Experts Dismiss Kamala’s Plan

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Michael Tanner: [00:00:10] What’s going on, everybody? Welcome into the Thursday, September 12th, 2024, edition of the Daily Energy News. Beat Stand up. Here are today’s top headlines. First up, oil markets are ignoring imminent production cuts by three OPEC plus members. Interesting. Little bit different than what I think a lot of people are hearing out there. Next up, layoffs loom as Volkswagen fights for survival. Sad to see them go. Next up, energy experts say Kamala’s energy plan is, quote, gibberish designed to muddy a record. Interesting. And then finally in the news segment, Putin calls for sanctions. Revenge threatens to cap uranium exports. Interesting little, little twist that Putin wants to do there. Straw then toss over to me. I will quickly cover what happened in the overall market, specifically oil and gas. That is a nice little price bump. We will then check out what the EIA did with a pretty surprising inventory build relative to what I think the API was expecting yesterday. And then we have two very interesting M&A deals that happened. Apache went ahead and announced the $950 million asset sale of its non-core properties in the Permian Basin to an undisclosed buyer. Super interesting. Have been able to figure out who they are yet. And then finally, Viper Energy, which is the mineral and royalties subsidiary of Diamondback Energy, announced another acquisition. So we will dive into all that. And a bag of chips guys. As always, I am Michael Tanner, joined by Stuart Turley. Where do you want to begin with? [00:01:36][85.6]

Stuart Turley: [00:01:36] Our buddies there where the oil markets are ignoring imminent production cuts by three OPEC plus members. Michael, I don’t know how to price out oil anymore. I’ll tell you right now, there’s three big bullet points here. It’s doubtful whether or not the Mexico shutdowns will generate enough momentum to fully reverse the month’s long oil sell off. Number two, back in July, Russia, Iraq and Kazakhstan submitted their compensation plans to the OPEC secretariat for overproduced crude volumes for the first six months of 2024. According to OPEC, the entire overproduced volumes will be fully compensated for over the next 15 months through September of 2025. Wow. [00:02:24][48.3]

Michael Tanner: [00:02:25] Yeah, I mean, the first question I have to you is, do we actually think they’re going to abide by these quote unquote, compensation plans? I don’t. [00:02:33][8.1]

Stuart Turley: [00:02:33] Think so. And then here’s where I just this is something we have to report because it’s part of what we got to try to figure out in saying, wait a minute, where’s the oil price going? And I have even less idea than I did 15 minutes ago. [00:02:50][16.7]

Michael Tanner: [00:02:50] Yeah, well, I mean, if we knew where oil prices were going on, trust me, we wouldn’t be sitting here. We’d be chillin on Necker Island next to Richard Branson. I do think it’s it’s interesting what OPEC Plus is is kind of putting out there. Again, I don’t think the market is missing this. I just think the market is looking beyond what OPEC is doing. It is looking at a possible oil supply glut. That’s coming up now. We can agree to disagree on if we actually think that glut is coming, but they obviously think it’s coming. And we saw a little bit of a bump in prices today. We’ll cover that towards the end. But, you know, things are choppy out there. [00:03:25][34.6]

Stuart Turley: [00:03:25] I think it’s more that people are afraid of a true global recession coming around the corner. That’s what I think people are afraid of right now in the markets. But it’s a personal opinion. [00:03:36][11.0]

Michael Tanner: [00:03:37] Yeah. So you’re talking Russia will be paying back about 480,000 barrels a day, theoretically, Iraq, 1.1 million barrels per day, which I think is is kind of crazy. I think Kazakhstan about 620,000. So, I mean, that’s basically to be a little over 2 million. [00:03:53][16.1]

Stuart Turley: [00:03:54] Barrels per day, a lot. [00:03:55][1.1]

Michael Tanner: [00:03:55] Of barrels a day that’s going to get cut. Hey, you never know. [00:03:57][2.4]

Stuart Turley: [00:03:58] Yeah, but you see, you still when you calculate out 700 of the ghostly tankers, that’s a lot you can hide now. Who knows? All right, let’s go to Volkswagen. Layoffs loom as Volkswagen fights for survival. Volkswagen has canceled a three decade old job security agreements. How would you like to be the manager of that contract? Retro. Big retro setting the potential for layoffs. It’s part of the Volkswagen’s efforts to reduce costs among struggling Germany economy and challenging transition to electric vehicles. Their main target is underperforming namesake passenger car brand, whose profit margins are getting squeezed amid sputtering transition to employees and consumer spending slowdown. There’s that recession kind of thing in there. Carmakers in Europe are also struggling to compete with Tesla and new entrants from China by by day and also selling cars at dumping price. So it’s a tough market out there and they brought it on themselves in a lot of ways. [00:05:08][69.8]

Michael Tanner: [00:05:08] They did. I mean, they’ve had troubles going back years now, especially with the stuff they got in trouble with the faking of the emission standards. I mean, come on, you just can’t get caught doing that. I think, you know, unfortunately, VW has it was once an iconic brand. I don’t think is the same thing, though. I mean, they’re having a tough time. I doubt they’re going be able to pull through on this one. [00:05:28][19.8]

Stuart Turley: [00:05:28] I don’t know if they’re going to survive as a company. I mean, look at HP. HP is a fraction of what they used to be, but they’re not going to be the CW in sets the standard for Toyota. Toyota is going places with their hybrid hybrid technology. I would be put in truck hybrid technology, the first one with a diesel hybrid truck when I guarantee it. [00:05:57][29.0]

Michael Tanner: [00:05:58] Yeah, no kidding. All right. What’s next? [00:05:59][1.6]

Stuart Turley: [00:06:00] All right. English experts say Kamala’s energy plan is gibberish designed to muddy it. That’s an interesting title. And you sit back and kind of go. That came from The Daily Caller. Now, last night I enjoyed my gathering after the debate with Kamala and President Trump. I thought it was pretty interesting to see the fall out. I think we were dead on right in our analyzation of the debate last night because it was pretty much everybody confirmed what we we we did say. So even the three of us in a box were laughing about it. I think we were right. The energy section of our energy page does not include a single specific policy position and instead features a heavy dose of vague euphemistic language meaning to disguise her views on energy and environmental issues as moderate as they truly are. Energy experts told the DNC. And here’s what gets me, is last night when she was in the debate, she absolutely lied. They fact checked President Trump five times during those five times. You can tell that ABC did, in fact, work with Kamala on this. I hope they get a big black eye, Michael. [00:07:19][79.7]

Michael Tanner: [00:07:20] Yeah, I mean, I think we we covered a lot of the debate in yesterday. You know, if you haven’t had a chance to listen to it, please, please go back and listen to that. [00:07:27][7.3]

Stuart Turley: [00:07:27] I appreciate our team for jumping. [00:07:29][1.2]

Michael Tanner: [00:07:29] In on that. Yes, we do. I find it super interesting that the flip flopping hasn’t necessarily gotten the attention, I think, in the in the mainstream as it really has in the oil business. I think everybody in the oil business is really wait and see what’s going to happen. And, you know, my stance is I don’t think she’s going to actually ban fracking. I doubt she’ll actually do it. I think she’s. Yes, I doubt it. [00:07:51][21.8]

Stuart Turley: [00:07:51] I disagree. And it’s because she did They did. They sabotaged Conoco Phillips in Alaska and slashed it to a quarter of the area. In the area. They did. They just decimated that entire drilling project. Then when she signed in the bill, like I said last night, she signed the bill, the inflation, the port goes bill, the inflation reduction. They didn’t have a single lease. This is the first year they’ve not done a leaf. Even though she says she’s got them approved, she’s held them up in a quiet way. There’s no leases out there. [00:08:30][38.6]

Michael Tanner: [00:08:31] There is a distinction between not approving leases and not and banning fracking. There’s a difference. You have to admit that. But the sentiment, I think, remains remains the same. They’re clearly anti oil and gas. You know, the sleight of hand we saw last night was the whole, well, we got to get off foreign oil. It’s like, wow, I kind of agree with that, unfortunately. But I don’t know that that seems like more of a talking point than I do think of policy. I think the problem is if if if we take what she says at face value, well, she ain’t going to ban fracking. But if we’re going to read into her language a little bit, well, that that leaves room for us to be read into Trump’s language and not necessarily believe the things that he says. So the problem is what you assume on one side, you got to assume on the other, because we all got to be working apples to apples here. [00:09:15][44.1]

Stuart Turley: [00:09:15] Right. And when they started to fact check Trump several times, it really irritated me because they turned around. Their fact checking was wrong. [00:09:23][7.4]

Michael Tanner: [00:09:23] So I think the difference I mean, we’re not a little sidetracked, but if you’re Trump, you’ve got to know that. You’ve got to know. You have to know coming into that it’s three on one. And I think the problem is he let it affect him a little bit more than he should because he should have gone into it knowing it’s going to be three on one. Who cares what the question is? Who cares what the fact check is? Nail your points and don’t take the you know, she talked about a lot of bait that Trump took, you know, talking about the rallies, talking about, you know, all the other stuff. You know, you know, the best thing he’s got going for him is immigration. And every time immigration was brought up, she threw out some red meat and Trump jumped on it. So instead of talking about immigration, Trump’s talking about people at his rallies. Who cares? We all know Trump’s rallies are bigger. You can just see it on. But no, he’s got to defend himself. And also, I don’t think it was a great debate from Trump. You know, he comes out and says he’s not going to do another one. I would think he should do another one, if only because I don’t think Kimmel is going to do any better than another one. And I think Trump is going to do a lot better. [00:10:24][60.8]

Stuart Turley: [00:10:24] I saw a bunch of people on on air saying that her ear rings or microphones and I’m like, okay, wait a minute. She was working. And I told you that last night, even before saying that, that she worked with the ABC team in collusion beforehand. You can tell by body language. As an investigator, I recognized their body language and I recognize their conversation. They work together, period. I will stand on that hill. I think she had somebody in her ear talking to her and that’s why she didn’t cackle. I said that last night. Why did she not cackle? It’s because she had somebody telling her what to say. [00:11:04][39.9]

Michael Tanner: [00:11:05] Detectives do on the case. All right. Let’s talk about your favorite by your favorite buddy poop. [00:11:09][4.0]

Stuart Turley: [00:11:09] Let me call a vote in here for some entertainment curtain calls. Sanction for revenge. Threatens to cap uranium exports. Michael, let me t the importance of this article up just a little bit. We still buy 20% of our uranium from. From Russia. Wild. Isn’t that funny? I mean, we can’t get a mine. We have all the uranium you possibly can do, but our government won’t let us. Russia is the leader. This is a quote out of it. Putin said Russia is a leader. A Russia is a leader in strategic raw materials like uranium, titanium and nickel. Putin said during a televised meeting with government. Since Western sanctions limit exports on some Russian companies like diamonds. Maybe we should also think about restrictions, he said, adding such limits that should not harm Russia. He can stop selling the U.S. 20% of their uranium, and it would mean absolutely nothing to his budget. [00:12:09][59.7]

Michael Tanner: [00:12:10] Yeah, no, I mean, again, the weaponization of the critical minerals is and strategic minerals is really what I should say to be specific, is. I mean, you know, here’s the thing. Whether you like it or not, clean energy, if we’re going to move to a clean energy economy, nuclear has to play a big role in it. The big issue is we don’t have any of the minerals, just like EVs. U.S. doesn’t have any minerals to do this stuff. So you’ve got to either play nice around the world or be stuck with the short end of the stick. [00:12:38][27.8]

Stuart Turley: [00:12:38] It takes 20 years to get a mine on line and they just can’t ship. Can. Excuse me. This is a family show and I apologize. They just canned a uranium mine. Yeah, absolutely. [00:12:49][11.4]

Michael Tanner: [00:12:51] All right. You got anything else? [00:12:52][0.9]

Stuart Turley: [00:12:52] No, I’m all worked up. Good. [00:12:55][2.1]

Michael Tanner: [00:12:55] Well, you take a breather here, guys, and we’ll pay the bills real quick. As always, thank you for checking out World’s greatest website. www.Energy News Beat.com the best place for all your energy and oil and gas news. Doing 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. Go ahead and hit that description below for links to the timestamps, links to the articles and check us out on substack. The energy news beat.substack.com again. Also hit us up at invest in Oil.EnergyNewsBeat.com. If you would like to get access to our direct working interest program that we have partnered up with the team over at Pecos Country operating and our friend RT Trevino on that. So that’s invest in oil.energynewsbeat.com. [00:13:41][45.8]

Michael Tanner: [00:13:42] And overall markets do a pretty pretty spicy day from the standpoint of of you know markets were down than they were up crude oil didn’t had itself kind of a pretty wonky day here but we’ll start overall with the markets. They were up about 1.07 percentage points. Nasdaq up two percentage point. Two year, yields up 1.3 percentage points. Ten year yields only about a fourth of a percentage point. Dollar index is basically flat. Bitcoin basically flat, $57,000. Crude oil actually ended the day after opening lower than expected, finished up about 2.3 percentage points, $67.28. Brant oil is only up about fourth of a percentage point 7089. Natural gas up 1.8 percentage points. Our actual contract is pretty flat on the day. So EMP companies not getting any of that price boost, You know, on the on the gas, on the oil price and gas price side, a lot of what’s happening is the shutdowns going on from the Gulf of Mexico and hurricane. What’s this? [00:14:38][56.0]

Stuart Turley: [00:14:38] Hurricanes names to Rita, I guess. [00:14:40][1.8]

Michael Tanner: [00:14:41] I think Rita what it is. Yeah. No. Francine. Francine. A hurricane. Yes, there was a tropical storm. Now it’s a it’s a hurricane. Hurricane Frances shutting down. Yeah, It’s about 49% of natural gas production at about 39% of crude oil production out of the Gulf of Mexico was shut down. So decent amount of production being shut down. [00:15:02][20.8]

Stuart Turley: [00:15:02] Yeah. [00:15:02][0.0]

Michael Tanner: [00:15:03] You know, in and to give you guys an idea that northern Gulf of Mexico is about 15%. Of total U.S. crude oil production is you’re talking about over Are you talking a little bit of like six, 7% of all U.S. now oil and oil production being shut down. So that mostly accounted for what we saw relative to prices. We saw a big drop this morning, mainly due to the fact that we had a pretty wild EIA crude oil inventory number. You know, yesterday the API was you brought out a solo show yesterday. I was a little busy during the afternoon. The API came out and was estimating about a 6.9 million barrel draw or that’s what happened last week. Now all of a sudden we were up 800,000 barrels. That was the print this week relative. The API yesterday said we were supposed to drop about 2.7 million barrels out of the out of the Cushing oil stocks and we only did eight and we actually did an 800,000 barrel builds that actually tanked prices early on in the day. Things rebounded. I mean, if there’s one thing you haven’t figured out and listening to this show, API, crude oil inventories and the EIA crude oil inventories, one, they’re never aligned and two, they’re becoming less and less tied to where prices are going. Yes, we saw a little bit of a price recession, but the main thing that happened was, hey, what’s going on in the Gulf of Mexico with all this shutdown stuff? I think you’re also seeing a little bit of what we talked about in the first segment of the show. OPEC. OPEC’s going to be doing a little bit of they’re calling a buyback program. It’s not really a buyback. It’s what I call a hole back program. Not sure how much that is going to factor into everything. But for our other inventory builds, we did see about a 2.3 million barrel build of gasoline inventories. Production averaged about 9.4 million barrels a day of gasoline production. Distillates, We saw an inventory increase of about 2.3 million barrels with production of about 5.2 million barrels per day. A lot of this was, you know, revised week over week. I think the only other two interest things I saw first up, Apache announced an agreement to sell about $950 million of its non-core properties in the Permian Basin. That was to an undisclosed buyer located in the Central Basin platform, Texas, in New Mexico and Northwest Shale. That represents about a net production of about 21,000 BOE per day, which is about 57% of that is oil. So we’re looking at about 11,000 barrels, which came out to be about $950 million. So what that tells you is there’s a lot of running room on that acreage, and whoever bought it feels like they’re going to be able to take that, take that and drive that number up because you’re talking about 11,000, you know, 12,000 barrels of oil for a basically $1 billion that’s spicy there. That’s a spicy number right there. You could do the math on what that is per barrel of oil. Yikes. You also have to remember, Apache is still integrating their acquisition of Callan, which will increase by about 66,000 barrels of oil per day as it continues to add what they would consider economic unconventional inventory. When you have to say we’re adding economic unconventional inventory, that means that you’re hearing from all of your other counterparties that, hey, you’re adding inventory, but is that inventory even economic? And I think where prices are right now, people are asking that question, hey, great, you’ve got 400 locations. I need them drilling. All you can actually drill any of them might look good on a balance sheet, but does it look actually good when it comes to integrating on a cash flow statement? That remains to be seen. The other deal we saw, Viper Energy, which is the Mineral and royalties subsidiary of Diamondback, announced an acquisition today. They went ahead and bought mineral and royalty interest from Tumbleweed royalty, or in exchange for about $461 million of cash and about 10.1 million Viper units, which comes out to be I don’t know what they said that came out to be. I think it was about 100 and $109 million and it was $109 million you’re talking about is like a five, six, $700 million acquisition ends up being about 3700 net royalty acres and yet about 2500 BOE or barrels of oil per day, which is expected to increase to about 450 barrel or 404,500 BOE per day on a full 2025 year guidance, which only the producing wells and based only the producing wells and some of the drilled and uncompleted wells and remember this acreage. So let’s give it a let’s let’s give it here. This acreage sits on top of Diamondbacks acreage. So, you know, just a little history like not history. There’s a little math lesson here. Minerals, you’re buying minerals, you’re playing two things. You’re playing a price increase. There’s pricing and production. How does production go up if somebody is drilling? So if you buy minerals on acres that, you know, new wells are being drilled, they’re going to be valuable. And Viper being owned by Diamondback has a quote unquote unique insight into Diamondbacks drilling program. Well, of course they do. The management teams the same on both, meaning they know exactly where they’re going to drill in 2025, which allows them to accurately determine the price of minerals. I mean, it’s a great setup. A lot of companies would love to do this, have their own publicly traded mineral company that they can, you know, play around with OPM’s. We like to say other people’s money at. Then know that the minerals you’re buying are going to go up in value because you know the drilling plan, they come out and say it. Viper currently expects the Viper currently expected. We think Diamondback is going to complete roughly 120 to 140 gross locations, which work out to be, you know, about 3.4, 3 to 3 and a half or three and a half to four net net wells, which basically means, you know, is usually how people talk about this. You’ve currently got about 16 rigs running on all the acreage. Eight of them are by ExxonMobil. Only three of them were by Diamondback for about 75% of the acreage in the Midland Basin is operated by Diamondback, with Exxon operating about 400 1400 net royalty acres Diamondback with about 950 royalty acres. I mean, you’ve got about a 1.4 and ROI across 96, completely undeveloped horizontal locations spaced at about 1200 gross acres. That would work out to be about 23.7 net locations. And they’ve got 5.7 net ducks and permits that are sitting there. So again, when you know where you’re going to drill by minerals because that’s where you get that, you’re going to your most amount of money in the first return. So yeah, great. You know, if if you’re a shareholder in Viper, which there’s not many of them, most of them are Diamondback, you know, you, you, you get to take massive advantage of this. You know it’s a pretty great set up, fairly unique in the business. There’s a few different ones at these. But again, knowing where the drilling schedule is coming from is extremely helpful when you’re talking about minerals. So yeah, just a good deal here and we’ll see how it all ends up. It’ll be interesting to see. Going back to the second, the first one I read about, Apache who ends up being the buyer in those Apache assets could be, could be super interesting, but it’s Thursday. Stu. We’ve had a great week. What? Well, what else we got before we close it out? [00:21:52][409.0]

Stuart Turley: [00:21:52] Buckle up. Keep your pets close to you. [00:21:54][1.8]

Michael Tanner: [00:21:54] Keep it. Yeah, yeah, yeah, yeah. Who we running on the show tomorrow? You said Doug Sandridge. [00:21:58][4.2]

Stuart Turley: [00:21:59] Yes, the Exxon Ridge. And he was in Norway. And it was great love talking to people from all over the world and everything else got dark in Norway, but it was great. [00:22:10][10.6]

Michael Tanner: [00:22:10] Absolutely. We love doing Live from Norway. You’ll hear the weekly recap on Saturday. We’ll take Sunday off and then we’ll be back in the chair bright and early Monday morning. But with that guys world, you get out of here, get back to work. Start your Thursday. Appreciate you checking the out World’s greatest podcast energy news beat For Stuart Turley I’m Michael Tanner. We’ll see you Saturday. [00:22:10][0.0][1301.0]

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