Energy Sector

[bizaro86]

3 hours ago, Pelagic said:

Out of pure curiosity does anyone know why Exxon uses Moebd instead of the more common formatting of Mboed or mmboed? I figured it was a typo at first but it seems they use it in everything.

 

Exxon does things the Exxon way. Even if there's no practical difference they'll never ever change because that's the Exxon way.

[Stuart D]

1 hour ago, bizaro86 said:

 

Exxon does things the Exxon way. Even if there's no practical difference they'll never ever change because that's the Exxon way.

One of my mates attended an Exxon Christmas party as a +1. Because he was an outsider they made him sit through a safety briefing. The safety briefing was a sermon glorifying The Exxon Way with bookends of the bathrooms & fire exit locations.

[SharperDingaan]

On 12/12/2024 at 8:58 PM, Dalal.Holdings said:

The thesis folks had was when the majors acquire the small shale players (like Exxon and Pioneer), they would show more restraint and rationalize production so that the U.S. supply boom that has driven prices down would end. Looks like Exxon is not going down that route…

 

Lower production costs = higher margins at current prices, and shorter payback periods. At payback periods < 1 year; maintenance capex is self-funding, as current spend has been recovered by year-end; thereafter the well produces at marginal cost, and lowers average production cost across the reservoir (ie: USD 35/bbl). Reduce the depletion rate, find a home for the rising gas/water cut, and that marginal cost production will also continue for quite some time. 

 

Drill baby drill, DOES mean more drilling, but NOT more NET production. Tier 2 inventory is not as prolific as Tier 1, typically depletes faster, and has a higher gas/water cut. To simply maintain an existing production level, the hamster wheel has to speed up, which means more drilling. Drilling technology advancements can slow it down for a time, but it has limitations.

 

The self-fund thing ???  If the payback period is 1 yr, 2024 maintenance capex is 400M, and 2025 maintenance capex is 440M  ... the actual 2025 new cash requirement is only 40M (425-400), and that cash saving can go into debt reduction, buy-back, M&A, dividends, etc.  

 

SD

 

 

 

Edited December 16, 2024 by SharperDingaan

[Spekulatius]

One thing that should be noted is that low energy prices is probably the best way to hurt all those shithole countries that are enemies of the west - Venezuela, Iran, Russia. Those three states run on oil exports and the lower energy prices , the less funds they have to do their things.

 

So besides  benefiting US consumers, low energy prices have incredible geostrategic benefits for the US and the West. It’s even better the US does continue the energy transition (using less oil) while pumping and hence exporting more. Canada should do the same.

 

The idea that reducing oil output would somehow help the green revolution just does not make sense. I think the US should continue to foster the energy transition in a measured way and use less energy but should pump and export more oil to anchor prices (including green energy) at relatively low cost to consumers but also hurt our oil exporting adversary’s.

 

Now China would also benefit from this, but they are already far ahead in the EV transition anyways and use more coal than oil and gas and even that is declining quite a bit.

Not that great for energy stocks,  and very low prices will eventually lead to lower output, but I am pretty sure that oil prices of $60/ barrel would probably not lead to an output decline with current economics in both deep water and shale.

Edited December 25, 2024 by Spekulatius

[Dalal.Holdings]

 

Pretty crazy and reshaping auto oems around the world and will affect energy around the world

[fareastwarriors]

America’s Big Natural-Gas Footprint Is About to Get Even Bigger

[Dalal.Holdings]

2 hours ago, fareastwarriors said:

America’s Big Natural-Gas Footprint Is About to Get Even Bigger

 

Nat gas in the U.S. is amazing because it has been good for everyone except nat gas producers. Just shows what can happen in the energy sector...

[Blake Hampton]

 

https://www.eia.gov/energyexplained/us-energy-facts/images/consumption-by-source-and-sector.pdf

Edited January 1 by Blake Hampton

[Dalal.Holdings]

1 hour ago, Blake Hampton said:

 

https://www.eia.gov/energyexplained/us-energy-facts/images/consumption-by-source-and-sector.pdf

 

 

Imagine what happens when a country like China replaces a good chunk of transportation with EVs...

 

The EU is planning this too...

[lnofeisone]

21 minutes ago, Dalal.Holdings said:

 

 

Imagine what happens when a country like China replaces a good chunk of transportation with EVs...

 

The EU is planning this too...

And where do you suppose the electricity to power these EVs will come from? 

[Spekulatius]

1 hour ago, lnofeisone said:

And where do you suppose the electricity to power these EVs will come from? 

Solar, wind,  LNG maybe even nuclear down the road etc. Certainly not petroleum products.

Edited January 2 by Spekulatius

[Dalal.Holdings]

12 minutes ago, Spekulatius said:

Solar, wind,  LNG maybe even nuclear down the road etc. Certainly not petroleum products.

 

Yeah. Pretty ridiculous argument to think grid power come from crude oil. Even in the U.S. it doesn't--it's cheap cheap (and cleaner) nat gas. Not to mention EVs are more efficient than internal combustion engines where a lot of energy is lost to heat and vibrations.

 

The Chinese are very smartly decoupling their economy from oil. This makes total sense for them because their needing to import vast quantities of oil is one of their core geopolitical vulnerabilities

[lnofeisone]

2 hours ago, Dalal.Holdings said:

 

 

Yeah. Pretty ridiculous argument to think grid power come from crude oil. Even in the U.S. it doesn't--it's cheap cheap (and cleaner) nat gas. Not to mention EVs are more efficient than internal combustion engines where a lot of energy is lost to heat and vibrations.

 

The Chinese are very smartly decoupling their economy from oil. This makes total sense for them because their needing to import vast quantities of oil is one of their core geopolitical vulnerabilities

It's ridiculous to argue that grid power will come from crude oil (though China has some electricity from oil). It's a good thing I didn't make this argument about grid power. Nice jump to conclusions there.

 

A real ridiculous argument is to claim that China is decoupling from oil.  Just about every credible projection shows China's oil (that would include gasoline, naphta, etc.) growing. Even if you remove entirely gasoline demand to make your EV argument, you only remove 25% of oil demand. And gasoline demand in China is still growing and when it starts to decline it is expected to go down by something like 3% annually if they continue their EV adoption (which I think they will if they can overcome some electricity-related challenges). And, you can't remove the gasoline demand because, as I showed you in an earlier message, China is selling a lot of plug-in hybrids that continue to use gasoline. 

 

Maybe on a good day you can argue that China is trying to double from coal with their goal to get to peak carbon by 2030. Chinese electric generation is something like 50% coal today, and it's still growing. I would like to emphasize that coal usage is growing. (Fun exercise: A typical coal plant is 33% efficient. Say your EV is 95% efficient, but your system efficiency is still 33%. It's just a tad bit higher than your ICE engine. So, for China, EVs and their efforts to get to carbon neutrality are like a cart before the horse, but, I guess, it's good to have a cart). 

 

While I'm at it, I am VERY skeptical that China will use LNG for power generation. It's more expensive than their renewables, and it's too volatile. China is fine with having oil as an import because it sees the world awash in oil, and prices are generally stable.

 

So, in the foreseeable future, you'll see China go with wind, solar, and nuclear energy, and they have a very long way to go, replacing all the coal with renewable energy. So it'll be interesting to see the next 5 years. Either there is a breakthrough in battery tech, or China will have to break its carbon peak pledge, especially if it continues with its EV sales (which I think it will). 

 

 

 

[Dalal.Holdings]

The bottom line is that the supply-demand picture for crude oil does not look bullish to me.

 

The China EV story is one I seldom hear discussed by those focused on "energy investing", probably due to incentives

[Blake Hampton]

I personally think fossil fuels are here for the long-term. In just looking at advanced economies, the current technology and infrastructure is nowhere near what's needed for the large transition to renewables. And like I said, this is simply looking at only the advanced economies. There's billions of people around the world that will slowly but surely start demanding more energy.

 

Also I'll add that I do believe in climate change, and I think it's an existential threat that we need to be focusing on. But I really struggle to understand the positions of places, such as California, where they vilify energy companies to such an absurd degree. Maybe we should conduct an experiment where we cut off all their oil and natty supply, and then see what happens.

 

Edited January 11 by Blake Hampton

[dealraker]

24 minutes ago, Blake Hampton said:

I personally think fossil fuels are here to stay for the long-term. In just looking at the more advanced economies, the current technology and infrastructure are nowhere close to what's needed for a large transition to renewables. And like I said, this is only looking at the advanced economies. There are billions of other people around the world that will start slowly but surely demanding more energy over time.

 

I'll add that I do believe in climate change, and I also think it's an existential threat that we need to be focusing on. But I really struggle to understand the positions of places such as California, where they vilify energy companies to such an absurd degree. Maybe we should conduct an experiment where we cut off all their oil and natty supply and see what happens.

Yes.  

[Spekulatius]

11 hours ago, Blake Hampton said:

I personally think fossil fuels are here for the long-term. In just looking at the advanced economies, the current technology and infrastructure are nowhere close to what's needed for a large transition to renewables. And like I said, this is simply looking at only the advanced economies. There are billions of other people around the world that will slowly but surely start demanding more energy.

 

Also, I'll add that I do believe in climate change, and I think it's an existential threat that we need to be focusing on. But I really struggle to understand the positions of places such as California, where they vilify energy companies to such an absurd degree. Maybe we should conduct an experiment where we cut off all their oil and natty supply and see what happens.

Depends on your definition of long term. A lot of things can get done in ten years or twenty years as long as we keep going. people tend to overestimate what can be done in the short term and underestimate what can be done long term.

 

Astor the Chinese, I think two reason for the renewable push is the lead their own industry has in these domains, but also weaning off from oil for national security reasons.

Coal is dirtier, but they can mine it themselves and Aldo import from Australia and Russia so it’s not dependent on a single supply line like the Persian gulf.

[petec]

On 1/2/2025 at 1:37 AM, Dalal.Holdings said:

The Chinese are very smartly decoupling their economy from oil. This makes total sense for them because their needing to import vast quantities of oil is one of their core geopolitical vulnerabilities

 

My interpretation is more that the Ukraine conflict unexpectedly made a lot of Russian gas available cheaply and they're enjoying that. 

 

What they're decoupling from is growth. I'd focus more on that in terms of oil demand.

[fareastwarriors]

Constellation Energy Nears $30 Billion Deal for Calpine

[Pelagic]

Less than ideal for all involved. I have to imagine there will be a fairly quick response in gas prices, particularly in the Midwest where most Canadian oil ends up. Maybe Canada gets serious about building more export capacity and it ends up being a net benefit to Canadian producers.

 

 

 

[bizaro86]

I'm hearing rumblings in Calgary about a production cap if the tariffs apply to crude oil. 

 

Basically limit production to the amount that can be sold at full price to the east/west coast by pipe/rail, plus the amount that the Midwest can't replace from elsewhere. That would keep underlying prices up and force the buyers to pay the tariffs effectively. I have to think if gas prices go up 15-25% in a week in most red states that will put huge political pressure on Trump.

 

Link the production cap to the wcs/wti differential - as long as it stays low and the buyers are covering the tariffs keep pumping.

Edited Monday at 04:19 PM by bizaro86

[Malmqky]

On 1/8/2025 at 7:36 PM, fareastwarriors said:

Constellation Energy Nears $30 Billion Deal for Calpine

Does anyone have any thoughts on this?

 

I know Constellation was richly valued so issuing stock for this deal makes sense.

 

I see they’re assuming like $12B of debt.

 

Maybe this is interesting from a nuclear angle?

[Spekulatius]

Calpine is such a blast from the past.

[SharperDingaan]

Just to throw out some numbers ..... for simplicity assume just one seller, and one US buyer refining Alberta crude.

 

No tariffs. 100 bbl sold @ USD 60 world price; seller gets USD 6,000, refiner pays USD 6,000. 

> US 25% tariff. 100 bbl sold @ USD 60; seller gets USD 6,000, tariff collector gets USD 1,500 (25%), refiner pays USD 7,500. US consumer pays more.

 

But the refiner can only pay USD 6,000 ......

> US 25% tariff. 100 bbl sold @ USD 60; seller gets USD 4,800, tariff collector gets USD 1,200 (25%), refiner pays USD 6,000. Producer gets 12% less revenue on the same 100 bbl sold. Need a solution ....

 

Cut US bound production to 80 bbls, sold at a higher price. Sell the remaining 20 bbls to Asia from BC tidewater. 

> US 25% tariff. 80 bbl sold @ USD 60; seller gets USD 4,800, tariff collector gets USD 1,200 (25%), refiner pays USD 6,000. US consumer pays more as the refiners cost is now USD 75/bbl, and in the short-term the refiner can't refine crude from anywhere else.

> No US 25% tariff. 20 bbl sold to Asia @ USD 60; seller gets USD 1,200. Producer gets a total of USD 6.000 (4,800 + 1,200) on the 100 bbl sold.

 

As long as the new west coast pipe and rail  has the capacity; the only folks getting hurt here are the US consumer, and it is the US tariff collector that has their money. And if that BC tidewater buyer is US tariff exempt ..... they merely sail a tanker down the west coast, and sell the crude to the refiner at a very profitable USD 75/bbl less costs. 

 

The way out is new and big pipe going south. Drop the tariffs, double production, spread the costs over a bigger base, and everybody wins.

 

SD

 

 

 

 

[Spekulatius]

Isn’t the recent rise in crude prices  due to the sanctions on the Russian shadow fleet? Biden was obsessed with the price of gas at the pump, that’s why he saved this measure until after he lost the election, I am sure. he should have done this a year or so ago when the workaround was getting traction with the Russians.

No doubt the Russians will find another workaround but it will take time and it will be expensive for them, which is exactly what sanctions do.

 

Also note that Ukraine has stepped up attacks on Russian energy infrastructure. Several refineries have been set ablaze and this is also fixable but costs time, there lost revenue. I think Russia may have troubleshooting keep their output up.

 

https://www.newsweek.com/russia-putin-tankers-anchor-sanctions-2014585