Finally!  We are now progressing nicely in the consolidation phase of oil and gas companies and, although many are 18 months late, it’s not insignificant that they are occurring now.  2021 budgets are almost complete and I can only imagine the faces of the management teams when the VP of Planning gave them the news.  Here’s how it likely went:

Planning:  “Ummmm….. we’ve finished all the scenarios and forecasting and forced ranking and management wedge creation…. do you, ummm, want to see it or should we just hit print?”

Big Wig: “Of course I want to see it!  I’m the CEO of this company and I need to tell the market how incredible our performance will be next year.  We will focus on capital efficiency and free cash flow generation and debt repayment and the markets will love us and our investors will come back!”  (looks at budget output).

“What is this????  This can’t be?  Our debt ratios are 60% worse, our production is 40% lower, our G&A, interest and OPEX per BOE are up 30%!  I can’t tell the market this!  They will hate us.”

Planning (under their breath): “You don’t even want to know what the YE20 SEC price will be for YE reserves this year…. all our PUD’s will be wiped out.”

Planning (out loud): “Maybe we should consider those mergers I told you about 18 months ago… I have a binder called “#hottakeoftheday” that outlines all the synergies….”

So, yeah, that’s happening in empty office buildings all around Denver, Houston, Midland and Calgary and, from north of the border, we got a pretty significant announcement on Sunday when Cenovus and Husky announced they were merging.  With it, it brings an end to the era of Li Ka-shing, who was the largest shareholder in Husky at ~70%, and while he will continue on with ~27% of the combined company, the Chinese-owned Canadian firm experiment is over.  If you are on Twitter, here’s a great thread that highlights some of the points, and rather outline them here… I won’t recreate the wheel.

South of the border, Contango and Mid-Con announced that they will be merging and concurrently, Contango has a private placement to raise $40 million for paying down debt outstanding and other general purposes.  G&A is the driver, and Contango raising equity on the catalyst is always smart to reduce debt because debt is the silent killer.

In closing, I would be remiss not to close the note with a concern that I have that, with each day, grows stronger.  The media are not unbiased.  At all. “THEY” are pushing an agenda that helps their business and their business is selling ads and data.  Whether it’s climate change, the election, wars, or what Biden did or didn’t say about frac’ing over the last year, the deplatforming, “fact checking” and the blatent use of algorithms to push a narrative are being done not for your own good, but for a profit motive. A business exists to make money, and they will let employees wear “Black Lives Matter” shirts or jerseys if they think on the net, it will grow profitability (or prevent decline in profitability).  Keep that in mind whenever you open your browser.  And so, when you open Google to research something… you may expect that the top 5 hits should be a balanced subset of answers to your question and from where you can start your own research but they are not.  They are designed with SEO (search engine optimization), cookies and data mining to show you what you want to see so that ad that appears beside it for the golf clubs you’ve been searching shows up.

I am doing my best to unplug from the internet and with my time, I am reading more books, many of whom were written by guests of the show.  “Inconvenient Facts”, “Digital Cathedrals”, “Saudi, Inc” (Ellen Wald is coming on this week) and for fun “1984”.

From here on out, until there is a change in regulations, you need to question everything that is fed to you through your “Smart” phone and web browser.  COVID analysis, views of the stock market (and specifically how a “Blue Wave” would be good for prices…), and Climate Change Disaster-ism are all pushed to sell ads.  Use your head.  The truth is out there, it’s just harder to find than it was 5 years ago.