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Speaker 1: Global Business News twenty four hours a day. If Bloomberg

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Speaker 1: He's a Bloomberg Business Flash and I'm Karen Moscow. This

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Speaker 1: updates Rosty you bi sector spider ets while by a

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Speaker 1: single stock, when you can invest in the entire sector,

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Speaker 1: visits sector spd r s dot com are called one

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Speaker 1: six six sector et F. Startwood Hotels and Resorts Worldwide,

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Speaker 1: which is being bought by Marriott International, received a separate

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Speaker 1: unsolicited takeover proposal from a group of companies led by

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Speaker 1: n Bang Insurance Groups. Starwood is up more than eight

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Speaker 1: percent this morning. In Apollo Global Management agree to buy

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Speaker 1: Grosser the fresh Market for about one point four billion

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Speaker 1: dollars in cash. Fresh Market up more than twenty three percent.

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Speaker 1: U S Dock Index Future is lower. SNP Emity Future

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Speaker 1: is down five points down, EMNI Futures down twenty six,

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Speaker 1: NAS Documni Futures down ten. The Acts in Germany's up

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Speaker 1: one point four percent ten. Your Treasury up to thirty

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Speaker 1: seconds he at one P nine Max screw to aild

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Speaker 1: down two point six per center not cents to thirty

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Speaker 1: seven fifty two A barrel coms Gold is down three

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Speaker 1: tents per cent or three dollars thirty cents to twelve

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Speaker 1: fifty six ten and ounce the euro a dollar eleven

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Speaker 1: o nine the end one thirteen point six four. And

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Speaker 1: that's a Bloomberg business flash. Tom and Mike Karon Mosco,

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Speaker 1: thank you very much. We're talking with Paul Sanky, senior

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Speaker 1: Oil and Guess analyst and Will Research, and we talked

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Speaker 1: before the break about the fact there may be a

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Speaker 1: bottom in now for oil prices, and that is leading

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Speaker 1: you to put out some notes that suggest maybe it

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Speaker 1: is time to start looking at oil uh stocks again.

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Speaker 1: And your advice seems to be go big or go

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Speaker 1: home at this point. Well, we've got the idea that

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Speaker 1: the very biggest oils maybe into a positive cycle. And

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Speaker 1: I'm talking about Exxon and Chevron particularly here, but such

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Speaker 1: an extent phillips um. The idea is, over the past

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Speaker 1: five years, these companies really struggled with growth, struggled with

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Speaker 1: very high costs and high spending, and also you know,

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Speaker 1: since she struggled to access to to new resources governments.

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Speaker 1: But we're making so much money at a hundred dollars

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Speaker 1: and what we've got going forward from here now is

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Speaker 1: a is a very aggressive capital expenditure program from the

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Speaker 1: past five years has being has being significantly reduced, but

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Speaker 1: the growth that they got from that lagging capital expenditure

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Speaker 1: is still coming through. So what we've got, unlike the

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Speaker 1: previous five years, is rising growth and falling capex and

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Speaker 1: by extension, rising returns. And that's the essence of the

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Speaker 1: bull argument that we put together for Chevron Texico when

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Speaker 1: we upgraded it last week. Paul, are they forever changed?

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Speaker 1: What was the lesson learned on? I give them great credit.

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Speaker 1: And this goes back to your work at Deutsche Bank

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Speaker 1: with Adam Saminski, where the big oil companies never got

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Speaker 1: carried away with a hundred dollars of barrel. But what

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Speaker 1: is their tone? Is there a new humility among big oil? Well? Yes,

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Speaker 1: actually that word did come up at the Chevron analyst meeting,

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Speaker 1: and I was impressed that the CEO was using it,

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Speaker 1: obviously in a I'm not to judge the man, I'm

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Speaker 1: judging the corporation it And you know, having said that,

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Speaker 1: I do believe that at the top of the cycle

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Speaker 1: they did get carried away. The Chevron's capex reached forty

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Speaker 1: billion dollars a year um and they guided that they

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Speaker 1: would remain that elevated, and that was really just far

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Speaker 1: too much money. The company's also, having spent all that money, did,

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Speaker 1: as I said, failed to grow. Chevron's major projects are

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Speaker 1: only just now starting up exactly at the wrong moment

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Speaker 1: from an price point of view. But as I said,

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Speaker 1: if we look at it on a longer term basis,

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Speaker 1: I do think they're now into a much more positive cycle,

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Speaker 1: and I do think that that humility that you reference

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Speaker 1: will keep them from greatly ramping up spending again even

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Speaker 1: as the old price begins to rise again. Here as

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Speaker 1: we talked about over the next three years, they are

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Speaker 1: you said, just coming online with major projects. How much

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Speaker 1: is that going to add to the amount of oil

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Speaker 1: out there? And can we back off all one in

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Speaker 1: certain cases, Yes, there's going to be tens of thousands

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Speaker 1: of additional barrels of oil just coming out of the

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Speaker 1: partition neutral zone between Qwait and Saudi Arabia over the

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Speaker 1: course of summer. A lot of what they're producing in

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Speaker 1: terms of growth at Chevron is liquid natural gas, and

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Speaker 1: that market is also in glut so the additional volume

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Speaker 1: is definitely not needed. And what we really need to

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Speaker 1: see here is a correction and overall global supply, which

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Speaker 1: essentially we're getting from the lowered rig count in the US.

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Speaker 1: That's the first mechanism, but we're also looking at the

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Speaker 1: clients beginning in Russia, in places like Kazakhstan, Brazil will

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Speaker 1: grow a lot less and so on. So globally we

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Speaker 1: are seeing a correction chev on the next and I

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Speaker 1: think can work into that market share opportunity. Where's the

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Speaker 1: terminal value? I mean, I know you and Mike talked

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Speaker 1: earlier about oil bottom or that. Is there a number

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Speaker 1: out there or are you just throw on the towel

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Speaker 1: on that. That's a great question. We think, as as

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Speaker 1: I've said many times, that this is the end of

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Speaker 1: the oil age in the twenty one century. So the

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Speaker 1: twentieth century was the age of oil. The twenty one

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Speaker 1: will be the age of electricity. But this is obviously

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Speaker 1: not something that you you switched clip clicker switch on.

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Speaker 1: It will take thirty years for that to through. If

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Speaker 1: if we are in the end of the oil age,

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Speaker 1: and as I said, if if demand doesn't respond to

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Speaker 1: low prices, were in the end of the oil age,

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Speaker 1: by definition the cycle has ended. Then exactly as the highlight,

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Speaker 1: there's no terminal value, and we're very worried about that.

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Speaker 1: The good news for all valuation is over the next

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Speaker 1: ten years we have seen a demand response to low prices.

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Speaker 1: We have seen very significant increases in sales of gasoline

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Speaker 1: driven cars and trucks in the US, and so I

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Speaker 1: believe we have one final cycle. If you want to

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Speaker 1: look twenty thirty years, I think possibly the terminal value

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Speaker 1: could be zero. When you talk about the majors, the

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Speaker 1: big ones, even with the problems they have in the

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Speaker 1: most recent quarter, Excellent, for example, has one point billion

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Speaker 1: dollars in free cash flow. If they're not going to

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Speaker 1: be ramping up um their capital spending, what are they

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Speaker 1: gonna do with the cash? Well over time, Again, we

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Speaker 1: think the free cash flow is certainly in the case

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Speaker 1: of Shovel the next on the balance sheets are still

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Speaker 1: in good shape, so we do think it will probably

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Speaker 1: go back to buy back and certainly we've we've said

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Speaker 1: that we will upgrade Chevron on the basis that we

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Speaker 1: don't see any threat to its dividend now, um we're

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Speaker 1: still expecting. We think Russia, the loss of Russia is

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Speaker 1: going to force Exon into making a big deal. The

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Speaker 1: problem is they're the only big buyer and the market

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Speaker 1: knows they're coming. So everything that's worth buying from an

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Speaker 1: operational point of view for for Excen is very aggressively

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Speaker 1: priced and they haven't been able to see something that

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Speaker 1: they find to be attractive in the value. But we

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Speaker 1: think they've really got to do something um so unlike Chevron,

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Speaker 1: where we don't see the need for them to deal,

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Speaker 1: and we do think you could get back into a

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Speaker 1: situation of rising dividend and buy back. For Excellon, we

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Speaker 1: see a deal is necessary and we're underweight that one.

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Speaker 1: We're under perform on that stop. By the way, some

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Speaker 1: for instances on what exim might be looking at Permian.

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Speaker 1: There's no question at the number one all field in

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Speaker 1: the world today, the number one will play in the

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Speaker 1: world today is the Permian in Texas, right in their backyard,

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Speaker 1: multiple s backs and zones there, so an almost unlimited

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Speaker 1: upside um. You know. The new technology that we've seen

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Speaker 1: here has made the break even to come all the

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Speaker 1: way down into the twenties twenty dollar barrel type range.

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Speaker 1: And as I said, it's in their own backyard. That's

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Speaker 1: second tired of dealing with what they had to deal

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Speaker 1: with in places like Russia. So you might ill deeal

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Speaker 1: with wherever the premier involve to get the map out

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Speaker 1: and look at that help me with peak oil. Then

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Speaker 1: you mentioned new technology which completely redefined decertitude of peak oil.

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Speaker 1: What's the new peak? I mean from from a hydrocarbon

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Speaker 1: engineering standpoint, what's the new peak? Peak technology? Peak demand?

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Speaker 1: That's the threat. I mean you can see in the

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Speaker 1: markets pricing Tesla that ultimately the way we drive, which

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Speaker 1: is Americans I think drive less than forty miles a day,

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Speaker 1: were sitting in congested urban space driving. We should be

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Speaker 1: all driving electric cars. There's no doubt about that. If

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Speaker 1: you want to drive to California from New York, you

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Speaker 1: want a gasoline car. But almost no one's doing that.

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Speaker 1: So over the next fifty twenty years, I think the

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Speaker 1: penetration of electric cars is going to be enormous. And

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Speaker 1: that's of global oil demand is basically transport. Then how

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Speaker 1: can you be institutionally long oil. It's like you can

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Speaker 1: be in it and you know, but then five or

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Speaker 1: ten years and now you've got to get out. I think, well,

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Speaker 1: I think on a thirty if you you want and

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Speaker 1: I think what you'll see is that if you look

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Speaker 1: at the multiple of test leversus the multiple of exxs,

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Speaker 1: and you've got your answer right there. I think over

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Speaker 1: the next five to ten years there is a there

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Speaker 1: is another peak cycle coming and that's what you're playing

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Speaker 1: for right here, in my view. Interesting. In the meantime,

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Speaker 1: Um Bloomberg government has a no doubt, Uh, this morning,

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Speaker 1: Congress is going to be looking in the Administration will

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Speaker 1: be looking at UM the what's the administration releasing the

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Speaker 1: next version of its um offshore releasing proposals Virginia's coastline.

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Speaker 1: I guess is the issue? Uh, do people care anymore?

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Speaker 1: Do people bid for these things? Is something you bid for,

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Speaker 1: put in your pocket but don't explore. It would have

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Speaker 1: been a big deal under the drill Baby drill days,

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Speaker 1: but nobody wants us to drill anymore. Yeah. Right. This

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Speaker 1: is one of the reasons we can firmly believe that

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Speaker 1: oil ists locks into a boom and bus cycle. Essentially,

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Speaker 1: there's a natural cycle. Higher prices give give less demand

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Speaker 1: and more supply. But there's a there's a plus g here,

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Speaker 1: which is not growth. That's the impact of government. It's

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Speaker 1: a big g and the government always shows up, but

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Speaker 1: exactly the wrong moment. What we should you know, absolutely,

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Speaker 1: opening up off shore leases to expiration today is, as

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Speaker 1: you say, is ludicrously irrelevant. What they should be doing

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Speaker 1: is putting in a gasoline tax. But of course no

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Speaker 1: one can do that. But obviously, with gasoline prices as

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Speaker 1: low as they are now and the opportunity to stop

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Speaker 1: the price going any lower, let's say you put a

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Speaker 1: floor in a two or two fifty a gallon, and

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Speaker 1: you really make this move that would be very beneficial

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Speaker 1: to towards electric cars, very valuable past. Thank you, Thank

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Speaker 1: you so much. What a what a briefing that was, Mike,

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Speaker 1: the Permian Basin. I'll try to figure out a map

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Speaker 1: and can get out on social is Central Texas to

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Speaker 1: the left, so it's over in West Texas, the Midland

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Speaker 1: Basin and things we know, almost down to the Rio

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Speaker 1: grand and then a little bit of the lower corner

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Speaker 1: of New Mexico. I did I describe that? Okay, it

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Speaker 1: seems to be. Yeah, the Permian Basin. I think Paul

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Speaker 1: had a great idea. Nobody's driving New York California. We

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Speaker 1: can take surveillance on the road, and we can listen

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Speaker 1: to it on Channel one Serious Sex hum all the

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Speaker 1: way from New York do Permian Permian basin. Yeah, from

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Speaker 1: eleven three oh in New York City to San Francisco

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Speaker 1: Bay Area coast to coast. We call that Bloomber twelve Boston,

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Speaker 1: bloom FM in Washington, good morning, and yes after the

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Speaker 1: West Coast Bloomberg nine sixty San Francisco, and that they are,

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Speaker 1: and we're thrilled you're listening nationwide across Canada on Serious Sex.

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Speaker 1: I'm show on one nineteen as well. Paul Sanky, I'll

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Speaker 1: look for that on the Bloomberg terminal. That interview deserves

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Speaker 1: to be really listened to, is what I would suggest

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Speaker 1: you can do that. iTunes has all of our radio interviews.

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Speaker 1: That's all you need to know. iTunes Bloomberg Surveillance, our podcast.

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Speaker 1: They're free. Good morning, h