Services are looking to buy First Republic following a government seizure, the Wall Street Journal reported Friday night, citing sources. [00:05:35][33.0]

Stuart Turley: [00:05:35] The FDIC asked for initial bids by Sunday, Bloomberg reported on Sunday after. I was going to say gouging, but gauging initial interest. Bank of America is mulling it. Michael this is systemic of an overall problem in is that government keeps bailing out banks. It’s going to be an issue. What are your thoughts? [00:05:58][22.5]

Michael Tanner: [00:05:59] Well, this comes back to the issue of these larger banks. I think it’s important to note that JP Morgan would need a regulatory waiver to buy first. So they clearly think they’re going to get the waiver if they’re overspending, if they’re know. I mean, they’ve got their whole team working on it. It’s kind of funny. JP Morgan does M&A for other companies. Imagine being on the M&A deal team for JPMorgan, that’s going to be an interesting deal team. I’d love to get out. I’d love to hear some stories about that. Not for Dylan. [00:06:25][26.3]

Michael Tanner: [00:06:26] But where this is all going to lead is again, Bank of America is mulling some of the banks buying. First of all, it’s much like in the oil and gas business, you’re seeing massive consolidation because of just the way that struck the equity and debt markets are structured. It favors big versus small. [00:06:39][13.6]

Michael Tanner: [00:06:40] I think that’s what you guys see happen in the banking industry you’re going to you’re going to see all of these regional banks get swallowed up by, you know, much larger regional banks. And then those larger regional banks will get swallowed up eventually by JPMorgan and you’ll have, you know, 10 to 20 banks throughout the country. [00:06:54][14.2]

Michael Tanner: [00:06:55] Is that a good thing or a bad thing? Probably on average, a bad thing there may be some good things about it you don’t need to worry about. You know, one of the advantages of having just huge banks is liquidity. You don’t have to worry about a run on deposits. The FDIC then can worry about other different things. [00:07:11][15.8]

Michael Tanner: [00:07:11] Now, having all of you having all of your deposits in one bank can also lead to massive. You know, we already think Wall Street has too much power and too much control over our lives. Imagine if if JP Morgan had all the power. [00:07:23][12.5]

Michael Tanner: [00:07:24] Now, I like if you know, I think the thing to be careful of is in this case. Yes. I actually you know, if I’m going to put my my money anywhere, it’s going to be a JP Morgan mainly based off what Jamie Dimon has said regarding the energy transition and his stance on oil and gas. He was one of the CEOs that sat up in front of Congress and said moving and getting off oil and gas would be the road to hell. [00:07:44][20.8]

Stuart Turley: [00:07:46] Wow!,. [00:07:46][0.0]

Michael Tanner: [00:07:46] He did. He said that they took yes, directly from him. Now, what happens when a new CEO takes over doesn’t believe that what happened? The problem with centralization is you’re counting on the people in charge. You may like the people in charge now, but do we like would we will we like them going forward? [00:07:59][13.6]

Michael Tanner: [00:08:00] So there has to be a balance we have to figure out a way to ride this ship. But JP Morgan may be the only company that could buy this, so I’ll be interested to see what happens. But I think that’s what’s going to happen. Consolidation among banks and will be generally worse off because of it. [00:08:14][14.2]

Stuart Turley: [00:08:14] I will give you great, great feedback, Michael. One small thing and you kind of said, what do you think about more big banks? It would be easier for the government to control the rollout of the Hamilton project, which is the digital currency, which is the end of financial freedom for the U.S. So that to me is even more scary on that part. Sorry. [00:08:44][29.6]

Michael Tanner: [00:08:44] I know you’re good, the Hamilton Project, but I but now, obviously, First Republic they’re in trouble their stocks down. You know it’s basically down over 100% that huge Q2 quarter one deposit outflows. You know there was an attempt to do quasi rescue it by it. [00:09:04][19.0]

Michael Tanner: [00:09:04] The FDIC came in and just said, no, we’re putting you up for bid right now. Someone will buy it. They won’t necessarily have to go into receivership. So I think that would be convenient for everybody. But we’ll see. Wouldn’t wouldn’t want to be in a regional bank right now. [00:09:16][11.7]

Stuart Turley: [00:09:18] Energy better positioned for any kind of recession. Analyst says Michael. I’m seeing this all over the place. Investors are calling and asking and they’re saying things like, What in the world do we do? It’s energy, baby. You know, it’s all about energy. And Chevron, Exxon post robust Q1 profits despite falling gas. They’re still got the profits in for the ones that are good management. Good numbers like you and I have always said, they’re good investments. [00:09:46][27.7]

Stuart Turley: [00:09:47] There’s a couple quotes in here that are just fabulous. Roger Reed says, Always a tough question to answer for the company or for us. So I think if you look at what’s typically made M&A work in this space, it’s more often occurred during a time of stress, meaning low commodity prices or other extraneous event for reasons create. It’s mergers. It doesn’t mean it can’t happen we just would be saying watch for those moments as opposed to just waking up one day and seeing everything. [00:10:22][34.4]

Stuart Turley: [00:10:22] You know what this is saying is last year the Dow Occidental was number one on the Dow on their Dow exchange. So when you sit back and take a look, Oxy number one, you know, that’s only one investment. You have 50% of the EMV operators in the U.S. are privately held. They’re good investments as well but you have real estate, Michael, coming around the corner. [00:10:48][25.5]

Stuart Turley: [00:10:49] I was watching Maria Bartolomo this morning and the real estate in San Francisco and New York, I think it was 48% is now vacant of commercial space. There is going to be a lot of commercial people looking to get out. So what you’re going to see is a run on minerals. You’re going to see a run on things with passive income anyway. I’m sorry for rolling on that, but I thought this was pretty incredible. [00:11:22][33.1]

Michael Tanner: [00:11:23] Yeah. I mean, I think he I think he accurately points out and I thought, you know, Roger, he’s a Wells Fargo analyst, so think think what you want about about their ability to predict. But I think he poses what I think is the right way to think about an ExxonMobil from a perspective of M&A. Because really what they’re talking about is, you know, while all these other things are crashing, where possibly should companies be looking at in terms of energy M&A? [00:11:50][27.1]

Michael Tanner: [00:11:51] Well, when you’re looking for an acquisition, are you looking for future drilling sites or more of a decarbonization play, which I think is key? There’s two driving forces that are going to keep energy high. Obviously, commodity prices and that goes into the future drilling location. But then also the decarbonization, all the stuff that’s going on in the Inflation Reduction Act. Who says there’s not an inflation Reduction Act, too, and all of a sudden the U.S. is thrown in there? [00:12:14][23.4]

Stuart Turley: [00:12:15] Here’s the thing there’s absolutely zero reason to fight the clout and, you know, fighting the clout. Great. Let them do it. Go make some money and then, you know, punch them in the nose or squeak their nose or squeak the horn later and just go put your money where you can make money and it’s in natural gas, nuclear, modular nuclear watch all you got to do is watch out for yourself. [00:12:37][21.8]

Stuart Turley: [00:12:38] Louisiana oil and gas still has a place in the future of energy. Michael, this is a great story. Louisiana is positioned to have opportunity to capitalize on changing global market demand and lead in the future of energy by bringing online new advancements in the industry, such as carbon capture and storage, CCUS and utilization I want to throw that in there blue and green hydrogen and renewable diesel. [00:13:07][29.3]

Stuart Turley: [00:13:08] Michael There’s about 16 really nice big projects going on in Louisiana and I respect the leadership because they are doing renewables, They are doing all oil and gas. Louisiana is home to the Haynesville formation and lots of natural gas. You’ve got so much going to the Gulf that they have a just a huge amount of good things going on besides having tires off of. GUTFELD There I mean, GUTFELD is a rock star and. [00:13:43][34.8]

Michael Tanner: [00:13:43] His ratings are insane I saw he’s the number one late night host. [00:13:46][2.9]

Stuart Turley: [00:13:47] Oh, absolutely. And I would like to have. GUTFELD and Tyrus and Kat on our podcast if they’re ever listening. [00:13:54][7.2]

Michael Tanner: [00:13:54] So I’m sure they’re listening. I’m sure they’re getting their editors on it right away. [00:13:59][4.2]

Stuart Turley: [00:13:59] Oh, absolutely but, you know, anyway, hats off to Louisiana. Absolutely a positive article. They’ve got $18 billion in projects announced for capture called carbon capture, Renewable biofuels, blue and green production of hydrogen and ammonia. While they’re doing all of the normal oil and gas in the Haynesville wonderful way to do it. [00:14:24][25.5]

Michael Tanner: [00:14:25] So yeah, and they’re they’re taking the I mean, I think the infrastructure and investment in the CCUS really will be the bridge between the old and the new if this is where things are going regardless. I mean, if we’re going to if scope one emissions are going away, CCUS is the quickest way to do that. So I think this is smart overall in terms of a strategic play,. [00:14:45][19.8]

Stuart Turley: [00:14:45] Right. Hey, are you proud of me? I didn’t pick a Debbie Downer or a Karen Downer story. You know, I get you one in there, man. [00:14:53][7.5]

Michael Tanner: [00:14:53] That was great. That was great. [00:14:54][1.1]

Stuart Turley: [00:14:55] Ford loses nearly $60,000 for every electric vehicle sold. Is that a good business sustainable model? [00:15:04][9.2]

Michael Tanner: [00:15:05] No, it doesn’t add up. I mean. [00:15:07][1.6]

Stuart Turley: [00:15:07] I’m I, I was like the carmaker was on a roll at the time. Let’s see here. It was planning on starting a production of their F-150 Lightning, the electric version of the iconic best selling 150. You and I have already talked about this. Let me get into the losses here. [00:15:28][20.9]

Stuart Turley: [00:15:29] It appears that the Ford Model E recorded a loss before interest and taxes of 700 million. This is a hundred million more than fourth quarter of 2022. The margins are also in the red the Ebbed earnings before interest and taxes, which allows investors to assess the true cost of the activity, is -102.1% and this is more than twice as much as fourth quarter and 2022 in which the event margin was -40%. [00:16:09][39.9]

Stuart Turley: [00:16:12] On the revenue side, it amounted to 700 million for the first three months of the year, it’s less than half of the 1.6 billion in revenue generated by the Ford model in the last quarter of 2022. We’re seeing some real trends there, Michael. People are not wanting to buy electric. [00:16:29][16.8]

Michael Tanner: [00:16:30] Yeah, I mean, they they specifically mentioned one of the third headlines here is gas cars are fine. I mean, they’re not necessarily seeing a dip in sales across their not electric fleet, which I think is is interesting and probably feeds into why, you know, really the other two stories you’ve got lined up, which is specifically More and More Americans don’t want electric cars, which has been a theme of this earnings season. [00:16:53][23.5]

Michael Tanner: [00:16:53] Remember, we’ve just gone through 158 companies were released their earnings more are coming on the way. We’re being able to dive in and really, you know, full year of all of these companies doing EVs, been able to sort of look behind the glass and see a little bit into their balance sheet. It’s not good. [00:17:09][15.8]

Stuart Turley: [00:17:10] No end. Siemens lost $1.7 billion in their wind farm division. [00:17:17][7.5]

Michael Tanner: [00:17:18] Yeah. Oh,. [00:17:19][0.6]

Stuart Turley: [00:17:20] Okay. I think and this is just my personal opinion on this before I go to the next story, which is related to this story, and that is the infrastructure bill, actually, I think is cause part of the problem, Michael, from the standpoint that the Biden administration goes, okay, look, tax credits. No tax credits. No, you get you get no tax credits for you. I mean, they’re just like they’re either. [00:17:45][25.2]

Michael Tanner: [00:17:46] The infrastructure bill or the Inflation Reduction Act. [00:17:49][3.3]

Stuart Turley: [00:17:50] Both of them are porkulus. But it was. [00:17:52][1.9]

Michael Tanner: [00:17:52] Yeah, because I was going to say there was the Porkulus bill was before the Inflation Reduction Act. [00:17:56][4.4]

Stuart Turley: [00:17:57] The Inflation Reduction Act had the big tax savings in the car. [00:18:00][3.5]

Michael Tanner: [00:18:00] And was it the it wasn’t the Porkulus bill is what it was it’s dubbed now, but wasn’t it called like build back better or oh yeah, there was some weird phrase. [00:18:09][8.3]

Stuart Turley: [00:18:10] You know, you just can’t buy this kind of entertainment next story here, man. More and more Americans don’t want electric cars. Battery powered cars seem like the next best thing, but growing Americans aren’t ready to give up internal combustion. We live in too big of an area. Michael, I. I travel from state to state. [00:18:29][19.6]

Stuart Turley: [00:18:30] Top line metrics on overall EV market share availability affordability have been on a long term upward trend, the market research firm said. But beneath those headline numbers, we are starting to see some consumer behaviors that suggest a possible bifurcation of the automotive marketplace. [00:18:51][21.2]

Stuart Turley: [00:18:52] Let me put it to you this way People are going to be able to have transportation in everywhere but California and New York. If you want to live and own a car, you can be anywhere in the U.S. except in those cities or even Chicago. I mean, that’s just the way that they’re planning on doing it, Michael. [00:19:10][18.2]

Michael Tanner: [00:19:11] Yeah, I think there’s there’s a few hurdles specifically on like the user acceptance side that I think this article points out. One, respondents in this survey were very concerned about their performance in extreme temperatures. I think that’s the first thing. Like, you know, no one in Colorado is. People in Colorado, yes, they have a Tesla, but they’re not taking it to the mountains. [00:19:32][21.1]

Stuart Turley: [00:19:33] No. And that’s their second car. [00:19:34][1.1]

Michael Tanner: [00:19:35] Yes, exactly. It’s like EVs or people’s second car then when the discussion shifts from second car to primary car, you may be have you might have me, but I that’s. But that’s a long way away is an interesting thing. [00:19:48][13.1]

Michael Tanner: [00:19:48] Obviously, the majority of boomers and boomers aren’t considering EVs that’s clear by these stats. This is interesting. 33% of Gen Z told this survey that they were either somewhat unlikely or very unlikely to be that’s not an insignificant portion of the population, you get no less. [00:20:06][18.1]

Stuart Turley: [00:20:07] I was surprised by that number. But I’ll tell you what. I mean, you sit back and take a look at. Why? Because I can buy a $15,000 used car and be just as happy. And think about the difference between that that buys a lot of gas, $80,000, buys a lot of gasoline. [00:20:24][16.9]

Michael Tanner: [00:20:25] Yeah. I mean, me and you have talked about this. It would be fun to get corporate podcast Teslas, but that’s a second vehicle that goes back to your original comment. It’s a second vehicle in most applications. [00:20:36][10.9]

Michael Tanner: [00:20:36] There are very few applications, in my opinion. Unless you live in like a dry climate, like cow, like Southern California and you don’t necessarily have a long commute is going to probably be you could be your primary car, the vast majority of Americans, it can happen. [00:20:50][13.3]

Michael Tanner: [00:20:50] As always, guys, we appreciate you tuning in and sticking with us each and every week. You guys are definitely the backbone of this show. For Stuart Turley, I’m Michael Tanner. Guys, we will see you Monday stay strong this weekend. [00:20:50][0.0]