WEBVTT - SailPoint IPO, Deere Earnings 0:00:02.720 --> 0:00:10.520 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.480 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:18.520 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.600 --> 0:00:21.800 Listen on demand wherever you get your podcasts, or watch 0:00:21.920 --> 0:00:23.040 us live on YouTube. 0:00:23.960 --> 0:00:27.200 Happy Thursday, Everybody, I'm Alex ste alongside normal Linda Paulsweeni 0:00:27.320 --> 0:00:27.840 is off today. 0:00:27.880 --> 0:00:29.320 This is Bloomberg Intelligence Radio. 0:00:29.360 --> 0:00:31.440 We bring you all the top news and business, economics 0:00:31.440 --> 0:00:34.000 and finance through our lens of our Bloomberg Intelligence folks. 0:00:34.000 --> 0:00:36.200 They cover two thousand companies and one hundred and thirty 0:00:36.200 --> 0:00:39.159 industries all around the world. We also keep our pulse 0:00:39.440 --> 0:00:41.760 on the market in all different forms, and today it 0:00:41.840 --> 0:00:46.960 is about the IPO market. Sale point is ipoing today 0:00:47.080 --> 0:00:50.600 we're waiting for that first trade. They received orders for 0:00:50.720 --> 0:00:53.960 more than twenty times shares available. This is according to 0:00:53.960 --> 0:00:57.200 people familiar with the matter, and they also upped their 0:00:57.240 --> 0:01:00.520 IPO range as well, raising about one point three to 0:01:00.560 --> 0:01:03.280 eight billion dollars shares. Are looking to open about twenty 0:01:03.280 --> 0:01:06.199 five dollars to share, so hire them that twenty three. 0:01:06.400 --> 0:01:08.240 So we we're lucky that we have the CEO of 0:01:08.240 --> 0:01:11.600 sale point Technologies with us Mark McLain, he joins us. 0:01:11.640 --> 0:01:14.240 Now walk me through. First of all, congrats. 0:01:14.440 --> 0:01:16.600 IPOs are always a really big day and a ton 0:01:16.640 --> 0:01:19.240 of work, so nice job getting that over the finish line. 0:01:19.520 --> 0:01:23.440 But how does this IPO mesh with your long term 0:01:23.520 --> 0:01:24.400 vision for the company? 0:01:25.120 --> 0:01:27.080 Well, I think in general, we've tried to stay focused 0:01:27.120 --> 0:01:30.160 as a business on building great business with our customers 0:01:30.280 --> 0:01:30.960 and winning. 0:01:30.680 --> 0:01:31.240 In the market. 0:01:31.319 --> 0:01:33.640 In some ways, what happens in the financial ownership of 0:01:33.680 --> 0:01:35.760 the business matters a lot, but it doesn't actually affect 0:01:35.800 --> 0:01:37.920 our day to day lives, if you will, and finding 0:01:38.000 --> 0:01:41.600 and securing customers and making them successful, that's certainly always 0:01:41.600 --> 0:01:44.000 our focus. We do think though, that the IPO gets 0:01:44.040 --> 0:01:45.880 us back out in the public eye a little more. 0:01:46.240 --> 0:01:48.680 The importance of what we do and what's called identity 0:01:48.720 --> 0:01:52.840 security is raising an awareness and importance to the large 0:01:52.840 --> 0:01:55.400 companies all around the world that we typically serve, and 0:01:55.480 --> 0:01:56.920 this will help with our visibility. 0:01:56.960 --> 0:01:59.280 It'll give us future fuel to grow the business. 0:02:00.000 --> 0:02:01.920 We've had a great run as a private company with 0:02:02.000 --> 0:02:02.600 Toma Bravo. 0:02:02.920 --> 0:02:04.000 Some folks know this. 0:02:04.080 --> 0:02:06.720 We were public before and before that we were runed 0:02:06.720 --> 0:02:07.360 by Toma Bravo. 0:02:07.400 --> 0:02:09.240 It's a little bit of an interesting. 0:02:08.800 --> 0:02:13.160 Story of a PE backed IPO, same PE backed IPO again. 0:02:13.280 --> 0:02:15.519 But all the while, our focus continues to be on 0:02:16.000 --> 0:02:18.400 doing great things for our customers and helping them secure 0:02:18.440 --> 0:02:20.640 their enterprises with identity well. 0:02:20.680 --> 0:02:24.080 Cyber threats have continued to increase. How does sale points 0:02:24.080 --> 0:02:26.160 stay ahead in identity security? 0:02:27.040 --> 0:02:29.519 Yeah, what's happened in the world of cybersecurity. There's a 0:02:29.560 --> 0:02:32.440 lot of shifting things in the landscape. A simple metaphor 0:02:32.480 --> 0:02:35.320 that sometimes helps folks is that the bad actors are 0:02:35.320 --> 0:02:37.480 the attackers. Not so long ago, their metaphor was to 0:02:37.520 --> 0:02:40.240 break the glass and grab the jewels and run. Quite 0:02:40.240 --> 0:02:42.480 often now, and we've seen this in breach reports, they'll 0:02:42.560 --> 0:02:44.519 try to sneak in the back of the jewelry store, 0:02:44.760 --> 0:02:47.120 poses an employee and eventually try to quote clean out 0:02:47.160 --> 0:02:50.000 the jewelry store. And that's because they've been able to impersonate, 0:02:50.040 --> 0:02:53.040 so to speak, an employee, and that's a compromised identity. 0:02:53.240 --> 0:02:55.600 What we do is help businesses. 0:02:55.280 --> 0:02:58.400 Typically mid to large enterprises around the world, focus on 0:02:58.840 --> 0:03:02.280 understanding all the identities they have, both human and non human, 0:03:02.520 --> 0:03:04.959 all the data they care about protecting, and making sure 0:03:05.000 --> 0:03:07.240 that at any point in time, all of those connections 0:03:07.280 --> 0:03:10.160 are secure. It's a pretty complex problem at scale. 0:03:10.520 --> 0:03:12.560 Who are your competitors right now and how can you 0:03:12.600 --> 0:03:13.400 help differentiate? 0:03:14.120 --> 0:03:17.160 Yeah, the truth is we've got more I like to 0:03:17.200 --> 0:03:19.839 call them PowerPoint competitors than real competitors. I mean, there's 0:03:19.840 --> 0:03:22.119 folks that are talking about this space quite a bit, 0:03:22.400 --> 0:03:23.960 but if you look at what happens day to day 0:03:23.960 --> 0:03:25.920 when we're out in the market, there's very few companies 0:03:25.960 --> 0:03:28.520 that are capable of delivering the success at scale that 0:03:28.560 --> 0:03:31.480 we have. We're fortunate to be in almost half of 0:03:31.520 --> 0:03:34.000 the Fortune five hundred, about a quarter of the Fortune 0:03:34.000 --> 0:03:38.000 two thousand, and they're generally throwing out older legacy products 0:03:38.040 --> 0:03:40.360 like from Oracle and IBM. There really hasn't been a 0:03:40.360 --> 0:03:43.240 strong challenger to us in this key space, and that's 0:03:43.640 --> 0:03:45.720 part of what I think has gotten investors excited about 0:03:45.720 --> 0:03:47.680 our potential for long term, durable growth. 0:03:48.480 --> 0:03:51.440 So another thing that's been in conversation, I'm curious, how 0:03:51.480 --> 0:03:53.800 are you all planning to address your debt load? 0:03:54.560 --> 0:03:56.840 Well, you know, one of the key use of proceeds 0:03:56.840 --> 0:03:58.240 will be to pay down a lot of the debt. 0:03:58.280 --> 0:04:00.960 We actually had a little more debt about six months ago. 0:04:01.360 --> 0:04:03.480 Our backers home a Bravo chose to take some of 0:04:03.520 --> 0:04:06.040 that debt out with equity before the IPO, and we'll 0:04:06.160 --> 0:04:08.000 use the bulk of the proceeds from the IPO to 0:04:08.000 --> 0:04:10.760 pay that debt down significantly, putting ourselves in what they 0:04:10.800 --> 0:04:13.880 call a debt zero, meaning we'll have as as much 0:04:13.920 --> 0:04:16.120 more cash as we have debt, which from a financial 0:04:16.120 --> 0:04:18.240 profile standpoint makes investors really happy. 0:04:19.000 --> 0:04:20.960 Why do you guys decide to do the IPO? Now, 0:04:21.040 --> 0:04:23.000 we were just talking about IPOs in general, and I 0:04:23.080 --> 0:04:26.400 was talking about an LNG export that went public at 0:04:26.480 --> 0:04:29.800 seemingly a great time and it didn't go so well. 0:04:29.839 --> 0:04:32.679 So I wonder why strategically you guys chose right now. 0:04:33.200 --> 0:04:35.960 Well, we've been watching markets as everyone has, and I 0:04:36.000 --> 0:04:38.160 think we were really pleased with the progress of the business. 0:04:38.160 --> 0:04:39.839 We went private about two and a half years ago. 0:04:40.440 --> 0:04:42.240 As part of our S one filing, we talked about 0:04:42.279 --> 0:04:44.080 the fact that as of our third quarter last year, 0:04:44.080 --> 0:04:46.400 we'd grown the business at thirty percent, We've been able 0:04:46.400 --> 0:04:49.800 to deliver non gap margins of about fourteen percent and 0:04:49.880 --> 0:04:52.560 had a strong sense that durable growth would continue. And 0:04:52.600 --> 0:04:53.359 that was at scale. 0:04:53.440 --> 0:04:54.120 We're over an eight. 0:04:54.080 --> 0:04:56.920 Hundred million dollar revenue business now and investors don't see 0:04:56.920 --> 0:04:59.960 a lot of profiles of growth at scale with profit, 0:05:00.160 --> 0:05:00.880 And I think. 0:05:00.760 --> 0:05:02.600 Our sense was that the markets were kind of. 0:05:02.560 --> 0:05:05.760 Hungry, so to speak, for new issuances, particularly I think 0:05:05.800 --> 0:05:09.159 in technology security has been considered a really good market 0:05:09.160 --> 0:05:09.840 for a long time. 0:05:09.880 --> 0:05:12.000 I think we looked like a company. 0:05:11.640 --> 0:05:14.880 That would fit many of their requests, so to speak, 0:05:14.880 --> 0:05:17.360 for a durable growth company in the security space. 0:05:17.839 --> 0:05:22.040 How are regulatory shifts driving demand for identity security solutions 0:05:22.160 --> 0:05:25.040 as enterprises continue shifting to the cloud? How a sale 0:05:25.080 --> 0:05:27.120 point evolving its offerings? 0:05:27.400 --> 0:05:30.440 Well, it's interesting you mentioned that regulatory is indeed part 0:05:30.480 --> 0:05:33.040 of the landscape we're addressing. Sometimes, you know, audits or 0:05:33.040 --> 0:05:34.880 the threat of failed audits or not being able to 0:05:35.000 --> 0:05:38.520 comply with regulations is a driver. But increasingly our space 0:05:38.600 --> 0:05:41.840 is less about that. Not it hasn't moved away from that, 0:05:42.040 --> 0:05:45.480 but it's less about that than truly securing their data. Again, 0:05:45.520 --> 0:05:48.600 what's happened is this concern that data can be compromised 0:05:48.800 --> 0:05:51.440 through this lens of identity. If a bad actor can somehow, 0:05:51.880 --> 0:05:54.720 you know, get in, break in, steal an identity, or 0:05:55.640 --> 0:05:58.520 in some way get access to data through those identities, 0:05:58.839 --> 0:06:01.120 they can do a lot of damage, so that focus 0:06:01.160 --> 0:06:03.440 on truly protecting the data is really more of an 0:06:03.440 --> 0:06:05.280 issue today than just regulatory compliance. 0:06:05.760 --> 0:06:08.840 Before we let you go, what's it like attracting talent 0:06:09.400 --> 0:06:10.839 right now in the market. 0:06:11.360 --> 0:06:13.800 Well, I'd say attracting talent is never easy in a 0:06:13.880 --> 0:06:16.760 very competitive technology market. I think we're very fortunate at 0:06:16.800 --> 0:06:18.880 sale Point. One of the things that we pay a 0:06:18.920 --> 0:06:21.520 lot of attention to is our culture and our values and. 0:06:21.480 --> 0:06:22.360 How that shows up. 0:06:22.720 --> 0:06:25.080 And as you probably are familiar, a glass Door runs 0:06:25.080 --> 0:06:27.800 around and surveys the world and tries to understand how 0:06:27.839 --> 0:06:31.479 companies are doing. We're super pleased they released those results recently. 0:06:31.520 --> 0:06:34.039 We were number seventeen in the world, and if you 0:06:34.080 --> 0:06:36.440 want to cut it by an interesting factor, we were 0:06:36.520 --> 0:06:39.960 the highest ranked tech company with under five thousand employees 0:06:40.160 --> 0:06:42.480 on glass Door. I think that speaks a lot about 0:06:42.480 --> 0:06:44.280 the kind of culture and the values that we live 0:06:44.279 --> 0:06:47.279 out in our company. It attracts and retains very good talent, 0:06:47.360 --> 0:06:48.359 and we're very fortunate. 0:06:48.760 --> 0:06:50.400 Hey, Mark, we appreciate your time today. 0:06:50.400 --> 0:06:52.040 We look forward to catching up with you again once 0:06:52.040 --> 0:06:54.800 you've had some time to be public. Mark McLain, CEO 0:06:54.960 --> 0:06:58.880 of sale Point Technologies, ipming today on the Nasdaq. Prices 0:06:58.920 --> 0:07:01.000 look to indicate to open it round twenty five at 0:07:01.040 --> 0:07:03.640 iPod about twenty three, so we will keep you updated 0:07:03.839 --> 0:07:06.400 when that stock officially starts trading. 0:07:07.440 --> 0:07:11.120 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:07:11.200 --> 0:07:14.280 weekdays at ten am Eastern on Apple, Cocklay and Android 0:07:14.320 --> 0:07:17.600 Auto with the Bloomberg Business app. Listen on demand wherever 0:07:17.680 --> 0:07:21.000 you get your podcasts, or watch us live on YouTube. 0:07:21.320 --> 0:07:24.600 We're going to move to a conversation with Christopher Chillino. 0:07:24.680 --> 0:07:27.720 He's Bloomberg Intelligence senior US machinery analysts, and he's here 0:07:27.760 --> 0:07:30.400 to talk about Deer earnings. We've got shares of Deer 0:07:30.480 --> 0:07:34.000 down about one point seven percent right now in trading, 0:07:34.040 --> 0:07:36.160 and this is after a report that it is having 0:07:36.200 --> 0:07:40.000 some issues with tough farms economics in focus, Christopher, what 0:07:40.080 --> 0:07:42.720 has really been the broad strokes of what you got 0:07:42.920 --> 0:07:45.560 and gleaned from this earnings report today? 0:07:46.680 --> 0:07:48.840 Yeah, we knew going into the quarter that was going 0:07:48.880 --> 0:07:52.040 to be a pretty ugly print, but these results were really, 0:07:52.160 --> 0:07:55.320 you know, well below even some of the most bearish expectations. 0:07:56.520 --> 0:08:01.360 The company really continues to underproduce retail them and across 0:08:01.360 --> 0:08:03.600 the board to bring down some of the excess inventories 0:08:03.600 --> 0:08:07.200 that the industry has been plagued with. We also sounds 0:08:07.200 --> 0:08:10.320 like some products there were some timing issues, so products 0:08:10.360 --> 0:08:14.240 got pushed out to subsequent quarters, which weighed on the 0:08:15.240 --> 0:08:19.239 one Q performance. Now, Deer did reaffirm its twenty twenty 0:08:19.240 --> 0:08:22.240 five net income outlook, and it certainly seems that we 0:08:22.280 --> 0:08:25.840 are approaching a cyclical trough this year. But just our 0:08:25.880 --> 0:08:28.320 concern lies that you know, earnings may not be fully 0:08:28.360 --> 0:08:31.160 de risked here. You continue to see further softness on 0:08:31.200 --> 0:08:35.760 the LARGEAG side. Used equipment inventories remain somewhat of an overhang. 0:08:36.480 --> 0:08:38.600 Currency headwinds are going to be more pronounced in the 0:08:38.640 --> 0:08:41.880 back half, and really we still have this uncertainty around 0:08:41.920 --> 0:08:44.920 what the US trade policy is going to be and 0:08:44.920 --> 0:08:47.640 and what those retaliatory actions are going to be as well. 0:08:47.720 --> 0:08:50.480 Well, I was going to say they sound relatively confident 0:08:50.520 --> 0:08:52.920 they'll be a trough, but then you add on tariffs. 0:08:52.920 --> 0:08:55.640 How well does that confidence hold up? 0:08:56.720 --> 0:08:59.000 Yeah, I mean that's the million dollar question, right. I mean, 0:08:59.080 --> 0:09:02.680 I would say that AG historically has had a tremendous 0:09:02.720 --> 0:09:06.720 amount of pricing power, and Deer in particular, this is 0:09:07.559 --> 0:09:10.360 a company in a market that even gets positive price 0:09:10.440 --> 0:09:13.800 in down markets. You know, this quarterly sales were down 0:09:13.800 --> 0:09:16.880 over thirty five percent, earnings down significantly, and we were 0:09:16.880 --> 0:09:20.319 still up on pricing. It will add costs, but they 0:09:20.360 --> 0:09:22.160 have a history and the track record of being able 0:09:22.160 --> 0:09:23.120 to pass those through. 0:09:25.240 --> 0:09:27.680 What has really been the concern for investors out of 0:09:27.679 --> 0:09:29.240 this report as they're looking forward? 0:09:30.720 --> 0:09:33.640 Yeah, I think there's two big concerns here. One is, 0:09:33.960 --> 0:09:37.240 you know, the expectation is that, yes, twenty five is 0:09:37.280 --> 0:09:39.679 trough and that we should start to see this recovery 0:09:39.679 --> 0:09:42.760 build into twenty six. But I still think there's a 0:09:42.760 --> 0:09:45.640 lot of uncertainty out there as to what the recovery 0:09:45.679 --> 0:09:50.520 trajectory looks like, just given the uncertainty around trade and tariffs. 0:09:50.600 --> 0:09:52.760 You know, I think we're probably looking at a lower 0:09:52.760 --> 0:09:55.600 for longer type cycle, So maybe we don't get that 0:09:56.360 --> 0:09:59.920 typical acceleration in the first year after a cyclical trough. 0:10:00.240 --> 0:10:02.720 So I think investors are still trying to digest that. 0:10:03.559 --> 0:10:06.040 And then too, you know, the cost side of the equation. 0:10:06.600 --> 0:10:08.480 It certainly seems that costs are going to go up. 0:10:08.800 --> 0:10:10.560 How are they going to mitigate that through some of 0:10:10.600 --> 0:10:13.520 their you know, internal initiatives or even from shifting some 0:10:13.520 --> 0:10:15.319 production around with their footprint. 0:10:15.840 --> 0:10:19.040 I alsom wondering where we are in terms of the 0:10:19.080 --> 0:10:23.600 cyclicality of equipment, Like are our farmers operating on older 0:10:23.640 --> 0:10:25.200 stuff that they're going to have to replace or did 0:10:25.200 --> 0:10:27.559 they already do that, say during the pandemic. So they're 0:10:27.600 --> 0:10:29.240 good for a while, and it's going to take like 0:10:29.320 --> 0:10:32.040 really new high tech products to get them to fork 0:10:32.080 --> 0:10:34.239 over that kind of cash. 0:10:34.280 --> 0:10:36.120 I think we're good for a little bit, a little 0:10:36.120 --> 0:10:38.000 bit of time here. I mean, you have to remember, 0:10:38.480 --> 0:10:41.319 we had you know, three four strong years of growth 0:10:41.440 --> 0:10:45.240 up to the twenty twenty three peak. Yes, twenty four 0:10:45.360 --> 0:10:47.439 was a down year. We were down, you know, fifteen 0:10:47.520 --> 0:10:50.800 sixteen percent in terms of units on high horsepower equipment. 0:10:51.440 --> 0:10:53.959 We're looking at somewhere of a twenty five to thirty 0:10:54.000 --> 0:10:57.520 percent decline in volumes this year. So that's going to 0:10:57.559 --> 0:11:00.480 put us you know, at at low's of you know, 0:11:00.760 --> 0:11:03.400 over the last two decades where we haven't seen before. 0:11:03.440 --> 0:11:07.360 So from these levels, we think there's probably limited downside risk. 0:11:07.440 --> 0:11:10.840 But you know, farmers still have the ability to you know, 0:11:10.880 --> 0:11:13.520 push out some of these replacement purchases at least for 0:11:13.559 --> 0:11:14.400 another few years. 0:11:14.400 --> 0:11:17.440 We think, what do investors really need to see from 0:11:17.480 --> 0:11:20.640 this company to have a bit of a more positive 0:11:20.679 --> 0:11:23.679 outlook and to see them actually bypass their competitors. 0:11:25.280 --> 0:11:29.240 I think you need to see you know, inventories greater 0:11:29.360 --> 0:11:31.800 confidence that we've you know, are starting to see some 0:11:31.920 --> 0:11:35.360 downward movement on inventories. We've seen inventory's peak just these 0:11:35.400 --> 0:11:38.360 past few months. We're just coming down off that peak. 0:11:38.400 --> 0:11:40.640 So I think we need to see more progress on 0:11:40.679 --> 0:11:43.680 the inventory reduction front, not only in the new new equipment, 0:11:43.720 --> 0:11:47.040 but used equipment as well. And then certainly, you know, 0:11:47.360 --> 0:11:50.800 higher crop prices are going to help their customers and 0:11:50.960 --> 0:11:54.240 ultimately drive equipment purchases. So we've seen a little bit 0:11:54.240 --> 0:11:56.679 of a rebound in crop prices here over the last 0:11:56.679 --> 0:11:59.560 three plus months. I think that has you know, spurred 0:11:59.559 --> 0:12:01.440 some op and ism in the space that you know, 0:12:01.520 --> 0:12:05.040 maybe we do return to a growth in twenty twenty six, 0:12:05.760 --> 0:12:08.360 but I think if we continue to see that progress, 0:12:08.440 --> 0:12:11.079 that would certainly, you know, bode well for the company. 0:12:11.240 --> 0:12:14.400 All Right, Chris really appreciated Christopher Cillino, Bloomberg Intelligence Senior 0:12:14.520 --> 0:12:17.360 US machinery analyst, joining us on Deer. 0:12:19.080 --> 0:12:22.760 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:22.840 --> 0:12:25.920 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:25.920 --> 0:12:29.240 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:29.320 --> 0:12:32.400 you get your podcasts, or watch us live on YouTube. 0:12:33.080 --> 0:12:34.720 All right, one of their asset class that's moving. 0:12:34.800 --> 0:12:36.760 Yes, it's definitely a tariff story, but it's also a 0:12:36.800 --> 0:12:39.040 potential end of war in Ukraine. 0:12:39.200 --> 0:12:40.640 Story is oil. 0:12:40.720 --> 0:12:42.720 So oil prices are down by about half a percent, 0:12:42.760 --> 0:12:44.920 but yesterday they got really kicked down the road, down 0:12:44.960 --> 0:12:47.280 by about two and a half percent on a potential 0:12:47.320 --> 0:12:49.880 resolution to the conflict in Ukraine. So I wanted to 0:12:49.880 --> 0:12:52.480 dig more into this with Dan Pickering, chief investment officer 0:12:52.480 --> 0:12:55.480 at Pickering Energy Partners, joining us here. Dan, it's just 0:12:55.520 --> 0:12:57.160 the main question, like how are you guys looking at 0:12:57.160 --> 0:12:58.880 the oil price right now? 0:13:00.960 --> 0:13:03.480 Alex That was a very pregnant pod there, Yeah. 0:13:03.320 --> 0:13:05.840 It was because there are so many things happening. I know, 0:13:06.559 --> 0:13:12.000 so many variables, whether they're political, geopolitical, supply demand. We 0:13:12.080 --> 0:13:16.480 got news today that the IEA International Energy Agency thinks 0:13:16.520 --> 0:13:20.240 that supply and demand is tightening. We have the risk 0:13:20.280 --> 0:13:24.000 of Iranian sanctions, We have a Russia conflict that if 0:13:24.040 --> 0:13:28.000 it concludes, everyone's nervous that well price goes lower because 0:13:28.080 --> 0:13:29.480 Russian production goes higher. 0:13:30.400 --> 0:13:31.439 So many variables. 0:13:31.640 --> 0:13:33.640 The way I think about it, supply and demand is 0:13:34.400 --> 0:13:41.240 generally generally sloppy, not particularly tight. The geopolitical stuff is 0:13:41.360 --> 0:13:43.600 keeping it a little bit tighter. And so I would 0:13:43.600 --> 0:13:47.800 take the current seventy one dollars WTI number for twenty 0:13:47.840 --> 0:13:49.880 five I'd put in the bank if I could get 0:13:49.880 --> 0:13:50.480 it today. 0:13:50.640 --> 0:13:52.280 So, so many things moving right now. 0:13:52.559 --> 0:13:55.080 Where would you say is the best outlook for energy 0:13:55.080 --> 0:13:57.040 investments this year? Gas oil? 0:13:57.280 --> 0:13:57.920 Services? 0:13:58.160 --> 0:13:58.760 Great question? 0:13:58.920 --> 0:14:01.480 Or I think the natural gas is the area that's 0:14:01.480 --> 0:14:05.320 getting better. If you look, particularly in the US, we 0:14:05.440 --> 0:14:10.000 have LNG exports that will rise about five percent of 0:14:10.040 --> 0:14:12.760 total US demand between now and the end of next 0:14:12.800 --> 0:14:16.760 year early twenty twenty seven, and so the market's very 0:14:16.760 --> 0:14:20.600 optimistic that we'll see tightening supply and demand. Natural gas 0:14:20.640 --> 0:14:23.400 prices we're in the twos for most of twenty twenty four, 0:14:23.440 --> 0:14:26.640 they're in the high threes right now. They're forecasts to 0:14:26.640 --> 0:14:28.960 be in the fours next year, could be fives. And 0:14:29.000 --> 0:14:32.240 so natural gas is the hottest area. I would say 0:14:32.720 --> 0:14:37.400 services is probably rig count is probably the weakest because drill, 0:14:37.440 --> 0:14:38.200 baby drill is. 0:14:38.160 --> 0:14:38.880 Not on the table. 0:14:39.720 --> 0:14:42.880 Just to jump in here more headlines coming out. This 0:14:42.960 --> 0:14:46.520 is also from CNBC saying that President Trump's reciprocal tariffs 0:14:46.680 --> 0:14:49.360 I will take effect some months later. So this is 0:14:49.400 --> 0:14:53.840 not a Today's story, just an announcement story today. 0:14:54.480 --> 0:14:55.120 Want we to oh? 0:14:55.160 --> 0:14:58.200 Also another head red headline here, Blue Origin is set 0:14:58.240 --> 0:15:00.440 to cut about ten percent of its work for This 0:15:00.680 --> 0:15:04.040 is Jeff Bezos's back to Blue Origin. That's quite interesting. 0:15:04.040 --> 0:15:07.480 It said to cut about ten percent of its workforce. Okay, Dan, 0:15:07.560 --> 0:15:11.080 there's a lot like you said to unpack, I do 0:15:11.200 --> 0:15:13.240 want to go so Okay. Last year at Sarah Week, 0:15:13.280 --> 0:15:14.840 and for those of you who don't know, Sarah Week 0:15:14.880 --> 0:15:16.680 is when all the energy nerds can mean on Houston 0:15:16.720 --> 0:15:18.320 and they talk about energy for five days and it's 0:15:18.320 --> 0:15:21.640 super awesome. The conversation was, look, you can only own 0:15:21.800 --> 0:15:25.000 one energy stock in your portfolio now maybe two max, 0:15:25.120 --> 0:15:26.760 So like you really got to pick the best of 0:15:26.800 --> 0:15:28.520 the best. And that led to some m and a. 0:15:29.000 --> 0:15:32.560 It also led to really the Kreme de la Crem 0:15:32.600 --> 0:15:36.760 stocks doing better than everybody else. Is that narrative still 0:15:36.800 --> 0:15:38.520 intact or can you own more? 0:15:38.560 --> 0:15:38.840 Now? 0:15:38.960 --> 0:15:40.000 Is it a different world? 0:15:41.080 --> 0:15:44.560 Well, it's definitely a different world. I think that last year, 0:15:44.600 --> 0:15:47.920 the last couple of years, energy has been a bad word, 0:15:47.920 --> 0:15:50.720 and there's been a headwind just kind of around the 0:15:50.720 --> 0:15:54.680 whole space. That headwind's probably turning into a tailwind. Doesn't 0:15:54.720 --> 0:15:58.800 necessarily mean the commodities improve, but I think sentiments clearly improving. 0:16:00.120 --> 0:16:02.280 Not clear to me that money flow toward the energy 0:16:02.320 --> 0:16:05.320 sector is picking up much, and so I think it's 0:16:05.360 --> 0:16:07.880 still a very selective market. I kind of think about 0:16:07.880 --> 0:16:10.960 it as an alpha market, not a beta market right now, 0:16:11.040 --> 0:16:14.360 and I think it will expand over time. But we've 0:16:14.360 --> 0:16:17.360 got this opec oversupply that we've got to deal with 0:16:17.400 --> 0:16:20.760 three million barrels today and all of this geopolitical uncertainty. 0:16:20.840 --> 0:16:23.280 So the winds are better, I don't know that it's 0:16:23.280 --> 0:16:24.800 pulling in investors quite yet. 0:16:25.520 --> 0:16:27.600 So, Dan, you mentioned natural gas as being one of 0:16:27.600 --> 0:16:31.160 the potential best outlooks for the energy investments this year. 0:16:31.560 --> 0:16:35.560 What's the upside case here the commodity or additional exports. 0:16:36.600 --> 0:16:39.400 Yeah, so the exports take a long time to put 0:16:39.400 --> 0:16:43.280 in place, big multi billion dollar projects that take a 0:16:43.320 --> 0:16:47.560 long time to put in place, and so the export pipeline, 0:16:47.560 --> 0:16:50.560 if you will, is pretty set from now until the 0:16:50.880 --> 0:16:54.240 later part of the decade. So the tightness in the 0:16:54.280 --> 0:16:59.240 market comes from those projects. Turning on the fact that 0:16:59.280 --> 0:17:03.000 we haven't been drilling aggressively for either oil or natural gas. 0:17:03.080 --> 0:17:06.560 So the supply sides constrain the demand sides improving. So 0:17:06.640 --> 0:17:09.879 it feels like price is the reaction function here. So 0:17:09.880 --> 0:17:12.720 I'd say that higher price is not more exports, at 0:17:12.800 --> 0:17:13.240 least not in. 0:17:13.160 --> 0:17:15.920 The short room going to oil in the drill baby 0:17:16.000 --> 0:17:20.200 drill scenario. Is it possible for President Trump to lower 0:17:20.240 --> 0:17:23.879 the cost curve enough through deregulation less, say methane tax, 0:17:24.240 --> 0:17:28.639 easing of federal land tax, et cetera, to incentivize more 0:17:28.800 --> 0:17:31.840 drilling even at say seventy or sixty five oil. 0:17:32.240 --> 0:17:32.400 Yeah. 0:17:32.480 --> 0:17:36.119 The one word answer there is no. The industry is 0:17:36.920 --> 0:17:40.159 on a path of capital discipline that says they are 0:17:40.200 --> 0:17:43.360 not going to spend above their cash flows. In fact, 0:17:43.400 --> 0:17:47.400 they're returning capital shareolders aggressively, and so at seventy or 0:17:47.520 --> 0:17:50.800 sixty five dollars a barrel, nobody in the US is 0:17:50.840 --> 0:17:53.159 drilling more alex. What I think that means is we 0:17:53.240 --> 0:17:57.000 have to look to the geopolitical piece of this. Maybe 0:17:57.320 --> 0:17:59.720 price comes down or energy in the US gets cheaper 0:17:59.720 --> 0:18:03.480 because of things that happened in Saudi Arabia, Iran, Russia, 0:18:04.000 --> 0:18:04.680 not the. 0:18:04.680 --> 0:18:06.480 End of like a Ukraine war kind of exactly. 0:18:06.800 --> 0:18:12.160 So there's a big The US government has more flexibility 0:18:12.200 --> 0:18:14.840 on energy policy than has ever had before because we 0:18:14.880 --> 0:18:17.879 are running at record levels of production. We are a 0:18:17.920 --> 0:18:21.240 net exporter, not a net importer, and so the actions 0:18:21.240 --> 0:18:25.040 that happen internationally around oil markets like the Middle East, 0:18:25.040 --> 0:18:28.080 for instance, we've got more flexibility than we've had in 0:18:28.280 --> 0:18:29.200 fifty years. 0:18:29.760 --> 0:18:32.520 Quickly, just off of that whole conversation about President Trump 0:18:32.600 --> 0:18:36.040 wanting drill, baby drill, is that what energy investors want. 0:18:37.280 --> 0:18:42.040 No drill, baby drill turned into oversupplied situation, what we 0:18:42.119 --> 0:18:44.600 call the shale bus that went from twenty fourteen to. 0:18:44.720 --> 0:18:46.720 Baby Yeah, exactly, it was. 0:18:47.040 --> 0:18:50.680 It was quite awful, and so energy investors have pushed 0:18:50.720 --> 0:18:55.000 aggressively for companies to stop drilling, stop growing, stop over 0:18:55.040 --> 0:18:58.879 supplying the market, and instead get more profitable and return 0:18:58.920 --> 0:19:02.359 those profits to CHERYLD. So it will take more than 0:19:02.400 --> 0:19:07.080 a request from the Trump administration for US to see 0:19:07.119 --> 0:19:08.200 an increase in activity. 0:19:08.240 --> 0:19:10.040 All right, Dan, it's really good to see you in person. 0:19:10.520 --> 0:19:12.240 I'll see you in Houston a couple of weeks. That's great, 0:19:12.240 --> 0:19:15.520 all right, Dan Pickering, Chief investment Officer Pickering Energy Partners, 0:19:15.520 --> 0:19:17.960