The latest on Iran and nuclear, Air Liquide picks up Airgas, Range Resources scoops Memorial, and Chuck Norris defeats communism!
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#065: Iran and Nuclear – Did We Get it Wrong?
Artificial Lift: How to Drive Cost Down and Get the Most Out of the Ground
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Obama’s Methane Crackdown Rankles Texas Oil and Gas Industry
Iran breaches nuclear deal and UN resolution for the third time
Kazakhstan increases gas output, decreases oil production
Kazakhstan’s Privatization Hits A Snag
MEET THE PRIVATE COMPANY THAT HAS CHANGED THE FACE OF THE WORLD
Air Liquide’s $13.4B acquisition wins regulatory approval, cos. agree to sell assets
GE: The Impact Of The Downturn In The Oil And Gas Industry, By The Numbers
Built To Sell: Some Backstory On The $3.3 Billion Range Resources-Memorial Deal
Stubborn Natural Gas Supply Imperils Best U.S. Rally in 14 Years
Goldman Sachs emerges as vast natural gas player
What’s the Best Way to Transport Crude Oil?
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#066 Oil and Gas This Week Podcast | Fort McMurray Fires – Aid Your Oilfield Family
Transcripts Courtesy Of
James: I’m James Hahn II.
Mark: And I’m Mark LaCour.
James: You’re listening to the Oil and Gas This Week Podcast, Brought To You By Red Wing. This is the show for busy oil pros who want to quickly keep their finger on the pulse of the industry. Episode 65. I am joined, as always, with our expert panelist, Mr. Mark LaCour from Modalpoint. What does Modalpoint do? We haven’t talked about that in a while.
Mark: Modalpoint has been its butt off this whole week. We’re so freaking busy. Modalpoint at its core is a market research company. So we basically help other companies figure out where their product or service fits in the oil and gas industry, who would buy it and why they would buy it.
James: To dovetail with that, Tribe Rocket Inc., our specialty is building and monetizing audiences. So when we’re not building and monetizing our own audience through sponsorship and different things like that, we’re helping brands build their audience to sell them things. So once Mark helps you identify your market, I can help you sell those things into that market. So that’s who we are.
We have some shout outs to give to some other people especially James Gordy. I just left him a review yesterday, Mark, actually. I finally got around to give him my five-star review because he is killing it on the Oil and Gas Young Professionals Podcast.
Mark: Yeah. He’s part of the family. James is close to both of us. He started his own podcast. It’s really, really good. So if you’re a young professional in the oil and gas industry check out his podcast. You’ll enjoy the heck out of it.
James: You told me a story about something that happened to Jake Corley, another mutual friend of ours from GDS Ware, that happened after he was on the Oil and Gas Young Professionals Podcast.
Mark: How cool is this. James Gordy interviewed Jake on his podcast. An operator heard the interview and reached out to Jake’s company. Now he’s engaged in the sales cycle. Nobody did that on purpose but that just kind of shows you the power when you have people that are listening to you, you’re in their ear buds for 20, 30, 45 minutes at a time. I just think that was really cool the way that kind of played out.
James: Yeah. That is really, really cool. Another thing that makes me excited is that an operator was listening to a podcast. It shows the adoption of the technology is really spreading. I think it’s going to explode this year.
Mark: Can I tell you a funny story about that?
James: Yeah. Please.
Mark: You know who I had lunch with yesterday. I’m just going to say that it’s an executive of a very, very large oil and gas service company. We’re actually talking about podcast. He was telling me how his CEO didn’t know how to load a podcast on his cell phone. So this guy who’s a senior executive had to go in his office, install iTunes, and then subscribe him to the podcast. The reason I think that’s funny is I’ve watched James do that in person. We go to events and people don’t know how to listen to a podcast. The older generation of this industry, God love them but they’re not the most technology proficient people but that’s changing which is cool.
James: It is changing. That’s the way I found out that we are number one because I always have people in person who say podcasting and I say “On-demand radio. On-demand radio.” “Oh, okay. That makes sense.” And then I have them open up the app. I always thought it was an issue with my phone caching the search for Oil and Gas This Week but I’ve seen it happen dozens of times at this point where I’ll just say, “Do you have an iPhone? All right. Pull it out. Find a podcast app.” Once you click search, as soon as you type in oil, we’re the first one it guesses you’re looking for across multiple devices.
We have some breaking news between Technip and another company that we talk about a lot. So you heard it here first. What is it, Mark?
Mark: FMC and Technip will announce today, it’s not done yet, that they are going to merge. This has been in the works for a while, the possibility of this. I think it’s great for both companies. Technip actually come out ahead as far as the stock trade agreement. They’ll get two for ones whereas FMC will just get one for one. The new company that comes out of this is going to be a butt kicking company. It is going to dominate. To all of our people listening at both companies — you and I have a very strong relationship with FMC Technologies — good job. This is going to bring really good stuff to both companies. We’re excited to see where this goes.
James: We’ve talked about this before. My understanding is usually in the tech world why someone would acquire someone for a certain IP or certain workflows or whatever it is in terms of valuations. What is Technip getting from the acquisition of FMC Technologies?
Mark: Technip does a lot of subsea services type of work. They do work on subsea pipelines and manifolds and plant some trees and blah-blah-blah-blah. FMC makes that stuff. So imagine if you’re a company that fixes cars and then you buy the company that makes cars. You got both ends of the market.
James: Boom! Love it. All right. We usually stand corrected but we stand contested with this one, Mark. Shout out to JB for hitting us up in the show notes on the last episode which triberocket.com/tw64 because — I forgot to mention, we get our pensions now. At any rate, JB dropped a link in here about the Tesla model S fine. It’s a little contested. I’m going to back away so that I don’t flub the story.
Mark: Big super, super, super, super shout out to JB to bring it to our attention. We love it when our audience shows that we might’ve made a mistake on something. However, in this case, JB, you said that they debunked it. It’s not debunked yet. So basically what happened is the LTA, which is Singapore Land Transit Authority, fined Tesla because, cradle to grave, their car even though it’s all electric and has no emissions from the tailpipe, cradle to grave, it emits a lot of CO2. When that happened Tesla issued a statement. That’s what JB sent to us, is the statement from Tesla showing the math, showing that the car does not emit more CO2.
Now, LTA is still doing an investigation on this. I did the math on this. I’m actually really good at math. I could easy make a mistake on this but when I do the math on this based upon public data, to me the car still comes back as a higher CO2 emitting car from cradle to grave. Once again, I could easily be wrong about that.
Any time that we put something out there that we are mistaken or wrong or it’s contested, please bring it to our attention because we want to know the truth. This isn’t about ego. This is about getting the truth out there for you and actually for us too. James and I need to know what’s really going on. So I think this is a story, James, that we’ll just follow and we’ll wait to see what LTA comes out with in response to Tesla’s statement.
James: If anybody doesn’t know, Google has search tools. There’s a button there that says search tools. It allows you to search for the past month or past year or past 24 hours or whatever. I searched for the past month. I haven’t seen an update. We will continue to follow this story.
Speaking of stories, we have to get into our top stories. We’re going to start off with a couple that we’ve been following. Number one, we just mentioned last week, Obama’s Methane Crackdown. That’s what the headline says but it continues by saying Rankles Texas Oil and Gas Industry.
Mark: This is just absurd. It’s getting ridiculous. We talked about last week. What I think is that the environmentalist have figured out they can’t go head to head with oil and gas so they’re trying to go around the sideways and put enough legislation in place that just increases the cost which unfortunately me, you and our listeners are going to pay for.
James: And everyone else. It’s not just the industry. The whole country.
Mark: It’s consumers. Everything that you buy gets transported. What happens to the price of that transportation if fuel goes up? It gets applied to the product, so your loaf of bread, your eggs, Ouija board, whatever.
James: No Ouija boards. So go ahead.
Mark: So the EPA finalized a new set of rules. They say they’re battling climate change. Methane is less than 4% of the greenhouse gas that’s out there. Hats off to our Congress spending our tax money to fight 4% of the problem. The problem is methane is basically what natural gas is. So if you set a new set of rules to limit the amount of natural gas that can leak out, which actually happens naturally, and the biggest — you may not know this. The biggest industry that causes methane to be released in atmosphere is agriculture.
James: Yeah. I actually did know that.
Mark: The government spending our money to fight 4% of the problem. And then instead of going after the biggest committer to methane they come after us. This is obviously targeted for a political reason. Unfortunately for the EPA they’re messing with the wrong state. So Texas has no problem going to court and suing the federal government.
James: Don’t mess with Texas, baby.
Mark: So this is going to be another place where Texas will lead the charge because no other state will do this. We’ll spend the time and money and we’ll bring it to the courts and hopefully we’ll get this thing just overturned because it’s ridiculous to add another layer of cost while people are losing their jobs in upstream right now. It’s a ridiculous political bull. This just needs to go away.
James: Kicking a guy when he’s down at its finest or worst as you see it. Regardless, we have to update as well on the Iran nuclear deal. Iran breaches nuclear deal and UN resolution for the third time. I said before, Mark, that I haven’t really pushed back on you here. I’m in contact with a couple of people that I highly respect who had been pretty hawkish on this deal from the beginning and not trusting anything that Iran is saying. Tell us about this story and how it plays into either side of that equation.
Mark: So the story is a bit of a gray area. It’s all around ballistic missiles. In the agreement that they signed Iran agreed not to undertake any activity related to new ballistic missile design capable of delivering nuclear weapons, including launching. Lately they’ve been launching some ballistic missiles. The hard thing is is it the right size to deliver a nuclear payload? So there’s a bit of a gray area.
I’ve supported this deal. I still support this deal. We originally talked about this. I support this deal only in the context that if they violate the sanctions we come to them and we come down to them hard. The reason I support this deal with Iranian people, if we can get them exposed to capitalism, to education, to the internet they will eventually turn into model citizens. I’ve seen it million times in history. But if Iran violates the deal we need to come down on them hard, including military actions.
I’m still hoping this deal helps Iranian people. I’m not worried about the Iranian government because I think eventually it’s going to be overthrown. Like I said, if the government breaches their contract we need to slap them.
James: Okay. So it’s basically about the missile launches. They’ve been doing tests.
Mark: So in the agreement they’re allowed to test ballistic missiles but they are not allowed to test or to develop ballistic missiles that can carry a nuclear payload. So when you start looking at nuclear payloads and multiple wardheads, there’s a certain size of ballistic missile that can do that. Below that size it’s not just physical able to do that.
The reason that was written is because of the same reason that when we finish War II with Japan, the agreement with Japan allowed them to have a military to protect themselves but not big enough to think they’ll conquer the world again. That’s what’s in this agreement. So you can have ballistic missiles to protect yourself but you won’t be able to nuke Europe. That’s not protecting yourself. That’s being offensive. United Nation Security Council should be investigating this. Like I said, if they violated the agreement the sanctions need to come back hard.
James: All right. Cool. Let’s move over to Kazakhstan. We’ll find out why a little bit later in the show. We’ve got a couple of stories out of Kazakhstan. I don’t really believe that we’ve spent too much time talking about their oil and gas production. Let’s bring everybody up to speed with Kazakhstan increases gas output, decreases oil production.
Mark: This country is relatively new. It’s part of old former Soviet Union. It sits right smacked between Russia and China. They’re decreasing their oil production but they’re increasing their gas production. They’re also decreasing their coal production, and that’s just market forces. There’s a big market for them to deliver gas to Europe. So they make more money at that. So they’re just tweaking their output to make sure that they monetize that the best way possible.
Now, they got a ton of natural gas. There’s a ton of natural gas that they’ve discovered. There’s also a lot of stuff that they haven’t discovered yet. It’s estimated that their gas reserves are around 1.5 trillion cubic meters. That’s a lot of gas.
James: Put it in context for us by a lot.
Mark: If you take how much gas the entire US uses, their field could supply our gas needs for 35 years.
James: Wow! I guess that is a lot. Like you said, that’s only what they’ve discovered so far.
Mark: Good for them. Good for the people there. I’ve never been there. I would love to go because of the history, being a former Soviet Union country and then setting up your own government. Hey, maybe we can do a show from there. Hey, if we have any listeners in the government over there and they want us to come and do a podcast, let us know. We’ll be happy to jump on the plane and come do it.
James: Well, we do have one listener over there. I don’t know that he’s a government official. Actually I know he’s not a government official. We’ll find out why later in the show. We’re going to move over to Kazakhstan’s Privatization Hits A Snag because we’re seeing this a lot around the globe in terms of people realizing or national oil companies, governments realizing privatization is a good thing. So what’s going on here?
Mark: Their government has an economic downturn. They’re trying to fix that by privatizing some of the industries that were government-owned. So they’re working on a deal with China to broker one of their national oil companies. And then Romania for some reason decided that it wasn’t a good idea so they disputed the process. So now it’s stuck in the courts. They’re going to have to figure out what’s the right way to do this.
From a business point of view, they should’ve went through. The influx of cash from China would’ve allowed them to upgrade their refineries, increase production, hire more people.
Romania is worried about market share because they also deliver to part of this market. So what they’re basically doing is trying to block a competitor from getting a bigger piece of the market. I don’t know the politics over there very well. If that happened here in the US I would do something to actually bite the fingers of the competitor, maybe buy somebody else. I’m not quite sure how the politic works over there. It is an interesting situation. We’ll see where it goes.
James: I can’t tell you how the politics works today but I’m going to throw it in the show notes. You have to watch the documentary on Netflix, Chuck Norris versus Communism. It’s all about Romania under communism and how this one guy pretty much overthrew communism by bringing in all of this black market, whatever, overdubbed US movies. The whole thing around censorship and people having viewing parties and them getting busted by the sacred police. It’s a phenomenal story. It doesn’t really have to do with this but I have to throw it in. Chuck Norris versus Communism. Just for the title alone it’s worth to watch but it’s a phenomenal documentary. It’ll be in the show notes.
All right. Let’s move over here to a pretty large company, Mark. MEET THE PRIVATE COMPANY THAT HAS CHANGED THE FACE OF THE WORLD.
Mark: Bechtel. I kind of love Bechtel. They do some great stuff. Bechtel is a big EPC company, engineering, procurement and construction. Think of anything big that needs to be built. Bechtel is one of the few companies in the world that could do it. There are only a handful of people that are in this world that have the scope and the reach and the engineering capacity to do stuff.
So this is a great article. They talk about in Saudi Arabia there’s 1,000-ton monster carving a tunnel. It’s a TBM, a tunnel-boring machine. If you’ve ever seen those in TV, they’re incredible. They build them in the ground. These things are huge. They’re bigger than a 747. They went and choose a hole in the ground. When I say a hole, it’s like 30 or 40 feet in diameter. It’s not like 6 inches. It processes all the rock and dirt and everything. It comes out the other end. The very backend puts in the casing, the concrete or steel, whatever casing to case that hole. It just moves to the ground creating a really cool tunnel.
What happens is when they’re finished with the project it stays down there. It’s too expensive to take it apart and bring it back up. So it ends up carving a side tunnel and then it’s there forever. This is talking about how they’re doing this in Saudi Arabia. Everybody knows the Hoover Dam. Bechtel built that. Anything big, Bechtel has played a part.
James: There’s a list right here. The Trans-Arabian Pipeline, the Bay Area Rapid Transit system, NASA’s Space Launch Complex 40, the Channel Tunnel. These guys are experts and have been doing it for quite a while.
Mark: The other thing that I think is cool is they’re privately held but they’re worth $40 billion. There are not too many privately held companies worth that much money.
James: Oh, my goodness.
Mark: What’s really cool is it’s run by the family. Every CEO since Warren Bechtel has been a member of the Bechtel family. I just think it’s a cool American story.
James: It’s a great American story, 118 years old. We got to give an update over here on Air Liquide. Not an update actually. I think we’ve mentioned Air Liquide over on the Career Show. I’m bringing them up here because Air Liquide’s $13.4B acquisition wins regulatory approval, companies agree to sell assets. I have to put in here the link that you’re going to have in the show notes is to the Houston Business Journal. To read the whole thing you have to get a free subscription. I really encourage you to get a free subscription of the Houston Business Journal. It’s become one of my favorite sources of news. They email three times a day. In terms of oil and gas news, there’s a ton of stuff that comes out daily. Let’s get back to Air Liquide. What’s going on here?
Mark: Air Liquide is an international industrial gas company. They have market share in the US but they want more. So they looked around. There’s a US company called Airgas which does basically the same thing that they do. They have pretty good market share so they did what any good company do. They bought them. Now, of course DOJ and FDC had looked into this. They’re going to make them divest some of their assets to make sure that it’s still a competitive market. I think it’s a great move for both companies.
Airgas employees and Airgas management are going to have exposure Air Liquide’s global marketplace. It’s interesting that this one got approved. This was a pretty decent size deal, $13.4 billon. Something’s happened in the US government in the last year or so. With large mergers they tend to not approve them. They always have a good reason why but I think it’s a political thing. I’m not quire sure how it helps one political party over the other. It’s a good thing that this one got approved.
James: They’re going to divest 16 air separation units and so forth, two nitrous oxide plants owned by Air Liquide, four facilities that produce both liquid carbon dioxide and dry ice and two facilities that produce only liquid carbon dioxide all owned by Air Liquide, and then three Airgas retail packaged welding gas stores in Alaska. If you’re looking for a welding gas store up in Alaska, go pick it up.
Mark: You know what nitrous oxide is?
James: I do. It’s not coming to mind right now so why don’t you go ahead and tell us.
Mark: It’s laughing gas.
James: Yes. That’s exactly what it is. It’s what they give you at the dentist.
Mark: If you’re scaredy cat at the dentist they give you this to relax you so they can work on you. It’s also what they use in drag racing. They inject it in engines and all of a sudden you got an extra 500 horse power. Have you ever seen a car show where they push the button on the dash and the car just takes off?
Mark: That’s injecting nitrous oxide. It’s funny that it makes you relax and at the same time it’ll double the horse power in a combustion engine.
James: Don’t mix the two, folks. Don’t try this at home. All right. We’ve talked a lot about GE lately. We got the Seeking Alpha story. GE: The Impact Of The Downturn In The Oil And Gas Industry By The Numbers.
Mark: I hate it.
James: All right. Yes. It’s been a while since you’ve hated a story from Seeking Alpha. So let’s get the hate out right now.
Mark: The numbers are right. GE Oil & Gas’ revenue has dropped dramatically over the last couple of years from oil and gas. What they don’t talk about in this article is that GE Oil & Gas is only in upstream services business. They don’t have any exposure to midstream or downstream. That’s why there’s an impact to the downturn because of what they have in the market. There are rumors going on right now, people, I don’t know if you’ve heard it yet, that GE is looking to pick up Baker since the Halliburton deal fell apart.
James: We’ve talked about it.
Mark: The other thing I know for a fact that’s going on is GE’s looking to pick up some downstream service companies to help spread their portfolio. This article is accurate. It has great numbers in here. It does show how the downturn has affected GE’s valuation, stock price and revenue but it’s not because the oil and gas industry took a downturn. It’s because GE only has presence in one space of our industry. Even GE is aware of this. I know for a fact that GE is looking downstream right now to help kind of mitigate this type of risk.
James: We’ve got to get the people at WG Investment Research listening to the show because at this point it’s just elementary. Come on. You got to know that someone’s only in one segment. If that segment is hurting it’s pretty obvious.
All right. Skipping over that one, all the hate, it’s that flare hater’s ball out here. One story that was making the rounds across the oil and gas interwebs is the Range Resources Memorial deal. Built To Sell: Some Backstory On The $3.3 Billion Range Resources-Memorial Deal. What is this deal all about?
Mark: This deal is about shock and surprise, it’s what this deal is about. So Range Resources, everybody, including myself has speculate that somebody’s going to pick them up, one of the big majors or super majors. So they’ve been an acquisition target for a very long time. So what do they do? They went and bought some of it themselves. Nobody, including myself, saw this coming. So they went and bought Memorial Resources for $3.3 billion. It’s a stock trade.
It makes sense. Range is one of the first companies to actually do some work in the Marcellus. They have some good holdings. They have some good production. Memorial is also in the same boat but in a different play in Louisiana. So it makes sense but nobody saw it coming or at least I didn’t see it coming or my network didn’t see it coming. I think this is kind of cool where even somebody like me when you see stuff going on and you go “I know where it’s going to go” a lot of times you’re wrong, just wrong. This is a perfect example.
James: Let’s pick this apart a little bit. One of the lines that I’d like to hear maybe your expansion is it says Memorial is a pure play too, and then it talks about the entirety of its operations in Terryville field in Northern Louisiana. Give us a little background on that.
Mark: Just like Range is one of the first people in Marcellus, Memorial is one of the first people in Terryville which means they got prime land, prime acreage at a very good price. They’re well into production. They understand the geology of that area probably better than anybody else. So they’re one of the top operators in that field just like Range Resources is in Marcellus.
You have some diversity in this new combined company because now they’re in two different plays instead of Range picking up somebody in Pennsylvania. It’s a good move. The fact that it’s a stock only trade, it’s smart in this downturn. We’ve been saying the price of crude is going to come back relatively soon. When it does, this is going to be a very robust company.
James: After that it talks about that Memorial didn’t start out as a pure play. It started out as a mess.
Mark: They started off not operating anything. They basically just bought other assets and then they had funding. So they basically use other people’s money to go buy assets. What they wanted to do was flip them. What happened is they couldn’t flip them so eventually they had to get into actually producing these properties so they can get some of their money back. They hired some really smart people who knew how to do this well.
So they went from just picking up assets to actually being an operator which is not usually how the story goes. Usually the story is the other way around. You start as an operator and as you go then you start picking up assets and start to flip them because you know how to do it.
James: So it talks about the deal being Ken Hersh and the NGP funds will hold a leading position of about 15% of Range shares plus one seat on the board. There’s more than a stock trade going on here.
Mark: You always have this sort of stuff going with management especially if there’s a private equity involved. Private equity company has an interest and also a duty to make sure this company is running well. So that’s what that’s about.
James: All right. Let’s move over to CNBC with Goldman Sachs emerges as vast natural gas player. We haven’t been favorable to Goldman Sachs. I have my reservations about them as a result of my mortgage industry background. Let’s talk about Goldman Sachs into the national gas plays.
Mark: Good company. I have nothing against them. Their oil and gas analysts tend to be wrong a lot. I’m not quite sure why they keep getting it wrong. You would think eventually they would accidentally get it right. One of the cool things they’ve done is they saw this market in gas and gas trading. They jumped into it because they ended up buying a broker, I think it was called J Aron, and then they learned how to do it themselves.
We’ve talked about this before how oil and gas is a commodity. People broker it. So you basically buy it for X and then sell it for X+1 or X+2. There are a lot of ways you can work the market around this. Put prices and shorts and futures and all that stuff. They’ve done a good job with this. An interesting thing is they’ve actually, here in the US, overtaken Chevron and ExxonMobil as one of the biggest natural has mergers in North America. You don’t think of Goldman Sachs as being in that world but they are.
James: I’m trying to absorb that right now because it is news to me.
Mark: Let’s be clear here. They’re not producing oil and gas at all. They don’t touch that. All they’re doing is buying it, somebody else produces it, and then sell it at a profit or trading it at a profit.
James: Trading it at a profit because it does talk about how the gas utility serving households in Buffalo, New York last year and so forth, but I’m thinking actually of the paragraph before this where it talks about they basically sold off all the infrastructure of that company that they bought.
Mark: We’ll see where this goes. It’ll be interesting to see if this is still an important part of their business in about five years from now.
James: The Wall Street Institution last year bought and sold 1.2 trillion cubic feet of physical gas in the US. We’re just talking about cubic feet and everything over in Kazakhstan. Interesting.
Anyway, we have a story from Bloomberg about natural gas again. I’m not sure how accurate or whatever this is. That’s why I wanted to hear your take on it. Stubborn Natural Gas Supply Imperils Best U.S. Rally in 14 Years.
Mark: The price has gone up dramatically. Unfortunately the price going up correlating with supply and demand, that match is not there. Prices went up because investors think that the market oversupply is falling. I don’t see that as being true. On the side note, this is a good example of how investors’ perception can drive commodity prices up or down. That is not always connected with reality.
Now, these guys do this for a living. I don’t. They rely on being able to accurately call this in order to make money, and I don’t. This is one of those places where I could be wrong but when I look at the numbers we still have this huge oversupply. I don’t see any decon and oversupply because we’re still doing a lot of gas production.
James: It talks about futures for 2017 have risen even more, surging 36% to trade above $3 per million British thermal units. West Texas Intermediate crude, the U.S. benchmark, has risen 21% this year and closed at $44.66 a barrel Tuesday in New York. Maybe you can talk us through a little bit the correlation or relationship between oil and gas prices because I don’t think it’s anything we’ve really dug into very much on the show.
Mark: There are a bunch of answers to that. In a lot of places in the world there will be a mathematical correlation to help price gas accurately. The reality is it depends on the geology that you’re in. Some plays are pure gas. Some plays are pure oil. Most plays are a mix. In the past when natural gas prices where so low that it wasn’t worth bringing the gas to the market and you’re drilling oil well and you hit gas, you just flared it or vent it to the atmosphere which is not really good ford environment.
Now what happens is people put it in the system even if it’s a low price because at least they can get some of their money back because the operator is going to go pay taxes no matter what. That relationship varies depending on the geology. The operators know this. Right TWI is on the rise and is much more profitable than natural gas. So everybody’s going after liquids. They’re going after crude. If that flip flops in a couple of years like it did a few years ago where gas was more profitable than oil, then operators are going to go after gas.
That flip flop is actually why we have an oversupply now. Gas is more profitable than oil and so everybody started drilling gas wells and went production which then increased the supply which then drove the price down. That’s the environment we’re in right now. Regardless, it’s cool to see the price go up whether it’s based on reality or speculation because the people that are benefiting are operators and the general public that works in this industry. It’s nice to see money starting to flow back again.
James: Looks like part of that perception is driven as well my meteorology in the form of people are predicting a hot summer, it says.
Mark: There are all kinds of things that play in this. A lot of good traders are actually pretty damn good weather forecasters because if there’s very hot summer, especially in the south, there’s an increased demand for electricity which in our case is fueled by natural gas. Same way if there’s a predicted extra cold weather especially in north. There’s a lot of fuel that’s burned to heat homes. So the weather play is actually a real big part of the demand cycle here in North America.
James: Perfect. Let’s wrap it up with lawstreetmedia.com. Pure midstream story. I’m asking you. What’s the best way to transform crude oil? I think I know the answer is pipeline.
Mark: Who the hell wrote this story? I read through this. Not only do you not know anything about oil and gas. You didn’t even do research on Google before you wrote this.
The answer to the story is a pipeline by gazillion times percentage. A modern pipeline is so efficient and so safe and so less impactful to the environment. Your other option is supertankers, rail, truck. None of that is a good way to transport as crude oil. So you read this article and anybody in the industry, especially in the midstream industry is going to read this and go “This is like silly. It’s like my seven-year-old son wrote this.”
They do have some good numbers in here but there are also some things they missed. They talk about Keystone but they never bring up the fact that we need to blend heavy crude with our sweet crude that we produce so the refineries can refine it which is the main reason for Keystone. They also don’t really talk about Keystone accurately. Most of Keystone is built. There’s only little bitty piece which is called Keystone XL which is not built, and that’s what the federal government rejected, whatever it was, five times — I mean just ridiculous. Keystone XL basically goes from, I think, Cushing, Oklahoma to here in Houston.
So what happened is other pipeline companies have built pipelines that go from Cushing to here. So there’s a pretty good transport even though Keystone didn’t finish it. What happens is Keystone brings the oil all the way to Cushing and then they pay the other pipeline company to bring it here. That’s something that’s relatively recent. Before that it was being done by rail which is horrible from a risk point of view.
So this is not a very good article. If you want to read an article written by somebody who doesn’t know about oil and gas you can read this one.
James: Shout out to Kyle Downey. That is who wrote it. He’s not seven years old but it might explain it because he’s in his last semester at Skidmore College, and will graduate soon with a bachelor’s degree in environmental studies. If you can contact him, staff at Law Street, I’ll have to send him this show and maybe we can get a little conversion going around the complexity of the oil and gas industry and some of the things he missed. That might be a good conversion. Maybe we can enlighten somebody.
Mark: Kyle, if we can help you, I’d be happy to jump on the phone and help. A 15-20 minute phone call, I could teach you more about this industry than most of the population knows. If you have an interest in doing this, reach out. We’ll be happy to help you.
James: We’d definitely be happy to help you. One thing that INTECH Process Automation would love to help you with is automating what you’re doing in the oilfield. Mark can talk much better about that than I can.
Mark: INTECH is a process automation leader out there. Anybody out there that’s an operator or a service company that touches operators, even though the price of crude is going up, you need to worry about saving money, you need to worry about efficiencies. That’s what INTECH is excellent at. They did a really cool thing for our listeners. They wrote — I hate to use the word white paper. They wrote a really good research article on how to drive efficiencies in the field especially in a frack place.
Like I said, if you’re in that world, if you’re an operator, if you’re a service company, go to the link and download it and read this. Even if you don’t engage with INTECH they’ve now given a way for you to actually increase the efficiencies in your field by yourself. So what’s that link, James?
James: It’s intechwww/podcast. The Weekly Onion/The Weekly Cringe on Mark’s part comes from Cam, Cam on Twitter. Oh, my goodness. It’s @Daguvana. We go back and forth on Twitter a little bit. So he hit me up. This one would be great for the show.
Mark: I actually was lucky enough. I was able to meet him in person at OTC.
James: Okay. All right. He’s the guy to blame for this week. It’s on Cam and me for enjoying this as thoroughly as we do. Inspirational English Teacher Canceled Out By Every Other Teacher At School. I had a few teachers like that in my days. I like the quote here. Sure, Mrs. Belsheim inspires us all to be the best we can be, but after sitting through Mr. Edward Durbrow’s awful science class the very next period, I really don’t care about school or my future at all anymore. That reminds me of my geometry teacher actually. I was struggling through geometry. One person who’s not struggling and is also a winner is someone who is going to come up later. He’s the reason we’re talking about Kazakhstan.
We have a winner for Red Wing’s offshore bag. I practiced how to pronounce his name, Mark. Do you want me to go for it?
Mark: Yeah. Go for it.
James: All right. I put myself on the spot. It’s Max Imangazinov. There you go. Max Imangazinov, He is a buyer in Coastal Chemical. Do you know anything about this company?
Mark: No. What’s Coastal Chemical about?
James: The coolest thing about this company is something we talk about all the time in the show. They are focused on serving upstream, midstream and downstream segments of the oil and gas industry. Offering products and value added services for drilling rigs, compressors, gas plants, gathering and transmission pipelines, refineries, ethanol and petrochemical plants across the United States. They are diversified, my friend.
Mark: Good job, Coastal Chemical.
James: Good job. You clearly established this company long before because it’s been around for 50 years. So long before the show so we can’t take credit for that. If you’re looking for an example of a company that has strongly diversified so they can protect themselves in a downturn it’s a great one. Max, enjoy your Red Wing bag.
We just actually put out the podcast. I don’t think you said you heard the interview yet, right, Mark.
Mark: No. I’ll actually probably hear it today.
James: Talk to us about Red Wing because you had your chance to interface with them. I just used that word. Damn it. I hate that word. You had a chance to meet up with Tito and Cris and the team out there. Just talk to us a little bit about Red Wing.
Mark: A company that’s totally devoted to quality. It’s not a slogan by management. Frontline people believe in this and practice this. Their boots are historically legendary but they also manufacture and supply all kinds of other PPE. So if you need to keep your people and yourself safe out in the field or in the refinery or in the pipeline, if you need to wear FR clothing to whatever other type of protective gear, look at Red Wing. Their stuff is unbelievably good stuff.
I had a conversion that actually will be coming out somewhere in the future with our buddy, Patrick Pistor. We’re actually talking about PPE. One of the things that he brought up to me that I’d never thought of and makes perfect sense is like when company spec PPE they need to look at total cost of ownership. So if this PPE is cheaper but it wears out after 13 washings — and something like Red Wing doesn’t wear out at all — it makes more sense from a cost point of view to buy the better stuff.
Like I said, if you’re in that world, if you need that protective equipment, look at Red Wing. It is a great company.
James: If you would like to join Max in owning a Red Wing offshore bag and myself as I never leave the house without it, as I’ve said before, there’s no purchase necessary, you can just see the official site for rules and details. It’s redwingshoes.com/podcast.
We’re going for the big finish here because we’re coming up against our time. Our Events on Deck. You sent me this last night. What’s the Houston Fight Launch Party all about?
Mark: It’s a funny name, huh? Okay. So our bud over FMC, Chelsea, who runs her young professionals group, sent this to me. FMC Young Professionals are involved in this. Houston Fight is the American Cancer Society’s first ever young professionals group in Houston. They’re doing a fund raiser to raise money to fight cancer. It’s a great cause with a great group of people. There are a bunch of oil and gas young professionals there.
It’s dirt cheap. It’s a $10 wrist band at the door. If you do $20 you get a free Houston Fight t-shirt. Drinks, food, fun, a bunch of young professionals. Thursday, June 9th, 6: 00 PM. James, I have the PDF in the show notes. If you want to support a good cause and meet other young professionals in the oil and gas industry, go check this out.
James: I’m going to have to check that out. This is going to the American Cancer Society. Good on them getting that put together. And then we have Oil & Gas Mobility Houston happening out in the Galleria from our friends at Oil & Gas IQ. So tell us about this because I know that you think it’s pretty cool, as do I.
Mark: Mobility and communications in oil and gas is something that is vitally important. It’s growing like crazy. It’s going to play into the whole IOT digital oilfield in a very, very big way. This is a summit built all around that. So even if you’re not into the geeky technology stuff, this is a business driving conference. You need to go check this out and see how, even if you’re not on the geeky side, how mobility can actually drive efficiencies and safety in the oil and gas industry. I’m trying my best to get there. I went last year. It was just awesome.
James: Okay. These links as well are in the show notes. The First Friday Q&A is two weeks away. The clock is ticking down. You can submit your questions on this episode’s show notes or by going to triberocket.com/qa. We’ve got several great questions already. We could use a handful more. Let’s talk about the LinkedIn group though, Mark.
Mark: If you’re listening to the show, go join the LinkedIn group. We have a bunch of new stuff coming down the pipe. I mean a bunch of new stuff, all really cool, all really exciting. The LinkedIn group will know about it first. It’s where our audience, our tribe, as James would say, interacts with each other. We interact. It’s a way get to questions answered. It’s a way to get help on stuff. It’s a way to get your peers involved. Just go join the group. It’s well worth whatever it takes, 30 seconds. Go join.
James: Thanks to everyone who has been joining. I’m seeing a large influx in senior leadership. We were joking earlier about people not knowing how to download podcast. Clearly it’s starting to spread. So thank you to everyone who is joining. Hopefully you’re getting value there. Thank you to everyone who has been leaving reviews. We have three.
Number one: Awesome!! Five stars. klc261982. Great podcast. Mark’s knowledge is very helpful and James’ upbeat attitude is great. Good podcast team. Love listening to them. Thank you, klc.
All right. The next one is a little bit longer. Great Podcast! Credit to James! I already said his name. It’s by Max Imangazinov. I have been listening to this podcast for over three months now. I have enjoyed the podcast as I joined oil and gas/chemical industry a little over two years ago. As I was learning about our company from the inside, this podcast has helped to learn about the outside oil and gas environment, companies, news, acquisitions, and in general this podcast has been a great tool to learn about major oil and gas companies.
Another aspect is your podcast touches not only domestic news but also the news internationally. I’m originally from Kazakhstan and always looking forward hearing news on Kazakhstan oil and gas companies and on the progress in the Caspian Sea production. Kazakhstan is really trying to diversify its economy but unfortunately oil is our main export right now, and we’re getting hit by the oil and gas crisis strongly. Anyway, great podcast.
P.S. One of the reviewers said he or she cannot stand James. I want to say this. If it was not for James Mark would not have taught so many interesting things and touched various topics. If it was not for James we would not have had this podcast.
Thank you, Max. I appreciate that. That’s awesome. Just a disclaimer. That glowing five-star review has nothing to do with the fact that he wanted a Red Wing bag today. It was just totally happenstance. You do not increase your likelihood by leaving review but we would love one, right, Mark?
Mark: Yeah. Please. Come on, folks. Give us a review. It’s helping us kick our competition’s butt in the search engine ranking. So help us keep pulling ahead of the competition. It takes a minute and a half. It helps to just really allow other people to find us that are in the industry that would enjoy the show.
James: One last one here. Great News Source. MartinT3. Five stars. I am on the road a lot because I manage a small oil and gas business and don’t always have time to read as much industry news as I would like to. I enjoy listening to Mark and James and think it’s a great source of information for all sectors and industry. Thanks for the dedication, guys.
I to turn that around and say thank you, Martin and everyone, for your dedication and listening to the show. You sent me something, I think it was this week or last, that someone just found the show and listened to 20 episodes.
Mark: Yeah. Love that, right? We actually see that a good bit. Share this with your friends who are in industry. They will get benefit out of this especially if they’re on the road a lot.
James: Speaking of that, if you have any comments about what you heard today, please leave them on the blog post for this episode which is at triberocket.com/tw65. It’s where you can get all of the links to all of the stories. If you want to dig in a little bit further we have the Facebook comments plug in going there as well as discuss. So there’s plenty of opportunity to leave your comments there. If you made it this far in the show, please do share it with your friends. You can do that.
Shout out to Samuel Hill on that point. Samuel went and tagged us both, I think, on LinkedIn, and then tagged me over on Facebook. He gives strong endorsements. Thank you very much. Shout out to everyone hitting me, and I know, Mark, you get a lot of this as well, I’m getting a lot of listeners reaching out through LinkedIn Messenger. Sam, thank you very much for sharing the show as you have. It’s at triberocket.com/shareli will share it straight to LinkedIn, /sharetw will share it to Twitter, /sharefb will share it to Facebook.
All of that said, Mark, we’ve got another show to record. Are you ready to get out of here?
Mark: Yeah. Folks, do great work. Pay it forward. We will see you next time.
James: Go find some grease, guys.