1 00:00:00,520 --> 00:00:03,000 Speaker 1: Hi, everyone. What seems like forever ago, when I was 2 00:00:03,040 --> 00:00:05,320 Speaker 1: an energy analyst just starting out, I used to hear 3 00:00:05,320 --> 00:00:08,399 Speaker 1: the term energy security all the time. Maybe it was 4 00:00:08,400 --> 00:00:10,520 Speaker 1: because I was based in Washington, d C. But if 5 00:00:10,560 --> 00:00:12,719 Speaker 1: your policy makers use it constantly to push for an 6 00:00:12,760 --> 00:00:15,360 Speaker 1: all of the above energy approach, so the U S 7 00:00:15,360 --> 00:00:17,400 Speaker 1: would be less relied on other nations for its energy, 8 00:00:17,520 --> 00:00:20,959 Speaker 1: particularly oil. But around two thousand nine that term really 9 00:00:21,000 --> 00:00:24,079 Speaker 1: peaked when shale oil and hydraulic fracturing came into play. 10 00:00:24,600 --> 00:00:26,680 Speaker 1: It changed the game, taking the U S from importer 11 00:00:26,800 --> 00:00:29,520 Speaker 1: to net exporter of oil and gas, and the impacts 12 00:00:29,520 --> 00:00:32,160 Speaker 1: of shale oil reach across all sectors and across the globe. 13 00:00:32,560 --> 00:00:35,680 Speaker 1: Today on the show, we've got Tai Lieu and Anidialinus 14 00:00:35,960 --> 00:00:37,920 Speaker 1: U S oil analysts for ben F. They're going to 15 00:00:37,960 --> 00:00:40,280 Speaker 1: tell us about the state of US shale oil, how 16 00:00:40,320 --> 00:00:43,479 Speaker 1: oil demand rising to pre pandemic levels is impacting prices, 17 00:00:43,760 --> 00:00:45,680 Speaker 1: and how oil producers are dealing with all of it. 18 00:00:45,760 --> 00:00:48,360 Speaker 1: Our discussion is based on report titled U S Sail 19 00:00:48,440 --> 00:00:51,280 Speaker 1: Oil Quarterly Outlook three Q twenty twenty one being if 20 00:00:51,360 --> 00:00:53,000 Speaker 1: users can get this report on beef, go on the 21 00:00:53,040 --> 00:00:56,360 Speaker 1: Bloomberg terminal beanef dot com and Bloomberg Mobile. As a reminder, 22 00:00:56,440 --> 00:00:58,760 Speaker 1: beaneif does not provide investment or strategy advice, and you 23 00:00:58,760 --> 00:01:00,560 Speaker 1: can hear the full disclaimer at the end of the show. 24 00:01:00,880 --> 00:01:03,240 Speaker 1: I'm Mark Taylor and you're listening to switch on to 25 00:01:03,320 --> 00:01:13,760 Speaker 1: be an f podcast. Ti Anna, Thanks for joining. So 26 00:01:13,800 --> 00:01:17,200 Speaker 1: we've brought you in to talk about US shale oil today. Ana, 27 00:01:17,280 --> 00:01:18,760 Speaker 1: can you start us off and tell us a bit 28 00:01:18,880 --> 00:01:22,080 Speaker 1: why we're talking about US shale. So, US shale oil 29 00:01:22,959 --> 00:01:26,759 Speaker 1: is a really interesting part of the global supply picture 30 00:01:26,880 --> 00:01:29,000 Speaker 1: for oil, and if you think about it, it's quite 31 00:01:29,040 --> 00:01:30,840 Speaker 1: different from a lot of the rest of the oil 32 00:01:30,880 --> 00:01:33,600 Speaker 1: production that we have in the market. Especially for people 33 00:01:33,600 --> 00:01:37,280 Speaker 1: who don't usually think about oil too much. You usually 34 00:01:37,280 --> 00:01:40,840 Speaker 1: probably picture things like the Beverly Hillbillies when you're envisioning 35 00:01:40,840 --> 00:01:43,320 Speaker 1: oil production. I think my generation we tend to think 36 00:01:43,319 --> 00:01:45,839 Speaker 1: about armageddon, you know, when they're on the offshore rig 37 00:01:45,880 --> 00:01:49,480 Speaker 1: and Harry Stamper hits the uh, the gusher and all 38 00:01:49,480 --> 00:01:52,680 Speaker 1: the oil comes out the top. Yeah. Yeah, well, the 39 00:01:52,760 --> 00:01:55,600 Speaker 1: same same idea, right. You kind of have this hole 40 00:01:55,640 --> 00:01:58,880 Speaker 1: that you've drilled, all the oil flows out just very easily. 41 00:01:59,360 --> 00:02:03,560 Speaker 1: That's oil production. Shale is quite different. Shale oil is 42 00:02:03,800 --> 00:02:07,400 Speaker 1: a fairly newer technology that has come onto the market. 43 00:02:07,600 --> 00:02:09,840 Speaker 1: It was developed actually, you know, sort of by the 44 00:02:09,960 --> 00:02:12,760 Speaker 1: US government and stuff funded by them for decades, but 45 00:02:12,800 --> 00:02:16,520 Speaker 1: it really came onto the scene around early two thousand's 46 00:02:16,560 --> 00:02:19,720 Speaker 1: and in this you extract oil from solid rock, from 47 00:02:19,760 --> 00:02:22,720 Speaker 1: shale rock, it's a tight oil supply. In order to 48 00:02:22,760 --> 00:02:25,520 Speaker 1: do this, you have to use technologies like hydraulic fracturing 49 00:02:25,560 --> 00:02:28,239 Speaker 1: and injection of fluids to help open some of these 50 00:02:28,280 --> 00:02:30,760 Speaker 1: pores that hold oil molecules and allow it to flow 51 00:02:30,840 --> 00:02:33,760 Speaker 1: to the surface. So it has a very different production 52 00:02:33,840 --> 00:02:37,800 Speaker 1: profile than a conventional well. But the benefit is it 53 00:02:37,880 --> 00:02:41,440 Speaker 1: actually takes much less time to get the well to production, 54 00:02:41,639 --> 00:02:44,400 Speaker 1: and the wells don't last nearly as long as conventional wells, 55 00:02:44,800 --> 00:02:49,080 Speaker 1: which actually makes them quite responsive. Anyways, shale is something 56 00:02:49,080 --> 00:02:50,880 Speaker 1: that was developed, as I mentioned, in the early two 57 00:02:50,919 --> 00:02:54,000 Speaker 1: thousands in the US and really started booming because there's 58 00:02:54,040 --> 00:02:58,240 Speaker 1: actually a lot of opportunity for shale in across the US, 59 00:02:58,320 --> 00:03:01,360 Speaker 1: and so starting around two thousand eight or so, we 60 00:03:01,440 --> 00:03:04,400 Speaker 1: saw production coming online and then we just over the 61 00:03:04,440 --> 00:03:08,160 Speaker 1: past few decades have seen phenomenal growth in this sector. 62 00:03:08,200 --> 00:03:10,760 Speaker 1: I mean, especially you look back just a few years ago, 63 00:03:13,080 --> 00:03:16,200 Speaker 1: US production was growing about twenty six percent from US 64 00:03:16,240 --> 00:03:20,800 Speaker 1: shale basins on an annual basis. Production grew to the 65 00:03:20,800 --> 00:03:24,040 Speaker 1: point where US was the largest producer of oil due 66 00:03:24,080 --> 00:03:27,480 Speaker 1: to this shale production that was coming out. So it's 67 00:03:27,520 --> 00:03:32,040 Speaker 1: been a really important feature of the U. S supply story. However, 68 00:03:32,160 --> 00:03:34,800 Speaker 1: the problem is that as the US was just flooding 69 00:03:34,800 --> 00:03:37,320 Speaker 1: the market with all of the shale oil, there was 70 00:03:37,680 --> 00:03:40,520 Speaker 1: also competition with OPEC for who can sort of supply 71 00:03:40,600 --> 00:03:43,720 Speaker 1: into this market where demand is pretty stagnant, and as 72 00:03:43,760 --> 00:03:46,200 Speaker 1: a result, prices were tanking. We've had very low oil 73 00:03:46,240 --> 00:03:48,920 Speaker 1: prices of the past few years, and this meant that 74 00:03:48,960 --> 00:03:51,920 Speaker 1: actually the profitability for a lot of these companies was 75 00:03:51,960 --> 00:03:55,080 Speaker 1: looking worse and worse. They were putting borrowing a lot 76 00:03:55,080 --> 00:03:59,240 Speaker 1: of money to invest in new production, and yet they 77 00:03:59,240 --> 00:04:02,360 Speaker 1: were receiving low prices for that production, and therefore they 78 00:04:02,360 --> 00:04:06,160 Speaker 1: were hiteing negative cash flow, not good returns for shareholders. 79 00:04:06,640 --> 00:04:08,320 Speaker 1: So all of this was kind of happening in the 80 00:04:08,320 --> 00:04:11,000 Speaker 1: background of the U S shale industry, and this was 81 00:04:11,040 --> 00:04:13,680 Speaker 1: all going on, this discussion of do they need to 82 00:04:13,720 --> 00:04:16,440 Speaker 1: be profitable, do you grow production, how do you balance 83 00:04:16,520 --> 00:04:20,440 Speaker 1: those two, and then COVID hit, which completely destroyed all demand. 84 00:04:20,800 --> 00:04:24,200 Speaker 1: Oh man, what a roller coaster. I mean kind of 85 00:04:24,200 --> 00:04:26,840 Speaker 1: halfway through what we're saying there is thinking like when 86 00:04:26,839 --> 00:04:30,960 Speaker 1: I started in the energy industry, I guess, like in renewables, 87 00:04:30,960 --> 00:04:34,039 Speaker 1: really we kept hearing, you know, we have to do 88 00:04:34,080 --> 00:04:37,000 Speaker 1: all this for energy security, you know, US energy security 89 00:04:37,040 --> 00:04:40,359 Speaker 1: and all that. But with shale it kind of seemed 90 00:04:40,360 --> 00:04:42,360 Speaker 1: to kind of end. I didn't I don't heard much 91 00:04:42,440 --> 00:04:44,760 Speaker 1: about that in years, but I guess then it became 92 00:04:44,760 --> 00:04:48,599 Speaker 1: a different problem, right of profitability and keeping the flow 93 00:04:48,680 --> 00:04:51,720 Speaker 1: going or keeping the oil coming. Yeah, so shill was 94 00:04:51,760 --> 00:04:54,119 Speaker 1: great for security in the sense of the US became 95 00:04:54,320 --> 00:04:57,320 Speaker 1: sort of a goal an exporter of oil where the 96 00:04:57,440 --> 00:05:00,200 Speaker 1: we were the largest producer. But you know, the quite 97 00:05:00,240 --> 00:05:01,880 Speaker 1: was what's the cost of all of that and is 98 00:05:01,880 --> 00:05:05,440 Speaker 1: it sustainable? Right? So, ty, can you tell us about 99 00:05:05,960 --> 00:05:08,400 Speaker 1: what did happen during COVID. I think the first thing 100 00:05:08,480 --> 00:05:12,320 Speaker 1: was that it's interesting that right before COVID, Russia and 101 00:05:12,360 --> 00:05:15,920 Speaker 1: OPEC was actually having a price war the head for 102 00:05:16,080 --> 00:05:18,479 Speaker 1: about a week or two, and then COVID hit, So 103 00:05:18,520 --> 00:05:20,480 Speaker 1: it was like a double ramby for the for the 104 00:05:20,600 --> 00:05:22,640 Speaker 1: all markets. You know, first you have the price war 105 00:05:22,839 --> 00:05:25,200 Speaker 1: right with Russia and OPAC, and they drove prices down, 106 00:05:25,720 --> 00:05:28,000 Speaker 1: and then like two weeks after one or two weeks 107 00:05:28,040 --> 00:05:31,440 Speaker 1: after that, COVID hit and prices just crumbled. I mean 108 00:05:31,839 --> 00:05:35,280 Speaker 1: right after COVID struck world. I guess OPAC and Russia 109 00:05:35,480 --> 00:05:38,680 Speaker 1: went into a truce immediately. But the mass took a 110 00:05:38,720 --> 00:05:41,200 Speaker 1: big hit, and so did all crisis. I think all 111 00:05:41,279 --> 00:05:43,320 Speaker 1: prices that w t I at one point, at some 112 00:05:43,400 --> 00:05:46,440 Speaker 1: point it was like straaighting at negative prices, but that 113 00:05:46,640 --> 00:05:49,200 Speaker 1: was because they were running our storage. They have basically 114 00:05:49,240 --> 00:05:53,520 Speaker 1: no nowhere to put the oil in Oklahoma, so the 115 00:05:53,520 --> 00:05:56,960 Speaker 1: demands took a huge hit. And all these producers because 116 00:05:57,000 --> 00:06:00,440 Speaker 1: it's kind of like for surprised to catch up demand, 117 00:06:00,520 --> 00:06:02,800 Speaker 1: there's usually a lag on the way up or on 118 00:06:02,880 --> 00:06:06,440 Speaker 1: the way down, and you really need like all parsons 119 00:06:06,520 --> 00:06:08,440 Speaker 1: to go down to web to wally low level before 120 00:06:08,440 --> 00:06:11,839 Speaker 1: these producers are willing to start shutting off the weals. 121 00:06:11,880 --> 00:06:13,839 Speaker 1: But that was what we saw, you know, and and 122 00:06:13,920 --> 00:06:17,480 Speaker 1: producers had to like we're forced shooting out after production 123 00:06:18,120 --> 00:06:20,400 Speaker 1: during the trap, during the bottom of the pandemic, when 124 00:06:20,400 --> 00:06:22,719 Speaker 1: when the when demand failed out the bottom, and now 125 00:06:22,760 --> 00:06:25,680 Speaker 1: they're starting to turn it back on. Well, I should 126 00:06:25,720 --> 00:06:28,640 Speaker 1: say about the third quarter a fourth quarter of last year, 127 00:06:28,839 --> 00:06:31,000 Speaker 1: they started turning on the worst down to all worlds 128 00:06:31,040 --> 00:06:34,640 Speaker 1: back on when demand slowly recovered. And so that was 129 00:06:34,680 --> 00:06:37,919 Speaker 1: what happened in the physical markets. On the financial side, 130 00:06:37,920 --> 00:06:40,159 Speaker 1: for like on the police companies from the westing side, 131 00:06:40,360 --> 00:06:43,240 Speaker 1: what really changed in the past years that the industry 132 00:06:43,240 --> 00:06:46,600 Speaker 1: has really changed from like a growth industry as and 133 00:06:46,760 --> 00:06:49,960 Speaker 1: I just mentioned, so really are for industry that's focused 134 00:06:49,960 --> 00:06:52,240 Speaker 1: on returns and cash bro physically meant I know w 135 00:06:52,320 --> 00:06:54,640 Speaker 1: T I is West Texas Intermediate and an oil price 136 00:06:54,680 --> 00:06:58,880 Speaker 1: bantomork Okay, so tie. So it's changed for the financial markets. 137 00:06:58,920 --> 00:07:01,160 Speaker 1: So what do you mean by well, I guess I'm 138 00:07:01,400 --> 00:07:04,040 Speaker 1: end set. Before the US shell production was growing at 139 00:07:04,040 --> 00:07:07,080 Speaker 1: a very fast group in the past, but that's a 140 00:07:07,400 --> 00:07:10,280 Speaker 1: pretty much funded by that our companies to going out 141 00:07:10,280 --> 00:07:13,880 Speaker 1: off that to fund this production growth. Nowadays, a lot 142 00:07:13,880 --> 00:07:17,640 Speaker 1: of investors um they want these companies to de leverage 143 00:07:18,040 --> 00:07:21,160 Speaker 1: because that's seen too much financial risk and they want 144 00:07:21,200 --> 00:07:24,400 Speaker 1: these companies to start paying back the show that's fastest 145 00:07:24,680 --> 00:07:29,040 Speaker 1: other in the ways of like higher dividend payout or 146 00:07:29,120 --> 00:07:33,000 Speaker 1: insuring purchases. So the industry has really transformed in the 147 00:07:33,040 --> 00:07:35,120 Speaker 1: past year. So it sounds like they went from kind 148 00:07:35,120 --> 00:07:39,920 Speaker 1: of a bonanza of production, you know, where everything was 149 00:07:39,960 --> 00:07:43,920 Speaker 1: just going great too a much much tighter market with 150 00:07:44,000 --> 00:07:48,120 Speaker 1: much more scrutiny over returns. And how has this change 151 00:07:48,160 --> 00:07:50,800 Speaker 1: in the all US oil industry, I guess the shale 152 00:07:50,840 --> 00:07:53,840 Speaker 1: industry at large, but also the recent changes, how has 153 00:07:53,880 --> 00:07:56,760 Speaker 1: that impacted the global oil market? Yes, so on the US, 154 00:07:56,800 --> 00:07:58,800 Speaker 1: the first thing is such the U S laws about 155 00:07:58,800 --> 00:08:02,000 Speaker 1: two mullion bills the day of production. During the pandemic, 156 00:08:02,400 --> 00:08:05,720 Speaker 1: we were producing about thoting million barrels per day of oil. 157 00:08:05,840 --> 00:08:08,920 Speaker 1: Now we're only doing eleven million barrels. So that's the 158 00:08:08,920 --> 00:08:12,440 Speaker 1: first thing. The second thing is the world all demand 159 00:08:12,520 --> 00:08:15,680 Speaker 1: growth was you pretty much met by us all surprised 160 00:08:15,920 --> 00:08:19,800 Speaker 1: or production growth. Now we a, we pretty much lost 161 00:08:19,840 --> 00:08:23,480 Speaker 1: that engine. And so when and when all demand returns US, 162 00:08:23,520 --> 00:08:26,960 Speaker 1: our production is not going to be there to meet demand. Wow. Okay, 163 00:08:26,960 --> 00:08:30,040 Speaker 1: so demand tanked during COVID, right, and that's what caused 164 00:08:30,040 --> 00:08:32,880 Speaker 1: all that that those challenges last year with over supply, 165 00:08:33,400 --> 00:08:36,040 Speaker 1: they turned off the wells. But now demand is starting 166 00:08:36,040 --> 00:08:38,280 Speaker 1: to pick back up. Is that right? And then you're 167 00:08:38,280 --> 00:08:40,720 Speaker 1: saying that the supply won't be there when the demand 168 00:08:40,960 --> 00:08:44,600 Speaker 1: comes back, There's going to be some difficulties of securing supprise. 169 00:08:44,679 --> 00:08:47,120 Speaker 1: If we assume the growth rate that we had before, 170 00:08:47,160 --> 00:08:50,480 Speaker 1: I think it's still we still have like speckup spac 171 00:08:50,520 --> 00:08:54,400 Speaker 1: capacity from OPAC to meet demand growth. But when we 172 00:08:54,440 --> 00:08:57,760 Speaker 1: turn demand we covers. But when it starts growing again, 173 00:08:57,800 --> 00:09:00,360 Speaker 1: we're gonna have to figure out where those are. How 174 00:09:00,400 --> 00:09:03,760 Speaker 1: how are you going to and mark? Maybe One interesting 175 00:09:03,840 --> 00:09:07,160 Speaker 1: thing to note about shale is that, as I mentioned, 176 00:09:07,160 --> 00:09:11,040 Speaker 1: shale wells are different than most other conventional wells in 177 00:09:11,080 --> 00:09:13,880 Speaker 1: that the production because it's you're pulling it out of 178 00:09:13,920 --> 00:09:16,600 Speaker 1: this tight rock. You get a lot of production in 179 00:09:16,600 --> 00:09:19,240 Speaker 1: the first few months, but then it actually declines quite 180 00:09:19,280 --> 00:09:22,800 Speaker 1: significantly over the next year or two. So you lose 181 00:09:22,840 --> 00:09:27,160 Speaker 1: about sev your well's output in the first few years. 182 00:09:27,200 --> 00:09:30,040 Speaker 1: So that's why in the US shale patch, producers need 183 00:09:30,080 --> 00:09:33,600 Speaker 1: to constantly be injecting capital into their operations in order 184 00:09:33,600 --> 00:09:36,839 Speaker 1: to do drill new wells to offset the declines of 185 00:09:36,880 --> 00:09:39,880 Speaker 1: old wells. So in order to keep production flat, you 186 00:09:39,920 --> 00:09:42,400 Speaker 1: need to constantly be drilling new wells. Anyway, in order 187 00:09:42,400 --> 00:09:44,440 Speaker 1: to grow production, you need to drill even more wells, 188 00:09:44,960 --> 00:09:46,959 Speaker 1: So you just got to keep going. Yeah, exactly. So 189 00:09:47,000 --> 00:09:50,280 Speaker 1: that's where because there was so little investment in new 190 00:09:50,320 --> 00:09:54,280 Speaker 1: production during COVID, a lot of those wells saw massive declines. 191 00:09:54,440 --> 00:09:56,920 Speaker 1: That's why a lot of the output from the region 192 00:09:57,280 --> 00:10:00,560 Speaker 1: has fallen off. And now as time ENTI and US 193 00:10:00,600 --> 00:10:05,320 Speaker 1: producers are just very reluctant to invest significant amounts of 194 00:10:05,360 --> 00:10:07,679 Speaker 1: capital such that that output will grow and sort of 195 00:10:07,679 --> 00:10:10,520 Speaker 1: replace the lost barrels. On the U S side, do 196 00:10:10,559 --> 00:10:12,600 Speaker 1: you think they'll come back? Do you think they will 197 00:10:12,920 --> 00:10:14,640 Speaker 1: meet the demand in time? And do you think that 198 00:10:14,800 --> 00:10:17,280 Speaker 1: oil will have to come from somewhere else? I mean, 199 00:10:17,320 --> 00:10:19,959 Speaker 1: you say the i A is already expecting oil demand 200 00:10:19,960 --> 00:10:24,200 Speaker 1: will return to levels but sometimes in two right, so 201 00:10:24,280 --> 00:10:27,000 Speaker 1: next year, yeah, I think it's going to have to 202 00:10:27,000 --> 00:10:29,400 Speaker 1: come from like several places, not just from U S. 203 00:10:29,400 --> 00:10:32,720 Speaker 1: Show who probably actually draw down their spank capacity compared 204 00:10:32,760 --> 00:10:35,240 Speaker 1: to what they did for some of the national oil 205 00:10:35,320 --> 00:10:38,080 Speaker 1: companies were probably have to pick up the slack um 206 00:10:38,200 --> 00:10:41,600 Speaker 1: some of those private companies which are not so much 207 00:10:41,679 --> 00:10:44,680 Speaker 1: under the financial microscope, they're not so much under the 208 00:10:44,720 --> 00:10:47,959 Speaker 1: scrutiny of the investing community, they probably have a lot 209 00:10:47,960 --> 00:10:51,160 Speaker 1: more leeway to grow production compared to properity companies, and 210 00:10:51,520 --> 00:10:55,080 Speaker 1: we might even need some of those Urani umbrelros mak wow. Okay, 211 00:10:55,640 --> 00:10:58,920 Speaker 1: so they might turn coming back from from everywhere. Will 212 00:10:59,000 --> 00:11:02,960 Speaker 1: be the impact of this possible demand on price, so 213 00:11:03,120 --> 00:11:05,320 Speaker 1: the price definitely go up. There is this there a 214 00:11:05,320 --> 00:11:07,760 Speaker 1: scenario where we might see a price tip. I think 215 00:11:07,800 --> 00:11:10,680 Speaker 1: chances are we will probably see like the market continue 216 00:11:10,720 --> 00:11:13,959 Speaker 1: to tighten, especially if you continue to draw down OPEC 217 00:11:13,960 --> 00:11:18,400 Speaker 1: spec capacity. Historically there's some correlation between christ and opex 218 00:11:18,559 --> 00:11:23,320 Speaker 1: aspect capacity, well negative correlation, and so I think there's 219 00:11:23,320 --> 00:11:26,000 Speaker 1: definitely more upside risk to prices than dan Cy risk. 220 00:11:26,240 --> 00:11:28,240 Speaker 1: In terms of dancy risk. I mean, you really have 221 00:11:28,280 --> 00:11:32,040 Speaker 1: to have the vaccine proout programs to hit a big 222 00:11:32,080 --> 00:11:34,720 Speaker 1: bump and and you know, maybe some of these countries 223 00:11:34,840 --> 00:11:37,880 Speaker 1: starts going back in terms of infection rates and then 224 00:11:37,920 --> 00:11:40,640 Speaker 1: you have to shut down passes the economy again. I 225 00:11:40,679 --> 00:11:43,080 Speaker 1: think that's probably the biggest risk as far as I 226 00:11:43,120 --> 00:11:46,720 Speaker 1: can see. Okay, so if vaccine progress kind of stalls 227 00:11:46,960 --> 00:11:49,800 Speaker 1: and then demand goes back down, then you'll see the 228 00:11:49,840 --> 00:11:53,280 Speaker 1: price follow right. Yeah. The only other one would probably 229 00:11:53,360 --> 00:11:57,760 Speaker 1: be if OPEC just didn't time their production correctly, right, 230 00:11:57,840 --> 00:11:59,920 Speaker 1: like as time mentioned, they have a lot of spirit 231 00:12:00,000 --> 00:12:02,920 Speaker 1: capacity that they're slowly bringing online as they see demand 232 00:12:03,000 --> 00:12:06,800 Speaker 1: ramping up. But if they missed time that they could 233 00:12:06,880 --> 00:12:10,040 Speaker 1: end up over supplying the market when demand is still 234 00:12:10,360 --> 00:12:13,080 Speaker 1: instilled flux. Is there a history of that is that 235 00:12:13,160 --> 00:12:15,680 Speaker 1: does that happen? I'm as an outsider, I have just 236 00:12:15,720 --> 00:12:18,280 Speaker 1: no idea. Yeah for sure. I mean I think before 237 00:12:18,280 --> 00:12:21,360 Speaker 1: this pandemic, OPAC member has like a history of like 238 00:12:21,440 --> 00:12:25,320 Speaker 1: cheating their quotas um so they always had produced like 239 00:12:25,360 --> 00:12:27,560 Speaker 1: a little bit more than what they said they would. 240 00:12:28,080 --> 00:12:32,040 Speaker 1: But this time around, surprisingly that Pakistano has been surprisingly 241 00:12:32,080 --> 00:12:35,920 Speaker 1: disciplined about the production. And I think special Saudi Arabia, 242 00:12:35,960 --> 00:12:38,560 Speaker 1: I mean they you know that really took like bills 243 00:12:38,600 --> 00:12:41,120 Speaker 1: of their own production offline. Who did this year just 244 00:12:41,160 --> 00:12:43,880 Speaker 1: to keep the marketing balance. So this time around they 245 00:12:43,920 --> 00:12:47,360 Speaker 1: are where we disciplined. But as we as surprises guests 246 00:12:47,400 --> 00:12:52,280 Speaker 1: higher and higher, you know, the temptations to cheat higher. 247 00:12:53,080 --> 00:12:56,880 Speaker 1: So yeah, cheeze okay, so needs to stay. We're in 248 00:12:56,920 --> 00:12:59,680 Speaker 1: for for an exciting year in oil global oil regardless. 249 00:13:00,240 --> 00:13:03,240 Speaker 1: One more question about about price, So I want to 250 00:13:03,320 --> 00:13:07,120 Speaker 1: quote you, so in your report you say the following 251 00:13:07,160 --> 00:13:09,760 Speaker 1: You say, although this price range is well above what 252 00:13:09,840 --> 00:13:12,319 Speaker 1: the vast majority of US oil players need to achieve 253 00:13:12,720 --> 00:13:16,000 Speaker 1: for profitability. We're doubtful US oil companies will turn on 254 00:13:16,080 --> 00:13:20,800 Speaker 1: the production spigits yet. So my question is, even if 255 00:13:20,880 --> 00:13:24,120 Speaker 1: the well has become profitable at a certain price, you're 256 00:13:24,160 --> 00:13:28,160 Speaker 1: saying that oil companies will not yet turn on production. 257 00:13:28,320 --> 00:13:30,440 Speaker 1: So why is that? I don't quite get it. So 258 00:13:30,600 --> 00:13:32,840 Speaker 1: I think, Um, if you look at bricky even point 259 00:13:32,840 --> 00:13:35,400 Speaker 1: of you, the vast majority of US show praise in 260 00:13:35,440 --> 00:13:38,360 Speaker 1: the money at these while prices, but they are really 261 00:13:38,400 --> 00:13:41,080 Speaker 1: resisting putting more capital into the ground to put more 262 00:13:41,120 --> 00:13:45,360 Speaker 1: surprise onlines because that will be busipin done debt. All 263 00:13:45,440 --> 00:13:48,439 Speaker 1: these uh mentioned they are are. They took on a 264 00:13:48,440 --> 00:13:51,200 Speaker 1: lot of that during the news to feel the growth. 265 00:13:51,600 --> 00:13:54,400 Speaker 1: So now, um, like all bubbles, when it bursts, you 266 00:13:54,440 --> 00:13:56,319 Speaker 1: know that you just have to work off the excess 267 00:13:56,400 --> 00:13:59,400 Speaker 1: on leverage. That's the first thing. The second thing is 268 00:13:59,640 --> 00:14:02,440 Speaker 1: a lot of investing community, allow of investors are demanding 269 00:14:03,040 --> 00:14:06,280 Speaker 1: faster payback for the investments in our companies. So even 270 00:14:06,320 --> 00:14:08,280 Speaker 1: after these companies woke of the dead, there would be 271 00:14:08,360 --> 00:14:11,560 Speaker 1: under pressure to increase like different and share buybacks. Okay, 272 00:14:11,679 --> 00:14:14,720 Speaker 1: So effectively they're kind of on a diet in a way. 273 00:14:15,559 --> 00:14:18,520 Speaker 1: So broadly speaking, what can we expect from the industry 274 00:14:18,559 --> 00:14:20,360 Speaker 1: going forward for the rest of the year and actually 275 00:14:20,360 --> 00:14:24,040 Speaker 1: poste anything different than we already mentioned already. So I 276 00:14:24,080 --> 00:14:26,920 Speaker 1: think going forward, because the US is no longer a 277 00:14:26,920 --> 00:14:30,240 Speaker 1: big growth engine of production, all prices realities will be 278 00:14:30,280 --> 00:14:33,160 Speaker 1: a lot more sustainable going forward because if you look 279 00:14:33,240 --> 00:14:35,400 Speaker 1: in the past, in the past like ten years or so, 280 00:14:35,520 --> 00:14:38,680 Speaker 1: there were more than several occasions when the growth of 281 00:14:38,840 --> 00:14:42,440 Speaker 1: US our production has like derailed price raieties and the 282 00:14:42,520 --> 00:14:44,800 Speaker 1: end up that OPEC had to like cut back the 283 00:14:44,840 --> 00:14:48,800 Speaker 1: production to make room for for US oil growth. But 284 00:14:48,960 --> 00:14:52,080 Speaker 1: without that, all prices are probably all price rarities are 285 00:14:52,080 --> 00:14:55,640 Speaker 1: probably much more sustainable than in the past. Yeah, and 286 00:14:55,680 --> 00:14:58,160 Speaker 1: the other thing on the US supply side, just as 287 00:14:58,200 --> 00:15:02,400 Speaker 1: time mentioned, producers really are even with the prices where 288 00:15:02,440 --> 00:15:04,440 Speaker 1: they are at the moment, producers are sticking to the 289 00:15:04,560 --> 00:15:10,240 Speaker 1: story of capital discipline, maintaining flat production, putting any increased 290 00:15:10,240 --> 00:15:14,560 Speaker 1: revenue towards debt reduction and shareholder payout. When they think 291 00:15:14,600 --> 00:15:19,240 Speaker 1: past into two, some of them are starting to talk 292 00:15:19,320 --> 00:15:24,200 Speaker 1: about slow production growth, so growth of maybe three percent 293 00:15:24,360 --> 00:15:27,080 Speaker 1: or five percent nowhere near the double digit growth rates 294 00:15:27,120 --> 00:15:29,520 Speaker 1: that we saw before. At the moment, it seems like 295 00:15:29,560 --> 00:15:32,040 Speaker 1: the investor community seems okay with that. We didn't see 296 00:15:32,040 --> 00:15:35,400 Speaker 1: any major stock price movements when they made those announcements 297 00:15:35,400 --> 00:15:38,960 Speaker 1: on their earnings calls. So it looks like if demand 298 00:15:39,000 --> 00:15:41,840 Speaker 1: does recover and things are going well into next year, 299 00:15:41,880 --> 00:15:44,080 Speaker 1: we might see a bit of growth out of the 300 00:15:44,120 --> 00:15:47,240 Speaker 1: U S. Shail patch, but nothing like it was before. 301 00:15:47,240 --> 00:15:49,680 Speaker 1: And they do seem to be watching what the opex 302 00:15:49,760 --> 00:15:53,160 Speaker 1: doing and sort of deferring to being more reactive to 303 00:15:53,200 --> 00:15:56,120 Speaker 1: OPEC rather than as time mentioned before, when they were 304 00:15:56,120 --> 00:15:59,920 Speaker 1: sort of ready to compete for a market share. Okay, okay, 305 00:16:00,200 --> 00:16:02,880 Speaker 1: so a little bit less ambition, more what do you 306 00:16:02,880 --> 00:16:05,240 Speaker 1: call it, fiscal discipline, much better term than I used 307 00:16:05,280 --> 00:16:09,360 Speaker 1: a diet. Yeah, but moderate growth coming yeah. Okay. So 308 00:16:09,360 --> 00:16:11,320 Speaker 1: we're gonna take a quick break and when we come back, 309 00:16:11,360 --> 00:16:13,160 Speaker 1: we're going to talk a bit more about what the 310 00:16:13,160 --> 00:16:15,840 Speaker 1: players are doing, who they are, and the next areas 311 00:16:15,880 --> 00:16:23,080 Speaker 1: of research for the U. S. Oil team. Stay with us. 312 00:16:23,120 --> 00:16:26,360 Speaker 1: So in the report, I noticed something that that we 313 00:16:26,360 --> 00:16:29,960 Speaker 1: were talking about before we hit record, was that a 314 00:16:29,960 --> 00:16:31,720 Speaker 1: lot of the players that you mentioned in this report, 315 00:16:31,720 --> 00:16:35,280 Speaker 1: I've never heard of so shale production comes mostly from 316 00:16:35,320 --> 00:16:37,840 Speaker 1: a handful of areas in the US are basins, and 317 00:16:37,880 --> 00:16:40,480 Speaker 1: the players are mostly independents, is that right? Or they 318 00:16:40,520 --> 00:16:42,840 Speaker 1: listed or they just you know, companies we were just 319 00:16:43,120 --> 00:16:45,440 Speaker 1: not familiar with. Can you describe it a bit in 320 00:16:45,480 --> 00:16:47,080 Speaker 1: the U S all page. A lot of these show 321 00:16:47,120 --> 00:16:51,200 Speaker 1: players on what we called US independent companies, So they're 322 00:16:51,280 --> 00:16:54,920 Speaker 1: not like the examble or show VP majors, the all 323 00:16:55,000 --> 00:16:57,440 Speaker 1: majors that most people are familiar with. They have like 324 00:16:57,520 --> 00:17:01,600 Speaker 1: one names like yog Resources, Devon Energy, Diamondback Energy, just 325 00:17:01,920 --> 00:17:04,600 Speaker 1: companies that people will only be familiar with. Your few 326 00:17:04,680 --> 00:17:07,080 Speaker 1: in the industry. I think it's like some history to 327 00:17:07,160 --> 00:17:10,600 Speaker 1: that because shore He's okay, that's not been big enough 328 00:17:10,640 --> 00:17:13,840 Speaker 1: of an impact for the all majors. So a lot 329 00:17:13,880 --> 00:17:16,520 Speaker 1: of these all majors dident invest in show until like 330 00:17:16,600 --> 00:17:19,320 Speaker 1: the later years. So that's why we have a lot 331 00:17:19,359 --> 00:17:22,480 Speaker 1: of like the smaller independent companies took over in the 332 00:17:22,560 --> 00:17:26,280 Speaker 1: early days, and some of them actually produce sizeable quantities 333 00:17:26,280 --> 00:17:28,600 Speaker 1: of oil. Actually at these points in times like EO 334 00:17:28,600 --> 00:17:33,600 Speaker 1: G and Occidental, they're they're pretty big, publicly traded companies 335 00:17:33,640 --> 00:17:36,520 Speaker 1: for what they produce. But yeah, there's a ton of 336 00:17:36,560 --> 00:17:39,600 Speaker 1: those medium sized guys and a ton of consolidation in 337 00:17:39,640 --> 00:17:42,760 Speaker 1: the industry actually, so you'll constantly hear of mergers and 338 00:17:42,760 --> 00:17:46,600 Speaker 1: acquisitions in this space. Are they particularly active like I 339 00:17:46,640 --> 00:17:49,040 Speaker 1: think they're in your report? You mentioned their five main 340 00:17:49,320 --> 00:17:53,119 Speaker 1: shale basins. Do they like have home home turf for you? 341 00:17:53,160 --> 00:17:54,879 Speaker 1: Know that this is that they are more active in 342 00:17:54,960 --> 00:17:58,240 Speaker 1: one versus another. How does that work? There's like two models. 343 00:17:58,320 --> 00:18:01,480 Speaker 1: One is that's definitely more focused in one region so 344 00:18:01,560 --> 00:18:04,440 Speaker 1: they can larage all the expertise and know how and 345 00:18:04,560 --> 00:18:07,119 Speaker 1: supply change in the one basin. And then they're like 346 00:18:07,160 --> 00:18:09,800 Speaker 1: a couple of companies that spread out so they can 347 00:18:09,840 --> 00:18:12,960 Speaker 1: diversify the risks, or they're spread out in the various regions. 348 00:18:13,400 --> 00:18:15,119 Speaker 1: Can we talk about the basins for a second. Is 349 00:18:15,119 --> 00:18:17,480 Speaker 1: there a basin that really stands out as being a 350 00:18:17,520 --> 00:18:21,240 Speaker 1: top performer? Definitely the Permian if you're talking about size 351 00:18:21,320 --> 00:18:25,560 Speaker 1: and performance, the Permans probably is producing about four point 352 00:18:25,640 --> 00:18:28,560 Speaker 1: six million bells with it right now. And the significance 353 00:18:28,600 --> 00:18:31,280 Speaker 1: if you consider the US is only its producing about 354 00:18:31,320 --> 00:18:34,040 Speaker 1: eleven million belts today, so almost half of the US 355 00:18:34,119 --> 00:18:37,280 Speaker 1: output it's coming from a one basin in the Permian 356 00:18:37,720 --> 00:18:40,199 Speaker 1: and for those of you who aren't familiar with oil 357 00:18:40,240 --> 00:18:42,639 Speaker 1: basins in the US geography sector, it's sort of in 358 00:18:42,720 --> 00:18:46,240 Speaker 1: western Texas and the sort of southeast corner of New Mexico. 359 00:18:46,400 --> 00:18:48,960 Speaker 1: That's where the Permian sits. And how are these plays 360 00:18:48,960 --> 00:18:51,239 Speaker 1: different from each other? They're all shale that are they 361 00:18:51,240 --> 00:18:53,919 Speaker 1: different geologically or anything like that. I think, on a 362 00:18:54,000 --> 00:18:57,640 Speaker 1: very hard level, shell geologically are pretty much the same. 363 00:18:57,680 --> 00:19:01,359 Speaker 1: They have the same characteristics, but the quality of the 364 00:19:01,480 --> 00:19:05,080 Speaker 1: rock definitely could be very different from not only from 365 00:19:05,119 --> 00:19:07,880 Speaker 1: basin to basin, but even from county to Candy. And 366 00:19:08,000 --> 00:19:10,879 Speaker 1: the other questions the maturity of these play Some of 367 00:19:10,920 --> 00:19:13,800 Speaker 1: these played, um, like the Legal Food which is in 368 00:19:13,880 --> 00:19:17,040 Speaker 1: South Texas, They've been very drewed out. They've been around 369 00:19:17,080 --> 00:19:19,960 Speaker 1: for a long time, and the productivity for these worlds 370 00:19:20,000 --> 00:19:22,480 Speaker 1: are just not as good as they were before. So 371 00:19:22,640 --> 00:19:25,640 Speaker 1: that's definitely like an age and quality aspect, as well 372 00:19:25,680 --> 00:19:29,320 Speaker 1: as other characteristics to like infrastructure of variability and so 373 00:19:29,400 --> 00:19:31,760 Speaker 1: on and so forth. Is there anything that you want 374 00:19:31,800 --> 00:19:35,520 Speaker 1: readers or listeners to know about any of the you know, 375 00:19:35,560 --> 00:19:37,520 Speaker 1: the outlook for any of these basins besides you know, 376 00:19:37,520 --> 00:19:40,280 Speaker 1: Eagle Ford is is drawing down. Is there anything else 377 00:19:40,280 --> 00:19:42,439 Speaker 1: that stands out, you know, we put you know research, 378 00:19:42,720 --> 00:19:45,680 Speaker 1: We think that US a production show production will pretty 379 00:19:45,760 --> 00:19:48,560 Speaker 1: much be fratished for the next eighteen months, will probably 380 00:19:48,560 --> 00:19:50,800 Speaker 1: grow by only a hundred sixty tho pars per day 381 00:19:51,320 --> 00:19:54,560 Speaker 1: wh should now and in December, and all of the 382 00:19:54,680 --> 00:19:57,560 Speaker 1: growth will be coming from the premier. The other basins 383 00:19:57,600 --> 00:20:00,840 Speaker 1: will probably be like out of threat or slightly over. Yeah. 384 00:20:00,960 --> 00:20:03,639 Speaker 1: So if the perman ever stops growing for whatever reason, 385 00:20:04,040 --> 00:20:06,399 Speaker 1: the growth trajectory is, it's not going to be exist 386 00:20:06,520 --> 00:20:09,480 Speaker 1: in existence. So, either from the report or not. What 387 00:20:09,560 --> 00:20:12,320 Speaker 1: are some of the major takeaways from your recent research, so, like, 388 00:20:12,640 --> 00:20:15,000 Speaker 1: what are you seeing in the market and what are 389 00:20:15,200 --> 00:20:17,960 Speaker 1: US oil producers saying. I think on that definitely a 390 00:20:18,000 --> 00:20:20,320 Speaker 1: couple of big takeaways. The first one is that hire 391 00:20:20,359 --> 00:20:23,119 Speaker 1: all prices, unlike in the past, it's not going to 392 00:20:23,320 --> 00:20:26,240 Speaker 1: translate into a more oil production, at least in the 393 00:20:26,400 --> 00:20:30,040 Speaker 1: US companies. The producers are really busy putting down to 394 00:20:30,160 --> 00:20:33,200 Speaker 1: debt and returning capital to shareholders, and they are where 395 00:20:33,240 --> 00:20:35,920 Speaker 1: we reluctant to invest capital more capital into the ground 396 00:20:35,960 --> 00:20:40,000 Speaker 1: to increase production. So even if higher commodities prices states 397 00:20:40,080 --> 00:20:42,240 Speaker 1: run for a while, production is not going to concrease. 398 00:20:42,320 --> 00:20:44,680 Speaker 1: That's the first one. I think the second one would be, 399 00:20:44,760 --> 00:20:47,600 Speaker 1: like that's colder of that is that all Pakis back 400 00:20:47,640 --> 00:20:50,520 Speaker 1: in control of all surprise. Historically, like and I mentioned 401 00:20:50,680 --> 00:20:54,760 Speaker 1: that all Pakis made adomy macroom for US production growth. 402 00:20:55,359 --> 00:20:58,280 Speaker 1: Now there's no longer the case. All Pakistani back in control, 403 00:20:58,640 --> 00:21:01,479 Speaker 1: but definitely all prices ready is going to be more 404 00:21:01,560 --> 00:21:04,520 Speaker 1: much more sustainable than in the past without the undergrowth 405 00:21:04,600 --> 00:21:08,359 Speaker 1: engine in the US and taking it to our clients, 406 00:21:08,400 --> 00:21:11,000 Speaker 1: your listeners might know or not know that. One of 407 00:21:11,040 --> 00:21:12,600 Speaker 1: the things that we do is we talk to two 408 00:21:12,680 --> 00:21:14,960 Speaker 1: clients quite a bit, people that are reading the research, 409 00:21:15,080 --> 00:21:18,920 Speaker 1: using the tools, using the data. Are they asking anything 410 00:21:19,000 --> 00:21:22,040 Speaker 1: particularly lately, any common themes of what you're hearing from them, 411 00:21:22,280 --> 00:21:24,320 Speaker 1: or what are some of the debates out in the 412 00:21:24,400 --> 00:21:26,680 Speaker 1: market right now? I think that like two big questions 413 00:21:26,840 --> 00:21:29,720 Speaker 1: from from our clients. The first one is that you 414 00:21:29,800 --> 00:21:33,920 Speaker 1: are um at these high all price levels, US producers 415 00:21:33,960 --> 00:21:37,040 Speaker 1: gonna increase the production or not? And I think at 416 00:21:37,119 --> 00:21:41,520 Speaker 1: least one they will not increase production in any meaningful 417 00:21:41,600 --> 00:21:46,320 Speaker 1: way now beyond um and I mentioned that your producers 418 00:21:46,600 --> 00:21:50,080 Speaker 1: probably comfortable increasing the production, but like where we slow 419 00:21:50,160 --> 00:21:53,640 Speaker 1: single digit through to five. So if you're looking at 420 00:21:53,800 --> 00:21:57,000 Speaker 1: like US all production at eleven million bills they right 421 00:21:57,040 --> 00:21:59,840 Speaker 1: now through five percent is probably about three hundred five 422 00:22:00,119 --> 00:22:02,560 Speaker 1: fifty bellars per day of increase on an annual basis, 423 00:22:03,280 --> 00:22:05,760 Speaker 1: so very far away from what we've seen before about 424 00:22:05,880 --> 00:22:07,600 Speaker 1: one mon and a half million bellars per day of 425 00:22:07,720 --> 00:22:12,320 Speaker 1: increase every year right before the pandemic hit. UM. The 426 00:22:12,480 --> 00:22:15,399 Speaker 1: second question is, Marcus, it is more philosophical. UM is 427 00:22:15,480 --> 00:22:19,280 Speaker 1: that will will these us all producers changed the tune 428 00:22:19,280 --> 00:22:21,280 Speaker 1: and you know, are they're gonna ever going to increase production? 429 00:22:22,080 --> 00:22:24,679 Speaker 1: And I think the answer to that is, and this is, um, 430 00:22:25,200 --> 00:22:29,720 Speaker 1: it does not lies with producers. It probably lies more 431 00:22:29,800 --> 00:22:33,960 Speaker 1: with the investors. So if investors added to change and 432 00:22:34,040 --> 00:22:35,840 Speaker 1: they're like, hey, you know what if you guys, I 433 00:22:35,880 --> 00:22:39,880 Speaker 1: think it's okay if our companies start producing the production 434 00:22:39,880 --> 00:22:42,879 Speaker 1: a bit faster than five percent, if they allow that 435 00:22:43,000 --> 00:22:45,719 Speaker 1: without you know, setting off the stock. Whenever these new 436 00:22:46,200 --> 00:22:49,159 Speaker 1: these ARE producers said they're going to increase production, I 437 00:22:49,280 --> 00:22:52,680 Speaker 1: think you know, we could see more product, faster production 438 00:22:52,760 --> 00:22:56,280 Speaker 1: growth from us ARE producers. Further down the line. The 439 00:22:56,440 --> 00:22:58,199 Speaker 1: two things that come to mind on my side, I mean, 440 00:22:58,240 --> 00:23:00,080 Speaker 1: it's time mentioned One of the big ones is what 441 00:23:00,119 --> 00:23:02,600 Speaker 1: would it take for US production to come up back online? 442 00:23:03,240 --> 00:23:06,440 Speaker 1: And that would really just be a change in strategy 443 00:23:06,520 --> 00:23:10,600 Speaker 1: amongst the producers themselves and the investors who back them. 444 00:23:10,960 --> 00:23:14,200 Speaker 1: H If there is appetite for shale growth, it's there 445 00:23:14,280 --> 00:23:17,520 Speaker 1: if you come back fairly quickly, but it would require 446 00:23:18,000 --> 00:23:22,320 Speaker 1: the capital to shift towards that end. The other question 447 00:23:22,440 --> 00:23:25,160 Speaker 1: I think that is hounding the industry at the moment 448 00:23:25,320 --> 00:23:28,040 Speaker 1: is what should the focus be? Right we talked about 449 00:23:28,119 --> 00:23:32,560 Speaker 1: this trade off between focusing on production growth and focusing 450 00:23:32,760 --> 00:23:36,359 Speaker 1: on capital returns, But then there's this other question of 451 00:23:36,480 --> 00:23:40,240 Speaker 1: like where does sustainability fit into this puzzle too. You 452 00:23:40,359 --> 00:23:43,760 Speaker 1: have some of the majors, especially across Europe, looking to 453 00:23:43,880 --> 00:23:47,760 Speaker 1: transition towards zero carbon diversify away from oil and gas. 454 00:23:48,720 --> 00:23:51,360 Speaker 1: At the moment, most of the US producers, especially these 455 00:23:51,400 --> 00:23:54,800 Speaker 1: smaller independent ones, are really focused on production. And then 456 00:23:54,840 --> 00:23:56,919 Speaker 1: the question is do you produce a lot and put 457 00:23:56,960 --> 00:24:00,200 Speaker 1: all your capital into increasing supply or do you keep 458 00:24:00,200 --> 00:24:03,280 Speaker 1: production flats and just generate returns. You know, the third 459 00:24:03,320 --> 00:24:05,760 Speaker 1: option would be do you take that capital and transition 460 00:24:05,840 --> 00:24:09,160 Speaker 1: it to some other energy source or some other type 461 00:24:09,200 --> 00:24:12,080 Speaker 1: of growth for the company, and I think that's a 462 00:24:12,200 --> 00:24:15,600 Speaker 1: question that especially some of the bigger, you know, more 463 00:24:15,680 --> 00:24:19,040 Speaker 1: financially sound of these companies are starting to think a 464 00:24:19,080 --> 00:24:21,720 Speaker 1: bit about or starting to see pressure on And you 465 00:24:21,760 --> 00:24:24,280 Speaker 1: can see this obviously at the highest levels with Excell 466 00:24:24,320 --> 00:24:28,439 Speaker 1: and having the activist investor pressure now to change up 467 00:24:28,440 --> 00:24:30,560 Speaker 1: their board and change up how they're thinking about things. 468 00:24:31,280 --> 00:24:35,239 Speaker 1: But some of the bigger independence like Occidental Pioneer, are 469 00:24:35,320 --> 00:24:38,840 Speaker 1: also starting to talk a lot about what their emissions are, 470 00:24:39,560 --> 00:24:41,840 Speaker 1: what their plans are for sort of the longer term 471 00:24:42,080 --> 00:24:46,400 Speaker 1: lower carbon future, and they've made investment in a yeah 472 00:24:46,440 --> 00:24:50,080 Speaker 1: exactly that they've made investments and things like carbon capture. 473 00:24:50,960 --> 00:24:53,520 Speaker 1: They're doing things like emissions tracking, which makes sense. You 474 00:24:53,640 --> 00:24:57,280 Speaker 1: have Biden newly elected and a new focused on emissions 475 00:24:57,960 --> 00:24:59,919 Speaker 1: um and then you have sort of the demand picture 476 00:25:00,040 --> 00:25:02,480 Speaker 1: you can't escape to. Right. We just published our the 477 00:25:02,560 --> 00:25:05,399 Speaker 1: electric Vehicle Outlook for be Enough and it's showing an 478 00:25:05,440 --> 00:25:09,720 Speaker 1: even faster adoption of electric vehicles globally than we'd anticipated before. 479 00:25:10,440 --> 00:25:13,080 Speaker 1: So it looks like sort of peak peak oil demand 480 00:25:13,200 --> 00:25:17,200 Speaker 1: is going to start edging even closer, and so especially 481 00:25:17,280 --> 00:25:20,920 Speaker 1: when the outlook for oil is looking more and more tenuous, 482 00:25:21,600 --> 00:25:23,959 Speaker 1: the question comes if you are doing this long term 483 00:25:24,000 --> 00:25:27,440 Speaker 1: strategy of financial returns, do you just ride out the 484 00:25:27,520 --> 00:25:29,880 Speaker 1: oil wave is it declined slowly, or do you try 485 00:25:29,920 --> 00:25:33,440 Speaker 1: and actually actively pursue other industries. Okay, these aren't just 486 00:25:33,840 --> 00:25:37,000 Speaker 1: little debates, these are existential questions. Is pretty heavy stuff. 487 00:25:38,000 --> 00:25:40,440 Speaker 1: And I think in the electric vehicle outlook that just 488 00:25:40,520 --> 00:25:44,359 Speaker 1: came out, they said they can pretty confidently call peak 489 00:25:44,920 --> 00:25:49,440 Speaker 1: new automobile or new internal combustion engine vehicle sales what 490 00:25:49,600 --> 00:25:52,760 Speaker 1: four years ago, I believe. So if that's a you know, 491 00:25:52,840 --> 00:25:57,439 Speaker 1: indicator of what's to come for oil, I mean yeah, wow, Okay, 492 00:25:58,080 --> 00:26:01,240 Speaker 1: existential indeed, yeah, there are some demand sector is certainly 493 00:26:01,280 --> 00:26:04,560 Speaker 1: still growing. I mean aviation. We anticipate aviation demand will grow. 494 00:26:04,640 --> 00:26:08,160 Speaker 1: We anticipate petrochemical demand will grow. But it does point 495 00:26:08,240 --> 00:26:10,080 Speaker 1: to the fact that you know, you have to pick 496 00:26:10,119 --> 00:26:13,359 Speaker 1: and choose your battles at this point too. So what's 497 00:26:13,440 --> 00:26:16,240 Speaker 1: next in your line of research? So what are you 498 00:26:16,280 --> 00:26:18,560 Speaker 1: looking at? Are you trying to answer these debates or 499 00:26:19,200 --> 00:26:21,439 Speaker 1: go somewhere else in new direction? What are you looking at? 500 00:26:21,760 --> 00:26:24,920 Speaker 1: One of our next research on operature right now is 501 00:26:25,000 --> 00:26:28,080 Speaker 1: I'm looking at gas production in the US UM since 502 00:26:28,160 --> 00:26:30,720 Speaker 1: we brew out like most of the models for for 503 00:26:31,080 --> 00:26:34,040 Speaker 1: use all production already, and gas production is pretty much 504 00:26:34,040 --> 00:26:37,040 Speaker 1: follows like a similar track in terms of like a 505 00:26:37,160 --> 00:26:40,200 Speaker 1: mothering and forecasting. So we're working on that right now. Yeah, 506 00:26:40,200 --> 00:26:42,840 Speaker 1: and then on the bigger picture discussions. The note that 507 00:26:43,040 --> 00:26:45,080 Speaker 1: I think is going to be really interesting is some 508 00:26:45,200 --> 00:26:48,480 Speaker 1: of our colleagues covering oil demand out of Asia are 509 00:26:48,520 --> 00:26:52,840 Speaker 1: looking into divestment. So sort of on that same note 510 00:26:53,119 --> 00:26:57,440 Speaker 1: of oil companies deciding how much exposure to have to 511 00:26:57,480 --> 00:27:00,680 Speaker 1: the upstream oil and gas space, a lot of the majors, 512 00:27:00,800 --> 00:27:04,800 Speaker 1: especially the international oil companies, are starting to diversify away 513 00:27:04,880 --> 00:27:07,920 Speaker 1: and divest out of maybe their most heavily polluting assets 514 00:27:08,000 --> 00:27:10,400 Speaker 1: or their most expensive assets. So if they sell off 515 00:27:10,520 --> 00:27:14,560 Speaker 1: major assets via acreage in Alaska or offshore or whatever, 516 00:27:15,359 --> 00:27:17,960 Speaker 1: that can not only reduce their exposure to oil and gas, 517 00:27:18,040 --> 00:27:20,000 Speaker 1: but also take a huge chunk of emissions off their 518 00:27:20,000 --> 00:27:23,760 Speaker 1: books and put it on someone else's, right. Yeah. So 519 00:27:23,880 --> 00:27:25,920 Speaker 1: that's the question though, is who's buying it um A 520 00:27:26,000 --> 00:27:29,400 Speaker 1: lot of these seem to be private producers purchasing them, 521 00:27:29,680 --> 00:27:34,320 Speaker 1: or some national oil companies purchasing them, where the transparency 522 00:27:34,359 --> 00:27:38,680 Speaker 1: around emissions is a lot murkier and so that's something 523 00:27:38,760 --> 00:27:40,439 Speaker 1: I think we'll be diving into it in a bit 524 00:27:40,480 --> 00:27:43,640 Speaker 1: more depth. Is what's happening around this divestment, what assets 525 00:27:43,680 --> 00:27:48,120 Speaker 1: are being divested, who's divesting them, and who's buying them? Well, 526 00:27:48,160 --> 00:27:52,119 Speaker 1: these all sound like upcoming shows for they will have 527 00:27:52,200 --> 00:27:54,840 Speaker 1: to have you back for ti Anna, Thanks for joining, 528 00:27:54,960 --> 00:27:57,000 Speaker 1: Thank you for having us. Thank you so much. Mark. 529 00:28:05,200 --> 00:28:07,760 Speaker 1: Today's episode of Switched On was edited by Rex Warner 530 00:28:07,880 --> 00:28:10,359 Speaker 1: of gray Stoke Media. Bloomberg any App is a service 531 00:28:10,400 --> 00:28:13,399 Speaker 1: provided by Bloomberg Finance LP and its affiliates. This recording 532 00:28:13,440 --> 00:28:16,639 Speaker 1: does not constitute, nor should it be construed as investment advice, 533 00:28:16,800 --> 00:28:20,320 Speaker 1: investment recommendations, or a recommendation as to an investment or 534 00:28:20,359 --> 00:28:22,879 Speaker 1: other strategy. Bloomberg An EPP should not be considered as 535 00:28:22,960 --> 00:28:26,160 Speaker 1: information sufficient upon which to base an investment decision. Neither 536 00:28:26,240 --> 00:28:29,600 Speaker 1: Bloomberg Finance LP nor any of its affiliates makes any 537 00:28:29,680 --> 00:28:32,720 Speaker 1: representation or warranty as to the accuracy or completeness of 538 00:28:32,760 --> 00:28:35,800 Speaker 1: the information contained in this recording, and any liability as 539 00:28:35,800 --> 00:28:37,880 Speaker 1: a result of this recording is expressly discribed