Don't ever apologize for burning hydrocarbons or owning oil, gas or coal stocks. Every time you fill up your gas tank you are helping boost crop yields and fish harvests and the world needs more food, not less.
Great article, it's so frustrating to see how the market shuns these companies and ignores the simple fact that more electric vehicles equals more pressure on a grid that's barely holding it together. There will come a day when public policy shifts back to pushing efficient decentralized production fueled with abundant natural resources (i.e. a gasoline engine). I'm never selling my Exxon shares.
Sitting in calgary, this morning the local “conservative” talk radio station had a newscast pushing the ludicrous debunked nonsense that this July is the hottest month in 120,000 years.
You see and hear this garbage every day and most people can’t read so they’ll never grasp they are being lied to.
But this is the nonsense used to devalue oil and gas companies and elevate EVs and renewables, dead end wasteful technologies
Excellent article. Gas and gasoline engines won't disappear. Either this crop of political hacks goes or the economy goes. Reality wins in the end, when everything else has been tried.
Goehring & Rozencwajg (G&R) are contrarian analysts. Their June 15, 2023 article, "Hubbert's Peak is Finally Here" https://blog.gorozen.com/blog/hubberts-peak-is-finally-here is relevant thought-provoking reading after reading Robert's "Fire Sale" analysis. I suggest downloading their Q1 2023 newsletter via the link part way down the page. (They request your email address etc.) G&R discuss a dataset back to 1900 examining periods when commodities are undervalued in the second essay. Note also their analysis of natural gas price trends later on in their newsletter. G&R were one of the first analysts to predict significant increases in the price per MW for wind and solar. They understood that the cost of energy to produce those generating means was often overlooked. Declining energy costs were one reason why solar and wind costs began to decrease circa 2010. Since about 2020, solar and wind costs have been rising, even with China's use of Uyghur slave labor to construct solar panels. (As a consequence of its high energy density, nuclear fission power is much more insulated from these challenges.)
Thanks for the insight Robert. I always enjoy your articles. I still have a hard time believing EV's will become more plentiful than gas/diesel vehicles when the media eventually reports on how many fires have occurred (https://www.vox.com/the-highlight/2023/1/17/23470878/tesla-fires-evs-florida-hurricane-batteries-lithium-ion). 5000 degrees F with no way to put it out. Anything near it will also burn. Just bringing reality into the crazy EV rush. All this from the same folks who told everyone the Covid shot was a vaccine and it was safe.
I completely agree that plug-in hybrids are the way to go and will buy one when My 10-year-old Lexus finally decides to move on to car heaven. Also, I am starting to think that the US would be much better off is we stopped spending so much money on wind and solar and used the money instead to begin to harden the areas that are being damaged by storms, upgrade the transmission grid and the pipelines network. That will improve energy security and lower insurance and building repair costs. After all I think we all know that the world and the US will not be able to exist without the use of fossil fuels.
Good article, but should be noted -- re increased efficiency -- that 10 years ago most Permian Basin wells were vertical (~2,000' perforated pay zones). Now most are horizontal (~10,000' perforated pay zones); therefore, initial production (5:1) is roughly equivalent for each foot of pay zone perforated. Also, the horizontal wells are ~5x the cost of the vertical wells, which is also roughly equivalent for each foot of perforated pay zone. Different economics to be sure, but still roughly equivalent ROI.
But for oil and gas upstream exploration & production companies (E&P), I find EBITDA useful.
The reason: it gives you a better cash flow comparison between E&Ps. “Earnings” are tricky in oil and gas companies. Management can ‘estimate’ the depreciation based on oil well type curves, etc. But those well type curves estimates can change. Plus, there’s impairment. Companies can impair their oil assets on low times and write it off on the income statement. And in Canada, they can add the past impairment back in when the oil prices rise and give a nice boost to the earnings thar had nothing to do with production.
Yes, you definitely need to go beyond EBITDA and look at the management, debt, capital expenses etc. too. But it’s a useful tool to compare business on cash flow.
The price of electric cars added to the inconvenience, as well as rising electric prices will kill sales. We are seeing that now with huge unsold inventories backing up at dealer lots. New gasoline cars will soon be illegal or nearly so.
With a little mechanical skill and some U Tube videos I’ll keep the RAM running forever. If I had to give advice to a high school grad today I’d say get trained to be a car mechanic.
Don't ever apologize for burning hydrocarbons or owning oil, gas or coal stocks. Every time you fill up your gas tank you are helping boost crop yields and fish harvests and the world needs more food, not less.
Great article, it's so frustrating to see how the market shuns these companies and ignores the simple fact that more electric vehicles equals more pressure on a grid that's barely holding it together. There will come a day when public policy shifts back to pushing efficient decentralized production fueled with abundant natural resources (i.e. a gasoline engine). I'm never selling my Exxon shares.
I did not know that. On the other hand the Brazil Govt owns most of it and they certainly do not take orders from him.....
Great informative article as usual.
Jet fuel usage is in the $ billions worldwide.
Sitting in calgary, this morning the local “conservative” talk radio station had a newscast pushing the ludicrous debunked nonsense that this July is the hottest month in 120,000 years.
You see and hear this garbage every day and most people can’t read so they’ll never grasp they are being lied to.
But this is the nonsense used to devalue oil and gas companies and elevate EVs and renewables, dead end wasteful technologies
Excellent article. Gas and gasoline engines won't disappear. Either this crop of political hacks goes or the economy goes. Reality wins in the end, when everything else has been tried.
EVs will never make a positive contribution to reducing Global GHGs because they only contribute a small fraction of GHGs to the total.
See latest scandal-
Volkwagen's EV Emissions Cover-up: Missing Lifecycle Analyses Reveal Negligible GHG Reductions
https://tucoschild.substack.com/p/volkwagens-ev-emissions-cover-up
Goehring & Rozencwajg (G&R) are contrarian analysts. Their June 15, 2023 article, "Hubbert's Peak is Finally Here" https://blog.gorozen.com/blog/hubberts-peak-is-finally-here is relevant thought-provoking reading after reading Robert's "Fire Sale" analysis. I suggest downloading their Q1 2023 newsletter via the link part way down the page. (They request your email address etc.) G&R discuss a dataset back to 1900 examining periods when commodities are undervalued in the second essay. Note also their analysis of natural gas price trends later on in their newsletter. G&R were one of the first analysts to predict significant increases in the price per MW for wind and solar. They understood that the cost of energy to produce those generating means was often overlooked. Declining energy costs were one reason why solar and wind costs began to decrease circa 2010. Since about 2020, solar and wind costs have been rising, even with China's use of Uyghur slave labor to construct solar panels. (As a consequence of its high energy density, nuclear fission power is much more insulated from these challenges.)
Thanks for the insight Robert. I always enjoy your articles. I still have a hard time believing EV's will become more plentiful than gas/diesel vehicles when the media eventually reports on how many fires have occurred (https://www.vox.com/the-highlight/2023/1/17/23470878/tesla-fires-evs-florida-hurricane-batteries-lithium-ion). 5000 degrees F with no way to put it out. Anything near it will also burn. Just bringing reality into the crazy EV rush. All this from the same folks who told everyone the Covid shot was a vaccine and it was safe.
I completely agree that plug-in hybrids are the way to go and will buy one when My 10-year-old Lexus finally decides to move on to car heaven. Also, I am starting to think that the US would be much better off is we stopped spending so much money on wind and solar and used the money instead to begin to harden the areas that are being damaged by storms, upgrade the transmission grid and the pipelines network. That will improve energy security and lower insurance and building repair costs. After all I think we all know that the world and the US will not be able to exist without the use of fossil fuels.
After reading Patrick Moore's "Fake Invisible Catastrophes and Threats of Doom" I have concluded that rather than cutting CO2 emissions, we should be burning coal and making cement as fast as we can. I summarized a few points at https://vsnyder.substack.com/are-humans-really-causing-climate and https://vsnyder.substack.com/the-end-of-life-on-earth
Good article, but should be noted -- re increased efficiency -- that 10 years ago most Permian Basin wells were vertical (~2,000' perforated pay zones). Now most are horizontal (~10,000' perforated pay zones); therefore, initial production (5:1) is roughly equivalent for each foot of pay zone perforated. Also, the horizontal wells are ~5x the cost of the vertical wells, which is also roughly equivalent for each foot of perforated pay zone. Different economics to be sure, but still roughly equivalent ROI.
Yes, fewer rigs but they sit on the hole much longer.
Tell your brother:
A few years back, Warren Buffet defined EBITDA as "earnings before managing the company."
Yes, for most industries that’s true.
But for oil and gas upstream exploration & production companies (E&P), I find EBITDA useful.
The reason: it gives you a better cash flow comparison between E&Ps. “Earnings” are tricky in oil and gas companies. Management can ‘estimate’ the depreciation based on oil well type curves, etc. But those well type curves estimates can change. Plus, there’s impairment. Companies can impair their oil assets on low times and write it off on the income statement. And in Canada, they can add the past impairment back in when the oil prices rise and give a nice boost to the earnings thar had nothing to do with production.
Yes, you definitely need to go beyond EBITDA and look at the management, debt, capital expenses etc. too. But it’s a useful tool to compare business on cash flow.
Robert is one of my favorite people to read and listen to... always well doen... keep it up!
The price of electric cars added to the inconvenience, as well as rising electric prices will kill sales. We are seeing that now with huge unsold inventories backing up at dealer lots. New gasoline cars will soon be illegal or nearly so.
With a little mechanical skill and some U Tube videos I’ll keep the RAM running forever. If I had to give advice to a high school grad today I’d say get trained to be a car mechanic.