How market perception drives oil price changes, the DOJ sues over Halliburton-Baker Hughes disclosures, and the death of OilPro.com.
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#058: How Perception Drives Oil Price Changes
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Crude at $40 Isn’t the Only Problem Facing Norway’s Oil Industry
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Nigeria: Energy Crisis Threatens Economy
Thoughts of a “Tanker Chaser”
U.S. regulator sues ValueAct over Halliburton-Baker Hughes disclosures
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Schlumberger’s CEO Warns Investors That Shale Efficiency Gains Aren’t Sustainable
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US oil industry business models to change post-recovery: Fuel for Thought
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#058: Oil Price Changes & Market Perception
Transcripts Courtesy Of
James: I’m James Hahn II.
Mark: And I’m Mark LaCour.
James: And you’re listening to Oil and Gas This Week, 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. This is episode 58. We’re making our way toward a hundred.
How are you feeling this morning Mr. LaCour?
Mark: I’m always so pumped up. Business is great. The weather is beautiful outside. We’ve had no technical issues yet so it’s all good.
James: Yet. So far so good. Got to kick of this show, lots of — a legend not only in country music but in the oil field, rest in peace Merle Haggard straight out of the oil field to Bakers field. We have the link in the extras from Rolling Stone, great tribute. Rest in peace Mr. Haggard and man, so many hits. I could go off for days. My daddy raised me on Merle and Waylon and Willie and it was a rough news yesterday but watching this decline over the last year, it started to feel like the end. He was a bit of a tortured soul so I hope he finds the peace that he couldn’t find here.
Mark: I’m not a big fan of country music but he was a legend, right? And he started out in the oil field so rest in peace, Merle.
James: Definitely. All right. Breaking news, Mark.
Mark: Breaking news?
James: We do not get everything right and this gives us a chance for a shout out to Mr. Mike Brzezinski [Phonetic] sorry and I’ll let you take it because you got a schooling from Mike.
Mark: Yeah and Mike, thank you so much for reaching out in our audience. When we get something wrong, let us know if something’s changed because we want to know too, right? There’s no egos involved here. So Mike reached out to us and let us know when I talked earlier about how fracking does not cause earthquakes. He’s actually done a study and I’ve looked at it as research work and it’s valid where the fracking itself doesn’t increase the chance of earthquakes but the injection of waste water, deep injection of waste water, looks like statistically in certain areas close to fault zones does increase the incidence of an earthquake by about 1%.
So Mike, man, thank you for reaching out. Thank you for educating us. I’m actually — I got an interview schedule with him because I was so excited that somebody reached out to us with his knowledge and background as able to talk through this.
So fracking doesn’t cause earthquakes. Deep waste water injection near fault zones looks like they do increase the chance of earthquakes so we stand corrected. Thanks, Mike.
James: Yeah and when I was talking to him, he said, “Oh, no. Mark, you’re saying something that was believed three or four years ago.” So it was awesome of him to reach around and get us updated on the latest.
Mark: Now, I will say this. There’s a link that James has to a PBS Rocky Mountain news article about this. It’s so slanted the wrong way. So they sensationalize this and then later down, they kind of mention the facts but this article is trying to make it look way worse than it actually really is.
James: Yeah. So I will have that in the show notes at triberocket.com/tw58 for this one but we will have more expertise coming from Mike so that we can get the full story on what the latest is in terms of injection wells and earthquakes.
Mark: Yeah and you know James, another reason I’m glad he reached out, as an industry, we need to own this, right? We don’t need to hide from it. We need to talk facts, talk the truth. If we increase the chance of earthquakes in fault zones, we need to know that. We have the best geologists on the planet. So we should, as an industry, we should make sure we do our best to learn what’s going on here.
James: Absolutely, definitely agree. We’ve got to get into the stories because goodness, it was a wild week in the oil field. I started off with 40 stories. So I whittled it down to the number that we have here. Let’s get on into it and we always kick things off abroad and we have never talked about Norway other than mentioning the North Sea here and there. So from Bloomberg, Crude at $40 isn’t the only problem facing Norway’s oil industry.
Mark: Yeah. I think if we’ve probably talked about this. We hit around this. The North Sea environment is not a good place to be. The fields are very mature. It’s getting expensive to get oil out of the ground over there. They’re not making new discoveries. So $40 a barrel is killing them and the fact that they can’t find more doesn’t help either.
Now, interestingly enough, and people may not know this but Norway knew at some point this was going to happen so of all the money they’ve made from the North Sea, they’ve invested to other stuff trying to bring different businesses into their country which is for a little socialist country, it was actually a very smart thing for them to do. This is a good article from Bloomberg talking about how there were certain blocks that were auctioned off and really, they’re subpar, right? The prospects there are nowhere near cost effective to get out.
Now, there are some blocks that people have been or companies have been on up closer toward the artic that have high potential. There’s some big reservoirs there but of course, they’ve got some feedback from the environmentalist not wanting people to drill that close to the Arctic. So the North Sea is in a pickle right now. It’s a technological advanced extraction and drilling extraction because of the weather conditions and it’s cold deep icebergs, all that sort of stuff.[0:05:42]
So I don’t see the North Sea coming back. I see the North Sea continue to have an output that contributes to the global supply but I don’t ever see it come back before its heyday.
James: What about in terms of bringing new technology to get more out of those fields?
Mark: Yeah. So it’s somewhere in the future, there will be new technology. Most experts believe that that will continue to happen but then you get to the whole price thing like is that new technology in the frack field on land more cost-productive than using that technology in the North Sea? So because we’re living in a hydro carbonate abundant world. I just don’t see companies pumping money into the North Sea because they get pumped that same amount of money somewhere else and get more out of the ground for less.
James: Where will these companies go then?
Mark: Well, Gulf of Mexico is a prime example, right? There’s a lot of oil in the Gulf of Mexico. All the gas of Mexico. Look at all the shale place and places like Australia, in South America, in Russia, none of that stuff’s — in China, none of that stuff’s even has been touched yet. So I think that’s where money will be pumped in the future. I think we’re in a long term low crude price market. When I say low, $55-$60 a barrel and it’s just doesn’t make physical sense to pump money into the North Sea.
James: There are so many — I didn’t throw any but I’ve seen so many people — I think it’s just Click Bay talking about oh, a hundred’s coming, 150’s coming. I don’t know why people got to that but anyway —
Mark: So it might happen. It’s in that realm of possibilities. When there’s global oversupply is depleted, we’re going to bounce back unbelievably quick. And if the perception out there is that the oversupply is gone and we’re going to bounce back really quick that perception can influence traders which we may see a high spike, it’s on our realm of possibilities. It may go from $38 a barrel to $90 but that spike will be — it’s just a perception. It’s a short term thing. And then it’s going to settle down like I said to $50-$60 a barrel.
James: Oh, shot in the iron for the addict and then —
Mark: Right. We don’t think that’s going to happen but it is in the realm of possibilities.
James: Got it. All right. We’ve been following this story. I’m curious to hear your thoughts, Saudi is to sell stake in parent of state oil giant by 2018. Very big numbers in this one. So talk us through it.
Mark: Yeah. We’re looking if they go IPO like a trillion dollar IPO, I mean just crazy because you have so many reserves on the ground. Now, I said this before and I’ll say it again. I don’t think the royal family is going to let go of Saudi Aramco because it’s what allows them to control the government, control the country and you read through this article in detail, this is from Fuel Fix, it’s a very well written article.
To sell a stake of less than 5% and so, you still have 95% will still be owned by the Royal Family but if they do it, it will be a huge IPO. This could give them a whole bunch of cash. They’re looking at doing some other things which we talked about previously. They’re looking to get a refining, they’re looking to take that money, get the petrochemicals because the world has a big appetite for that.
Luckily for people here in the US, we’re ahead of everybody for that export market so Saudi Arabia will catch up to us. They also talk a little bit in here about how OPEC and Saudi Arabia particularly is still the swing state as far as being able to keep crude prices low if there’s a need for that. I disagree with it. I think in the very near future, the U.S. will be the swing state and if we decide that we want prices to be low, we control that, not OPEC anymore. So but good article talking about them going to sell a stake in their parent company to raise some cash.
James: Yeah. I’ll throw it in the extras in the show notes because I didn’t add it here but it was from plantengineering.org. U.S.A. swing producer in balancing oil and gas market is actually talking about one of the guys from IHS. He’s going to be presenting an OTC and so I’ll throw that in the show notes as well.
We have a lot that we can dig into on the Saudi Arabia front. One thing I do want to ask though is that even though it’s 5%, it’s still a Royal Family giving away a portion but I’m connecting some dots here. Is this them also trying to build up that savings that they’ve been depleting?[0:10:04]
Mark: It could be, James. I said earlier, a trillion dollars is actually more like two trillion dollars. That’s a lot of cash. They could very well re-build that savings which I know they’re going to struggle with in the future. I also see them taking up money investing in other parts of the oil and gas industry. Particularly petrochemicals refining ethylene crackers, that sort of stuff. They’re in a weird position. They have the cheapest oil to get out of the ground but they import refined fuels and petrochemicals.
They’ve never found anything before and they see the world market for petrochemicals and so they want to try to grab some of that market so they pivot a little bit with their economy and instead of their economy based on exportation of crude, they want to start actually manufacturing goods. They want to down shrink component to their economy. Just from a business point of view, very shrewd stuff, very smart because they’re going the right direction. Do I think it’s going to allow them to be able to maintain a chokehold on the crude price globally? Nah. It’s too late.
James: Too late for that.
All right moving from one country that is abundant in oil and petrochemicals and so forth, over to an emerging crisis in Nigeria, energy crisis threatens the economy. Several stories again on this one. We’ve actually — I’ve got two back-to-back sort of give the high level view of what’s happening but then to give a personal view of a guy waiting for 45 minutes to get gas for his car. So talk us through what’s going on in Nigeria.
Mark: Yeah. For a country that has a bunch of crude and natural gas or I really shouldn’t say crude, you wouldn’t think that this would be going on but it’s an infrastructure issue. A lot of our listeners may not know this but when somebody like say, Chevron goes to Nigeria, they don’t connect to the commercial grid. They have their own sewage treatment plants.
They built a sky rise. They built a skyscraper but then they build their own sewage treatment plants and their own electrical generated plants just for their needs because the country’s electrical and sewage and water is so unreliable. It goes down all the time. So it’s interesting if you actually go to see all these super majors and majors out there with their own office builings. Each one has their own generating capacity. It’s only where they can keep the thing running.
So this is a good article in AllAfrica about how the lack of reliable energy, electricity and fuel, so diesel jet fuel gasoline is hurting the country and the reason it’s going on is they had to struggle with refining their own stuff and once again, it kind of relates back to corruption which the president’s working on to get rid of but also to distribute it, right? Even though you may be able to produce diesel for generators, do you have the infrastructure to build a ship where the generators are? In Nigeria’s case, they don’t.
So this is really weighing heavy on their economy. I mean think about it, James. Would you want to go open a Tribe Rocket office at a place where you couldn’t get fuel for your people and couldn’t get electricity to run your computers? I mean no. So they’re working — the president’s working on trying to fix this issue is the years and years of corruption especially around infrastructure projects and when you build an infrastructure, when you’re building power lines or pipelines, you can’t do it over night. It takes time.
So this is how just showing how it’s hurting their economy and hopefully, they’ll be able to pull through this.
James: All right. So you talked us through the high level. Give us the recap on the thoughts of a tanker chaser.
Mark: Yeah. So that’s another good article. Basically, this poor guy that’s writing this article literally has just enough fuel in his automobile to be able to go to the next gas station and wait forever to get a liter of fuel of gasoline and so he can’t actually run his business because he can’t buy enough fuel and the fuel he buys is unbelievably expensive so what’s going on is there’s this black market which is not good for their economy, not good for their country of fuels so people could run their business.
It’s affecting the cost of their currency. It’s not free market which the government is trying to implement that means that people are rich are able to grab resources that the poor people can’t which is also not good for their economy so this is just a mess and for people in the U.S. and Europe, you just can’t imagine the idea of not being able to buy fuel for your car but it happens.
James: Yeah. It’s a reality so another reason I’m very happy to be an American just to have the blind dumb look to have been born here but yeah, all of the corruption and the infrastructure issues and then you add on top of that, just I’ve seen — one of the stories to show the lines and lines, I mean it looked like 1970s America. It was crazy.
Mark: That’s normal. That’s their normal.
James: Yeah. Gosh. I hope things turn around there. All right. Let’s bring things back to America because we got a big story. U.S. regulator sues value act over Halliburton-Baker Hughes disclosures and this is making a big splash around the inter-webs so tell us about it.[0:15:09]
Mark: Yeah. So before I get to this, I just want to read something. So I have the actual U.S. District court complaint about the Halliburton-Baker Hughes merger. All right? Now our government publicly talks about how we need to invest in renewables that oil and gas is not good for the country, not good for the U.S. but in this complaint it says — I’m just going to read the introduction.
Halliburton’s proposed acquisition of Baker Hughes would violate Section 7 bla, bla, bla because it would combine two of the three largest providers of oil field services in the world. It would eliminate substantial head to head competition and would likely lead to higher prices and less innovations in this critically important industry.
So their complaint says the oil and gas industry is critically important to the U.S. government and to the U.S. people but publicly, they say they want to get rid of it. What the heck? But you can’t do that. You can’t play both sides of the fence, right? This complain should say that oh, renewables are going to play the major energy part so it doesn’t matter if Baker buys — I mean Halliburton buys Baker in but that’s not what they’re doing.
But anyway, we knew this was going to happen. Halliburton knew this was going to happen. This is a good article on the intricacies of when a very large company buys another one. That’s stuff they have to go through with the department of Justice to now violate anti-trust things. And in the U.S. government’s defense, it is good that we have anti-trust laws, right?
We don’t want people to have a monopoly. But what the government is not acknowledging is that the oil and gas industry is fundamentally changing. We’re going to be in a long term hydro carbonate abundant, low crude price environment and when you have that type of environment, you’re going to have mergers, right? Because scope allows you to drive efficiencies.
So they’ll work this thing out. What’s going to have to happen is Halliburton’s got to have to agree to invest, just basically sell off some of its business units or some of Baker’s business units. I still expect this to go through. It may be another three years on the courts before it does but it’s going to happen because it’s the nature of the industry.
James: If it takes another three years, there was a Montney full article out there that I’ll put in the show notes as well in the extras. They were just asking the question do Baker Hughes’ stockholders win no matter what?
Mark: The shareholders of both companies long term wise no matter what short term wise, Halliburton paid a premium so you could’ve exit really quick. Now, the thing is both companies’ stock has been cut by I would say almost half in value because of the low crude prices which then just shows that the merger needs to go through.
Basically, these companies are worth half of what they were before and Halliburton-Baker both saw this coming. Now there’s a little bit of a back story. It’s called a merger and it really was not a merger. Halliburton came in and forced Baker Hughes to sell itself to them.
That’s the backstory but that’s what happens in business and so I believe this will go through. There’s still some DOJ stuff that needs to be hacked out but it just bothers the bajeebees out of me that the government publicly says one thing about the oil and gas industry’s not important and this could disappear and they file in court the official documents saying that the oil and gas industry is vital to the U.S. I mean that’s just wrong.
James: Politicians speaking out of the both side of their mouth. Are you serious? I’ve never heard of such a thing, Mark.
Mark: I know, I know, but it’s just to see it in print. It’s just wrong.
James: Oh, goodness. It’s like certain band’s concerts. It’s okay to see it in TV, you don’t want to see it in person.
Schlumberger’s CEO warns investors that shale efficiency gains aren’t sustainable so some more possibly — I don’t know. There was just a lot of controversy going on. We didn’t even mention the Panama papers but let’s talk about this article.
Mark: Yeah. So I disagree with Paal. Paal Kibsgaard is the CEO of Schlumberger. I think the efficiency here to say, I’ve seen it. What he’s talking about is he’s saying that the efficiencies in the frack field especially have been driven by the service companies like Schlumberger and Halliburton and Baker Hughes and Weatherford have cut their prices dramatically including to a point where maybe they’re just breaking even on jobs and he’s saying that when the price of crude comes back that of course, there will be inflation in the service companies and those efficiencies will be removed but I just see he’s wrong.
I mean James, you and I where we were — they had a CEO, was it Noble Energy talk about the efficacies they drove by installing pipelines for waste water instead of trucks? I’m hot heavy with clients looking at digital oil field in the oil and gas industry. I see it. I’m interviewing oil and gas executives. They’re talking about saving 15%, 20%, 30% by implementing new technology.
So I disagree with him. The other thing I disagree with him is that he says Shell is a high cost oil to get out of the ground.
James: Shell or Shale?
Mark: Shale, I’m sorry. It’s a high cost oil to get out of the ground. You can’t say that as a blanket statement. You get a good operator and a good piece of property that knows what they’re doing and it’s very inexpensive to get out of the ground. You get a bad piece of property or you get a bad operator and of course their cost goes up so there’s a range there.
I don’t really get why he’s doing this. I suspect that this somehow is tied back to Schlumberger trying to increase shareholder value. So this is something what their investors to hear so maybe their investors think oh, the prices will come back so Schlumberger’s stock would go back up but I disagree with them. The efficiencies are there and they were going to continue to come up with new efficiencies as we look at new technologies.[0:20:37]
James: I mentioned the addict analogy earlier but in the case of an operator driving efficiencies, once they get a taste of that higher margin, it seems like they’re not going to want to go back either.
Mark: No. They won’t. It’s self-fulfilling, right? If you’re an operator or if you’re a drilling contractor, either way I mean look at drilling. So we’ve got rid of turn tables, top drive, we’ve got higher horse power rigs. We got rigs that could walk themselves to the drill pad. That’s efficiency. That’s not going away. Nobody’s going back to an old rig that you got to stand up and stack. I think this is Schlumberger’s CEO trying to drive some perception to increase shareholder value.
James: It’s interesting, yeah. We’re not going to go back to Windows 98.
Mark: Yeah. It’s not just going to happen.
James: All right. Over to the Wyoming business report. Experts say current uncertainty in oil and gas to continue but turn around could come soon. This is just a pretty lengthy piece but not too lengthy but it sort of hits on some of the things that we’ve been talking about.
Mark: Yeah. I read through this. I agree with a lot what they said. I wonder if they hit and listen to our show and write this article. But they’re basically saying that the oversupply is shrinking which it is that production has fallen somewhat which it is and you put those two together and the prices will rebound and they think it’s going to rebound relatively soon which is what we’ve been saying since before the prices even fell.
James: So they talk about pressure pumping is probably the poster child for excess capacity. Can you unpack that statement for us?
Mark: Yeah. So that part of the industry has had a huge increase in activity and they’re also — we talked about this earlier, about technology. They’re using technology, higher horsepower per well so they’re able to get more on the ground quicker and faster. Now, that’s efficiencies. That does not necessarily have anything to do with the oversupply. Yeah, of course if we ramp up production and we can bring that over supply back but I don’t see that happening.
The world has an enormous appetite for crude oil and natural gas. That appetite is growing so that the consumption globally is growing. It’s not growing as much as it was but it’s still growing and our ability to produce because of technology can keep pace with that growth and just the market drivers itself will correct stuff.
What people keep failing to understand is we’re in a commodities market and it corrects itself every 10, 12, 15 years. This is not new. It’s the fourth one I’ve been through. I’ll go through probably three or four more in my life. It just happens and it always corrects itself. It always comes back.
James: Mentions right here at the bottom about China being an over-leverage market. What are your thoughts on that?
Mark: They’re not over leveraged. Their economy is still growing faster than almost any other economy in the world. It’s not just growing as fast as it was before and they have a huge appetite for energy of any kind because they need to build critical infrastructure.
China’s not like the U.S. Most of China is rural. Most of China has no electricity. No water, no sewage, no roads. So they have to build all the stuff that’s been in place in U.S., in Europe for over a hundred years to bring their population up to create that middle class and the Chinese government, no matter what you say they’ve actually in the last ten years, done a really good job of managing that.
They’re building that infrastructure. They’re building the hydroelectric power, they realize that coal’s bad for their air quality so they get rid of coal and they import natural gas. They’re building petrochemicals so they can supply their own plastics for fertilizers. I mean it’s going there and it’s growing. It’s not just growing as fast as it was. They make a claim here that China’s economy has never gone through real world stress testing. Yeah, it has. They do it actually pretty darn good. So it’s a good article, good facts in here but yeah, the price of crude’s coming back.
James: All right. Cool. And then after price if the price of crude comes back, things are going to be fundamentally different. We keep talking about these fundamental shifts in the industry. So from Platts, U.S. oil industry business models to change post-recovery fuel for thought.
Mark: Yeah. This is a great article. So we’ve talked about this on past shows how I think there’s a — equity market is going to be stood up in oil and gas which is new. New source of capital.[0:25:00]
They’re talking about in this article about how investors or look at the oil and gas industry differently which is true, absolutely true. They’re going to look at a more long term, they’re going to look at companies’ balance sheets whereas before, people restored money especially to small operators because they’re such a big return when oil’s $100 a barrel.
So if you think about this, if you think the investors are going to make smarter decisions, if there’s going to be new sources of capital for these small independent operators, it’s a good thing for the industry. If we get to the point where we can control that swing production and if we do that in the U.S., it’s not going to be the Chevrons and the BPs of the world.
It’s going to be the small independent American operators that are going to be able to turn that faucet wide open or cut it back. If we get to the point where we can be the swing producer, we now control the global price of crude and that’s a good thing for the world.
James: So one of the paragraphs I’d like to hear your thoughts on and unpack a little bit, public companies have much less money to buy stuff now and they have a lot of acreage of their own. He added P.E. back companies will have to more fully develop their assets requiring more money and more time so quick flips won’t be as prevalent.
Mark: Yeah. So P.E. is private equity so they’re partially right here. Some public companies have a ton of money right now. Exxon’s sitting on like 40 billion dollars in cash. I mean Exxon can go buy Chevron if they wanted to. They won’t but they could. And Chevron actually is in a good place cash wise too. I mean they’re hurting more than Exxon but they have cash too and even some of the bigger service companies that have laid off a lot of people, they’ve kept some cash reserves because they know they’re going to need to do some acquisitions.
So some public companies have cash. Most — I wouldn’t say most. I would say 50% of the publicly owned oil and gas especially the operating companies, are in cash constraints right now but I wouldn’t say most of them are. Then they’re right. They private equity companies are going to have to show their value more and that’s what they mean when they say more fully develop their assets.
So you won’t see quick flips just like the housing bubble whereas a bunch of people buy houses and flip them and flip them and flip them because all these bogus mortgages out there that allow people that shouldn’t buy a hundred thousand dollar house to buy a hundred thousand dollar house, you had that going in the oil and gas industry for a while when the oil is $100 a barrel. And this is just once again it’s going to be smart people doing smart things with their money. It’s going to drive good stuff in our industry.
James: All right. So downturns aren’t always bad. We can’t say that enough. The best of the best in the refining industry, let’s go down stream, Mr. LaCour.
Mark: Yeah. We’ve talked about this so much. It’s almost like we wrote this article. This is in Seeking Alpha and they’re talking about some of the best downstream companies out there from a balanced sheet point of view. The first one is Valero Energy which I agree 100%. Valero did something very unique. They go out and find old moth ball refineries. They retrofit them and they come super-efficient and then they buy the cheapest crude, the most crude in the market and nobody else wants and they’re able to refine it and make money. Nobody else can do that.
So Valero is absolutely one of the best. It’s not the biggest and when you look at scope. Scope is important in the global market for refinery because your products are sold globally so look at scope, they don’t talk about ExxonMobil in here but ExxonMobil’s way bigger than Valero. Exxon’s more scoped than Valero.
They talk about PBF Energy. I love PBF Energy. PBF Energy is — speaking of Exxon is looking to acquire one of Exxon’s refineries in California. You’d go, “Well Mark, why is Exxon selling refinery if their refinery’s so strong?” Exxon’s core business is big. Big refineries. Big fields, big super tankers. That’s what they do better than anybody else and this refinery’s small and so it doesn’t fit in their portfolio plus quite honestly they don’t talk about this here. It’s in California and Exxon’s just fed up with dealing with the politics in California. If you want $7 a gallon while the rest of the county’s paying $2, just you had it. I’m getting out of here.
So PBF energy’s another rock store. Their balance sheet is very strong and they talk about Marathon patrolling and you know I’ve talked about Marathon before in the show. Once again, a great company, great balance sheet, good shareholder value and they do a really good job. Now Marathon’s interesting as it looks like they’re trying to own more of that value chain.
So instead of just buying crude of open market and shipping it to refinery, Marathon’s actually building and buying pipelines so they can control the transport and then they’re brokering long term deals with very selective operators so that they have a good solid price point so they could work their refining margins around that because they know what the future prices are going to be. So it would be interesting to see if that works for them or if it hurts them but I agree completely. These are some of the top refineries in the world.
James: Oh, my goodness. You brought another one out that I didn’t have here but it was all throughout again in the show notes. We missed it last week from the Q & A show. It was pipeline companies threating liens on oil producers that don’t pay. That’s a whole nother story that we don’t have time to get into right now but just to let everybody know we’re still tracking that story in the shakeout in terms of bankruptcies and so forth. You just mentioned California and ExxonMobil. ExxonMobil about the Torrance refinery. They basically — it sounds like they got the green light to go back on.[0:30:32]
Mark: It’s interesting you put this in here. I think this is the first time this has ever happened with us is that I just talked about this. I didn’t know this article was in here. Here’s another Seeking Alpha story about Exxon getting rid of their Torrance refinery in California. They’ve had some regulatory issues. They basically had an explosion at the refinery, what ExxonMobil calls an incident and they’ve had to prove to the government in California that everything’s back up and safe.
Now, PBF also wanted to buy this refinery. PBF was not going to buy it until Exxon did the upgrades and fixed the things that blew up. So it looks like they finally got theirs so this should sail right through the regulations over there and like I said earlier, part of this which they don’t mention here is Exxon is just fed up with dealing with California politics and it’s like I’m just getting out of there.
So they’re going to let PBF who has a better appetite for dealing with California politics take over this refinery. Good stuff.
James: Yeah. You can’t be mad. They just raised the minimum wage to $15, so get the heck out of there. I posted on Facebook, “Brace yourself, taxes. Economic refugees are coming.”
Mark: Nope that won’t happen here.
James: No, but the economic refugees are coming. How many economic refugees have you talked to around Houston?
Mark: They’ve been coming. I could tell you story after story of major — I mean large multi-billion dollar companies in California that literally just had enough. They’ve reached out to the government here in Texas and they’re moving their company and their employees over here because it’s just so much cheaper to do business here.
James: All right. One business that was not running above board and was founded on some nefarious dealings, pretty big story around the social oil and gas social web. Rigzone, I’m just going to let you talk so that I can temper my anger.
Mark: This is so wrong on so many different levels. So David Kent founded Rigzone sold it for I can’t remember how much, 51 million or some big number but he built a backdoor into their database then he started a competitor as soon as his non-compete was over with called Oilpro which a lot of the industries especially the younger people in the industry jumped on but he was stealing information from the company that he sold to grow his own company.
Let me tell you, this industry, the oil and gas industry as a whole has a big issue with public relations. It has a big issue with what people think about it. We don’t need someone of our own doing something crappy like this. It’s just wrong that give us another black eye in the public.
So he’s in jail. I don’t think the judge is going to show any mercy here and the judge shouldn’t show any mercy and the bad thing is, think about the Oilpro employees that weren’t part of this, right? A lot of them lost their jobs overnight and this happened in the industry where people are being laid off everywhere. So this is — for his own personal gain, this is just so wrong. I hope the judge throws a book at him and he’s out cracking rocks somewhere for the next 20 years because this is just wrong.
James: Well, I can tell you that I spend a little time in the hacking underworld just so I can know it or what our opponents are up to and as someone who honestly is a fan of hacking and I can’t boss mainframes or do anything crazy like that but there is good hacking and bad hacking. Hacking is a skill just like anything else. It can be used for good or evil.
Mark: Like the force on Star Wars.
James: It’s just like the force. You can use the force and for instance, some of the earlier things that were happening where LulzSec took down the FBI website. Hey, I thought, I’m all in for that because that shows we don’t have enough security. Same thing with the AT&T hack that happened and you can watch.
There’s a Netflix documentary called Hacker Wars that takes you through this whole thing but regardless if you have the ability to hack and you know code and things like that, there’s ways that you can use it in a public service kind of way to show for instance, AT&T, one of the biggest hacks in the early days was you could just basically put in a number and sign in to the next person’s AT&T account and people on that list for so like Diane Sawyer and all kinds of different people.
So from my perspective as someone who works and lives and breathes on the internet, if you go the wrong way with that skill, I have no mercy and no compassion for you. You deserve what you get and judges feel the same way and he’s going to get it thrown at him.
And just to try this in here, Oilpro is back online with limited capabilities, I don’t know where they’re headed but personally, I’ll never sign in again.
Mark: Yeah. Me neither.
James: I’ll never sign in again because I cannot support a company that was founded on evil, period. Not to get too much on my soap box but David Kent deserved to be called out for that because it is just wrong.
Mark: Yeah. I agree 100%.[0:35:35]
James: All right. Let’s get on to some good news. Once wedded to oil, Houston economy carries on despite bust.
Mark: Yeah. This is something a lot of people in Houston don’t realize but they should. Just look at the traffic, how bad it’s gotten the last couple of years. So what’s happening is a lot of companies will pick Anadarko. Anadarko is close to a lot of remote offices which means they brought their people back here which means those people need a place to live which means those people need to go grocery shopping which means they need a restaurant and bars and Walmart’s and everything else.
So the Houston economy is actually on a roar. If you drive down the energy core door or downtown, you watch them tear down these Class B skyscrapers to build Class A and it makes physical sense because there’s a shortage of Class A office based because so many people are moving here to Houston. So our economy’s on a roar.
The good thing about Houston was ’82 or ’83 that bust, the Houston economy was totally built upon oil and when that bust came, Houston was just decimated and Houston’s government learned its lesson back then and they’ve diversified their economy. We will soon have the largest biomedical research facility in the world, right? We have deep water ports. We have transportation. We have Aerospace. We have NASA.
So even though part of our economy has been hurt, other parts that were going well, things like refining, we got 85 billion dollars’ worth of refining projects here in Houston. So this is an article talking about actually a particular person who has worked for one of the big service companies decided to get into medical to give herself some buffer room because she knew that if the price of oil tank that she may get laid off. So it’s just a great article talking about how Houston’s economy’s doing well regardless of the price of oil.
James: And that’s a good point we’re going to hit on probably on the career show that we recorded next which is that a lot of your skills are transferrable and always have a Plan B because you don’t know and you just got to work in yourself so that you can maximize whatever opportunity comes your way if you’re laid off.
All right so moving on for there, those are all of our stories. We are getting towards our time but I think we got enough time to get through the rest of the stuff so we have to mention right here it’s not the onion but it is from Ayata which I have an interview from Ayata on my first show. I’m just going to play a couple seconds over here.
Stuff business people say.
Male 1: All right. Let’s play hard ball.
Male 2: So how are we going to position ourselves?
Female 1: Let’s hit the ground running.
Male 1: Let’s hammer this out.
Male 2: Let’s get our ducks in a row here guys.
Male 1: All right. Here’s the 30,000 ft. view.
Male 2: Let’s drill that down.
Female1: I’ll beef it up.
Female 2: Can you put a deck together?
Male 2: Look, I’ll do most of the heavy lifting.
Female 2: Okay. I’ll put my fillers out.
Female 1: Can you send me the dial-in?
Female 2: What’s the dial-in?
Male 1: Hey, Lory. What’s the dial-in?
Male 2: I just pinged her.
Male 1: Somebody ping Carl.
Male 2: Loop me in on that.
Female 1: Loop me in on that will you?
Male 1: Can you guys loop me in on that?
Male 2: So what space are you guys in?
Female 2: Is this B to B?
Male 1: Or B to C?
Female 2: Is it C to C?
Female 1: We’re B to C to B.
Male 1: We’re B to C to B but back to C sort of.
James: All right. Let’s get our ducks in a row here, Mr. LaCour. We have a winner —
Mark: Who’s our winner, James?
James: For another Red Wing Offshore bag. This might be the last one. Our winner is C.L. Brantley from Performance Wellhead & Frac. He’s an operations manager and Performance Wellhead & Frac Components is a leading oil and gas service company specializing in surface well control equipment and related field services utilized in all phases of drilling, well stimulation, production and intervention operations. I’m pretty fired up that a cat like that won the bag.
Mark: Yeah. Congratulations, C.L. You will love this bag. It’s great for bringing it out on the field which obviously you spend a lot of time out in the frack fields. So congratulations. So James, we’re not quite sure if we’re going to give away more bags but we may be giving away some other stuff if our listeners want to get a chance to win. What should they do?
James: They should go to triberocket.com — I’m sorry not triberocket.com. They should go to redwingshoes.com/podcast and whatever we’re coming up with next, it’s going to be even cooler because I’ve been texting back and forth anyone who’s won any — notice that Chris is the global brand manager. She’s a phenomenal person to work with and we’ve been going back and forth to some different ideas and it’s going to get bigger and better. So look forward to that.
In the meantime, you can still go to the website, no purchase necessary, see official site for rules and details and those rules and details might change because it might get better and then also we have to give a shout out to our other supporting sponsor Intechww they have a — sorry intechww.com, which is Intech Automation. They have a white paper that I’ll let Mark talk about because as our reviewers say, I lack technical experience.[0:40:30]
Mark: Yeah. So our winner, CL, hey CL you ought to get you and your whole company go download this paper. This might be something that might be important to you. Intech did a great job on how you can actually drive cost down in the field so if you’re a service company and you have producing clients, this would be something you’d want to understand because it might be another product line for you to bring to your service companies.
So in CL’s case, he might download this paper, understand what’s going on and then be able to go to his clients and offer Intech services and Intec’s going to be happy with that. But if you’re a producer, and you’re in this low crude price environment, you absolutely — you could download this white paper. Intech did a great job showing how they can reduce your cost up to 50% in production and in this low crude price, that’s vital so if you want to go check this out, it’s intechww.com/podcast. Go there. No costs. It’s free for listeners and download it.
James: Download it and then they will also give you a free automation assessment. Let’s give a shout out to Dave Weaver because he sent over a veteran’s link in LinkedIn.
Mark: Yes. So Dave, thanks for sending this to me. Dave is a U.S Airforce veteran. I got a lot of good memories with those fly guys because when I was in the marine core, they moved me around a lot. So this is at LinkedIn. This is LinkedIn actually donating courses and career advice for veterans. So if you’re a veteran out there, and you’re looking at re-entering the civilian world and brother, I know how hard that could be. Go here. It’s free.
It’s LinkedIn giving something back and they’ll help you figure out how to best do your LinkedIn profile and they’ll give you free courses on Lynda.com which we’ve talked about before. A great resource to learn job skills. So Dave, thanks for sending this and for all my veterans out there, thanks for your service.
James: Definitely. It’s veterans.linkedin.com. It takes you straight there.
Events, we got a few to talk about. I found one that Mark didn’t have. And I think it’s pretty cool. Ventura Oil Field’s centennial anniversary.
Mark: Yeah. So if you don’t know Ventura Oil Field, it’s one of the oldest oil fields in California. A lot of people don’t know this but California before it got all crazy politically was one of the bigger producing of oil —
James: They’re still fourth I think so they still do. They just don’t publicize it.
Mark: They still do, yeah. They have the reservoirs there. It’s just politics getting away from people actually being able to tap into that. But this is a free event. It’s the public. They’re going to do an educational event from 10 a.m. to public to 12 p.m. at the Shell Clubhouse which is — we’ll put the link up to the address here but you get to learn the history of this field and this is a lot of industry and also how much this field has attributed to the local community.
So there’ll be exhibits, there’ll be food, there’ll be experts out there, geologists, reservoirs engineers, all that sort of that sort of stuff. So, if you live in that part of the country, go check this out. This is really cool.
James: Yeah. Any of our California listeners and we know we do have some people in the oil fields out there in California and so head on over. I love it. It’s such a Californian line they put in here 600 Shell Road, just North of Ventura city limits. Just get on the — no, sorry. API Houston Luncheon next week.
Mark: Yeah. I’m not going to be able to make this. Speaking of California, I’ll be in California with clients but this is a good one. So we have Kyle Cooper who’s going to talk about hydrocarbon inventories and implications, think over supply and then Pete Miller who’s the CEO of National Oilwell Varco.
Pete’s a great guy, and National Oilwell Varco has split up their services from the distribution business and now Pete is the executive chairman of distribution now which is their distribution side and he’s going to be talking about the future of vision, of the oil and gas industry.
So I wish I could be there. I can’t. But if anybody out there is in the industry, you need to go to this.
James: Yeah. Down there at the Petroleum club just up the street. And if anybody’s looking for an excuse to go to the New Orleans, who isn’t, Mark? We’ve got an event for you.
Mark: I wish I could go to this one too. Once again, I got client stuff I have to take care of but this is the GPA convention. It’s basically a midstream thing and if you’re in upstream or if you’re in downstream, you don’t know midstream. Midstream is doing very well. Not as great as downstream right now but they’re doing very well. So go check this out and quite honestly, think of all the cities in the planet as far as doing conventions, New Orleans is a pretty cool place to go spend a night or two.
James: Yeah. Pretty cool place. I lived there for one semester. I like to drop that on people. Xavier University baby. XU. You can get all of the links to these types of events because OTC’s coming up and Mark is going to be giving away passes so go to triberocket.com/events. That will take you straight to Mark’s events page where you can opt in and hopefully get yourself an OTC and if you want to check out any of these events on our show notes, again triberocket.com/tw58. First Friday Q&A four weeks away. Mark.[0:45:23]
Mark: Yup. People, we need questions. We got a bunch of good ones last time so give us some more so that we can answer your questions. Remember the goal is not to try to stump me.
James: You said it. You threw it out there. You threw yourself under the buzz on that one.
Mark: Good stuff.
James: Yeah. It’s good stuff but the goal is to educate, right?
Mark: Right. The goal is to educate. So if you have anything you want to know and I mean literally anything about the oil and gas industry, go to our show notes, type in the question that’s why we don’t lose it and if we answer your question on the air, we will give you a big shout out.
James: Yeah. And anywhere you go on triberocket.com, if you’re on a desktop or laptop, there’s an orange button that says send voice mail, and we’ll play your question on the show. We’ve got one of those so far so who’s the next? Somebody step on up and man, stepping up. We are inching ever so close to a thousand in the LinkedIn group.
Mark: Yeah. That’s awesome. If you listen to the show, go join the LinkedIn group, we have a bunch and I mean a bunch of new shows coming out, you’ll find out about it first on the LinkedIn group. You get to have your input there, if you want questions answered, you have peers to help you with stuff, James and I both step in and help people, other people help you out there. So if you listened to the show, go join a LinkedIn group, you’ll be so glad you did.
James: And then another thing. Just to throw this out here. If you come across news throughout the week that you’d like to hear us talk about in the show, put a link in the LinkedIn group and say hey, what are your thoughts on this? And we’ll take a look and I’m the one who curates the content. We’ll see and if it makes the cut, we can discuss your story.
Reviews, we got two new ones. Two new ones, Mark.
Mark: Better than we had last week.
James: It’s better than we had last week. All right. “Great!” Five stars. Big Earl ’89. That is a great name. “Great show. I trade oil stocks and this show helps a lot.” And then from WSCU student, that was the title Eddie 40 Schroeder, “This is a great show for anyone looking to learn more about the industry being a student, this podcast gives me another source of information. Go mountaineers!”
Mark: Go mountaineers! Yey!
James: Go mountaineers. West Virginia, correct? Yeah because that’s where my grandma was from. And if you want to leave us a review — it doesn’t have to be five stars. It can be one star. If you hate us, let us know. I don’t know that you would’ve made it this far and these many shows but either way, leave us a review at triberocket.com/twreviews and I don’t know if you have anything to add, Mark.
Mark: Yeah. Folks, come on leave us a review. Takes a minute and a half. This helps us so much. We don’t charge you for this show. We could but we don’t but by giving us reviews allows us to rise higher in the search engine ranking and also in iTunes so more people can find us so please personal favor, go take a minute and a half and leave us a review.
James: Yeah and if you made it this far in the show, please share it with your friends. As Phife would say, tell your father send the telegram, triberocket.com/shareli. We’ll share it on LinkedIn, /tw share it on Twitter, /fb on Facebook.
All right, Mark. You ready to get out of here?
Mark: Yeah. Let’s get out of here. Folks, do great work. Pay it forward and we will see you next time.
James: Go find some grease, guys.
Mark: Back when I worked for BellSouth, our management team, the sales management team loved this buzz words. And so I actually made some bingo sheets of this buzzwords and at that time, there were things like big pipes or I don’t know frame, relay, or whatever and so I made some bingo sheets and I gave it out to my team.
A sales team would set these big meetings and every time one of the executives would say one of the words, we cross it off and one of my people, they win and get bingo and we all put in $20 in the pot and so that person would win $150 or whatever but that was our way to entertain ourselves when we sat through these big long sales meetings.