Oct
12
2019
Ah, California. It would be easy to pile on
and sing out my fellow dual citizen’s song “Isn’t it Ironic?” but come on- you
expect more from me and quite frankly, so does Alanis.
Such are the ironies
of our modern society- built around the electricity generated from wind, hydro,
solar, nuclear, coal and natural gas. But because generation doesn’t happen
near use, it takes transmission lines to move it on a grid cobbled together
over the last 100 years. (If you want to learn more,...
Oct
11
2019
This week’s series happened to coincide
with two previously arranged speaking engagements and so in an odd swing of
timing, my message of Gloom hit the road. Perhaps my parents said it best last
night: “You are really depressing.”
Look. I want to be
wrong. I want prices to go up; I want balance sheets to be better; I want to
have a happy message to tell people about the future of the industry. But...
This is a balance
sheet crisis and means that a meeting of...
Oct
10
2019
In the introduction to the series on
Monday, I argued that the fall in prices has been a distraction that masked the
real issue- which is balance sheets. Low interest rates on the heels of
the 2008 financial crisis, coupled with historically high commodity prices led
to a huge liquidity infusion into O&G balance sheets. Today, we
examine magnitude of the issue.
With thanks to my
new friend Michael Kelly, CFA, Seaport saved me the effort of manually creating
all the comps for public E&Ps to make...
Oct
09
2019
Hey, Kid, Come Here...I got something for you.
All your peers are doing it- you wanna try? You can pay me later. Wait until
you see what it does to your equity! You’re gonna be so rich!! You know you
want to...
Earnings BEFORE... Interest. We left off yday
with EP: They moved quickly in ‘16, cut capex and generated net positive FCF.
But alas, every positive step was eaten by interest and so the debt remained.
Flashback: in Feb ‘14 when oil was...
Oct
08
2019
Let’s start with my favorite question: is shale a
Ponzi scheme? 100% no. But like the answer you give your doctor when they say
“how many drinks do you have a week?”- the truth may be somewhat different than
you like to believe. (FYI - my doctor friends tell me they multiple the number
you say by 3).
With a b factor of 1.3, you produce approximately
30% of the total reserves in the first 12 months.; The AVG US oil shale well
produces 16...
Oct
07
2019
The origin of the ‘08 financial crisis was
people’s desire to own homes; The CAUSE of the crisis was the debt ON DEBT that
was put there.
Throughout history, when the ability to generate
real returns dry up, bankers get creative. In ‘08, all this origination meant
lots of fees and all the leverage meant higher equity returns (and fees). But
when the music stopped, it almost brought the economy down with it.
In the past 10 months I have focused my attention
on the...
Oct
03
2019
We hosted a forum for 30 really smart,
optimistic and fun technical experts yesterday and I opened the session by
being down right gloomy. Have you ever given a speech where you finished and
said “man- that’s not what I wanted?” Well. That was me yesterday.
What I came to
realize after getting over the regret was a) the people in that room were very
smart and b) without a true paradigm shift, the risk of change can feel high.
But we are there and we...
Oct
02
2019
During my MBA, we did a case study that
asked: what if United and Southwest merged? I asked- who’s the CEO?
“The United guy”. I said “Fire everyone from Southwest.”
The class was up in
arms and I sat back to let the anger wash over me and I smiled. In a way- it
was my first hottake.
But mergers are as
much about culture as they are about assets and United and Southwest have
nothing in common. Pilots pitch in to clean. Turnaround times. Greeting
people. Boarding....
Oct
01
2019
Culture shock aside- the post ‘06 Anadarko
was a better company. The assets were upgraded and thank Goodness, we didn’t
have to drill $hitty Wattenberg wells (tri-fracs of the re-fracs were annoying
enough!). To be honest, Wattenberg was the perfect asset to send people to die.
That is- of course- unless they were sent to midstream! Worst place
ever!!! (Just ask the guys who got shoved there for the IPO)
The company was
flying. All the mistakes of “Reserve Issues Past” (aka Marco Polo) were solved;
new...