Big Digital Energy

0:00 Hey, big digital energy fans. We are here on a very special edition today. We have a convergence of factors. We brought in the talent. We brought in the talent. So because we have talent, we're

0:14 gonna introduce in here. March back to you. So it's not just that. It's not just that. By the way, that was a pisser. I was out buying locations for2 million. Oh, shots fired. Now we have the

0:28 confluence of events here where we're recording on President's Day. Colin is not with us. And we have our special guest today, Josh. Josh, welcome in. Thanks for having me. So because you're

0:41 the guest today, we have a thematic trivia question. All right, let's go. Given that Colin's gone and it's President's Day, who was the shortest president in United States history? Oh, man. I

0:55 don't know. Great. Over Cleveland.

0:58 I think he was he was going the other way Martin Van Buren James Madison. Wow. Five, four, one hundred pounds. That's right. Five, four, one hundred pounds. Yeah. Wow. Grover Cleveland,

1:11 though, is our only president, I believe, to serve non-consecutive terms. Is that right? Yes, which we don't have to recap the John Wilkes Booth angle. Was Lincoln the tallest? Lincoln and

1:24 Lyndon Johnson, both six, four And that's always the biggest. Who's the oldest living? Who lived the longest as past president? Carter, who's still alive, I think he passed Bush maybe 250 days

1:41 after Bush passed away. Yeah, 41, something like that. God rest his soul or not yet, but he's been in hospice for a year, I think, oh, witches, so. All righty, so last week we talked about

1:57 Diamondback. and endeavor, and the commentary was basically, all y'all did was talk a bunch of fluff. Mark was not here. We didn't have Josh on. Man, it was tough. Kirk and I will sit over

2:10 here on our hands, not say a word, endeavor fang. Hey, I love when we get critical feedback from our

2:20 fans. Or our hating fans, either one. There we go. I think of, you know, just a basic framework or recap of the numbers,

2:30 size, location, you know, what we were just talking about, production multiples, et cetera So. I think Josh is well more currently placed. I should have notes that actually show those on me.

2:44 But it was roughly - it was a 370, 000 BOE. 's a day, 150, 000 or so barrels a day of just oil. And that's important And. I have to look up the exact numbers. It's important to break that out,

2:58 because right now natural gas prices are converging towards zero. We should have done that rose a few months later, because I feel like it was a little different for the EQT guys. So when you look

3:13 at the economics, especially on spot pricing, the economics for the oil are sort of the overwhelming component of returns, at least on the current production, which is why it matters to separate

3:23 out the oil and the natural gas The most important things are it was over 10 accretive to Diamondback, I believe, before synergies. So that's a really important measure. And then the synergies

3:36 that they represented actually seemed sort of on the low side. It looks like they sort of intentionally sandbagged those in order to be able to accomplish more. They're going to spend less per well,

3:48 which is good because it looks like Endeavor was spending a little more than Diamondback was.

3:55 There's going to be some other cost savings in there. So anyway, 26 billion deal worked out to be about 72, 73, 000 per flowing barrel of oil equivalent and about 133, 000 barrels of oil, or

4:08 sorry, dollars per barrel of oil per day. And then we put out something at Bison just real short comparing it

4:21 to some other companies and prior transactions. It was the second most expensive on production transaction in the last couple of years in the Permian, second only to the Exxon Pioneer deal. And

4:27 then it implied that Permian resources got a steal on

4:33 Earthstone. It implied that vital, which I own and I'm not recommending is worth like four times as much if it sold for that. And again, it's not gonna sell for that, but if it sold for half of

4:43 that from an inventory perspective, it still would have like 200 or something upside on those metrics, again, heavily discounting for inventory value. companies generally trading? And are we

4:55 seeing

4:58 kind of

4:60 different multiples based on size historically, bigger the

5:04 company, the higher the multiple? What does that landscape look like these days? So the weird part is that historically it's actually the opposite, and we were just talking about this before we

5:13 started rolling. The small companies with sort of the growth stories and whatever actually used to trade at a huge premium to reserve values, and the public companies used to trade around the

5:22 reserve value or at a little bit of a discount in recognition of the difficulty in managing large businesses, the expense in managing them, and the challenge in actually growing asset value and

5:33 production. So this deal went off, it looks like at around six times EBITDA on sort of a consensus 2024 basis. Diamondback based on that, if it was 10 accretive would have been at about six and a

5:47 half times EBITDA. And then the stock went up somewhere between 15. around 15 or so from when the deal was announced to the end of the day on Friday the first week. So the market liked it so much

5:60 that I guess it got bid up closer to, let's say, seven times or seven and a half times EBITDA for Diamondback standalone and maybe seven times on a pro forma. Again, just using consensus numbers

6:11 and just sharing the actual numbers of what happened. And I think as a comparative, as I recall, Pioneer was trading on an EBITDA basis about a turn lower than Exxon at the time of that deal. And

6:23 I don't remember the percentage magnitude of the accretion, but it's, as you suggest, upside down. Yeah. So getting back to the small versus big and public companies. So you have some of the

6:35 smallest public companies trading around two to three times EBITDA. You have some of the medium sized ones trading in sort of that four to five times EBITDA range And then you have the largest ones

6:46 trading six to eight times EBITDA, depending on sort of the set up and whether they're a super major, which index they're in or so on. And if they're based in Europe, what happens to 'em? It's

6:58 complicated today. It's something we've talked about quite a bit. So the smaller companies trading at a lower multiple makes sense to me, 'cause in that the market just saying they need to go away

7:09 and we'll get rid of the GA and blah, blah, blah and all. So I can kind of see the market being punitive potentially towards that.

7:22 The thing I found really interesting though about this deal and I tweeted this out after BDE last week is Autry owns 99. So there was one person making this call and it really hadn't done anything in

7:40 the way of estate planning till a couple of years ago. So I mean, builds this company, ends at 100 himself, even heard some interesting discussions Autry was never able to get a divorce just

7:52 because if they got a divorce and they split up the company, they couldn't pay the taxes. So there was this kind of uneasy detente, if you will, that kind of went with that. So till a couple of

8:05 years ago, so it's driven by estate planning, Autry's really sick, unfortunately, which is sad. It's got cancer, so that played a role in it But the thing I didn't think of until after we were

8:18 on BDE is he literally could not have asked these various other players to participate because they were all tied up in other deals. I mean, standard in a sale and purchase agreement is until you

8:33 get FTC approval from ideal and we close, you cannot bid on anything else, right? So Exxon's on the sideline with Pioneer, Oxy's on the sideline with Crown Rock, you've got Chevron on the

8:47 sideline with Hess.

8:50 So he literally didn't have a cash bid, which I find pretty interesting. So I'm wondering if something comes out, there was an overriding factor to do this. Or if he just wanted to do the deal

9:06 with Diamondback, there was a lot of talk that he wanted the company to remain in Midland. He wanted his employees to have a good home, that overrode economic

9:16 issues But I find it fascinating that you would do a deal where the, you know, three of the most likely buyers are on the sideline. Yeah, it's, you know, it's already a fairly small universe of

9:27 potential bidders. And then when you

9:33 take

9:35 essentially three of the largest out you've got. What was the old bum Phillips line about our old Campbell? He may not be in a class by himself, but it don't take long to call roles Oh yeah,

9:48 they're in a lot. So, well, I don't want to go too far off on a tangent, I'd like to hear what Josh thinks about this, just given the huge valuation disconnect

10:01 of the small and micro relative to the larger players. We've talked a little bit about really the European response or lack of response. You know, you see these trend setting deals, if

10:18 you can call Chevron, Oxy and Exxon, a trend,

10:27 what's the, I guess what's the marketer, the investor case, for coming back for, say, a shell or a BP to do, to have an in-kind response? Do they need to reestablish or establish a meaty

10:36 Permian position?

10:47 to continue to play the game because they're all about closing that chronic valuation gap that they're suffering for this and a lot of other reasons relative to the US-based super majors. I mean,

10:59 I've written about this before. I think the way for

11:04 BP and Shell to close their valuation gap is to stop mal-investing their shareholder money, which they're working on to some extent. And there's an activist that owns a tiny amount of BP that's sort

11:14 of pushing for that as well So I think that's a starting point and going and paying 133, 000 a flowing barrel of oil for production and to get some great inventory along with it, I'm not sure that

11:30 that's the path to a higher return for an oil major. So I don't think that it would be a great idea for those guys. Personally, I don't think that would be great for them to, I mean, it'd be

11:41 great for the Permian producers and it'd be great for me for the valuation of some of the stuff I own, but I don't think that's necessarily a path. value creation for them, especially considering

11:50 the low valuations they trade at and the relatively large asset inventories that they're sitting on that are conventional and offshore in various other places. If they want to have a better valuation

12:01 or at least a better shareholder return, they could just flip from malinvestment and offshore wind and solar and various other stuff that they've lost enormous amounts of money on and just take that

12:11 capital and buy backstop So, this is Kirk's point that I'm stealing because he brings it up all the time. Sorry, Kirk. And I had a point that's worth repeating, it's great.

12:24 Do you think at least part of the European lower multiples has to do with the significance of their trading operations? I mean, BP has a huge trading operation. Shell has a huge trading operation

12:41 Trading operations have a tendency to implode. I'm not sure how high a multiple I'd put on. a bunch of traders running in and out. 'Cause you don't hear about the stop investing in renewables,

12:53 lower return business, but you don't hear the quit using your balance sheet for a five cents a barrel. Yeah, you know, I've actually looked at this. Exxon and Chevron do this too. They just

13:07 don't talk about it as much 'cause they are less successful with it. And they don't ramp it up as much 'cause they're also, their history is sort of more spotty in it, they've sort of gone in and

13:17 gone out of those businesses and they've always been involved in one form or another from sort of their early days of those businesses. So I don't think that would sort of fully explain it. I think

13:30 if you look at the midstream companies that also have marketing components, I think that's maybe like the best proxy for that. And you don't see significant discounts for marketing components in

13:39 midstream companies that also have big earnings in other aspects of their businesses, at least not today. So if you're a. XYZ pipeline company or infrastructure conglomerate and 20 of your cash

13:51 flow or something comes from marketing and, you know, it's essentially some of the trading like you're describing, but they have a fancier name for it. It doesn't seem to really hurt your

14:01 evaluation. And if anything, it is sort of more capital efficient in the sense that you don't have as much sort of sunk capital that's sort of stuck in any particular thing So interesting you say

14:14 that because I kind of like ask the question because I have a view on it too because the largest Yates family holding for a long time was Plains All-American. Just a show up at Kane Anderson. We buy

14:26 the GP interest. I cut a check. My pregnant wife is crying. Why did we just buy something where a rogue trader put the company into a tin near bankruptcy five years before? But anyway, I wound up

14:41 being a good deal for the Yates family and I, planes made so much of its money, particularly when the curve was in Contango in terms of trading barrels around. And I don't think the mark did

14:54 appreciated that versus charging 15 cents to move a barrel from point A to point B.

15:02 I just, I think it's a question of like the scale of it. And I think both for BP and Shell, it's small enough that I don't think that's really what's holding back their stocks. And also those

15:14 earnings have been pretty strong over a multi-year period. It's not like they had won Benians a year where they made a bunch of money on trading and then lost a bunch of money over multiple years.

15:23 So I think those are the sorts of things that would hurt the valuation around that. So if anything, it's sort of better in the sense like you were describing where there's some aspect of it that's

15:32 actually counter cyclical and it's sort of more consistent than the cash flow from many other parts of both upstream and oil major businesses. I agree and we've talked about this as well I think it's

15:44 ill-advised portfolio allocation. particularly on the part of the European majors

15:50 and BP being the farthest out in front on how was it put? What's the rationale by the hedge fund that's suing them? I forget the name.

16:02 Why does the

16:05 board and management field that transition faster than society is transitioning with all the crosswinds that were prevalent in the early stages of the let's hurry up and go in things like offshore

16:20 wind and solar? All right Kirk you're our resident expert on the majors. Let's hit on that and then I got our exit question from the Diamondback Endeavor deal. You're talking about just trading in

16:34 general? Life. I mean it ran on the majors. You're our major. I know for CFOs they hate trading operations in general because of the cash. I mean you can be be. Yeah. You might need a quick

16:45 billion to cover huge losses, but BP and Sheldon have been doing this for a long time. They're good at it. They have also, they're also trading positions with assets, so they know what they're

16:59 trading. It's not necessarily something that a lot of these hedge funds are doing where they're taking a ton of risk. They're not taking that much risk, but I do think, as Mark said, it's about

17:11 what actually, I like what you said, Josh, it's a Mao investment. There's been a lot of Mao investment going on by the Europeans, and part of it is the stress. If you go over to Europe, you see

17:22 the stress. You saw the stress, but now Europe's in a really tough place as we've discussed as well.

17:29 As energy prices are so expensive, that manufacturing's dropped to record lows, and now they're importing, And there's a lot of issues happening, which I want to flip that at some point because

17:44 extremely warm winter in the US and why natural gas prices are going to zero is that due to the weather and should we be worried about it. But it's interesting because we've talked about how the warm

17:54 winter has saved Europe. Now we're talking about maybe the warm winter is screwing natural gas and it would be interesting to hear y'all's take on that. We talk our own book real quick. We'll go to

18:07 natural gas next, mark the exit question on Diamondback Endeavor. Great. Five years from now we're we're reconvening this this group back together. We're doing a download on the deal. What are we

18:21 saying in five years about this transaction?

18:27 I think over a five five year horizon, I think Um.

18:34 Structurally, prices are going to make the outcome better than I think we would expect. What that better is, I can't really peg it, but from a macro perspective, I think in agreeing with Vicki

18:49 and what she said at Davos is that because of the investment globally in exploration, we should expect that horizon of tighter markets and higher prices It wasn't just Vicki, I've been saying this

19:04 for a decade. There's been such an underinvestment in exploration specifically. Well, as I said, we looked at it for a long time and I think it was the BP statistical reviews to put up the

19:17 scoreboard every year of what global exploration looked like. The industry got increasingly bad at it and when they found stuff, it was usually the wrong stuff to find his gas. success rates were

19:33 somewhat generous in terms of what you would classify true exploration success. There was a lot of devallocating going on as we used to call it. So I do think there's a catch up here and that's not

19:47 a real easy engine to restart because the vast majority of the world and the vast majority of the supply base is conventional. And that's a different to technical animal and risk animal than what

20:01 we're seeing. What has really filled the gap in the last 10 years and that in terms of the wedge of growth and that's predominantly US onshore unconventional and predominantly Permian. So basically

20:12 beta outlooks great doubling down on beta was smart by case. Well, let me let me let me explain that better just on a normalized basis, you know, four million a location, which in the old days it

20:25 was dollar per undeveloped acre. But since you have kind of a three dimensional asset under an aerial expanse of acreage, it's better to assign a location value on all those future undeveloped

20:36 locations. I'd ask Joss, sorry to interrupt your

20:42 lightning round of trivia. We're on podcast. Or forecasting, I should say. We don't apologize here. How do you think just - Location that eight to eight on a basis paying four billion a location,

20:53 if that's the right number, what is that, how does that look projecting out into the future, what's possible, and what is really, really stretching? So there's two questions. One is Chuck's

21:05 question, which is what's it look like? And I think the future is better for Diamondback having done this deal than not having done the deal. I think the market reflected that already, and there's

21:16 sort of a consensus. So I think there's almost no question, especially given the large equity component here, and the quality of the inventory, and the sort of industrial logic of longer laterals,

21:29 more synergies purely in operating the fields and so on. And synergies actually really being synergies. I think these are real synergies. Yeah, that's what I was saying. I thought - It's a

21:38 creative for sure.

21:41 I thought their synergies were actually understated which is maybe 10 of MA, they understated. And they say that MA is

21:50 it's like one of the lowest success endeavors where, I mean, the bankers always get paid and they always love it and try to defend it to the nth degree But in most cases, there's value destruction.

22:00 I think it's a good question. I think from an equity perspective, it improved Diamondbacks position. And it was clearly a creative. There is the opportunity cost question, which is, hey, what

22:11 else could you buy? And does it make sense to pay this much? And, you know, I think you have to look at the value of the inventory itself because not all locations are exactly the same. But when

22:22 you look at the capital efficiency around this inventory and the high declines And sort of what you'd end up with, if you went and capitalized this asset to get an incremental, let's say, 100, 000

22:32 barrels a day of, a BOE's a day of production, if you just let the existing production decline off and if you just spent, if you look at it sort of to better understand conceptually the unit

22:43 economics, you're looking at, to get 100, 000 barrels a day, a BOE's a day, sorry, it depends on the exact locations and mix that you're going for To get it and to get it down to that sort of 30

22:55 decline rate that people are estimating, both of these companies are sort of their production bases are at, you're looking at somewhere in the four to five billion dollar range because you have to

23:05 take the initial capital efficiency, let's say it's30, 000 per BOE per day by the time you're done with that first year. Let's say you have a 18 to 24 month payback, not just on the drilling, but

23:18 on sort of the full sort of build out of everything, there are delays, true IRRs involve, you know, you 10 wells on a pad and then complete them or 20 or whatever the number is, but you're not

23:28 getting that sort of spreadsheet or presentation single well economics that are shown. So, it really requires a lot of math. When you look at that math and you say, Hey, where can I buy 100, 000

23:39 barrels a day for5 billion, let's say? I mean, there have been a number of transactions at lower prices than that, and there are a number of publicly traded companies trading below that. And then

23:52 the question is, okay, how much more inventory do you need to deplete once you're there to be able to sustain that production? And can you go buy something else that has a lower decline rate that

24:02 might not require burning through42 million locations just to sustain production? So I think the world started at this sort of question, let's say 15 years ago for oil and gas, it went completely

24:10 to the other side, to the more sort of private equity-ish approach

24:21 What's the value per location? What's the capital efficiency on drilling? And then let's just sell it to XYZ big company that'll buy it for various reasons with low corporate returns. And I think

24:31 we're sort of getting back to that point where it makes sense to actually measure the corporate return associated with buy versus build and then sort of the net cash flow on a time adjusted risk

24:43 adjusted basis. The risk is the other aspect where you go and pay42 million a location and then you try to drill it It's like are these locations, are they drilling locations or are they holding

24:56 locations for asset value where you might have some problems if you're actually sort of like the eating versus trading sardines sort of metaphor. So I think there's lots of questions around this but

25:07 the simple question of was this a good deal for them? Sure. And are they better off five years from now versus not doing it? I think there's almost no doubt that they're better off this versus

25:18 stand to us. I certainly think market reality says scale is better in kind of 50 billion in enterprise value and higher when the lines are boring a little bit between some of the quasi majors like I

25:33 still think of oxy as a major and it still stuns me to see that Conoco Phillips has a higher market cap than BP but there's that's a whole other show but I do think you have a lower risk premium in

25:47 terms of execution on all of that because of the long track record of Diamondback really proving it both from a cost standpoint and a productivity efficiency standpoint this isn't their first major or

26:03 large acquisition rodeo and so I do think that that credential should translate qualitatively at least into a lower risk premium as we think about it because There's pretty good evidence that they can

26:16 get it done. this is not the first go-around. How do you think about the right discount for the second half or second two thirds of the pro forma inventory on a company like this where you have the

26:31 market attributing value, you have analysts and research firms that sell this stuff to people and get in the newspaper or whatever for it,

26:42 but there's no evidence from what I can tell that going and drilling that second half of these companies, many of them have just gone and replaced their inventory rather than having to go drill their

26:53 sort of bottom 50 or even bottom 75 of their inventory. Is it possible that the market's just overvaluing all of that? And the reason I ask that is when you look at the smaller companies with less

27:06 inventory, they get heavily punished for this narrative of, hey, they only have, let's say, five years or three years or whatever versus 10 or 20, but if you never test that 10 or 20, because

27:15 they're always going and buying more. Is it real, and then how much of it? If it is real, why aren't you drilling it sooner? And if it's not real, why are people giving billions or tens of

27:27 billions or hundreds of billions of dollars in aggregate a value to it? I think these are real questions that make sense. So you're playing this hand all the way out. And

27:38 let's think about it. If we went from start to sunset, just with what's in hand today in terms of inventory, the question quickly becomes a timeline one, because the back third or whatever

27:55 proportion of that inventory gets pretty quickly discounted heavily, if not to zero in some cases. I mean, not too many years ago, companies were talking about 50 to 75, 000 perspective locations

28:08 in the midst of some big acquisitions. And most of those were private equity related. And I asked the question in an investor conference of the CEO,

28:18 really what's kind of the, what is the drilling and completion capacity to get to all those locations relative to where you are now with your capacities to sustain a drilling and completion activity

28:35 level of some number. And it was oftentimes multiples and multiples of that. I think we did one on when Southwestern first came out at their current rig level. And we were just doing this to make a

28:46 point that the inventory that was implied on all the Fayetteville acreage said you'd get to the end of that inventory by I think around 75 or 80 years. So what's the long tail of that look like in

28:60 terms of value? There's one other aspect that people don't talk about that I think is worth addressing and is a motivator for this. And I'm not saying that all of the inventory companies are

29:10 counting isn't good. I just, I think there's probably a chance that some of it isn't. But there's another problem which is that

29:18 really economically accessible in the sense that there's not just a time aspect. There's also a market absorption question where if you look at Pioneer, I think there's very little doubt that

29:29 Pioneer had at least 10 years of great inventory. So they could have accelerated that instead of selling and taking it to five years and had an extra 50 or 100, 000 barrels a day, maybe even of

29:40 just oil in addition to the BOEs, the gas and NGOs. And the problem is, was there a market for it? Was there takeaway capacity for it? And then what would they. Yeah, the people there is the.

29:53 And I think the people were there and the equipment was there and they could have got the takeaway. The problem is, if you have two or three companies go and do that and try to really ramp, let's

30:02 say, add 100, 000 BOEs a day each, you very quickly get back to that sort of pre-COVID shale bust market environment. And so if you're oxy, maybe you're better off, even if you have the

30:15 inventory ground rock instead of going and building your own ground rock with your existing high-value inventory. If you're diamondback, you're almost definitely better off buying and diver,

30:28 merging with endeavor essentially because of the huge equity component for that deal than you are going and trying to build endeavor or mini-endever with your existing assets just by accelerating them

30:41 But I think that's one reason the market's been so favorable for acquirers over the last couple of years. I think the market's sort of rewarding that view on capital allocation of going and buying

30:54 stuff instead of building it. And I think that's part of what's driven these sort of higher valuations for assets. And I think that continues and especially after, again, I love the market

31:05 reaction. I think that diamondback is a better company for having done this endeavor deal And I think that sort of reaction is what gets more deals done And I think it also - focuses management teams

31:17 and their bankers, advisors, et cetera, on the sorts of metrics and the sorts of accretion that Diamondback is accomplishing with this. So I think it's sort of the self-perpetuating cycle. So I

31:30 like it. And I think it makes a lot of sense, even if there are these questions about a longer life inventory. There are two things here that have nothing to do with numbers that I always found out

31:40 in my career. Number one, big assets get bigger They just do. You get better drilling stuff, you get better at completions, you can never build that into the model. I mean, we would fudge and

31:55 have the junior associate build in efficiencies like that. But just anytime you have really, really good rock shit just gets bigger. It just does. It's always happened that way, at least in my

32:09 career of watching these things The second thing is. Anytime, here was the joke we always had. If you had a chance to buy a big asset from a major, you wired the money first and did your due

32:25 diligence later 'cause big companies truly don't know what they have and you just find stuff. And Autry was a great oil man, but Autry literally was running a28 billion company on a

32:40 shoestring. They have no idea all the stuff they have and they're gonna wind up, Diamondback's gonna put a professional group of landmen on it, professional group of engineers on it and the

32:53 endeavor team's amazing. I'm not disparaging them in any way, but they're gonna find so much stuff they've got that's not even on the books that I'd be willing to pay 25 more for it just 'cause.

33:08 You know you're gonna find this sort of stuff. And to answer my own question, Yes, five years from now. we will be talking about how this was a really great deal from them just 'cause at the end

33:19 of the day, all the numbers we've kind of talked about and just the huge amount of optionality they bought themselves on beta, I think is. And somewhat uncharacteristically, Exxon kind of led the

33:32 opening round or the shot across the bow that, as you remember in the Pioneer call, they were talking mainly about the source of synergies being from productivity improvements, things like four

33:44 mile laterals, but the one that I really got fixated on was this notion, whether it was apples to apples per foot or going from two to four miles, they tease the notion of doubling recovery factors,

33:59 which is, that's non-trivial and that's really not, in my experience, that's not - Over five years. It was over a time period, but yeah. But when we're talking about low single digit,

34:14 mid to upper single digit recovery factors of oil and place, based on all the work that's been done in the last 10 years and as technology has really accelerated, I guess the limit to reservoir

34:29 physics suggests that the level of complexity and the level of technical sophistication and technology sophistication, I think we're going to have to see to affect that, even if it's 3 to

34:43 5 more, that's just a gigantic and a giganticly difficult thing to execute on. So there's a joke about that, which is that on a cost basis, if Exxon were to double its dollars to barrels

35:02 productivity and the Permian, and this is from the service providers and so on, it would just catch them up to the average. So I think it's one of those things you want to

35:14 Who's saying what? And if you look at the old reports out on drilling productivity and days to drill and complete a well and so on, Exxon's been in the bottom decile. They've been improving, so

35:26 they're getting closer to that sort of average. So I would be very hesitant from the short guy talking about dunking, like you want them to, maybe they need to be like average before they get it.

35:38 It's kind of like when we talk about the baseline for a degree and a half, why did they pick 1850? Yeah, exactly, it's the lowest point. Yeah, and heck yeah. I'm just saying from a messaging

35:50 standpoint, I know all the pre and post-XTO and Y Shell ultimately left the Permian and you look at some of their comparatives and they talked about, you know, how they were moving into upper

36:00 quartile and decile in terms of drilling completion cost performance and productivity and IPs and things like that way back in the day when they first got started within this shale sweepstakes games

36:14 far behind the best in class. All right, Kirk, you're up. Good five years from now. What are we saying about the deal? I mean, I'm looking at macro trends and saying it's gonna be a great deal

36:26 overall because the world needs a lot more oil and gas. So, and the Permium

36:34 is one of the, you know, some of the best dirt out there. So I'm playing long game. I think energy prices are gonna sustain I mean, we'll talk about gas here in a second, but. So not a, not a

36:47 descending vote, but we'll have BRV on to give the descending vote at some point. Kick us off on natural gas. First of all, I want to just say a statement. I tweeted this and I'm convinced I'm

36:58 doubling down. Exxon is an OG of the Permium through Humble Oil. And people don't want to admit that, but I'm like, if you talk Midland, Exxon's been there for a long time. Mark, you wanna

37:10 debate me on this one? First, the H is silent, but

37:14 humble.

37:17 Yeah, I lived outside of Houston for a little bit. They're just used to the original discovery, if you will, was not ex honor. No, no, but yeah, I would call their carpet baggers. I'm sure

37:32 they were calling tumbling tumbling and OG

37:37 and I'm going to continue to say a permit as well when gas. Let's go to get naddy. I want to go to Josh on this because we talked about this warm weather And the US, which is celebrated in Europe

37:49 because we've been talking about how they're inventories and their possibilities of getting more gas is questionable. What do you think about US, Josh? What's your view? So you mentioned BRV. So

38:04 tomorrow is going to be the sandwich dividend payment date for their second special dividend, which I own the stock. I'm not recommending it. They did an extra, I think this one was

38:18 a150 or2 special dividend, and in addition to their ordinary one, there were some posts about it going bankrupt at070 and

38:26 so on. And here it is, they will have paid subsequent to those. We're getting close to4 of dividends over, let's say, 35 year period from a070 share price. So it's getting close to the point

38:41 where it's just all gravy in terms of what the stock is trading at, but also last I checked the stock was at1280 or something. So victory there, despite natural gas prices being exceptionally

38:52 extraordinarily low. So I think

38:54 the starting point for natural gas is that it's not impossible to actually do really well in natural gas. You just have to be a rational capital allocator in the natural gas space. And when you have

39:07 too many irrational allocators, there's one I was picking on on Twitter a a little bit where year over year per this. drilling rig report from a big investment bank, this large dry gas oriented

39:22 producer had increased the rig count from two to six, despite the natural gas price falling from about4 an MCF to under2 an MCF. So over that time frame, you had the drilling rig count go up a lot,

39:35 and you had, by this one particular operator, and you had the price fall a lot. So it's very, very interesting, I think to contrast it again, very different size companies, different prospects

39:45 on investing, but I think in the end, you get sort of measured, and I run a fund, my fund gets measured based on how I do, both on an absolute basis and relative to the benchmark, and I think it

39:57 makes sense to measure these companies on their performance, and frankly like drilling more into a lower price environment, and actually way below their stated cost of supply, they show to get the

40:07 return that they want they took it out of their most recent presentation. I think maybe because I mentioned it, but the one before that, it showed they needed 350 and MCF natural gas to hit their

40:19 target return. And so, again, just the disconnect of increasing the rig count a lot versus the decreasing price and only 40 of their production is hedged. So it's not that incremental MCF that's

40:32 coming from that incremental capital. And sure, it takes a while to come on and so on, but they're choosing to produce their current production at like half or less their target price to hit their

40:45 target return for their car. Are there other reasons do you think behind that?

40:50 I think that sort of gets into the realm of speculation. There are various folks on Twitter and elsewhere that are talking about different motivations, whether it's trying to put competitors out of

40:60 business or shake loose assets, whether it's an election year and people really hate this one, but they hate it so much that maybe it's worth giving it a second. You know, they're being ultra low,

41:10 natural gas prices suppresses the inflation rate, and natural gas itself is small, but natural gas as an input to the US economy is actually pretty material. And again, it's weird because of the

41:21 public statements made, but if you ignore, Buffett said this, and I forget where the original person said, but if you ignore, ignore people say, and you just look at what they do, it sort of,

41:31 I think, reveals, I guess it's an economic idea, right? Like a revealed preference versus a stated preference And so it's a very odd situation, and not all the producers are doing that, and

41:40 tarot dropped a rig, Comstock dropped two rigs, I think you're going to see more producers drop rigs because it's uneconomic. But the largest single current independent producer of natural gas in

41:50 the US. increased the rig count by 200 in a year as gas prices fell, just very odd and noteworthy, and I think worth talking about. Yeah, the thing, I've got to me at Culpa every time we talk

42:02 natural gas, I mean, I just totally miss the associated natural gas phenomenon winning. came to the shell revolution with oil, you know, you, you sit there and you realize that just on a volume

42:15 basis, call it a third of each well is, is natural gas based and permanently just permeance what 17 BCF a day now on a plus or minus 100 BCF a day us. Yeah, and growing production and didn't give

42:31 a shit to your point earlier, talking about endeavor. Well, there's worth nothing Yeah, this is just an anecdote, but I talked to someone on the family office side and they do a bit of private

42:44 investing in the EMP space and we were just catching up and he said, Hey, by the way, we just completed and IP'd our seventh well in the program. I don't know how big the program was. Well, when

42:59 you hear numbers like 25 million a day and

43:04 2, 000 barrels of condense a day and the stuff you really don't see, at least, or don't hear about in the discourse. and think about how many more examples of below the water line. It reminds me

43:16 in the public guys that are out there in the industry who have, in some cases, shown the counterintuitive week over week, guest director, Rig Count goes up and we continue to kind of push this

43:28 thing lower. I know it's not perfectly contemporaneous, but reminds me of one of my former colleagues' favorite quips. He said, not only do we shoot ourselves in the foot, we emptied the whole

43:39 dang clip, which is what the industry, at least from a high level or the optics appeared to be about, but, you know, associated gas, I think, for those of us who think about things like that,

43:52 and rising GORs and Permian, you know, I never expected it to become the juggernaut it's become, that's a huge percentage of overall gas production that's essentially a byproduct. LNG, export ban,

44:06 if you will, the administration have anything to do with at Kirk or just way more supply. I mean, that's a question for Josh and probably another question for, we should get some traders on the

44:20 show as well. 'Cause it did seem coincidental that, you know, well, we're not, we're gonna put a ban on potentially looking at new LNG facilities. Well, that's been the big, that's sort of

44:32 been the main storyline around, from the political class Yeah. Is this is a way to keep prices down for the economy through the election. But, yeah. I think Josh's point about, and Doomburg has

44:47 written about this a bit recently as well,

44:53 the impact of cheap natural gas on the industrial economy. And it's leveraged to helping keep inflation in check.

45:06 I mean, there's a resurgence of US. manufacturing and, I mean, I heard Steve Chays and say this is a long, a long time ago at a conference and they were forget exactly what the scenario was, but

45:19 they were shifting

45:21 more capital than at the time upstream companies, more upstream, more EP is always better than anything else. If you have anything else in your portfolio. And so he was challenged a bit in the Q

45:34 and A, and I love just one of the brightest CEOs I've ever witnessed. And the response to the challenge as to why more pet chem or pet chem expansion was, and Steve was both edgy, dry and funny

45:55 and smart, was, we liked the notion of permanently cheap US natural gas. That was the end of the Q and A. What's also happening is coal is going through a resurgence in demand globally. So part

46:14 of me is trying to, you know, if you do enough math, is there, is there a tendency of, hey, let's keep gas prices down because coal could be coming back as a main, as a big competitor. Now in

46:25 the US, well, we shall see, but I mean, idiots flying through the roof I know US manufacturers of coal are selling it globally, any thoughts of the correlation there? Josh, any thoughts? Sure.

46:39 So, yeah, I think it's really interesting in terms of the resurgence of coal. I posted something today about just the, you know, the our world and data, just when you look at how much energy

46:48 consumption is growing in the world, there's no energy transition, there's just energy consumption expansion, we're just absorbing all of it I think there's this real miss from an economic

47:02 understanding. perspective by policymakers in Washington, DC. And I know that's like doesn't, that shouldn't be a radical statement, but it's the argument against central planning. And it's the

47:13 reason why you want to have as little regulatory and tax impact on the economy as possible, because central planners will always miss stuff relative to sort of distributed knowledge. I think they

47:26 don't understand that higher energy prices, because the US is a net producer of hydrocarbons, higher energy prices are net positive to the US economy, not net negative. And I think there's just

47:39 this sort of laggard effect where these economists in many cases were trained 10 or 20 years ago, or they're not economists, and they're just getting sort of bad data. They don't understand bad

47:51 analysis and are sort of stuck in a sort of understanding of the world. Yeah, Josh, so take it down one more layer. Explain the theory So what that means is that if you um if you are in a mindset

48:05 of essentially, I guess it's sort of like a scarcity versus plenty mindset to sort of like really generalize it. But if you had higher oil and natural gas prices, you'd have more drilling rigs

48:16 running, you'd have more pipelines being built, you'd have more service people working on all kinds of things around the drilling and completion of wells. You'd have more housing built in oil

48:27 fields and around them, you'd have more royalty payments with people going and spending money on using all of that You'd have way more tax collection which could then actually be used to fund some of

48:37 the government expenditures and you'd have additional expenditures in places where oil and gas are produced. Frankly, you'd also have it in places where they're consumed because there are taxes and

48:47 so on on that as well. And so when you look at the way that sort of the US economy has developed and the way that that modern economies have developed, there's been this sort of tendency to

48:58 overweight services and to overweight sort of technology sort of transactional economic activity, which is what the GDP measures. But there's also a sort of real component to not just inflation

49:14 adjusted, but actually manufacturing driven or other sort of product supplied. And when you look at it from that perspective, it's even sort of more important to have various manufacturing or even

49:26 sort of digital manufacturing equivalent activities. And so I think when you look at what's the economic impact of10 higher oil, let's say from here, oils at79

49:38 at89 oil from79. If you could, let's say, just keep it there for a few years, you'd have way more rigs running. You'd have hundreds of thousands, if not millions of people more employed directly

49:50 and indirectly and sort of the second and third effects of that. And so that's real versus if you look at the negative aspect where you'd have people spending an extra let's say3 per time they go and

50:02 fill up there. gas at the gas station. So you're saying that money multiplier effect benefits a lot more than the cost to the ultimate consumer of higher prices? Yeah. I mean, it's not even close.

50:15 It's radically higher and everyone is so caught up in this world of the government supposedly creating economic growth and forgets that economic growth is always and wealth is always created by

50:28 individuals and small associations and groups of individuals and then is sort of collected by the government rather than created by the government. And then the government redistributes stuff and

50:39 takes stuff, people and the private sector creates it. And I think when you remember that and then you look at the economic effect of producing incremental supplies and just the benefits of higher

50:53 prices of those supplies that are produced here versus the negatives of the higher price on the consumption of those Again, it's just there is that multiplier effect, even if there weren't, even if

51:03 it was just a one-for-one, because we're a net producer of these things, versus a net consumer, there would be a positive economic impact, but because of the multiplier, like you said, there's

51:14 actually a huge economic impact, which is a reason to talk about it, because these guys just are not, they're clearly not updating their economic models. In many cases, they may actually not care,

51:23 or they might prefer less economic growth in order to punish people in places that are sort of viewed as politically undesirable. It's a great take, it's a great take. No, that is a great take,

51:34 it's, but it's the whack-a-mole. You basically have, in effect, like you've just closed with your political support is anti-hydrocarbons and boom, so you have to serve that. I don't think it's

51:50 necessarily higher gasoline prices, it's the rapid change in gasoline prices that generally drives sentiment and so forth. If gasoline prices go up pretty dramatically in a short period of time,

52:04 people get pissed off, you're having to deal with that, same with home heating and the like. When you see kind of the rapid change, when it flattens out at a certain rate, people just get used to

52:15 it and it kind of dies down. So it's juggling all that. I think that drives government behavior as opposed to your point of being thoughtful. I think it's a bit misdirected in terms of how the

52:31 political opposition characterizes it because of the huge overall net positive economic uplift. And you think about what, you know, highly developed nations, particularly the US, in terms of we

52:46 have all this income and wealth uplift, the proportionality of our own individual energy costs is much less. And so it's not as acute, not as front of mind economic issue. And if you look at, you

53:02 know, if we create a scarcity and we've seen a little bit of a

53:11 textbook example of it all around the sanctions on Russia, and I just, before we came in here, I didn't have a chance to look at the numbers. Rosinov reported, you know, very robust results.

53:24 And it's, you know, it's the price effect and what we would be able to do to really punish Russia is the West, the US in particular, continuing to drive more toward an abundance

53:39 and prices lower like we're seeing in natural gas. So those that are producer based economies and overwhelming majority of Russia's relatively small economy is dependent upon prices staying elevated

53:56 and so that's kind of a scarcity world where that that advantage accrues to

54:03 the producers. So the get out question. Again, five years from now, we're sitting around here. Mark, rapid fire round. What's the price of natural gas? Nine X. Five years out, five years out.

54:19 I think between three and four. Three and four. Where are you car? Six dollars. Six dollars. 350 plus inflation. Nah! Which will be six dollars So, I don't want the same thing. I don't want

54:31 the same thing. Yeah, yeah, exactly, I like that. I think at the end of the day, there is a permanent cap on at least my lifetime on natural gas at four, so it won't be above that. Just given

54:46 that we can turn it on if need be. Yeah, we used to say, and this was more about reservoir characteristics and fluid mobility guess is easier, oil is harder. bigger molecules, more complex,

55:01 harder to mobilize and move, but the gas potential of North America is there's just so much in the Arctic and on the North Slope and, you know, things that today - Oh, that's true, you've got to

55:15 come out on your face and it's all natural - I mean, there's - Natural gas. There's 35 TCF sitting in the gas cap at Prudhoe Bay that just goes in a circle So there were some analyses I think last

55:27 year or two years ago where they were arguing that Henry Hub would converge with JKM and TTF, the US natural gas price would converge with Europe and Asia and that there would be sort of this huge

55:39 revaluation up and I think it just didn't, I think it didn't appreciate the relative abundance. Even if you accept that, hey, like the core of the Marcellus and maybe even the core of the

55:48 Hainesville is somewhat depleted, it sort of doesn't matter because by the time you get to, let's say350 or4 an MCF gas, you can go to that tier one and tier two and there's just, there's a lot of

55:58 it like you're saying. We'll do a whole podcast later on this, but just the refusal of the United States to ultimately just build things like pipe ones and to mass two, so it's normal. Yeah, but

56:12 TTF has fallen 22 this year. Which I mean, it's not necessarily, they're not ever gonna converge. I don't see that, but it's definitely having an impact. Yeah, the frame - The frame's laughing.

56:26 They're one, absolutely. One last point in the framework of the US. LNG pause, which is potentially a structural issue if it becomes permanent. We've seen a number of examples in the immediate

56:40 aftermath. We talked about India as an objective to double their coal production by 2030. Pakistan said last year, because of all the difficulty they had buying LNG that were gonna quadruple

56:52 coal-fired thermal generation and we've seen deals. like Brazil, looking at the Qataris, the UK, think it was the UK grain processor, cutting a long-term LNG deal from other sources. So

57:12 structurally, I think that's an important bow on in terms of this all,

57:20 I think it was characterized that India's net zero plan or target date of 27, 70 is the functional equivalent of never And I think the timeline to sunset on coal is similarly characterized. Yeah.

57:33 All right, Mark, real quick, John

57:37 Arn will join the board of meta. Colin is celebrating 'cause this might be the way that he's gonna be able to get and get it out. And what do they call jujitsu? Grapple, grapple with Zuck. Yeah,

57:53 so, it was John. I tweeted, John Arnold tweeted out last week that he had been invited to and elected to the board of directors of meta, which I found highly appropriate and interesting and I

58:07 think it's a great move. Just a

58:11 few data points, meta has an 11 member board and not surprisingly pretty heavy on tech entrepreneurs and, and tech executives or retired tech executives, like Cheryl Sandberg

58:25 We've got some who have been fairly high profile in government service and law. Their directors, we were talking, I looked at the proxy earlier, their directors are paid a cash retainer50, 000 a

58:38 year. Now, if you're the lead director, you get150 and their

58:45 incentive comp, the annual equity grants, the restricted stock units are capped at 375, 000 at time of grant policy within their. um, governance that says that total comp cannot exceed a million

59:01 dollars, which that's just kind of a gee whiz. I, I would have thought it would have been much, much more for his, I mean, just a couple of flights on the, on the private jet. You burned

59:11 through that quickly, right? Chuck, uh, the good old days. So as we've been discussing, and I'll turn it back to you, I think there's a number of interesting and very, very forward looking

59:24 energy implications as, as regards as I think it's a great addition to the board. And it's a, it's a, an expertise and a skill set that they needed. Yeah. No, I mean, we've talked about it a

59:34 lot on here. If we're going to triple the amount of electricity used in the United States about 2045, where is it going to come from? And I, and this was at least acknowledged by Zuck when he's

59:49 talking about we're just have real energy issues we're going to have to deal with and having John on on board, you're great. Here we got. The company I was chairman of in Canada, we ramped up our

1:00:00 internal power gen to go mine Bitcoin, which was, I was like 2017, 2018. So I guess this was sort of radical, a bunch of Canadian investment banks hated it and dropped coverage of our company.

1:00:11 It was very strange. We like wanted to make money on our gas instead of losing money on it, and they hated it. They want you to issue shares, I guess, make more money on that 7 commission on the

1:00:21 share issuance than they do on. Right. You're just earning money for your shareholders But yeah, I think it's a great idea for energy companies where they can, especially if you're producing

1:00:32 natural gas right now, why not either encourage PowerGen and one of the companies I'm invested in right now is doing that, they're building out PowerGen to supply the grid and then also trying to

1:00:43 encourage folks to come and essentially use it more directly. I mean, if you can, you know, the Bitcoin guys going and burning essentially flared gas or burning very cheap gas out in West Texas in

1:00:55 southeast New Mexico, I mean. makes a ton of sense and you're gonna need a lot more of this. There was an AI exec I was interacting with briefly, actually on Twitter, I was trying to get an

1:01:06 estimate from him in terms of how much power demand is gonna grow from this AI rollout. He was talking about building sort of an Nvidia competitor. Sam Altman said he would build it for seven

1:01:18 trillion or eight trillion and then this guy was written up as being able to do it for well under one trillion to replicate Nvidia, which again, why you want to replicate Nvidia, I'm not sure. Is

1:01:29 it worth spending a trillion or seven trillion dollars on, I don't know, but hey, interesting. So I asked him, hey, how much do you think power demand is gonna grow from AI and sort of what's

1:01:40 the right way to think about the build out necessary? And he was saying that actually the right way to think about it is how much power can you supply? Because any of the power that you can supply,

1:01:50 he expects any of the incremental power will be used and it sounds like it's sort of. It's not economically totally independent, but it's pretty price agnostic in terms of that demand. So it makes

1:02:04 sense to try to start to have, I mean, energy, I think, is gonna be a bigger issue, even if you think that some of these stocks are in a bubble, even if you think whatever this trend towards

1:02:14 significantly more compute and significantly more GPU and other similar stuff use, I think is real. And so that could actually end up, maybe we all end up wrong on our gas price estimates. I mean,

1:02:26 these

1:02:28 data center providers and cloud providers, they're already at capacity. There is no more, you cannot build data centers. You think it's just easy, you just go build a data center. But the

1:02:39 biggest problem with data centers today is using AI chips fueled by NVIDIA is they run faster, which means they run hotter, which means energy consumption is greater And there's not enough power.

1:02:54 capacity in the market, especially the way these grids, the global grid has been designed, especially with these import, you know, you have to have a data center in the US because there's rules

1:03:05 and you can't build it, you can't host it somewhere else, etc. But there really is a lack of capacity physically. And the biggest number one contributor to that is we don't have enough power in

1:03:16 that location to be able to fuel your data center to provide enough capacity. That's the big issue. It's a big bottleneck. Dominion is turning away data centers right now as we speak. And so it's

1:03:30 a real issue. And I know we've talked a lot about this on the podcast, so I won't belabor it. Five guys in a rusty pickup truck and some new frack technology literally could go double US oil

1:03:43 production because we did that, right? You can't do that in power. It's way more complicated. You've got a grid, you've got a sink, things. It's crazy. So, well, and so this will, in terms

1:03:56 of. John or modular reactors will solve it. John Arnold joining Meta's board, I think, is more specifically forward-looking because

1:04:09 of his, you know, outside of all the great things he's doing on a number of societal issues with his foundation. His new startup. Yeah, his new startup is, the mission is focused on improving

1:04:23 the reliability and the resilience of the grass. And he spoke about that at Fuse back in October. Yeah, it's going to be a big deal. Last issue, and then we'll get to our deep dive on an election,

1:04:37 cannot stress highly enough that every person on the planet needs to watch Mike Benz on Tucker Carlson. You don't have to like Tucker. You can hate Tucker. In fact, I think Tucker may say. 10

1:04:52 sentences in the whole hour. But Mike Ben's worked for the State Department. He was head of the cyber unit within the Department of Homeland Security. And he just tells a horrible tale of how

1:05:07 basically when the internet first popped up, the State Department, the CIA, wanted free speech on the internet because that allowed all these groups, dissident groups in countries we wanted to

1:05:21 overthrow, to gather, come together, throw their revolution. And we really pushed that. Developing those skills, we took it the next step of actually influencing elections in countries. We

1:05:36 wanted to change the governments in. We had Oopsie slips or two. We

1:05:42 then turned this on ourselves And in 2018, in response to a supposed Russian interference, In our election, we created a cyber group within the Department of Homeland Security that literally has

1:05:58 gone out to social media companies and said it is against the law for you to have misinformation on your platform. We're gonna find you the defense against the finding because we get, it's really

1:06:15 hard to police all this, is basically you run our algorithm that is called seek and delete and you run that and we will let you off the hook if we catch you violating the policy. And they have been

1:06:32 doing that and this guy actually ran that group and he talks about seven months before the 2020 election that they put within the algorithm things like you cannot criticize mail-in balloting because

1:06:47 basically the premise was any attack. on our democratic institutions, mail-in balloting, the mainstream media. All of this was considered a cyber attack just like you were trying to take over a

1:07:04 power generation plant. So anyway, it's just a very harrowing story. And the reason I wanted to at least bring it up is one, I want everybody to read it, two,

1:07:15 our friend, Arjan, Arjan, Merti, yeah Just got, just got pinged by YouTube for climate change. We routinely get that. So I was like, yeah, welcome to the club. But anyway, it's crazy

1:07:27 because this

1:07:32 is running. It told us to run as a badge of honor. This is running right now on our, on social media and tagging us as they're watching, watching us talk. And the important thing obviously is

1:07:41 we've got a lot of hard decisions and discussions to have when it comes to climate change and energy and energy security and the like. and it's just crazy that this is happening. Not only is our

1:07:54 government listening to us, but this is great. Joe Merchant just tweeted, Jell followed Joe. Yeah. In five years from now, we're all going to be paying 8, 000 an acre in Tier 2, Utica bookmark

1:08:04 this. Nice.

1:08:07 Well, we'll see if he got banged or not. I think one of the, there were two things that stood out to me. I listened to it this morning, driving through Dark East Texas, but the actual

1:08:23 designation of institutions that are protected by this from quote unquote attack of speech includes the mainstream media or the establishment media. So an opposition or a criticism theoretically gets

1:08:43 treated as an attack on a democratic institution elections certainly are.

1:08:53 our government bodies certainly are, but extending that designation out to something like the establishment media, which I read as the New York Times and Washington Post, etc, is, is, I think,

1:09:09 an interesting twist that, that gave me some pause in terms of, what do they, my, my, the other thing that stood out to me is the algorithms that you were talking about. He termed them the, the

1:09:22 weapons of mass deletion. Yeah. Isn't this just sort of applying to the technology what we've already seen in the real world? So like, I mean, in my experience, Bison did really well in 2021.

1:09:36 And so we got interviewed by the Financial Times and by Barons to discuss sort of what had happened and what we had done before and, you know, why it was working. And they were really interested in

1:09:48 our take on ESG, I think they were hoping to hear. We're making money in oil and gas, but we're real sorry for it and we're going to reinvest in alternatives and we're really surprised and

1:10:00 they printed it anyway, kudos to them to still print these interviews despite not meeting their normal editorial standards. But I think it was quite damaging for our ability to raise capital, which

1:10:14 was we didn't have the equivalent of the nonsense ESG slides that all these guys have, where they pretend like they're saving the planet while cutting down the rainforest to drill or whatever. So

1:10:25 yeah, I think we're already sort of seeing that, at least I can speak to that from my experience and from what I see. And you look at where BlackRock and Vanguard and these various other allocators

1:10:36 or asset managers, sorry,

1:10:40 have been deploying and what they've been pulling away investment from. I mean, I think we're already seeing it with capital, we're already seeing it with companies sort of doing various ESG or DEI

1:10:51 or whatever virtue signaling, hurting their own economics in exchange for signaling something positive. So I don't know. I mean, is this really - This is what the difference - The difference for -

1:11:01 I agree with you. The difference is we all knew it was happening because I would send out certain tweets and not get, Huh, I got five people viewing that. How did that happen? The difference for

1:11:13 me was it was previously kind of the woke liberal media establishment or whatever that's

1:11:26 in effect censoring my speech. This is the actual government that's doing it in effect at gunpoint. Twitter had to accept the algorithm, Facebook had to accept the algorithm, and that to me is

1:11:42 just the civil libertarian just makes my stomach turn.

1:11:48 And that's what really worries me about it. I guess my point is just that's worrying, but so was all this other stuff. And the reality is a lot of the other stuff was sort of coerced or forced as

1:12:01 well, maybe not by the government, but by large asset managers that collected money under one premise, which was passive investing, and then switched over and sort of enforced all these different

1:12:12 rules on many companies that then did the same sort of thing And so at what point is that, you know, government enabled or government sort of endorsed, and it is different from the government

1:12:25 actually doing it themselves, but I think we've sort of been moving unfortunately in that direction for a while in a number of different fronts. And I would just say, you know, this is, it's not

1:12:34 great to hear, and it's disconcerting, but I think it's sort of the later stages of a long process that we've all sort of seen. And, you know, many of us have not spoken up about, And I think.

1:12:47 you know, Colin likes to say, or a joke that I'm the most hated man on Twitter. I think like speaking up about this sort of stuff has real consequences and you know, it's okay. Like I think

1:12:56 there's sort of this trade off in terms of like how much money you make versus like what else you do in life. And I'd like to earn the best possible returns I can, but also, you know, if I do it

1:13:07 with less capital 'cause I'm like not filtered about this sort of stuff, that's okay too

1:13:12 The one last thing I'll say about the Ben's piece is it's interesting with Elon Musk because in effect buys Twitter, he's a richest man on the planet, but the military industrial complex that's kind

1:13:31 of driven this whole program by the

1:13:36 CIA eventually winding up in this cyber unit, they're dependent on Elon I mean Starlink is real, he's putting. satellites up in space with his, you know, Tesla being part of the green revolution

1:13:52 and the like. And so there is an uneasy detente trying to be settled right now with a lot on this. And I think we saw his response the other day when he was sitting there talking and said, Fuck you.

1:14:07 Right. And so this is going to be interesting to watch

1:14:15 All righty. I'm off my soapbox. Let's do this. So Josh, one of the things we've done on BDE is we viewed this as the year of the election. Supposedly 2 billion people are going to go vote on the

1:14:28 planet this year. And what we've been doing is at the end of each BDE, we take one of the elections we look at real quick. We've talked about Congo. This week, Pakistan. So they had elections on

1:14:44 February 8th and just to kind of level set fifth largest country on the planet. They have a bicameral, parliamentary, federal structure. They vote for the lower house, which is called the

1:14:55 National Assembly, 336 members, 266 of those are elected, 70 seats are reserved for minority and women candidates. Ultimately, the National Assembly votes for the prime minister So what's been

1:15:12 fascinating about this is the winner,

1:15:17 the PTI party was founded by Imran Khan who, Mark informed me this morning, is like the Michael Jordan of cricket in Pakistan. A big, huge deal. He was the 22nd prime minister of Pakistan from a.

1:15:39 in 2018 until April of 2022,

1:15:45 he's been in jail during this whole election. He was arrested last year on charges of corruption and leaking state secrets. So we're highlighting this because we want to highlight something that has

1:15:57 to do with energy. But I wanted to point these things out. This is the first election where the party that's winning was not backed by the military in Pakistan. So that's going to make it pretty

1:16:11 interesting. The second thing that was pretty fascinating is 40 of

1:16:17 folks in Pakistan can't read. And so the way you would run as a political party is you had a symbol. And so you'd go to the ballot and vote for the symbol. PTI, I believe, was the lion. Was

1:16:29 there their symbol or the tiger? And anyway, the Supreme Court stripped them of their symbol. So PTI had to run as independent. So you actually had to be able to read the ballot.

1:16:43 But this is what's crazy and what I wanted to point out, the PTI was very aggressive in their use of AI. Basically, Khan sitting in prison would write these speeches out. They would use AI to

1:16:59 create images of him actually saying it and they broadcast this on TVs everywhere. They had trucks running around with big TVs of him giving these AI-generated speeches. They had AI-generated robo

1:17:12 phone calls that were his voice and he from prison was able to win this election. And so, I think of trends we're gonna see in the year of the election is the role of AI on these elections. But I

1:17:32 think the punchline of this whole thing and the reason to bring it up is, You're potentially gonna have. A guy who's sitting in prison whose elected leaders aren't being allowed to be seated in

1:17:45 parliament, being stripped by the military, you're gonna have this best case, you're gonna have an uneasy electorate if this guy's not prime minister too, or you're gonna have an all-out

1:17:56 revolution in a really big area in a nuclear power that's kind of sitting in between one-third of the world's oil production, right? The Middle East and Russia, they're here in Southeast Asia, and

1:18:11 so this is just something crazy to watch. Given that level set, I will say from just long personal knowledge and study of Pakistani political history, I was there for a couple of years as an expat

1:18:28 in the mid '90s. This revolving door of different party prime ministerships prime ministerships and military. rule dates back really, at least as far as my research went, to when military leaders

1:18:49 Eolol Hawke, who had actually hanged Benazir Bhutto's father in the late 70s as a political opposition, was

1:18:59 killed in what many believe. With the US ambassador, I believe it was in 1988, there was a mid-air explosion or a plane crash. And so, over the period of the late 80s to the mid 90s, it was a

1:19:15 bit of a back and forth between Benazir Bhutto and then what is now known as

1:19:22 PML Nahuas, which was, I think, came in second in the most recent outcome.

1:19:28 Nahuas Sharif was either in the Prime Minister's seat or he was in exile. And so I would say that Imran Khan as the Prime Minister lost a no-confidence vote. There's nothing new about corruption

1:19:40 charges and

1:19:43 jailing or forcing prime ministers who've lost the prime ministership to go into exile. So you're either an exile operating a remote campaign headquarters or you're in prison. And what's made it

1:19:58 different is

1:20:06 now the populism has an immediate and instantaneous voice and distribution in the form of social media Interestingly, Saturday, and this said happened a number of times in 2023,

1:20:16 Twitter went black and it is still offline. In fact, when - In Pakistan. In Pakistan, right around the time that - 'Cause I'm gonna assure you, it's up and running right now in the US. 'cause we

1:20:27 got some great stuff going on there. Well, right around the time in Ron Khan was jailed, they had the longest Twitter blackout, I think, of all the blackouts and it lasted a week.

1:20:38 It's, it's, it's going to be interesting to see what happens, but they will, you know, they don't, they don't have the same protections, at least the populists who are going to be clamoring and

1:20:49 protesting. They don't have the same protections as who? As the military. Oh, oh. Yeah. Those with guns and power usually since that time he lost to no confidence vote, I think it was in 2021,

1:21:03 Imran Khan lost to no confidence vote There's been a caretaker, prime minister who was actually now a Sharif's brother.

1:21:13 I mean, who knew it now it's going to all of this is not all of this is not unprecedented except for the

1:21:23 communications aspect in the form of social media. It doesn't make anything much progress on politics. And actually the winner being unsupported by the military this time. You tell me how that

1:21:35 sounds any different than what we have in our own country today. Josh? I think the most interesting part, I heard in all this is that he won from jail and one of the two likely candidates for

1:21:48 presidency in the US is being indicted and so on and folks are trying to put him in jail. There was also a very weird legal outcome in New York against one of them where hundreds of millions of

1:22:01 dollars were awarded for an alleged claim where there wasn't any, they claimed fraud when there weren't any damages and there wasn't any. No complaining witness. Yeah, yeah, it was very weird.

1:22:13 It was one of those things where you look at the value of Palm Beach real estate. I'll take part of the law. Yeah,

1:22:21 I'll pay that plus inflation. Yeah. You know, in a second, you know, someone would pay 10 times. I'll do the kid that deal. Yeah, absolutely That's 20 times or 30 times return instantly.

1:22:33 Yeah, I think that sort of frame, like you're saying, I mean, there are these parallels, and it's a horrible world where one, where these sorts

1:22:42 of terrible things are happening in any country, but also two, that there's this parallel to what's happening in the US. Yeah, well, they saw what happened. I think the most, or the highest

1:22:52 profile example of this state craft of using social media and using

1:23:01 cyber warfare, if you will, to allow the populist opposition to affect what we're looking for, which was an overthrow of the existing government was the Arab Spring in Egypt. That's when this

1:23:16 really, I think, demonstrated in a very high profile way, and there was a series of those type of things happening around that time And then the, so

1:23:29 2014, with that. Russian and the Crimea, and I forget the - Yeah, I think 20 - Yeah, 'cause Georgia was under Bush, Crimea was under Obama, right. Yeah. And that's part of what was - Like a

1:23:43 unique attack. What Ben's discuss was really the turning point for when things started to - Okay, we're gonna use this domestically.

1:23:57 Yeah, crazy. Josh, thanks for coming on, Dave. Thanks for having me. This was fun having you. I thought it was gonna be more explicit, like controversial, you're gonna throw some bombs out,

1:24:01 but no way. Production math, I don't know, transaction values. And certain circles are very controversial, but I don't know, I feel like these things, it's just, there's not really that much

1:24:13 sort of new to say about these things. There's so much analysis that's out there. And I think the big thing is just, this emperor has no clothes around these high valuations on the largest

1:24:24 companies with sort of the least opportunity to have outcomes that are different from consensus, which just, you know, is so different. Maybe it tells us that we're still at the bottom of

1:24:35 the cycle because we're the ones we were talking about, Gasco and the various other sort of tiny companies with the crazy valuations. We don't have those right now, maybe so much, so maybe there's

1:24:46 a setup for the next set of small companies. So let's say I put my life savings on a roulette table, and on that roulette table are a bunch of names of oil and gas companies, where would I put my

1:25:01 all my stock right now? So I can't answer that. Yeah. I can tell you the few companies that I own stock in that I've talked about publicly and why I own them, but I own them, they're not

1:25:14 recommending them to anyone, but there's I think three companies I've talked about that I own, that I've disclosed and shared investment theses on and so on, which are vital energy, which is in

1:25:26 the Permian, and we've done a lot of math around their intrinsic value in

1:25:33 the consensus view versus what our variant view is on it. And a lot of it's just pure production math and doing a discounted cashflow analysis and reserve math versus the negative, less math-y,

1:25:46 less detailed perceptions of them. And then Sandra, which we talked about already, where they've just been paying the assets - Yeah, it's unreal Like the things - If someone listening or show

1:25:57 wanted to reach out and find you, 'cause they think that they wanna invest or be part of - Or yell at you. Or yell at you, where they find you. Oh, you idiot. So yell at me, I get plenty of

1:26:09 that already. Info, advice, and interest. None of this is solicitation for my fund either. I run an investment strategy. It's for accredited investors only, you know, talk about these sorts of

1:26:20 things because it's fun to talk about them Yeah, there's interesting energy policy implications and for educational purposes. If someone's interested in Bison, they should go on Bison's website and

1:26:30 click the contact us or email us at infobisoninterests. And we're always happy to chat with folks. Dude, what a pleasure, man. Great. Yeah, thank you guys for having us.