BP avoids acquisition, oil and gas opponents don’t like heating their homes, and the US shale boom is NOT over.
Congrats to the First Two Red Wing Helicopter Bag Winners!
Congratulations to Patrick Pistor, Quality Health Safety and Environmental Engineer at Seadrill, and Alexander Uteshev, Analyst at JPMorgan Chase & Co. Y’all are the first two winners of the killer Red Wing bag I’m stealing from Mark 🙂
Your SWAG is on the way, gentlemen!
#045: The US Shale Boom is NOT Over
Subscribe, Rate, & Review
Listen on YouTube
Platts Report: China oil demand grew 1.5% year over year in November
Nigeria: Anticipating Nigeria’s Fortunes in 2016
Top 5 Indian stocks exposed to the slowdown in the Gulf
Royal Dutch Shell: A Good Bet Despite The Challenges?
4 Energy Gainers Set for a Better 2016
Diamond Offshore Drilling Inc (DO) to Post FY2015 Earnings of $2.48 Per Share, KeyBanc Forecasts
Is This The End Of The U.S. Oil Boom?
Pipeline project watchdogs anticipate arrival of compressor station
BP agrees to sale of Alabama petrochemical complex
The Weekly Onion
Events On Deck
API Houston Luncheon
When: Tuesday January 12, 2015 11am till 12:30pm
Where: The Petroleum Club, 1201 Louisiana St., Houston, TX 77002.
Leaders in Industry Luncheon
When: Wed January 13, 2016 from 11:30am till 1pm
Where: The Petroleum Club, 1201 Louisiana Street, Houston, TX (Total Building)
First Friday Q&A
All the cool kids are submitting their FFQA questions. The coolest ones send voicemails!
We have one spot left, and it’s a race to the finish. Gets in where you fits in!
This Week in Oil & Gas On-Demand Radio LinkedIn Group
Get Mark’s Monthly Events Email
Connect with Us
#045 This Week in O&G | The US Shale Boom is NOT Over
Transcripts Courtesy Of
James: I’m James Hahn II.
Mark: And I’m Mark LaCour.
James: You’re listening to This Week in Oil & Gas 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 45, Mr. LaCour. We’re coming up on your age there.
Mark: Yeah. Right. Five years ago. Happy New Year to you, James.
James: Happy New Year, brother. When does your New Year expire? Because we learned from Seinfeld that it’s not okay to keep saying happy New Year in February or something.
Mark: Yeah. At the end of this week probably I’ll stop saying it.
James: So I’m James Hahn II from triberocket.com. We’re a media company that works within Oil & Gas. You’re probably saying, “Well, if you’re a media company then why did you say that you’re a consultant for so long?”
Well, we just covered our hedgehog concept. That is thanks to Jim Collins and his book, Good to Great. I’m not going to go through it all here but you can go to triberocket.com/hedgehog and read the blog post that explains where we’re coming from. What about you, Mark?
Mark: Yeah. Mark with modalpoint.com. We aren’t the oil and gas sales experts.
James: You must be an expert because last week someone read one of your transcripts and posted it as their own podcast on SoundCloud.
Mark: I mean somebody took my content. In case people don’t know, I publish a lot of short videos and have the transcript beneath the videos.
James: Why do you do that?
Mark: Thanks to James. He taught me that. So somebody actually went to my website, read one of my transcripts, recorded it as their own podcast, and released to the public. I mean come on, people. Don’t do that.
James: You don’t need to do that. You just don’t need to do that. I’ve had people thieving stuff from me for years. Some people are cool and transparent about it. We had a disagreement but we’ve since become good friends. Shout out to Paul Chaney. Just do you. Do your own thing because ultimately if you’re not doing yourself and being yourself and building your brand, you’re building a brand on someone else’s, that’s not transparent and you’re going to get exposed.
Mark: Yeah. What’s so sad about this is the person who did this has a good story to tell in Oil & Gas. I just don’t think they have enough faith in themselves that they can tell that story. Folks, don’t steal content.
James: Especially from us.
Mark: Yeah. Not from us. We’re the wrong two people who’d do that for them.
James: Very, very wrong. I don’t know anybody in Anonymous but hey, people pull some strings.
Mark: We would know if we did know anybody in Anonymous.
James: Very good point. Here’s something you don’t know, Mark. My server was changed by my web host this week because I was getting the DDoS-ed so much.
James: We definitely have some enemies out there.
Mark: I had a denial-of-service attack and my hosting provider had to pull my website off line. So yeah, I’ve been there, done that. No fun.
James: That’s what’s so great about this particular company, WP Engine, they didn’t have to pull it off line. They just moved it. That showed me you pay what you get for because I got this email where they said, “Hey, you got a lot of people trying to take down your site. We moved it.”
Anyway, you talked about the oil and gas experts and our friend with a story. We have a lot of stories to cover. Let’s get into it. First off, Platts, our enemy in the reviews.
Mark: They’re not our enemy.
James: I’m joking. I’m joking. Platts Report: China Oil Demand Grew 1.5% Year Over Year in November.
Mark: Yes. This is showing how China’s growth is slowing. We’ve talked about this in past shows. So the year over year growth is only 1.5%. Now, that’s actually pretty good in most countries but the Chinese, the brakes are being applied to their economy. They’re slowing down.
So they talked about how demands for different refined products are going down, the actual use of crude oil and natural gas is going down. Interestingly enough, if you read through this article, China’s refineries, especially their small refineries which are called teapots, their outputs actually went up a bit. Once again, that’s to be expected because the market for refined goods globally is going up.
So really good article by Platts. It’s got some good numbers in here. Once again, it just reinforces the fact that the growth of the Chinese economy is slowing.
James: One point I see here, it says, “Gasoil is the most widely consumed oil product in China.” What’s gasoil?
Mark: It’s a funny name, huh? It’s almost like a typo. So when you think of heavy fuels like diesel, if you make it heavier than that you get the fuel oil which the world burns either for electricity or for heat, for furnaces. If you go heavier than that you get gasoil. So it’s just a heavy fuel stock.
James: Is that why they have so much pollution in the air over there?
Mark: Yeah. What makes the pollution even worse is they don’t have pollution control equipment, carbon capture, catalytic converters, lean-burn technology. So the exhaust is just raw exhaust which in US and Europe doesn’t happen. The exhaust of your car, the exhaust of the power plants are cleaned up before it’s released in the atmosphere.
James: We’ve all been stuck behind a truck whose exhaust is just disgusting. That’s a horrible 10, 15 seconds. You just want to drive them off the road. Is that what every power plant is like in China?
Mark: And every car, James, and lawnmowers and boat motors, everything. If our audience wants to see something that almost looks like special effects from Hollywood, go to YouTube and look for smog over Beijing and look at what it looks like walking around the city. It is just insane.
James: I’m taking a note down. I will actually throw that in the show notes. By the way, they will all be at triberocket.com/TW45. Enough with China.
We haven’t talked about our friends in Nigeria for a while. We have a perfect opportunity right here. I had two different choices of which story to go with here but I just love the way that this guy said the year of our Lord, 2016. I’ll throw in this one in there. Anticipating Nigeria’s Fortunes in 2016. What’s going on?
Mark: Yes. So there’s a bunch stuff going on in Nigeria. Nigeria, the bulk of their income comes from crude. So with these low crude prices it’s hurting their income. The currency of theirs is called naira. Naira is being devaluated which is not a good place to be. And then of course there’s still corruption all over the place.
Unfortunately, not only is their currency being devalued, but now I have the word about inflation. Inflation is basically if something costs $1 last year, now it costs $1.05. So your dollar, or in your their case, naira, doesn’t go as far. So it’s not looking really great for them.
Now, if you read this article, one of the things that I think is hilarious in here is they talk US politics, how it affects Nigeria, and they’re talking about how Trump is not going to win the presidency and it’s just going to push Clinton in the office. It’s like “I’m not sure I would call it that way” but that’s how the author called it in this article.
James: It’s always fun to try and discuss another country’s politics when you’re not there. So we know about the corruption. Do they talk about Buhari being the democratically elected leader?
Mark: Yeah. Actually they go to detail in something called PIB, which is the Petroleum Industry Bill. Basically the PIB is the government’s attempt to clean up all the corruption in the entire oil and gas industry in Nigeria. I hope this bill passes because this could do a lot. I’m sure the Nigerian people hope this bill passes.
James: It says it’s going to drive unemployment down. So since it’s a knock though, they have a lot more jobs for the people.
Mark: Yeah. Right. Once you clean up the corruption that money’s still there but now that money could be spent on hiring people, upgrading refineries, doing more drilling. You recoup that money and actually use it in your business instead of it going to crooked politicians’ pockets.
James: Not that we have any of those in America either.
Mark: Not like they have in Nigeria.
James: No. Yes. Explain the difference, please.
Mark: There are two fundamental differences. One is the US, regardless of what you believe politically, the US has a balance and check system. We basically have a police force who’s designed to investigate our politicians and make sure they’re on the up and up. I’m not saying that corruption never happens in the US but the people of the US don’t want corruption, we don’t agree with it, and we have the checks and balances in place to check up on our politicians. Both of those things do not exist in Nigeria.
The people, the culture in Nigeria, corruption’s normal. The Nigerian government, up until recently, didn’t have any policing of their own politicians. Now, their new president, he is the enforcer. He’s the new sheriff in town. He’s doing policing on his own and he’s setting up a board to actually start trying to implement that. So my hopes are that the Nigerian people back all of this and pull themselves out of this holdering because of corruption, and go ahead and move forward and be one of the leaders in the world.
James: You know what’s hilarious about that? I was just listening to an interview of Alec Baldwin interviewing the director of The French Connection. Of course The French Connection came out in the early ’70s or whenever that was. This will show you how corrupt the police force was in New York back then. The only thing they tried to get permission for was the car chase train scene because they said, “All right. We’re going to get on top of a subway. We better get clearance for that.”
So they went to the port authority, the head guy who was in charge of all the trains. They said, “How much would it cost or how fast can this thing go all of this?” He’s going “If I approve this for you I’m going to lose my job and I’ll never be a little work in this city again. It would be really hard for me to get this approved.” They were like “All right. Okay” and they went to leave. He’s like “Hey, what are you doing?”
They said, “We’re leaving. You said we couldn’t get it approved. You said it would be hard to get it approved.” “I didn’t say it would be impossible.” They said, “Okay. What do you want?” He said, “$45,000 and a one-way trip to Jamaica.” That’s what they gave him to be able to do the scene in The French Connection, to be able to do that.
Mark: Thank goodness it’s not like that anymore.
James: That’s exactly what happened though. He went to this New York official. He got his one-way trip and lived out his days down in Jamaica. So thank God they cleaned that up.
Let’s move over to India. This isn’t exactly oil and gas but it is. Top 5 Indian stocks exposed to the slowdown in the Gulf.
Mark: Great financial article written in a way that most people would’ve thought of. So basically low crude price is hurting everybody including Saudi Arabia. So Saudi Arabia is dipping into its savings account to keep its social programs running. Just like if you and I had to dip into our savings account, they also have to cut stuff.
So what’s happening is a lot of the labor in Saudi Arabia comes from India and a lot of the materials sat Saudi Arabia buys, steel, pipe, that sort of stuff come from India. So because Saudi is slowing down it is actually affecting the entire economy of India. So India is slowing down.
James: How bad?
Mark: It’s not horrible, not yet. You’re looking at a slowdown of $12 to $15 billion over a year. India’s economy is hundreds of billions of dollars. So you’re not looking at 10% or 20%. You’re looking at 4% or 5% but it’s enough to make a difference.
James: One of the things that’s jumping out at me, “However, this slowdown will eventually spread to all other Gulf countries because a number of them have 40% to 50% revenues from oil and gas.”
Mark: Yeah. Unfortunately for a lot of the smaller countries out there or the ones without a savings account like Saudi Arabia have, they’re going to be in real trouble. We’ve talked about this for a long time about the strategy of OPEC and how it has nothing to do with trying to put the frackers out of business. This is Saudi digging in its heels and using the fact that it has a savings account to punish the rogue members of OPEC that did not cut production last time OPEC asked for production cuts.
James: What’s one of these companies that they talk about that is affected?
Mark: So it’s funny. If you read the whole thing, they keep talking about Tata Steel, Tata Motors, Tata Communications. Tata is a huge company in India. Tata has a presence in oil and gas here in the US. They do a lot of IT stuff here. They’ve won some big contracts. So those separate companies that make that glummer all slowing down. They talked about L&T which is another big EPC company that also does work in oil and gas. You’re having some major companies that have exposure to slow down the Middle East. It’s affecting their shareholder value.
James: It’s interesting on the Tata point. It says that they have joined hands with the leading UAE-based petrochemicals company. So it looks like they’re trying to move downstream.
Mark: Well, they’re already in downstream. What they’re doing is they’re forming partnerships with the refineries that are being built in Saudi Arabia so they can do the work and supply the materials.
James: Got it. All right. Good stuff on India. I already think I know the answer to the next question. Royal Dutch Shell: A Good Bet Despite the Challenges?
Mark: Yeah. Shell is doing good. Shell has responded well to the slowdown. Shell has shifted away from projects that weren’t viable. Quite frankly, their downstream business is keeping everything else afloat. So they’re in a good place. Folks who are listening to this, do not use our show to do investing. We’re not your stock experts but I actually just picked up some more Shell myself because I think it’s going to move up in the next year.
James: What brings you to that conclusion?
Mark: Basically that the globe needs more gas. Shell buys BG assumption. BG has turned itself to global gas company. Shell is one of the first companies to walk away from some expensive order projects and Shell has been around for a while. They know what they’re doing. Their stock is doing okay and I think it’s going to surge ahead in the next year.
James: Based on crude price rebounds?
Mark: Base on the fact that their business is where it needs to be. They’re going to have increased revenue, they’re going to have growth, they’ve cut expenses, all of the stuff that Wall Street looks at to value their stock.
James: If you are a small independent listening to this show what would be one thing that you wish you knew that Shell did really well that you could implement in your business?
Mark: Well, that’s kind of a hard one because those are two different businesses. One of the things that Shell has done really good is they’ve stopped projects that were not economically viable. They didn’t keep trying to do projects and trying to weigh out the market. So if you’re a small independent and you have some marginal wells or you have some wells that aren’t drilled yet and you’re not quite sure if it makes financial sense, just don’t do it. Save that cash on stuff that’s actually making money for you right now.
James: Got it. All right. Good stuff on Royal Dutch Shell. Moving over to Zacks. We have 4 Energy Gainers Set for a Better 2016. Downstream?
Mark: Yeah. Downstream. That’s right. You’re absolutely right. This is a well-written article about from Zacks on how you should invest your money if you’re looking to invest in oil and gas. They highlighted for companies. We know these four companies. Phillips 66, Marathon, HollyFrontier, Alon USA. They’re all downstream companies, they’re all doing well and they all will continue to do well. Downstream as a whole is on fire especially here in US.
Here’s a perfect example of how that affects these companies’ return on their investment and their shareholder value. Zacks is saying these are companies to pick up. I actually think you should’ve picked them up about six months ago but they’re still good investments.
James: So Zacks is always giving you the financial side of things. What is the more industry side of things, some lessons we could glean from these companies?
Mark: So I think the bigger lesson you could learn, if you’re in the oil and gas industry, make sure you know the entire industry, upstream, midstream, downstream and service, and understand how the money flows, how the business works. We call this over a year ago that with the low crude prices downstream was going to surge ahead, and they have, but that’s because we understand how the industry works.
Same way if you’re an investor. Don’t just be an upstream investor. Understand how the dollar flows on oil and gas industry. It’ll lead you to the right investments. You’ll be able to think through this sort of stuff yourself.
James: I’ve never heard of Alon USA Energy. Do know much about them?
Mark: Yeah. They’re in Dallas. They refine and make petrochemical products. So they’re in a good spot.
James: Can you give us an update on any of the refinery projects that are coming on line in the Gulf?
Mark: There are $85 billion with a B, billion, worth of new greenfield construction right here in our backyard in the Gulf Coast. The majority of those are ethylene crackers but there are also LNG plants, there are refinery upgrades, there are petrochemical plants. So it’s crazy, the money and the business that’s ramping up right here in our backyard. That’s going to continue to happen.
We have the infrastructure in place both to get the raw feedstock to crude and natural gas down to the Gulf Coast. We also have infrastructure in place to export whatever they manufacture whether it’s plastics or fuels or whatever. We have deepwater port. The Gulf Coast is where it’s at.
Now, I say that but any place in the US that has cheap natural gas in the infrastructure place, you’re also seeing downstream growth, places you wouldn’t think of like Virginia. So downstream is where it’s at. Downstream is going to continue to be where it’s at at least for the next two years.
James: What are the kinds of services that a downstream company would need that would translate well if you’re an upstream company that’s trying to get some money in the downturn?
Mark: So are you asking me if you’re a service company that services upstream, does downstream need what you do?
James: More specifically, what kind of services does downstream need that might apply across the board?
Mark: Marketing, sales, accounting, HR, HS&E. I mean I could go on and on and on and on. Welders, pipefitters, engineers. The needs are in a different order, in a different format but the needs in upstream and needs in downstream overlay each other very well.
James: Again, all of the people that are crying wolf or whatever you want call it, just go over there and you can find your money?
Mark: Yeah. So they’re not crying wolf. Upstream is hurt right now. This low crude prices has either financially impacted a company negatively or the company is scared of the perception or both. But the business of oil and gas always makes money. There’s always one segment that does well, and right now it’s downstream.
If you’re a service company and you predominately have done upstream for your whole life, take a look at downstream. You may have to remarket what you do but a lot of what you do, there’s still a need for it. It’s just in a different segment of the industry.
I had a conversation with one of my board members in API. He heads up the sales efforts for a fabrication yard. They’ve always done top sites. So when you look at a rig, the part that the people work on, it’s above the water, it’s called a topside. He was telling me how bad their sales are hurt. I was telling him “Your same fabricators, welders and machinists are needed downstream.” So he went out and picked up a couple of downstream contracts, and now he’s doing just fine.
James: Yeah. I would like to retract that crying wolf because I don’t want to downplay the pain people are going through. It definitely hurts. I always just try to bring that different perspective that you’ve taught me.
Mark: There’s always opportunity in oil and gas. My advice is get to know the entire industry, not just the part that you grew up in.
James: Speaking of upstream though, Diamond Offshore Drilling Inc. to post fiscal year 2015 earnings. Talk about it.
Mark: Diamond you’d think would be starving to death right now. Diamond is basically an offshore contractor. They own the drill rigs that people like Shell and BP and log and everybody else went, go drill a well offshore. So that business right now is hurting everywhere. Diamond is doing okay, and they’re doing okay for a couple of reasons. One thing is they made a very strategic investment in their fleet a few years ago, and modernized everything. So they have higher horsepower, more maneuverable rigs and they also have deepwater rigs.
So if you’re an older drillship company where your fleet is older, companies don’t want to pay for rigs that don’t work as well or as efficient. They’d rather pay for rig that’s more efficient. So Diamond did a very shrewd thing. Since their fleet is upgraded their utilization rate is high. Because they have deepwater and ultra-deepwater rigs which are rare, even with this low crude price people are still drilling offshore. So they basically have the constraint of ultra-deepwater rigs, they feel that constraint. So there’s a need for 30 of them. There are only 10 of them. Diamond happens to have seven of them. So they’re in a good place.
James: That just brings up the business point that I’m always focused on which is your niche. The tighter that you niche, the better you’re going to be. They said, “Okay. We’re going to be the best in the world at this very, very small sliver of this huge industry, and plan for it long term.” And it pays off.
Mark: Right. I know it’s very strategic for them to do it but I bet when they’re in the process and they were spending the money to upgrade, I bet a lot of people called them on and said, “You’re wasting your time and your money. It’s not a good business decision.” And then the price of crude drops. It was a very smart decision.
James: It’s always good to think that long term. Is this the end of the US shale boom, Mark?
Mark: No. It’s is a crappy article.
James: Well, we talked before about writing about something in a country that you’re not from. So this is the Alberta Oil Magazine. I don’t know that’s part of it. Talk us through the ridiculousness of this article.
Mark: Yeah. It’s just a bunch of wrong stuff in here. They talk about OPEC putting frackers out of business. Wrong. They talk about how US has contribute to the global oversupply. Wrong. Well, now we can export our crude but when they wrote this article we couldn’t export our crude. I think the reason that it comes across so negative is the fact that they’re in the oil sands part of the world, in Canada. Oil sands are the most expensive oil to get on the ground. So oil sands are hurt the most by these low crude prices.
A lot of frackers in the US actually are making money at $40 a barrel. They’re not loving it but they’re actually making money. They’re not even breaking even. They’re making a profit. Now that we’ve lifted the export ban, you’re already starting to see crude being exported. The price of crude will go up in 2016. This article is just kind of a negative article with a bunch of guesses and opinions. I really didn’t care for this one.
James: One thing that the guy talks about though that I see across the board is a lot of people talking negatively about the bucking. What’s going on in the bucking? Is it just media?
Mark: It’s media and you know how that works in shale play. So you have some very good operators with some very good acreage that are doing just fine. You have some okay operators with some bad acreage, and they’re hurting. And you have some horrible operators with a mix of bad acreage and good acreage, and they’re hurting as well. So it will shake itself out.
The people that are doing well will continue to do well. The people that are upside down will figure out some way to get out from under that whether they file bankruptcy or somebody buys them or whatever. You’ll see a shifting of players but the guys that are doing well are just fine in the bucking.
James: If someone was listening to this for the first time or they’re just getting into the industry, can you help us to understand what you mean by good and bad acreage?
Mark: Yes. This applies to everywhere where there’s oil and gas, even offshore. So when you have a piece of land that you’re going to drill for oil, there are areas that you can drill that you’ll get more oil on the ground and there are areas that you can drill that you’ll get less oil on the ground.
So the areas that you can drill that you get more oil out of the ground are good acreage. The areas that you drill the exact same well and exact same way and you get less on the ground are bad acreage. So there’s always a range. It’s geographic. Sometimes it can be literally 100 yards off and you have a poor performing well than you do 100 yards the other way.
James: We’ve seen though that certain operators, no matter what the acreage grade, can get it to perform.
Mark: Yeah. It’s because fracking is not 100% science. There’s an art to it. Those guys have been doing it for years and years and years. They get a feel for where that bit is. Are they in the right horizontal area? They look at the rock fragments coming up. They look at the shaker. They maximize their production. Yeah. It’s all being a good operator. I can take a bad operator and give him class A acreage and they’ll still be upside down.
James: Yeah. That’s always the case. No matter what the technology is, if you’re not good at what you do — back to this whole Jim Collins, Good to Great thing. He says, “Yeah. You could’ve taken the exact same technology and given it to the comparison company, and they would’ve never done what this company did because they just weren’t that company.”
James: All right. Let’s move on to pipelines because we did get a question that we’re going to thrown into the next first Friday Q&A show. It’s on the East Coast. Pipeline project watchdogs anticipate arrival of compressor station. Oh, my goodness. What’s going on in the East Coast?
Mark: Yeah. Mountain Valley Pipeline is building a pipeline. In a pipeline, especially a natural gas pipeline, you have what’s called compressor stations. Every so often it just boosts that gas moving through the pipeline. It’s the only way you can make it work. They’re basically environmentalists out there. They’re trying to keep this pipeline from being built. What they focused on is the compressor stations.
What they’re telling people is they pollute and they’re noisy and you don’t want it in your backyard. Well, if you can’t build compression stations, then you can’t build a pipeline. Now, what this article doesn’t talk about is pipelines tend to be built in the middle of nowhere on purpose.
So compressor stations are loud if you’re inside the compressor station. Outside the compressor station, they’re not loud and they do not pollute. So once again, this environmentalist is using a fear tactic to help keep a piece of critical infrastructure from being built in Virginia.
James: Because they don’t like heating their homes during winter, right?
Mark: You and I are going to talk about that as something that we’re going to do for the surge. It’s gotten to the point where it’s literally ridiculous because you know they use oil and gas and oil gas products and yet they try to stop it from letting other people use it. Crazy.
James: What is the situation in Roanoke with the oil and gas? Because you’ve got things that have happened in the Marcellus where these are not traditionally oil and gas states where they embraced it. What’s the legislature like out there?
Mark: I’d actually say they were anti oil and gas at one point not that long ago. It’s actually flipped around because what happened is they need money. They’re looking at these other states that have all this income from the taxes and sales tax and all the workers.
Mark: Jobs. Right. They’re going “Well, we want some of that.” So they’ve actually kind of flip flop. Now the legislature is — I wouldn’t say pro oil and gas but they’re on the pro side instead of on the con side.
James: That’s always good when they wake up. All right. We’re going to finish off the regular stories with BP agrees to sale of Alabama petrochemical complex. What did BP unload this petrochemical complex for?
Mark: They need the cash. Bottom line, they need the cash. BP is still recovering from the Macondo disaster. I thought for sure they will be picked up by Exxon. It hasn’t happened. BP is managed to raise its shareholder value to the point where now it’s not as good an acquisition target as it was just last year. They need cash.
We talked about the growth in downstream. This refinery indicator is the world’s only manufacturer of something called NDC which is a specialty chemical used in plastics. So this is a moneymaker for BP and it’s a moneymaker for whoever bought it. I think a public company ended up buying it. So this is just BP’s way to generate some cash.
James: How much more are they going to bleed?
Mark: They’re not bleeding anymore but this low crude price environment combined with the fact that they spent most of their cash on their legal battle leaves them in a position where they literally just don’t have enough cash. So if they want to make an acquisition right now, which is prime time, they can’t. So they’re looking at their business and they were getting rid of stuff that can generate revenue for them.
James: Where are they focusing most of their energy?
Mark: BP has a lot of conventional reservoirs around the world that at $20 a barrel they’re still making money. They’re pumping a lot of money into that. They’re being very selective on their deepwater and ultra-deepwater projects. They’re only continuing the ones that can be financially stable in a long term low crude price market. And then, of course, BP has refineries. Here’s one they’re getting rid of but the rest of refineries are doing very well for BP and making the money.
James: So over the long haul does it look like they’re going to survive on their own?
Mark: Yeah. They will. I really thought Exxon was going to pick them up. They ended up divesting themselves with a bunch of stuff that the public doesn’t know about. So BP at one point, their flagship was their wind energy program globally. They’ve sold that.
James: I used to see those in commercials.
Mark: Yeah. They’ve sold a bunch of very high quality leases all over the world and right here in our backyard, in the Gulf of Mexico. So they’ve sold a lot of stuff. I have to admit. I really thought somebody was going to pick them up, and I thought it was Exxon. BP fought a fantastic battle to get their stock price back up so they couldn’t be acquired. Hats off for them for doing what it took to keep somebody from picking them up.
James: I remember talking about it on the show and asking if it was a PR play, publicly what the CEO was saying. This might be a good case study for a business school.
Mark: This would be a great case study for a business school, one of the worst most publicized natural disasters in oil and gas industry in the Gulf of Mexico. BP took full accountability. BP spent the time and the money and got the people to clean all that stuff up. It’s gone. You can’t find oil in the Gulf of Mexico right now. They changed their culture. They made a mistake, they paid the price, and now they’ve recovered from it.
James: How did they change their culture?
Mark: I really don’t want to talk about it.
James: Maybe over on the thing we’re going to do.
Mark: Yeah. When somebody’s down, I don’t want to talk about why they were down.
James: All right. Let’s kick someone while they’re down. Going into the weekly Onion. North Korea Successfully Harvests Wheat In Show Of Growing Strength. All right. That’s enough of my ridiculousness. We have some winners to talk about.
Mark: Yes. Folks, if you’re following us, you know that we’ve been giving away some helicopter bags which are really an offshore bag but to me they’re helicopter bags. We have two winners. Who are those winners, James?
James: It’s Patrick Pistor, Quality Health Safety and Environmental Engineer at Seadrill, and Alexander Uteshev — please let that be right — Analyst at JPMorgan Chase & Co. So congrats, Alexander and Patrick. You all have a really awesome bag headed your way.
Mark: Yeah. We have more of those bags to give away. So if you want one of these bags go sign up. James, where do they need to go?
James: So it’s no purchase necessary to enter or win. You can see the official rules at redwingshoes.com/podcast.
Mark: Yeah. So catch one of these bags. I promise you’ll be glad if you reg and you win one of these things. They’re awesome.
James: Yeah. Hopefully I can get my hands on one of them since you got one.
Mark: Good luck.
James: All right. I’m just going to come and take yours. By the way, before we jump into the events, I have said this on a few different shows. You can sign up for Mark’s monthly e-mail at triberocket.com/events or you can just plug in your email. That’s actually where we get all of this information from because, Mark, you’re the only person in the industry who aggregates this data.
Mark: Yeah. We take all of the events that are going on and we stick them in your inbox once a month. Now it’s to the point where a lot of times I get free tickets to give away to people outside of my newsletter. A lot of times you get these things free instead of paying. So just go and sign up. It’s worth your 30 seconds that it takes.
James: All right. So we got the API Houston luncheon. I am now a member, Mark.
James: Yeah. I dropped the $20, finally, and registered for this yesterday. So that’s next Tuesday. What’s going on at the luncheon this month?
Mark: So this is our monthly luncheon. It’s going to be a really cool event. So we’re having a mini tech expo. So we’re going to have a bunch of vendors there. Because it’s a private event, nobody tries to sell you anything. They just try to help you understand what they do. This isn’t like going to a public event where all the vendors there have salespeople in the booth. We actually have the engineers and the owners or whatever in the booth.
And then we have Bob Johnson who’s the president of Source IEC, and Neil Frank who used to be the director of National Hurricane Center. They’re going to have a bit of a panel discussion. So this would be a really good event. I’ll be there. James will be there. If you’re going, reach out to me on Twitter. You can come sit at my table. I’ll make introductions.
James: Yeah. Same here. You can find all our contact information in all of these events and everything again at triberocket.com/TW45. So we got that going on Tuesday at 12:30 at the Petroleum Club down in Houston. And then we have the leaders in industry —
Mark: We actually have 11:00.
James: Oh. Sorry about that. 11:00 AM until 12:30. I missed the beginning part. The leaders in industry luncheon will happen the next day from 11:30 AM to 1:00 PM also the Petroleum Club. So if you want to go downtown two days in a row — it sounds like they should though.
Mark: They definitely should go to both of these. If you’re in the oil and gas industry and you happen to be in Houston or near Houston either Tuesday or Wednesday, these are both two good events for you to go to. This industry is still, even though it’s global and huge, it’s still an industry of people doing business with people. Going to events like this is how you build that network within oil and gas. People get to know you, they get to trust you, and it just benefits you and it benefit everybody else as well.
James: So tell us about the people that are going to be speaking at this one?
Mark: So this is Bill Von Gonten, I believe is how you pronounce his name. He is a well-known industry consultant in oil and gas. This is put on by IPAA, the Independent Petroleum Association of America. It’s insider stuff. When you go to these luncheons you hear the real story of what’s really going on in oil and gas. The people sitting next to you are senior leaders in oil and gas industry. So go.
James: He’s the founder of WD Von Gonten & Co. Do know anything about what they do?
Mark: Yeah. They’re oil and gas consulting company.
James: What do they specialize in consulting on?
Mark: I believe they specialize in geosciences.
James: Okay. All right. So we’re going to get some really good geoscience rock nerd data.
James: Awesome. The guy who hated geology class more than anyone in college is excited to go here about geology from Mr. Von Gonten. All right. Let’s give a plug for the first Friday Q&A because this last show we had so many questions that I didn’t even have to send out an email or do anything. Let’s remind people that you can go to triberocket.com/QA. What do you do there, Mark?
Mark: Yes. So if you have any questions for us, the first Friday of each month we actually answer those questions. It’s also a great learning experience. So submit your questions. James just gave you the link. Preferably if you can leave a voicemail, that would be even better. We can play the voicemail live on our show.
James: Yeah. You said it’s a learning experience. As we learned on the first Friday Q&A we just did, it’s a learning experience for us too.
Mark: Yeah. I mean we learn stuff as well. It’s nice to have people point out when I make a mistake or they have some additional information around something we talked about. I mean that’s our community. This isn’t a one-way street. I try to learn something every day about our industry and I will continue to learn stuff. If I can help other people learn, that’s just a great thing.
James: Yeah. The one thing that we did get wrong, it was my fault. The Powder River Basin is not in Oklahoma. All right. Talk too about sponsorship because we’re almost sold out.
Mark: Yeah. We literally have one spot left. So we have one supporting sponsorship left. If you want to get in front of it, global, huge oil and gas audience, reach out to James but hurry up and do it. We’ve sold all the other sponsorships. Reach out to us. If we can help you with your business we’ll be happy to do so.
James: Yeah. Talk about the other show.
Mark: Yeah. So we have another show. It’s careers in podcast in oil and gas. So if you’re interested in a career in the oil and gas industry or you have a job and you’re interested in promotions or bettering yourself, listen to our other show. It’s a short format show. We get straight to the point. We’re out there trying to help people, like I said, either get a good position in oil and gas or improve their current career.
James: Yeah. I know that several people that are longtime listeners of the show, they really miss — there are a few people that really miss the 20-minute format. That’s exactly what we do on that show. We get in and get out. So if you’re looking for something for your commute, then you can just search oil and gas and both of the shows will just pop up in iTunes and Stitcher, by the way. We’re still waiting on Google Play to release their podcasts. So it’s going to be a minute on that.
All right. We’ve got to talk about reviews because we have some competition. So Platts is not the enemy. They’re only our enemy in iTunes.
Mark: Yeah. So we’re competing with Platts.
James: And Oil and Gas IQ who hasn’t published a show for two years, I think, but still ranks above us for longevity.
Mark: Yeah. So if you’re listening to our show and you have a competitive streak, you play sports or you like to make sure that you always come out in top, help us do the same darn thing. Help us get ahead of Platts and IQ. Leave us review. It helps push our search engine rankings in iTunes above theirs so more people are going to discover our show instead of theirs.
James: That’s right. I track this every day. We’re always flipping back and forth. Everyone that comes in helps to push us higher. We actually got three from the last show. So thank you so much for that. I’ll go ahead and read those. Number 42 on the list, “Very helpful for oil and gas pros,” from Steven11. It’s a five-star review. “As an oil and gas professional it’s hard to keep up with everything that’s happening but this podcast distills out the key stories and combines them with great insights. Mark and James do a fantastic job of helping me understand what I need to know and what I need to do. Keep up the great work, guys.” That’s a good one.
Mark: Yeah. That’s awesome.
James: That’s solid. All right. So moving on to Rob in — we got a Pittsburgh. I wonder if he’s a Pittsburgh dad. Oh, goodness. I got to give you the link to Pittsburgh dad reacts to Star Wars. It’s phenomenal. I’ll throw it in the show notes. Trust me. All right. “Successfully fills a void,” Robin Pittsburgh, five stars.
“There’s been a need for a podcast dedicated to oil and gas with a primary focus on domestic plays. There are plenty that boringly discuss international developments but nothing touched home and supplied poignant weekly updates until James and Mark. When asked where I get my weekly industry news, I always plug these guys and will continue to do so. Keep it up.” Man, that’s freaking awesome.
Mark: Yeah. What a great review. Thank you so much.
James: That’s awesome. “I always plug these guys.” Yeah. Thanks for the plug. And then the third, “Great summary of weekly oil and gas.” Five stars. This is JohnRyan74. “I look forward to the show each week. Keep at it.” You all keep at it. Please give us the reviews. We need to dominate oil and gas searches in iTunes. Of course, if you’re an android person, you are listening on Stitcher, eventually they are going to release Google Play podcast. As soon as that happens we’ll let you know.
Mark: Yeah. So please, please, please. It takes you literally a minute and a half to leave us a review. Leave us a review so we can keep dominating our competition.
James: It’s at triberocket.com/TWreviews. Let’s round it out with a LinkedIn group because, man, it’s growing and active.
Mark: Yeah. If you’re listening to the show, we have a sister to show. It’s our LinkedIn group. James will give you a link to go join your peers on there. We’re on there. Great dialogue, great questions, people help each other. It’s just a good companion to the show.
James: Triberocket.com/LinkedIn. It will take you right in there. Thank you very much for listening. Thank you again to our sponsor, Red Wing for giving away this awesome stuff. We are working on a white paper with them right now. We’ll hopefully get that done within the next two days. So that will bring you some quality content from Red Wing. Thank you to everyone for everything especially you, Mark, for putting up with me on this show.
Mark: For our entire audience, thanks for listening. I mean we really appreciate the fact that you take time out of your day and stick us in your earbuds for 45 minutes once a week. So thanks to our audience.
James: Definitely. All right. Anything else, Mark?
Mark: No. Do great work. Pay it forward. We will see you next time.
James: Go find some grease, guys.