WEBVTT - Bloomberg Surveillance TV: September 4, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.600 Terminal and the Bloomberg Business app. Stephanie Roth of Wolf 0:00:37.600 --> 0:00:40.280 for Research anticipated one hundred and seventy five thousand jobs 0:00:40.320 --> 0:00:42.760 were added last month and for unemployment to come in 0:00:42.840 --> 0:00:45.880 line at four point two percent. Definitely, I'm pleased to 0:00:45.880 --> 0:00:48.600 say is back with u. Stephanie. First of all, welcome back. 0:00:48.720 --> 0:00:51.440 Second of all, congratulations on your little baby girl. We're 0:00:51.440 --> 0:00:53.479 looking forward to more conversations with you in the future. 0:00:53.479 --> 0:00:56.720 So thanks for racing back for payrolls Friday. We appreciate it. 0:00:56.920 --> 0:01:00.040 Let's talk about payrolls first, Stephanie, Let's get to it. 0:01:00.160 --> 0:01:02.840 On Friday, the matin estimate our survey around one hundred 0:01:02.840 --> 0:01:05.479 and sixty five thousand. We've already heard from the feed 0:01:05.600 --> 0:01:07.920 Share chairman poull In Jackson Hole that he does not 0:01:08.040 --> 0:01:11.360 welcome any further deterioration in this job's market. What is 0:01:11.440 --> 0:01:14.360 further calling further deterioration in this job's market? 0:01:14.360 --> 0:01:16.280 How would we define that? On Friday? 0:01:17.360 --> 0:01:17.800 I think that. 0:01:17.760 --> 0:01:20.200 Would be another payrolls print that's sub one hundred and 0:01:20.200 --> 0:01:23.160 fifty thousand. I think that would be the unemployment rate 0:01:23.280 --> 0:01:24.559 potentially rising up to four. 0:01:24.440 --> 0:01:25.199 Point four percent. 0:01:25.240 --> 0:01:27.679 Again, not our call, but if we continue to just 0:01:27.720 --> 0:01:30.600 see more signs of softness, our base case is that 0:01:30.680 --> 0:01:32.080 a lot of the softness that we saw in the 0:01:32.080 --> 0:01:34.920 month of July was driven by Hurricane Barrel, and we'll 0:01:34.920 --> 0:01:37.560 see a thirty seven thousand rebound from the month from 0:01:37.640 --> 0:01:40.320 the state of Texas, in which case our payrolls print 0:01:40.360 --> 0:01:42.080 will be above one hundred fifty thousand, which we kind 0:01:42.120 --> 0:01:43.880 of view as trend. So if we see a number 0:01:43.920 --> 0:01:46.800 closer to one hundred thousand this month, and we'll have 0:01:46.840 --> 0:01:49.480 to reassess our view on the labor market. But our 0:01:49.480 --> 0:01:52.040 base case is the print should come in pretty solid. 0:01:51.800 --> 0:01:53.800 Even if we get one fifty given the revisions we 0:01:53.840 --> 0:01:56.360 saw over the previous year. Why shouldn't I just chop 0:01:56.400 --> 0:01:59.280 off sixty seventy thousand of that number on Friday? 0:02:00.440 --> 0:02:03.600 Well, I think the revisions might be a little bit overstated, right, 0:02:03.680 --> 0:02:07.800 So we initially had the numbers that came in and 0:02:07.800 --> 0:02:10.360 then it was revised down because of unemployment insurance records, 0:02:10.360 --> 0:02:13.400 and it's actually possible the revisions won't be quite as 0:02:13.480 --> 0:02:17.920 large ones we get the final numbers because immigration has 0:02:17.960 --> 0:02:19.760 been playing a role here and it's possible that's not 0:02:19.760 --> 0:02:22.400 necessarily getting counted in the unemployment insurance So basically it's 0:02:22.400 --> 0:02:24.639 a lot of noise to say I wouldn't necessarily chop 0:02:24.639 --> 0:02:25.840 off sixty to seventy thousand. 0:02:26.040 --> 0:02:28.359 Maybe you can chop off thirty to forty thousand. 0:02:28.000 --> 0:02:30.239 But then you're still looking at a label market that's 0:02:30.240 --> 0:02:33.640 still growing jobs and an economy that's doing okay. And 0:02:33.680 --> 0:02:35.960 by the way, consumer spending is growing about three percent 0:02:35.960 --> 0:02:36.440 in reil. 0:02:36.320 --> 0:02:38.839 Chirvice slowing, so not slow. I'd also love to get 0:02:38.880 --> 0:02:42.160 your take on what happened yesterday with the ism manufacturing. 0:02:42.280 --> 0:02:45.520 We just had Andrew Hollandhorse published and report saying a 0:02:45.600 --> 0:02:49.680 fifth consecutive sub fifty ISM reading shows the manufacturing sector 0:02:49.720 --> 0:02:53.480 is in a sustained contraction. Do you foresee that through 0:02:53.520 --> 0:02:54.240 the end of the year. 0:02:55.560 --> 0:02:56.360 The ism has. 0:02:56.280 --> 0:02:58.000 Been weak for a long time. It hasn't been a 0:02:58.000 --> 0:03:02.560 great measure of what's happening in terms of the broad economy. 0:03:02.720 --> 0:03:05.360 And by the way, measures of sentiment, which is effectively 0:03:05.360 --> 0:03:09.160 what a PMI is, it's asking you, purchasing managers, how 0:03:09.160 --> 0:03:12.040 are conditions this month versus last month? Same as consumer confidence, 0:03:12.040 --> 0:03:13.360 that would have told you we were in a recession 0:03:13.360 --> 0:03:15.480 for all of last year. So I wouldn't necessarily take 0:03:15.520 --> 0:03:18.000 that as an indication of where actual broad growth is 0:03:18.040 --> 0:03:19.160 for the economy. 0:03:19.400 --> 0:03:21.280 That said, the manufacturing sector has. 0:03:21.160 --> 0:03:24.600 Been hurt by elevated rates, and we've seen a cyclical 0:03:24.639 --> 0:03:27.880 slowdown in a lot of parts of rate sensitive aspects 0:03:27.880 --> 0:03:30.320 of the economy. We might see that for the next 0:03:30.400 --> 0:03:32.320 quarter or so, but now that rates have come down, 0:03:32.440 --> 0:03:35.320 we should start to see a rebound in the manufacturing sector. 0:03:35.480 --> 0:03:37.880 I wouldn't necessarily anticipate that in Q three, I think 0:03:37.960 --> 0:03:40.320 Q four, and heading into next year, especially as we 0:03:40.360 --> 0:03:44.360 get certainty from a political perspective, I think there might 0:03:44.400 --> 0:03:46.840 be and they mentioned this in the report yesterday, there 0:03:46.880 --> 0:03:49.200 might be some hesitation to invest just because we don't 0:03:49.240 --> 0:03:51.560 know what the political landscape will be, especially from a 0:03:51.600 --> 0:03:53.280 tax perspective, but our base. 0:03:53.160 --> 0:03:55.280 Case is Q four and to Q one you'll start to. 0:03:55.240 --> 0:03:58.000 See a rebound in the manufacturing sector and the cyclical 0:03:58.040 --> 0:03:59.920 parts of the economy won will start to pick up. 0:04:00.080 --> 0:04:02.280 So basically our parts of the economy just on hold 0:04:02.400 --> 0:04:03.800 until after November fifth. 0:04:04.880 --> 0:04:06.680 I think that's fair well, at least on the cycle 0:04:06.720 --> 0:04:07.080 go side. 0:04:07.120 --> 0:04:09.280 On the business investment side, there have been some questions 0:04:09.320 --> 0:04:10.960 about whether the consumers are. 0:04:10.720 --> 0:04:13.160 Waiting to see the results of the election. I don't 0:04:13.160 --> 0:04:13.480 think so. 0:04:13.520 --> 0:04:15.640 I think the consumer and we certainly saw that with 0:04:15.720 --> 0:04:20.840 Q two GDP consumer is continuing to spend in real terms. Certainly, 0:04:20.839 --> 0:04:22.960 good spending has picked up a little bit. Services spending 0:04:22.960 --> 0:04:26.880 has been fairly solid, albeit a little slower, but it's yeah, 0:04:26.920 --> 0:04:28.960 I think it's fair to say. On the capital spending side, 0:04:28.960 --> 0:04:30.440 there are a lot of companies that are just in 0:04:31.040 --> 0:04:33.440 hold mode, and then once they see the results of 0:04:33.440 --> 0:04:36.000 the election realistically, probably either way, they'll be able to 0:04:36.000 --> 0:04:38.919 start investing in investing again and they'll have a greater 0:04:39.000 --> 0:04:40.760 sense in terms of what the investing lines gap will 0:04:40.800 --> 0:04:41.280 be next year. 0:04:41.400 --> 0:04:42.919 Stephanie, we've gott to leave it that it's going to 0:04:42.920 --> 0:04:45.000 have you back. The Brittian and Stephanie Roth of Wolf 0:04:45.120 --> 0:04:47.200 Research on the light system the jumps market looking ahead 0:04:47.240 --> 0:04:58.080 to Friday. But this is around a table amount of 0:04:58.080 --> 0:04:59.600 a line of flack oral command in mornings. 0:04:59.680 --> 0:05:00.880 It's going to thank you for having me. 0:05:01.000 --> 0:05:03.240 Let's get to this credit market. How sensitive has this 0:05:03.279 --> 0:05:05.200 credit market been to the growth scare of the last 0:05:05.520 --> 0:05:06.039 four weeks. 0:05:06.160 --> 0:05:08.440 It's been incredibly sensitive, and I think you can see 0:05:08.440 --> 0:05:11.000 it both in the widening that happened in the during 0:05:11.000 --> 0:05:14.159 the early part of August and the very swift snap back. 0:05:14.360 --> 0:05:15.680 And I think what that shows you is that the 0:05:15.680 --> 0:05:18.800 credit market is sensitive to the growth backdrop, especially high 0:05:18.800 --> 0:05:21.560 heeled and leverage loan issuers in the credit market, not 0:05:21.920 --> 0:05:24.360 just the cost of capital and the interest rate environment. 0:05:24.839 --> 0:05:28.719 Starting trading yesterday morning, we had retraced the entirety of 0:05:28.800 --> 0:05:32.560 the early August widening. We saw almost a record day 0:05:32.600 --> 0:05:34.800 of new issues supply yesterday in the corporate credit market. 0:05:34.880 --> 0:05:36.880 So spreads have gapped out a little bit wider than that, 0:05:37.200 --> 0:05:39.560 but we're still in this kind of narrow range. We're 0:05:39.600 --> 0:05:42.320 seeing widening get bought by investors. I think the key 0:05:42.400 --> 0:05:46.159 for credit investors, is that one, yes, the forward path 0:05:46.200 --> 0:05:49.200 of monetary policy matters, but the reasons behind that rate 0:05:49.240 --> 0:05:53.080 cut really matter. And then two, we don't need really 0:05:53.160 --> 0:05:55.920 strong growth in credit to remain resilient. We just kind 0:05:55.920 --> 0:05:58.080 of just need trend or slightly above trend. And I 0:05:58.080 --> 0:06:01.240 think there's really a wide chasm between a recessionary outcome 0:06:01.600 --> 0:06:04.240 and the current pace of above trend or slightly above 0:06:04.279 --> 0:06:06.200 trend growth, and that we live in that space in between. 0:06:06.400 --> 0:06:09.360 United the recent round trip, how symmetrical was the widening 0:06:09.480 --> 0:06:11.200 versus the tightening beneath the surface? 0:06:11.520 --> 0:06:12.560 What led and what lacks? 0:06:12.880 --> 0:06:17.800 So actually a kind of higher beta cyclical sectors led 0:06:17.880 --> 0:06:20.840 the tightening, but it wasn't uniform. For example, triple c's 0:06:20.839 --> 0:06:25.480 are still underperforming the overall broader index tightening. But this 0:06:25.520 --> 0:06:29.160 has been almost a low quality rally in that high 0:06:29.200 --> 0:06:32.599 yield and leverage loans have been outperforming their investment grade 0:06:32.640 --> 0:06:35.440 peers over the past few months. That's continued the year 0:06:35.440 --> 0:06:37.200 to date trend. And so for all of them talk 0:06:37.200 --> 0:06:40.080 about concerns about downside risks, I think investors are making 0:06:40.080 --> 0:06:42.520 the calculus that are saying, Okay, I'm entering at pretty 0:06:42.520 --> 0:06:45.440 attractive all in yields. Growth is slowing, but it's not slow, 0:06:45.880 --> 0:06:48.760 and therefore the outcome for corporate credit investors can be 0:06:48.800 --> 0:06:49.600 quite resilient in. 0:06:49.520 --> 0:06:51.520 That BACKDROPD what are you personally advocating for? 0:06:51.640 --> 0:06:53.880 Yeah, so, I think there have been a couple act 0:06:53.880 --> 0:06:57.120 allocation shifts that have been super relevant. The first and 0:06:57.160 --> 0:06:59.080 foremost has been the trade off between high ode and 0:06:59.120 --> 0:07:02.760 leverage loans. For most of this year, that equation was 0:07:03.000 --> 0:07:05.040 very clearly in favor of leverage loans because of the 0:07:05.120 --> 0:07:07.479 rate backdrop. I think it's now shifted more neutral between 0:07:07.520 --> 0:07:10.920 hyold and leverage zones. That's one. Two, the recent volatility 0:07:10.960 --> 0:07:13.720 has showed us how quickly the market can change. That's 0:07:13.800 --> 0:07:16.320 especially true for the barrowers that may have found that 0:07:16.320 --> 0:07:18.080 they were locked out of the market, even just for 0:07:18.120 --> 0:07:19.880 a short period of time. So I think we've seen 0:07:19.880 --> 0:07:23.280 more interest from investors on kind of private capital, something 0:07:23.320 --> 0:07:25.680 that's not at the whim of the public market volatility. 0:07:25.880 --> 0:07:28.080 And Then three, I still like moving down in quality 0:07:28.080 --> 0:07:30.400 within the investment grade spectrum. I think one of the 0:07:30.480 --> 0:07:33.680 key developments since the pandemic is that that cliff between 0:07:33.720 --> 0:07:36.400 downgraded from IG to high yield isn't as severe as 0:07:36.440 --> 0:07:38.800 maybe we would have thought several months ago. And so 0:07:38.880 --> 0:07:41.240 if you can own triple B rated firms that have 0:07:41.280 --> 0:07:43.680 a strong incentive to stay investment grade, and even if 0:07:43.680 --> 0:07:46.360 they do fall to highyield, will likely be supported and bought. 0:07:46.520 --> 0:07:47.560 I actually like that, So. 0:07:47.520 --> 0:07:50.800 I think within IG moving down in quality makes a 0:07:50.840 --> 0:07:52.920 lot of sense. Within high yield, I would not go 0:07:53.000 --> 0:07:54.760 all the way down in quality to that triple C 0:07:54.880 --> 0:07:57.560 cohort because they've likegged when you say the corporate credit 0:07:57.680 --> 0:08:01.640 reaction to the cuts is more important aka normalization or easiness, they're. 0:08:01.480 --> 0:08:05.400 Actually seeing the deterioration in the economy. That scenario is 0:08:05.440 --> 0:08:08.440 not reflected right now in valuations. What would it take 0:08:08.640 --> 0:08:09.800 for that scenario. 0:08:09.360 --> 0:08:11.040 To be reflected? You're exactly right. 0:08:11.160 --> 0:08:13.600 I think three sixteen is where we're on the Hyaled index. 0:08:13.640 --> 0:08:16.960 That's nowhere near even the post financial crisis average. So 0:08:17.040 --> 0:08:19.160 what we are baking in at the moment is truly 0:08:19.400 --> 0:08:22.520 a pretty benign outcome for credit. I think, as Stephanie mentioned, 0:08:22.600 --> 0:08:25.320 you would need to see deterioration in the labor market, 0:08:25.600 --> 0:08:28.400 the growth backdrop that is consistent with the weakness that 0:08:28.440 --> 0:08:31.600 we saw in July, such that it kind of spooks 0:08:31.640 --> 0:08:34.920 credit investors that growth is not even at trend, but 0:08:35.000 --> 0:08:38.880 actually meaningfully below. That's really the critical factor. But again, 0:08:39.160 --> 0:08:42.240 so long as we have trend growth, companies have shown 0:08:42.240 --> 0:08:44.440 that they've had an ability to navigate this cost of 0:08:44.440 --> 0:08:48.640 capital environment, and so really it's an extreme downside risk 0:08:48.679 --> 0:08:51.559 to growth now. I think the important thing for investors, though, 0:08:51.559 --> 0:08:53.000 is there is a lot of room for spreads to 0:08:53.040 --> 0:08:56.080 widen in such a scenario where we're kind of nearing 0:08:56.200 --> 0:08:58.920 kind of not recessionary levels, but a sharp slowdown. I 0:08:58.920 --> 0:09:01.760 think you could see spreads five fifty six hundred from 0:09:01.760 --> 0:09:03.720 three to sixteen. So there's a lot of room to wipe. 0:09:03.840 --> 0:09:05.240 You've got your finger in the pulse of this market. 0:09:05.280 --> 0:09:07.360 I think an interesting question for Friday would be how 0:09:07.440 --> 0:09:10.000 sensitive this market would be too stronger than expected dates 0:09:10.120 --> 0:09:13.000 versus weaker than expected dates. What would generate the launcher move. 0:09:13.080 --> 0:09:15.160 I think weaker than expected data because it feels to 0:09:15.160 --> 0:09:17.640 me like stronger than expected data is almost priced in 0:09:17.720 --> 0:09:21.400 at the moment I realized that GDP can be revised 0:09:21.400 --> 0:09:23.720 in third quarters tracking at two percent, so I would 0:09:23.720 --> 0:09:26.439 say that's not extremely above trend. But we've had resilient 0:09:26.440 --> 0:09:28.880 growth all year, and I think the consumer has surprised 0:09:28.880 --> 0:09:31.760 to the upside in terms of spending, albeit bifurcated. 0:09:31.400 --> 0:09:32.439 Just quickly on supplying. 0:09:32.440 --> 0:09:34.280 You mentioned it the amount of supply we've had in 0:09:34.280 --> 0:09:36.480 the last twenty four hours, the announcement of companies bringing 0:09:36.559 --> 0:09:39.160 debt to market. Are they operating from a position of 0:09:39.160 --> 0:09:40.880 strength or weakness or stress? 0:09:41.679 --> 0:09:45.080 A position of proactivity and strength. And Stephanie had mentioned 0:09:45.160 --> 0:09:48.880 kind of capital spending slowing, but capital management has not slowed, 0:09:49.000 --> 0:09:51.120 and so if companies I think are being proactive in 0:09:51.200 --> 0:09:53.480 terms of capital management in the balance sheet as they 0:09:53.640 --> 0:09:54.760 moved towards later in the year. 0:09:54.760 --> 0:09:56.720 And the event risk a clinic as always, it's got 0:09:56.760 --> 0:09:57.040 to see it. 0:09:57.120 --> 0:09:59.240 Thank you, AMOUDA line a black croc with the lysis 0:09:59.280 --> 0:10:02.320 in the credit market use where the Barclay's Energy Investor 0:10:02.320 --> 0:10:05.079 Conference kicking off today in New York. Baker Hugh CEO 0:10:05.160 --> 0:10:08.720 Lorenzo similarly attending, following a better than expected earnings report 0:10:08.920 --> 0:10:11.440 earlier this summer, the company seeing high demand for its 0:10:11.480 --> 0:10:14.800 drilling services and equipment in international markets and place to 0:10:14.880 --> 0:10:17.679 say that. Joining us around the table is Lorenzo. Good morning, sir, 0:10:17.960 --> 0:10:19.959 great to be with you. Let's talk about the outlook. 0:10:19.960 --> 0:10:22.679 You raised the midpoint of that outlook, competitors did not 0:10:23.200 --> 0:10:26.439 a similar story with competitors, though, was this better international 0:10:26.440 --> 0:10:29.880 bankdrop compared to say, what's happening domestically? What explains that 0:10:29.960 --> 0:10:31.440 divide does emergent right now? 0:10:32.600 --> 0:10:34.720 I think, first of all, as you look at Baker Hughes, 0:10:34.960 --> 0:10:37.800 the strength of our portfolio is much broader than just 0:10:37.880 --> 0:10:41.280 oil field services, and so as you look at the 0:10:41.280 --> 0:10:43.800 results that we posted in second quarter and also the 0:10:43.840 --> 0:10:47.360 increase in guidance, it's really based on that total portfolio 0:10:47.520 --> 0:10:52.040 capability that we have that extends into rotating equipment, compression 0:10:52.480 --> 0:10:55.240 and industrial sectors as well. As you look at the 0:10:55.240 --> 0:10:59.520 international markets, again, they are going to continue to grow, 0:11:00.000 --> 0:11:01.720 and again we said at the beginning of the year 0:11:02.120 --> 0:11:05.840 we would see high single digit growth in the international markets. 0:11:06.120 --> 0:11:08.640 We retain that view as we go into the second half, 0:11:08.880 --> 0:11:11.400 and as we go into twenty twenty five, the growth 0:11:11.400 --> 0:11:14.320 will still be there, it will decelerate, and it's really 0:11:14.400 --> 0:11:17.760 driven by the demand that you're seeing internationally. When you 0:11:17.800 --> 0:11:20.920 look at the exports, for example, from Saudi Arabia, a 0:11:20.960 --> 0:11:24.160 lot of that goes to other countries, very little comes 0:11:24.200 --> 0:11:28.679 into North America or goes into the developed marketplace. It 0:11:28.760 --> 0:11:32.400 really is a developing market aspect, and the growing population 0:11:32.840 --> 0:11:35.679 and demand for energy globally is increasing. 0:11:35.840 --> 0:11:37.640 Can you talk to us about the headwinds domestically and 0:11:37.640 --> 0:11:39.160 where they're coming from? Is it off the back of 0:11:39.200 --> 0:11:42.240 the consolidation we've seen, we see more careful spending. Is 0:11:42.240 --> 0:11:44.120 it off the back and lower prices? What's driving it? 0:11:45.120 --> 0:11:48.920 There's definitely a lot of the aspects of consolidation that 0:11:48.960 --> 0:11:52.600 have taken place. There's efficiency also that you're seeing within 0:11:52.679 --> 0:11:57.240 the production which has enabled production to stay relatively flat 0:11:57.320 --> 0:12:01.400 and increasing in some cases. And so domestically, I think 0:12:01.440 --> 0:12:04.080 again we continue to see weakness as we look at 0:12:04.080 --> 0:12:07.199 the second half of twenty twenty four and then also 0:12:07.240 --> 0:12:09.880 in twenty twenty five, really looking at North America to 0:12:09.920 --> 0:12:13.640 be flatish. The gas market may be increasing somewhat, but 0:12:14.000 --> 0:12:18.839 North America is really the operators are being very pragmatic 0:12:18.880 --> 0:12:21.400 with their balance sheet, and again, capital discipline is the 0:12:21.440 --> 0:12:22.040 name of the game. 0:12:22.320 --> 0:12:24.840 Yeah, you need a lot less capital now to produce 0:12:24.960 --> 0:12:27.400 even more oil than you had in the past. But 0:12:27.480 --> 0:12:29.079 you think it's going to be flat. Some of the 0:12:29.200 --> 0:12:32.320 numbers we've run actually see thirteen point nine million barrels 0:12:32.320 --> 0:12:35.360 a day coming from North America and then fourteen in 0:12:35.440 --> 0:12:38.640 twenty twenty five. Do you think that's an accurate trajectory. 0:12:39.440 --> 0:12:42.680 Again, if you look at between thirteen point nine and fourteen, 0:12:43.240 --> 0:12:45.400 you're looking at a very slight difference, and again it's 0:12:45.440 --> 0:12:49.560 driven by the efficiency. It's very transactional in North America. 0:12:49.840 --> 0:12:51.760 So I think it's early to call right now and 0:12:51.800 --> 0:12:54.880 will continue to monitor it. Baker Hughes is much more 0:12:54.880 --> 0:12:58.640 focused on the production side and also the chemical side, 0:12:58.720 --> 0:13:01.400 and I think what we are seeing is really a 0:13:01.440 --> 0:13:06.760 focus on existing wells and also improving recovery rates from 0:13:06.800 --> 0:13:11.160 existing wells, and that's where the mature assets solutions that 0:13:11.200 --> 0:13:15.079 we provide actually have a huge opportunity. And it's actually 0:13:15.160 --> 0:13:20.080 important to remember seventy percent of the world's production comes 0:13:20.120 --> 0:13:23.200 from mature wells, and that's a well that's been in 0:13:23.240 --> 0:13:26.360 operation for over twenty five years or has fifty percent 0:13:26.400 --> 0:13:30.760 of its reserve depleted. If you're able to increase the 0:13:30.800 --> 0:13:34.640 reserve recovery by one percent, you're going to add two 0:13:34.640 --> 0:13:38.120 to three years of the production required globally. So there's 0:13:38.160 --> 0:13:43.000 a big focus on capital discipline and maximizing the recovery 0:13:43.040 --> 0:13:45.359 rates from the mature assets that are available. 0:13:45.520 --> 0:13:48.319 You also mentioned gas. Can we talk about liquefied natural gas? 0:13:48.320 --> 0:13:51.679 Because yesterday we actually saw the Energy Department go ahead 0:13:51.920 --> 0:13:56.800 with an export license. Because the Biden mormonitorium on the 0:13:56.960 --> 0:14:00.560 export license, the courts have pushed back. Is that a 0:14:00.600 --> 0:14:03.400 sign that potentially we could see more LERG come online. 0:14:04.240 --> 0:14:06.840 First of all, very pleased that the license was given 0:14:06.840 --> 0:14:09.920 and congratulations to the team there. I think as you 0:14:09.960 --> 0:14:15.760 look at the global expectations, it's that the monitorium actually 0:14:15.800 --> 0:14:19.000 ceases in twenty twenty five. As you look at the LNG, 0:14:19.200 --> 0:14:23.640 demand is expected to increase. We've predicted that by twenty 0:14:23.760 --> 0:14:27.000 thirty we need an installed based capacity of eight hundred 0:14:27.000 --> 0:14:31.200 million tons per annum and the US can contribute to that. 0:14:31.200 --> 0:14:34.200 That being said, you know, you're never sure until it's done. 0:14:34.440 --> 0:14:37.800 And international projects are continuing to go forward as well, 0:14:38.000 --> 0:14:41.520 so the LNG will be available, and hopefully the United 0:14:41.560 --> 0:14:45.160 States also participates as it's got plenty of gas that 0:14:45.240 --> 0:14:45.960 it can explore. 0:14:46.000 --> 0:14:48.040 A big focus on this program over the last I 0:14:48.080 --> 0:14:50.280 would say six months or so, it has been the 0:14:50.320 --> 0:14:52.280 burden that's going to emerge on the energy grid in 0:14:52.280 --> 0:14:55.160 this country in the next several years. Every single day 0:14:55.200 --> 0:14:58.280 we talk about Nvidia and Capex spend coming from some 0:14:58.400 --> 0:15:02.720 major tech players, spend money throwing money at data centers. 0:15:03.120 --> 0:15:05.280 Can you walk us through just the scale of demand 0:15:05.400 --> 0:15:08.360 you're expecting to see and what you're hearing from some 0:15:08.440 --> 0:15:10.880 of these utility providers and some of these companies, these 0:15:10.880 --> 0:15:14.680 tech firms and the need for off grid solutions that 0:15:14.720 --> 0:15:17.280 you can provide. How big is that growth opportunity for you? 0:15:18.120 --> 0:15:21.360 It is a significant growth opportunity. And I think you 0:15:21.400 --> 0:15:24.800 said earlier this isn't just about today. It is a 0:15:24.840 --> 0:15:27.000 long term trend. If you look at some of the 0:15:27.040 --> 0:15:31.400 statistics out there Generative AI, the consumption of electricity by 0:15:31.480 --> 0:15:35.360 data centers, it's expected to double by twenty twenty six. 0:15:35.640 --> 0:15:39.280 That's going from two percent to four percent of the 0:15:39.480 --> 0:15:43.000 electricity usage. Think about that. That's the same amount of 0:15:43.000 --> 0:15:46.880 electricity that Japan uses on an annual basis. So from 0:15:47.080 --> 0:15:51.480 an installed capacity perspective, it's a significant increase. What do 0:15:51.560 --> 0:15:56.160 we have as a challenge grid stability? And also I 0:15:56.200 --> 0:15:59.200 live in Houston today, I have power outages on a 0:15:59.200 --> 0:16:03.920 continuous basis, and we need off grid solutions and that's 0:16:03.960 --> 0:16:08.840 where distributed power comes in. That's where opportunities for modular 0:16:09.040 --> 0:16:13.800 capabilities of gas turbans that are packaged, smaller off grid, 0:16:13.920 --> 0:16:17.880 and they provide the stability to the data centers for 0:16:18.000 --> 0:16:23.320 ongoing operations, because the other important aspect is intermittency is 0:16:23.400 --> 0:16:27.000 important because a data center can't go down, so you 0:16:27.080 --> 0:16:30.320 need to have that consistency of power generation. 0:16:30.400 --> 0:16:32.520 What does growth look like in this area currently and 0:16:32.560 --> 0:16:34.360 what will growth look like in the years to come 0:16:34.400 --> 0:16:37.160 for you exclusively specifically for us. 0:16:37.000 --> 0:16:39.760 If you look at the industrial gas turbans that we 0:16:39.840 --> 0:16:43.880 provide significant opportunity. Just look at the ratio of the 0:16:43.920 --> 0:16:47.600 increase on the electricity utilization from two to four percent. 0:16:48.080 --> 0:16:51.680 So we're looking and working with the hyperscalers, looking at 0:16:51.720 --> 0:16:55.040 the ecosystem, and we're looking at the opportunity of mini 0:16:55.040 --> 0:16:57.120 gas turbans being sold into this market. 0:16:57.240 --> 0:16:59.560 What's the overall contribution to your revenue mixed do you 0:16:59.640 --> 0:17:01.480 expect to come from that in the next. 0:17:01.440 --> 0:17:02.160 Say several years. 0:17:02.200 --> 0:17:04.040 The reason I asked that question is we've seen a 0:17:04.080 --> 0:17:06.760 big rally in utility companies in line with the rally 0:17:06.800 --> 0:17:09.040 we've seen in AI firms. And if we're to sit 0:17:09.080 --> 0:17:11.600 here today and think about the changing characteristics of your stock, 0:17:12.040 --> 0:17:14.800 I need to know what the contribution from that area 0:17:14.840 --> 0:17:16.560 would be to the overall top bottom line. 0:17:16.600 --> 0:17:18.000 What's that going to look like in years. 0:17:17.760 --> 0:17:20.239 To come as we look at it, and again, this 0:17:20.320 --> 0:17:23.720 could be from five hundred megawatts to one point five 0:17:23.760 --> 0:17:25.560 gig watts, and that's what we're looking at from a 0:17:25.560 --> 0:17:29.520 scaling perspective, and again from a dollar perspective, it's going 0:17:29.600 --> 0:17:32.719 to range based on five hundred million to potentially larger, 0:17:32.920 --> 0:17:34.920 and it's going to come over a series of years. 0:17:35.000 --> 0:17:35.959 As we go forward. 0:17:36.240 --> 0:17:39.199 We look at it as a major new area that 0:17:39.280 --> 0:17:43.080 we can focus on. We've participated before and we've played 0:17:43.200 --> 0:17:46.080 in distributed power generation, and we look at this as 0:17:46.080 --> 0:17:47.680 a growth factor for Baker Hues. 0:17:47.920 --> 0:17:50.520 A big concern to the US energy industry has always 0:17:50.520 --> 0:17:53.760 been these cyber attacks, whether it's colonial, what'sly recently happened 0:17:53.800 --> 0:17:56.280 with Halliburton. Have you seen any impact. 0:17:57.200 --> 0:18:01.480 So we haven't seen any impact. Again, though we're very vigilant. Obviously, 0:18:01.560 --> 0:18:05.280 cybersecurity is a big concern for everybody and we're all 0:18:05.320 --> 0:18:08.600 taking the measures accordingly to put the controls in place 0:18:08.720 --> 0:18:11.320 and very much vigilant on a daily basis. 0:18:11.680 --> 0:18:14.960 What does that look like meaning being vigilant, is that 0:18:15.080 --> 0:18:16.919 having the proper systems in place. Is there a lot 0:18:16.920 --> 0:18:19.720 of communication with the US government. 0:18:20.560 --> 0:18:23.679 There's definitely a communication that takes place across the sector, 0:18:23.840 --> 0:18:28.119 and there's also trade associations that discuss it. From a 0:18:28.160 --> 0:18:31.040 standpoint of vigilance, it means making sure that we're doing 0:18:31.119 --> 0:18:34.240 our own testing on our own systems, making sure that 0:18:34.280 --> 0:18:36.760 we're putting in the controls, we're patching with the new 0:18:36.800 --> 0:18:41.000 security that's available, and also doing our own fishing exercises. 0:18:41.359 --> 0:18:44.800 And so we've got a team that continuously Red team, 0:18:44.880 --> 0:18:47.840 Blue team, and we test our own systems. But I 0:18:48.080 --> 0:18:50.800 also say, you can never be too careful, and you've 0:18:50.800 --> 0:18:52.960 got to stay vigilant, and you've got to be prepared. 0:18:53.040 --> 0:18:54.600 You've got a really busy day ahead of you before 0:18:54.600 --> 0:18:56.840 we let you go. This conversation's got to time arise 0:18:56.920 --> 0:19:00.000 in multiple decades, the time horizing of this market. The moment, 0:19:00.080 --> 0:19:02.480 about five minutes, can we just reflect on yesterday's price action? 0:19:02.560 --> 0:19:05.320 What's going on include energy markets at the moment. It's 0:19:05.359 --> 0:19:08.400 a real tangible concern from your side around demand in China. 0:19:08.400 --> 0:19:09.119 What's it all about. 0:19:10.240 --> 0:19:12.440 I think you're always going to have volatility on a 0:19:12.520 --> 0:19:14.720 daily basis, and it's something we deal with in the 0:19:15.240 --> 0:19:18.720