Is Oil the Next Commodity to Rip? (Josh Young)

1
00:00:00,040 --> 00:00:02,880
And I guess just very
specifically, the one thing that

2
00:00:02,880 --> 00:00:06,560
I think matters maybe more for
oil markets than any other thing

3
00:00:06,600 --> 00:00:11,160
right now is if the US bombs
Iran in terms of what the oil

4
00:00:11,160 --> 00:00:13,440
market will look like in a year.
I know it sounds sort of

5
00:00:13,560 --> 00:00:18,760
dramatic.
Travis Ricciardo, we've got a

6
00:00:18,760 --> 00:00:20,440
somewhat different style of
conversation.

7
00:00:20,440 --> 00:00:21,600
We're talking about energy
today.

8
00:00:22,120 --> 00:00:24,680
Energy, yes, I mean, we talked
about energy in the past.

9
00:00:24,680 --> 00:00:27,760
We talked about coal, we talked
about uranium mostly, but.

10
00:00:27,880 --> 00:00:29,800
Different forms the.
World of energy is much bigger

11
00:00:29,800 --> 00:00:32,920
than the metals that we talked
about in our mining world.

12
00:00:33,280 --> 00:00:35,680
In fact, the world of energy is,
is much, much bigger than that

13
00:00:36,160 --> 00:00:41,040
dominated by oil.
And we're looking around for, I

14
00:00:41,040 --> 00:00:44,560
suppose for value opportunities
like what we're like, what, what

15
00:00:44,560 --> 00:00:47,480
commodities haven't run yet.
What can you what thesis can you

16
00:00:47,480 --> 00:00:50,480
come up with that something
which is pretty beaten up could

17
00:00:50,480 --> 00:00:54,400
have, you know, it's it's time
to shine in in the near future,

18
00:00:54,520 --> 00:00:58,400
the medium term and you and I
kind of are getting increasingly

19
00:00:58,400 --> 00:01:00,920
interested in the energy space.
We're looking at the energy

20
00:01:00,920 --> 00:01:03,760
space thinking that, you know,
oil and the services plays

21
00:01:03,760 --> 00:01:06,640
around there could could have
their their time to shine in the

22
00:01:06,640 --> 00:01:08,320
in the future.
That's exactly it.

23
00:01:08,320 --> 00:01:10,960
We've got some homework to do
and the best way to do it is to

24
00:01:10,960 --> 00:01:12,760
get people to teach us.
So we're going to chat with a

25
00:01:12,760 --> 00:01:15,600
few people and we're going to
release some conversations about

26
00:01:16,040 --> 00:01:18,680
energy, the the whole broader
world, the services space as

27
00:01:18,680 --> 00:01:19,720
well.
I think it's particularly

28
00:01:19,960 --> 00:01:23,160
interesting and what the basic
fundamentals are and a whole hit

29
00:01:23,160 --> 00:01:25,200
more.
So we hope you like the the

30
00:01:25,200 --> 00:01:27,200
conversation we've got with Josh
Young coming up.

31
00:01:27,200 --> 00:01:30,400
Before we jump in, we need to
talk about Exceed Capital Mate,

32
00:01:30,400 --> 00:01:32,520
the preeminent property group
from QLD.

33
00:01:33,160 --> 00:01:35,560
Exceed capital, exceed my
expectations with this mate,

34
00:01:35,560 --> 00:01:37,440
What have you got?
We're talking about the SP

35
00:01:37,520 --> 00:01:40,680
Property Trust.
So I bet a bunch of money miners

36
00:01:40,680 --> 00:01:43,200
out there would have felt the
stomach churning volatility in

37
00:01:43,200 --> 00:01:46,080
the resources portfolios over
the past few months, over the

38
00:01:46,080 --> 00:01:47,560
past few years.
It's always sort of been that

39
00:01:47,560 --> 00:01:51,800
way in the resources space and a
natural diversifier is property.

40
00:01:51,800 --> 00:01:54,280
So we're talking about
commercial property in

41
00:01:54,280 --> 00:01:57,080
Queensland, Grade A tenants,
you've got people like the

42
00:01:57,080 --> 00:01:59,640
Queensland government in there,
They're paying monthly

43
00:01:59,640 --> 00:02:03,400
distributions and targeting an
8% per annum cash return over a

44
00:02:03,400 --> 00:02:05,240
five year period.
What's not to like, Matt?

45
00:02:05,600 --> 00:02:09,360
This is a specific property and
there's a specific trust set up

46
00:02:09,560 --> 00:02:11,960
to to enable participation in
this specific investment.

47
00:02:12,840 --> 00:02:15,040
It's interesting, mate.
Yeah, I think diversification is

48
00:02:15,040 --> 00:02:16,360
very important.
Lots of people like their

49
00:02:16,360 --> 00:02:18,560
property.
Lots of people love property.

50
00:02:18,560 --> 00:02:20,520
In Australia, we love mining
stocks and property.

51
00:02:20,760 --> 00:02:23,560
Check out Excel Capital.
And here we go with the

52
00:02:23,560 --> 00:02:27,440
interview.
JD we're we're joined today by

53
00:02:27,440 --> 00:02:32,520
Josh Young of Bison interest.
Josh, you have been intimately

54
00:02:32,520 --> 00:02:36,360
following the the, you know, oil
and gas energy complex for many,

55
00:02:36,360 --> 00:02:39,400
many years.
You've been a contrarian in your

56
00:02:39,400 --> 00:02:41,920
calls in, in that sector for a
long time.

57
00:02:42,120 --> 00:02:45,320
One thing that we know following
mining stocks is a pays to be a

58
00:02:45,320 --> 00:02:46,920
contrarian, a pays to be
patient.

59
00:02:47,280 --> 00:02:50,440
And, and as we're looking at the
mining metals and mining complex

60
00:02:50,440 --> 00:02:53,880
right now, everything is kind of
just going limit up in a, in a

61
00:02:53,880 --> 00:02:55,880
lot of a lot of a lot of the
metals.

62
00:02:56,160 --> 00:02:59,000
So we're looking for, we're
looking for areas where there

63
00:02:59,000 --> 00:03:02,600
might be value, where, where are
the cyclical markets that might

64
00:03:02,600 --> 00:03:07,120
still be unloved and, and, and
yet to really, really like

65
00:03:07,400 --> 00:03:09,480
really move.
And we're looking to oil and gas

66
00:03:09,480 --> 00:03:11,680
despite being mining tragics
ourselves.

67
00:03:11,680 --> 00:03:15,840
We're hoping that you can help
us make sense of, make sense of

68
00:03:15,840 --> 00:03:18,520
the oil and gas world because I
think it's similar.

69
00:03:18,520 --> 00:03:19,800
I think there's a lot of
similarities.

70
00:03:19,880 --> 00:03:23,040
And yeah, just delighted to have
your expertise to help us and

71
00:03:23,040 --> 00:03:26,120
our our audience kind of unpack
what the what the landscape

72
00:03:26,120 --> 00:03:28,000
looks like and, and what the
opportunity might be.

73
00:03:30,640 --> 00:03:35,080
Yeah, thank you for having me.
So first of all, I, I hadn't

74
00:03:35,080 --> 00:03:38,880
heard of you guys and then I
looked and saw that you've had a

75
00:03:38,880 --> 00:03:40,720
number of really great folks on
here.

76
00:03:40,720 --> 00:03:42,880
So I really appreciate coming
on.

77
00:03:42,880 --> 00:03:45,680
And I was actually listening to
one of the interviews you did a

78
00:03:45,680 --> 00:03:47,720
little bit earlier.
So thank you.

79
00:03:47,720 --> 00:03:50,440
Thank you for having me on.
And then also no promises in

80
00:03:50,440 --> 00:03:52,560
terms of explaining oil and gas
thoroughly.

81
00:03:52,560 --> 00:03:53,720
I'm still trying to figure it
out.

82
00:03:53,720 --> 00:03:57,080
So I'll just maybe help you
along the journey.

83
00:03:57,320 --> 00:03:59,040
Appreciate it, Josh.
We're we're coming from a low

84
00:03:59,040 --> 00:04:00,440
base.
I'm, I'm sure you'll help us

85
00:04:00,440 --> 00:04:03,520
out, but why not start like we,
like we kind of do with all

86
00:04:03,520 --> 00:04:06,120
commodities with, with the
fundamentals, the, the supply

87
00:04:06,120 --> 00:04:09,200
demand narrative.
Everywhere you go right now,

88
00:04:09,200 --> 00:04:12,120
you, you hear about an oil glut.
You, you, you see it on

89
00:04:12,120 --> 00:04:14,880
Bloomberg on, on every other
mainstream media channel.

90
00:04:15,240 --> 00:04:19,079
And you see it in some of the
data as well with ultra bearish

91
00:04:19,079 --> 00:04:20,920
positions from hedge funds in
oil.

92
00:04:20,920 --> 00:04:23,800
So I'm curious to to hear what
you make of this and to sort of

93
00:04:24,080 --> 00:04:27,480
set the table for us in, in
terms of the the basics of where

94
00:04:27,480 --> 00:04:32,320
the oil market is in its cycle.
Well, it's a funny time to be

95
00:04:32,320 --> 00:04:36,120
talking about this because
we're, we came into the year

96
00:04:36,120 --> 00:04:39,480
with everyone really, really
bearish on oil and positioned

97
00:04:39,480 --> 00:04:43,760
very sort of negatively.
But then there's been, we're

98
00:04:43,760 --> 00:04:48,000
sort of in our, I think our 4th
or 5th mini cyclical

99
00:04:48,000 --> 00:04:54,440
geopolitical risk escalations.
And so right now, as we're

100
00:04:54,440 --> 00:04:58,600
talking, energy stocks are up a
lot for the year and oil is

101
00:04:58,600 --> 00:05:01,880
actually up I think what 15 or
20% or something like that for

102
00:05:01,880 --> 00:05:04,240
the year.
And so there's sort of this

103
00:05:04,240 --> 00:05:10,280
weird extreme bearishness on
fundamentals and then rising

104
00:05:10,320 --> 00:05:14,480
bullishness on geopolitical
risk, which people are all

105
00:05:14,480 --> 00:05:17,880
saying they're really looking
forward to fading and shorting

106
00:05:17,880 --> 00:05:20,520
against and so on.
So it's a very sort of odd

107
00:05:20,840 --> 00:05:23,640
moment.
And then one of the other things

108
00:05:23,640 --> 00:05:25,960
I'll highlight before we get
into sort of a specific supply

109
00:05:25,960 --> 00:05:32,200
demand numbers are that there's
actually this sort of weird cone

110
00:05:32,200 --> 00:05:34,360
of uncertainty almost.
I was trying to figure out what

111
00:05:34,360 --> 00:05:39,080
the right way to describe it is.
But for a market that's as big

112
00:05:39,080 --> 00:05:42,920
and as important as oil and gas,
particularly the oil market and

113
00:05:42,960 --> 00:05:47,360
oil products and Ng LS, the data
is abysmal.

114
00:05:47,640 --> 00:05:52,520
And the accuracy on the data is
astonishingly low.

115
00:05:52,520 --> 00:05:54,680
I've looked at all the different
providers, look at all the

116
00:05:54,680 --> 00:05:57,280
different folks.
And I mean, you see what makes

117
00:05:57,280 --> 00:06:00,200
it into the investment bank
research and into, you know,

118
00:06:00,200 --> 00:06:01,880
Bloomberg and various other
spots.

119
00:06:01,880 --> 00:06:04,600
And it's just, it's just wrong
all the time.

120
00:06:04,600 --> 00:06:07,560
And so I wanted to highlight
that one, as you're trying to

121
00:06:07,560 --> 00:06:10,040
figure it out, this is a thing
to watch out for.

122
00:06:10,040 --> 00:06:13,120
And then two, as we talked
through stuff, my own numbers

123
00:06:13,120 --> 00:06:15,240
are going to be just as flawed
as everyone else's.

124
00:06:15,240 --> 00:06:18,040
And what I try to do is just
focus on a few of the key

125
00:06:18,040 --> 00:06:20,320
elements.
But I think it's important to

126
00:06:20,320 --> 00:06:23,160
highlight that, like you said,
as we journey into the oil

127
00:06:23,160 --> 00:06:27,640
market, knowing that we're in
very Muddy Waters, I think is

128
00:06:27,640 --> 00:06:29,800
really helpful in figuring out
what's actually going on.

129
00:06:30,080 --> 00:06:33,160
I'm glad, glad you framed it
that way, but it is, it's also

130
00:06:33,160 --> 00:06:36,480
surprising just given the like
the very physical nature of what

131
00:06:36,480 --> 00:06:39,120
we're what we're talking about.
It should, it shouldn't be an

132
00:06:39,120 --> 00:06:40,560
impossibility to get the right
numbers.

133
00:06:40,560 --> 00:06:43,840
But I, I want to just kind of
like zoom out and, and talk

134
00:06:43,840 --> 00:06:46,960
about like the, the cycle of
capital starvation that that

135
00:06:46,960 --> 00:06:49,800
has, has been parallel with the
sector.

136
00:06:50,080 --> 00:06:52,920
Like like where did that capital
starvation begin and where are

137
00:06:52,920 --> 00:06:55,680
we now?
And also why, why Despite that

138
00:06:55,680 --> 00:06:59,240
capital starvation, you know, is
the is the the narrative of the

139
00:06:59,240 --> 00:07:00,720
moment that there's this oil
clot?

140
00:07:03,000 --> 00:07:05,600
Yeah, I think it's a good a good
spot to start.

141
00:07:05,600 --> 00:07:08,920
And I think it's helpful to come
at it from I think a sort of

142
00:07:08,920 --> 00:07:10,600
generalist commodity
perspective.

143
00:07:10,600 --> 00:07:13,880
I think that is sort of the
easiest to understand both for

144
00:07:13,880 --> 00:07:16,520
you guys and and your general
audience as well as anyone else

145
00:07:16,520 --> 00:07:19,720
that might be listening to this.
So if you look back at the last

146
00:07:19,720 --> 00:07:24,360
commodity cycle, you had a boom
that no one believed in in the

147
00:07:24,400 --> 00:07:28,680
late 90s or the 2000s with
demand coming from China, demand

148
00:07:28,680 --> 00:07:32,960
growth coming from China and
sort of grade degradation.

149
00:07:32,960 --> 00:07:36,640
Whether it was oil where the
Saudi oil fields, their core oil

150
00:07:36,640 --> 00:07:40,400
fields were running out or
whether it was with, you know,

151
00:07:40,400 --> 00:07:44,320
copper or whatever commodity you
look at, there was sort of these

152
00:07:44,320 --> 00:07:46,720
problems from under investment
for a long time.

153
00:07:47,000 --> 00:07:50,600
And so you had a huge commodity
cycle, a huge capital cycle

154
00:07:50,600 --> 00:07:55,360
where arguably way too much
money was spent in that bull

155
00:07:55,360 --> 00:07:58,600
market for commodities.
And it sort of peaked out around

156
00:07:58,600 --> 00:08:02,040
2012.
And you started to see commodity

157
00:08:02,040 --> 00:08:06,080
investment collapse, frankly.
And you saw some of the precious

158
00:08:06,080 --> 00:08:08,560
metals start to fall.
And what was it, 2011, 2012?

159
00:08:08,840 --> 00:08:12,760
You saw oil hang in there sort
of because of geopolitical risk

160
00:08:12,760 --> 00:08:15,720
and a couple other factors and
then collapse in 2014.

161
00:08:16,040 --> 00:08:20,320
And so I think you always want
to know I think for cyclicals

162
00:08:20,480 --> 00:08:24,080
what the last cycle was to
understand sort of where, where

163
00:08:24,080 --> 00:08:27,280
you are now and whether you
might be in a Next up cycle or

164
00:08:27,280 --> 00:08:30,760
whether you're just sort of in
for more persistent bear market

165
00:08:30,760 --> 00:08:33,400
pain.
So I think that'd be sort of how

166
00:08:33,400 --> 00:08:35,760
I'd start framing it and then
I'm happy to sort of keep

167
00:08:35,760 --> 00:08:37,840
answering that or happy if you
had sort of it looked like you

168
00:08:37,840 --> 00:08:39,440
might have a specific question
around that.

169
00:08:39,600 --> 00:08:42,080
One of the things I just find
amazing here when you look at

170
00:08:42,080 --> 00:08:46,120
the oil price, you look at you
look at Brent or WTI and you see

171
00:08:46,320 --> 00:08:48,960
call it 60 ish bucks, maybe a
bit over that right now.

172
00:08:49,920 --> 00:08:52,680
If you take inflation into
account where, where we kind of

173
00:08:52,680 --> 00:08:57,120
are and you compare that with 15
years ago, 20 years ago and and

174
00:08:57,120 --> 00:09:02,960
further it's, it's relatively
extremely low and and you say

175
00:09:02,960 --> 00:09:05,360
that in the in the profitability
terms with with a lot of the

176
00:09:05,360 --> 00:09:08,120
producers, right.
Prices are really low on an

177
00:09:08,120 --> 00:09:10,440
inflation adjusted basis.
And part of why I wanted to go

178
00:09:10,440 --> 00:09:14,120
back to the last cycle is that
if you frame what's happened so

179
00:09:14,120 --> 00:09:18,120
far versus what happened in the
late 90s and early 2000s and

180
00:09:18,120 --> 00:09:21,640
then how that cycle progressed,
you had some of these other

181
00:09:21,640 --> 00:09:26,120
commodities lead to some extent,
you had gold baffle everyone and

182
00:09:26,120 --> 00:09:29,880
start rising.
And so here you are very, very

183
00:09:29,880 --> 00:09:35,400
similarly where you have oil
prices quite low at prices that

184
00:09:35,400 --> 00:09:39,960
really are sort of below, I
think full cycle breakevens for

185
00:09:39,960 --> 00:09:42,840
most producers, especially for
the marginal producers.

186
00:09:43,160 --> 00:09:46,480
And you know, you have these
other commodities that have

187
00:09:46,480 --> 00:09:47,880
spiked.
And I think this one's a little

188
00:09:47,880 --> 00:09:50,480
different because you actually
got to these extremes and some

189
00:09:50,480 --> 00:09:54,400
of these other commodities while
still having oil quite low on an

190
00:09:54,400 --> 00:09:57,760
inflation adjusted basis.
And so I think some of that's

191
00:09:57,760 --> 00:10:00,640
political, some of that's
related to sort of futures

192
00:10:00,640 --> 00:10:04,320
positioning and some of it's
related to this particular

193
00:10:04,320 --> 00:10:09,240
downturn for oil, which was I
think more severe, maybe some

194
00:10:09,680 --> 00:10:12,000
basic metals commodity folks
might get mad about this.

195
00:10:12,000 --> 00:10:15,160
But I think more severe than
most other commodity downturns

196
00:10:15,160 --> 00:10:17,800
that that were experienced in
the last decade.

197
00:10:18,000 --> 00:10:20,680
I think the biggest thing was
that there was this giant

198
00:10:21,880 --> 00:10:26,640
investment boom despite the
price signal to not do it in US

199
00:10:26,640 --> 00:10:30,240
shale development and Canadian
shale development as well as

200
00:10:30,240 --> 00:10:32,200
actually a sort of people don't
like to talk about it.

201
00:10:32,200 --> 00:10:35,280
But there was sort of this
offshore persistence of

202
00:10:35,280 --> 00:10:38,840
investment where you should have
seen a bunch of projects

203
00:10:38,840 --> 00:10:41,480
canceled and instead they just
sort of went through with them

204
00:10:41,480 --> 00:10:43,680
anyway.
And so you've had this much

205
00:10:43,720 --> 00:10:48,520
longer sort of tail of
production and investment from

206
00:10:48,520 --> 00:10:52,720
the last cycle that was sort of
held over and huge losses

207
00:10:52,720 --> 00:10:55,200
because of this.
I mean, astronomical losses by

208
00:10:55,200 --> 00:10:58,480
oil majors, by private equity,
by public equity investors, by

209
00:10:58,480 --> 00:11:01,560
debt investors, I mean just, you
know, astonishing amounts of

210
00:11:01,560 --> 00:11:04,920
money that was lost.
And so we're we're at the tail

211
00:11:04,920 --> 00:11:07,200
end of that.
And I think the real question

212
00:11:07,600 --> 00:11:11,200
most, I think oil market
observers that don't believe in

213
00:11:11,200 --> 00:11:15,400
sort of this net 0 fantasy that
oil is going away and whatever.

214
00:11:15,560 --> 00:11:18,600
I think it's just a debate of,
hey, is oil going to go up a lot

215
00:11:18,600 --> 00:11:21,200
this year or next year or the
year after.

216
00:11:21,480 --> 00:11:24,960
And so that's I think where a
lot of the sort of specifics of

217
00:11:24,960 --> 00:11:27,680
the barrel counting come in.
And then it's a question of,

218
00:11:27,680 --> 00:11:31,360
hey, how much do physical
shortages weigh in versus how

219
00:11:31,360 --> 00:11:36,240
much do you know sentiment and
futures market positioning weigh

220
00:11:36,240 --> 00:11:38,480
in?
In, in the mining world, we,

221
00:11:39,200 --> 00:11:42,400
we're well acquainted with the
phenomenon of, of great decline.

222
00:11:42,400 --> 00:11:45,720
You mine the highest grade part
first and then as time goes on,

223
00:11:46,440 --> 00:11:49,160
yeah, you've got to spend more
and more CapEx to expand the

224
00:11:49,160 --> 00:11:52,560
mill as the grade goes lower to
kind of maintain the production

225
00:11:52,560 --> 00:11:53,920
that you were you're doing
before.

226
00:11:54,520 --> 00:11:58,320
What kind of parallels to to
grade decline are there in into

227
00:11:58,320 --> 00:12:02,120
the oil and gas world and and
how are those like decline rates

228
00:12:02,120 --> 00:12:04,000
different by the types of
projects?

229
00:12:05,960 --> 00:12:08,240
Yeah.
So from what I've seen on mining

230
00:12:08,240 --> 00:12:11,320
equipment and mining
technologies, there's been

231
00:12:11,560 --> 00:12:15,440
nothing close to what's happened
in the oil and gas space in

232
00:12:15,440 --> 00:12:20,080
terms of the innovations in
shale drilling and completions

233
00:12:20,080 --> 00:12:23,600
and some of the other sort of
aspects of getting oil to

234
00:12:23,600 --> 00:12:26,760
market.
And so the first thing that

235
00:12:26,760 --> 00:12:30,040
comes to mind is that it used to
be, let's say if you go back to

236
00:12:30,040 --> 00:12:34,560
2014 that a long lateral.
So the amount of well bore that

237
00:12:34,560 --> 00:12:38,680
was exposed to the zone that was
being produced from a long

238
00:12:38,680 --> 00:12:41,960
lateral would be one mile
through the formation

239
00:12:41,960 --> 00:12:47,840
horizontally.
And these days long lateral is 4

240
00:12:47,840 --> 00:12:50,040
miles.
And there are some wells on the

241
00:12:50,040 --> 00:12:55,040
gas side that are 5 or 6 miles.
And so if you just think about

242
00:12:55,040 --> 00:12:59,960
the gains just purely from not
having to drill, let's say 5

243
00:12:59,960 --> 00:13:04,280
wells or six wells to reach that
zone, just to drill one well,

244
00:13:04,480 --> 00:13:09,040
the efficiency gains purely from
longer laterals are astronomical

245
00:13:09,120 --> 00:13:12,800
in oil and gas for shale
development and they've way

246
00:13:12,800 --> 00:13:15,560
overwhelmed for much longer than
you would have expected.

247
00:13:16,320 --> 00:13:19,760
The grade degradation, sort of
core depletion as they call it

248
00:13:19,760 --> 00:13:24,560
in, in the shale development way
more than you would have

249
00:13:24,560 --> 00:13:26,280
thought.
I think from sort of a mining

250
00:13:26,280 --> 00:13:30,080
perspective, the global decline
rate for oil is somewhere

251
00:13:30,080 --> 00:13:37,000
between 5 and 8% a year.
So shale, it's sort of hard to

252
00:13:37,520 --> 00:13:41,240
properly, I think consider it in
the context of other commodities

253
00:13:41,240 --> 00:13:45,000
because you have to grow a lot
just to sort of stay flat and

254
00:13:45,000 --> 00:13:48,160
you have to drill a lot just to
sustain existing production

255
00:13:48,160 --> 00:13:51,240
levels.
And so there's this huge, the

256
00:13:51,240 --> 00:13:54,000
amount of activity that's
persistent even at very, very

257
00:13:54,000 --> 00:13:57,960
low price levels just to keep
U.S. oil production, let's say

258
00:13:57,960 --> 00:14:01,120
around 13 million barrels a day
of crude oil or around, let's

259
00:14:01,120 --> 00:14:05,040
say 21 or 22 million barrels a
day of crude oil plus natural

260
00:14:05,040 --> 00:14:07,520
gas liquids.
So there's this huge amount of

261
00:14:07,520 --> 00:14:12,120
sort of persistent production
growth just to stay flat in

262
00:14:12,120 --> 00:14:15,840
shale.
And shale has only very recently

263
00:14:15,840 --> 00:14:18,880
started to roll over.
I actually made this mistake a

264
00:14:18,880 --> 00:14:21,120
few years ago where it looked
like it was starting to roll

265
00:14:21,120 --> 00:14:22,920
over.
And then there was this next hit

266
00:14:23,200 --> 00:14:27,360
from improved well productivity
from much longer laterals and

267
00:14:27,360 --> 00:14:29,800
then much more intense well
completions.

268
00:14:29,800 --> 00:14:34,240
And so it's only been a problem
to have to replace shale in

269
00:14:34,240 --> 00:14:38,040
let's say 2026.
And so we're just hitting that

270
00:14:38,040 --> 00:14:40,920
wall now.
And so, you know, the, the

271
00:14:40,920 --> 00:14:44,640
common, I think bearish critique
on the oil bowl thesis would be,

272
00:14:44,640 --> 00:14:48,520
hey, well, there's Guyana where
you've had oil go from zero to

273
00:14:48,520 --> 00:14:51,320
1,000,000 barrels a day.
And there is Brazil, where

274
00:14:51,320 --> 00:14:54,640
you've had oil production
growing recently after, you

275
00:14:54,640 --> 00:14:57,640
know, a decade of promises.
Eventually Brazil delivered in

276
00:14:57,640 --> 00:15:02,080
one year and then you have a few
other spots where there have

277
00:15:02,080 --> 00:15:06,760
been big discoveries and there
was some growth last year in

278
00:15:06,760 --> 00:15:10,880
offshore Kazakhstan.
And so I think it's an open

279
00:15:10,880 --> 00:15:14,000
question in terms of where's the
oil production going to come

280
00:15:14,000 --> 00:15:15,960
from next.
But I think it's important to

281
00:15:15,960 --> 00:15:18,880
understand where we're at, which
is there was all of this

282
00:15:18,880 --> 00:15:22,240
production that was promised to
grow that actually showed up for

283
00:15:22,240 --> 00:15:26,120
the most part.
But it's not so clear how you

284
00:15:26,120 --> 00:15:30,080
get from the million barrels a
day in Guyana to let's say,

285
00:15:30,080 --> 00:15:32,000
3,000,000 barrels a day.
You probably don't.

286
00:15:32,280 --> 00:15:35,320
And it's not so clear how you
get from the close to 4 million

287
00:15:35,320 --> 00:15:38,880
barrels a day in Brazil that
you're at right now to anything

288
00:15:38,880 --> 00:15:41,200
more than that.
And you probably don't at least

289
00:15:41,200 --> 00:15:44,120
anywhere close to current
activity levels and take into

290
00:15:44,120 --> 00:15:47,640
account current discoveries.
And so it's a real open

291
00:15:47,640 --> 00:15:50,760
question.
And I think that's part of what

292
00:15:50,760 --> 00:15:53,840
has me so bullish on oil is just
really I, I don't know.

293
00:15:54,160 --> 00:15:57,200
And when you, when I look at
sort of global development plans

294
00:15:57,200 --> 00:16:00,440
and global models by all these
banks and consultants and so on,

295
00:16:00,680 --> 00:16:04,240
it's just not clear.
It's known sort of where there's

296
00:16:04,240 --> 00:16:07,720
going to be incremental oil in
certain countries, but it's not

297
00:16:07,720 --> 00:16:10,760
clear where there's going to be
incremental oil that offsets

298
00:16:10,760 --> 00:16:13,120
global declines.
And that's really I think the,

299
00:16:13,480 --> 00:16:15,840
the big question and the one
other question I'm sure we'll

300
00:16:15,840 --> 00:16:19,680
get get to this in more detail
is just getting demand levels

301
00:16:19,680 --> 00:16:22,120
right and demand growth levels
right.

302
00:16:22,400 --> 00:16:26,760
And even OPEC I think was
shocked in the last year by how

303
00:16:26,760 --> 00:16:30,760
much demand there's been for oil
at these ultra low prices that

304
00:16:30,760 --> 00:16:33,280
we've been experiencing on an
inflation adjusted basis.

305
00:16:33,280 --> 00:16:36,240
I mean there were months where
we had I think the highest Jodi

306
00:16:36,240 --> 00:16:38,680
number I saw, which is one of
these different groups that

307
00:16:38,960 --> 00:16:41,560
collects oil, they're sort of
more OPEC affiliated rather than

308
00:16:41,560 --> 00:16:43,520
more sort of IEA type
affiliated.

309
00:16:43,720 --> 00:16:47,080
So more oil producer country
versus more oil consumer country

310
00:16:47,080 --> 00:16:49,800
affiliated.
And they showed a number, I'm

311
00:16:49,800 --> 00:16:53,080
going off memory, it was either
2.1 million barrels a day of

312
00:16:53,080 --> 00:16:56,880
growth for a year or 2.4 million
barrels a day of growth for a

313
00:16:56,880 --> 00:16:58,240
year.
And I've been called the

314
00:16:58,240 --> 00:17:01,160
crackpot for saying I think that
oil demand is going to grow by a

315
00:17:01,160 --> 00:17:06,040
million barrels a day a year for
a while around 1%, you know plus

316
00:17:06,040 --> 00:17:10,240
or minus a little.
And here we have demand measured

317
00:17:10,240 --> 00:17:14,440
demand growth at twice that in
the last year.

318
00:17:14,480 --> 00:17:18,079
And you know, it looks like even
some of the preliminary numbers

319
00:17:18,079 --> 00:17:20,920
for January look like they're
well over 1,000,000 barrels a

320
00:17:20,920 --> 00:17:22,920
day, whether they're 1,000,000,
1/2 or two.

321
00:17:23,000 --> 00:17:27,000
I think we'll we'll get final
numbers in six months at a point

322
00:17:27,000 --> 00:17:29,600
where it's less relevant, but
it's somewhere in that, in that

323
00:17:29,600 --> 00:17:31,400
range and it's pretty, pretty
remarkable.

324
00:17:31,840 --> 00:17:34,840
So, so the part of supply there
that I'd love to understand more

325
00:17:34,840 --> 00:17:38,560
is the US you said 13 or
14,000,000 barrels a day.

326
00:17:39,480 --> 00:17:42,600
Oil is roughly 100 million
barrel a day market.

327
00:17:43,480 --> 00:17:48,280
What is the consensus for that
to be in say five years time and

328
00:17:48,280 --> 00:17:50,800
and how do you kind of differ
with the consensus outlook?

329
00:17:52,680 --> 00:17:56,920
Yeah, so, so crude oil I think
is like 88 or 89,000,000 barrels

330
00:17:56,920 --> 00:17:59,800
a day.
And then oil plus natural gas

331
00:17:59,800 --> 00:18:05,160
liquids is closer to I think
we're at something like 106

332
00:18:05,160 --> 00:18:10,120
million barrels a day.
And so and US production again,

333
00:18:10,120 --> 00:18:14,280
crude oil is around let's say 13
million barrels a day plus or

334
00:18:14,280 --> 00:18:19,600
minus a little bit.
And then Ng LS are another let's

335
00:18:19,600 --> 00:18:22,280
say 9 million barrels a day
right now.

336
00:18:23,280 --> 00:18:27,520
So I think it's important to
mention that because I think a

337
00:18:27,520 --> 00:18:31,720
lot of the uncertainty has to do
with double counting Ng LS where

338
00:18:31,840 --> 00:18:36,760
natural gas liquids, which come
frequently but not always with

339
00:18:36,760 --> 00:18:39,640
oil, particularly with oil that
you're producing from shale and

340
00:18:39,640 --> 00:18:41,960
sometimes from gas you're
producing from shale.

341
00:18:42,920 --> 00:18:45,560
They can be produced directly
from the formation, but they can

342
00:18:45,560 --> 00:18:47,640
also come from the refining
process.

343
00:18:47,840 --> 00:18:51,600
Their outputs from refining
crude oil, but they're also

344
00:18:51,840 --> 00:18:57,520
outputs from producing shale oil
or shale natural gas or some

345
00:18:57,520 --> 00:19:00,600
combo wells which are sort of a
mix of oil, NGLS and natural

346
00:19:00,600 --> 00:19:03,920
gas.
And so that that sort of makes

347
00:19:03,920 --> 00:19:07,480
the whole thing a mess.
In terms of counting, there's a

348
00:19:07,480 --> 00:19:13,400
number the EIA the US Energy
Administration put out recently

349
00:19:13,400 --> 00:19:17,400
where they claimed that there
were 24,000,000 barrels a day of

350
00:19:17,400 --> 00:19:21,440
liquids being produced in the US
and there's just no way to come

351
00:19:21,440 --> 00:19:23,720
to that figure.
That's just wrong, unless you

352
00:19:23,720 --> 00:19:29,440
include the uplift from refining
oil, which is very clearly, I

353
00:19:29,440 --> 00:19:32,400
would argue, double counting
because how can you count the

354
00:19:32,400 --> 00:19:35,520
inputs and the outputs towards
your production number?

355
00:19:35,520 --> 00:19:40,920
It just seems, you know, like
you, you count your iron ore and

356
00:19:40,920 --> 00:19:45,200
your steel like pick 1.
And so, so I think that's been

357
00:19:45,200 --> 00:19:47,800
sort of one of the big problems.
And so I, I would say the

358
00:19:47,800 --> 00:19:51,560
biggest difference right now is
that is actually on the demand

359
00:19:51,560 --> 00:19:55,360
side where I think that demand
is going to continue to grow by

360
00:19:55,360 --> 00:19:58,880
a little over, let's say 1% a
year under normal economic

361
00:19:58,880 --> 00:20:03,080
conditions.
And there are 0 forecasts in

362
00:20:03,080 --> 00:20:07,280
this sort of set of numbers that
OPEC assembled recently along

363
00:20:07,280 --> 00:20:09,320
with the IEA and.
Whatever from a bunch of

364
00:20:09,320 --> 00:20:11,280
different agencies and banks and
so on.

365
00:20:11,480 --> 00:20:16,720
There are 0 forecasts through to
2050 showing 1% annual demand

366
00:20:16,720 --> 00:20:21,040
growth, which is astonishing to
me considering one, that recent

367
00:20:21,040 --> 00:20:24,720
demand was actually well in
excess of that demand growth was

368
00:20:24,720 --> 00:20:27,840
in excess of that.
And two, that the 40 year trend

369
00:20:27,880 --> 00:20:30,920
of oil demand growth is in
excess of 1% a year.

370
00:20:30,920 --> 00:20:34,920
So everyone in the world is
assuming that we just stop

371
00:20:34,920 --> 00:20:39,360
growing our oil production when
all the evidence that I can

372
00:20:39,360 --> 00:20:41,560
tell, at least in the current
market and the current

373
00:20:41,560 --> 00:20:44,280
environment is to the contrary.
And so I think that's probably

374
00:20:44,280 --> 00:20:47,960
the biggest single driver of my
variant view is just, I just

375
00:20:47,960 --> 00:20:51,200
think that things aren't
different this time and they're

376
00:20:51,200 --> 00:20:53,840
not changing until there's
evidence that they've actually

377
00:20:53,840 --> 00:20:56,600
changed.
And I haven't seen, yeah,

378
00:20:56,600 --> 00:20:59,600
there's electric vehicles, but
they have plastic as inputs.

379
00:20:59,600 --> 00:21:03,000
And yeah, there's XYZ thing, but
there's some offset to that.

380
00:21:03,000 --> 00:21:05,040
And then there's just the
reality, which is how much oil

381
00:21:05,040 --> 00:21:09,240
is actually being consumed right
now versus what the forecasts

382
00:21:09,240 --> 00:21:11,200
were for how much oil was going
to be consumed.

383
00:21:11,480 --> 00:21:13,920
And then the same folks that
were wrong on that are

384
00:21:13,920 --> 00:21:17,680
forecasting that out to 2050 and
claiming some high degree of

385
00:21:18,320 --> 00:21:20,720
accuracy.
And, and how does China fit into

386
00:21:20,720 --> 00:21:23,240
your, your forecast?
They've obviously invested A

387
00:21:23,240 --> 00:21:27,920
tremendous amount to, to build
out energy capacity, be it coal

388
00:21:27,920 --> 00:21:31,360
or, or new energy.
And, and they sorts and

389
00:21:31,680 --> 00:21:34,560
obviously they've got a real
drive on, on energy independence

390
00:21:34,560 --> 00:21:37,680
that is top of the list for, for
China and what, where they want

391
00:21:37,680 --> 00:21:40,840
to be in the future so that
they're not reliant on on anyone

392
00:21:40,840 --> 00:21:42,320
else.
But what sort of hit does that

393
00:21:42,520 --> 00:21:44,880
do to to the demand numbers in
your mind?

394
00:21:46,840 --> 00:21:48,360
Yeah, I mean, China's
fascinating.

395
00:21:49,560 --> 00:21:53,920
The the number of people I've
heard who are bullish copper.

396
00:21:53,920 --> 00:21:56,760
I, I can't actually remember
hearing or reading anyone who's

397
00:21:56,760 --> 00:21:59,000
been bearish copper in the last,
let's say three years.

398
00:21:59,000 --> 00:22:01,840
Other than people who are really
worried about a global economic

399
00:22:01,840 --> 00:22:04,920
collapse, I haven't seen anyone
bearish copper and.

400
00:22:04,920 --> 00:22:06,520
I'm looking at the last 15
years.

401
00:22:08,040 --> 00:22:09,800
Sure, sure.
But I'm looking at these charts

402
00:22:09,800 --> 00:22:13,760
of China exporting copper and
importing oil as on a net basis

403
00:22:13,800 --> 00:22:16,760
and it's like, OK, well this is
interesting, right?

404
00:22:16,760 --> 00:22:21,240
Like what, what is going on
that, you know, this consumer

405
00:22:21,240 --> 00:22:25,280
that everyone's sort of very
concerned about running out of

406
00:22:25,280 --> 00:22:32,240
demand on the oil side,
exporting copper and importing

407
00:22:32,240 --> 00:22:35,040
more oil.
So I don't have exact numbers

408
00:22:35,040 --> 00:22:37,920
for you on China.
And I think anyone that has

409
00:22:37,920 --> 00:22:42,360
exact numbers for you on China
for oil consumption is exactly

410
00:22:42,360 --> 00:22:44,880
wrong.
And I just don't know which

411
00:22:44,880 --> 00:22:48,360
direction that'll be.
And I think that the most

412
00:22:48,360 --> 00:22:52,960
interesting thing to me on China
in terms of oil demand and oil

413
00:22:53,200 --> 00:22:57,200
numbers that people show with a
very high degree of sort of

414
00:22:57,560 --> 00:23:04,280
bizarre to me conviction is that
China economic statistics are

415
00:23:04,320 --> 00:23:08,800
not believed by anyone in any
category except for their oil

416
00:23:08,800 --> 00:23:12,520
consumption.
And so it's a very weird thing

417
00:23:12,520 --> 00:23:15,160
where just the, the rule is that
you just don't believe any

418
00:23:15,160 --> 00:23:18,160
economic numbers about China,
but everyone believes their oil

419
00:23:18,160 --> 00:23:20,680
consumption numbers, whether
it's from them or from the sort

420
00:23:20,680 --> 00:23:24,880
of third parties.
And the, the degree of humility,

421
00:23:24,880 --> 00:23:28,600
I think on those numbers is
astonishing, just how poor the

422
00:23:28,600 --> 00:23:32,920
numbers are on China generally
and how confident people are on

423
00:23:32,920 --> 00:23:36,960
their numbers on Chinese oil
consumption and oil storage.

424
00:23:37,200 --> 00:23:40,800
I mean, you just don't see any
room in the reporting and the

425
00:23:41,560 --> 00:23:44,320
there's just no room for error
or for uncertainty.

426
00:23:44,560 --> 00:23:47,680
And the reason I point that out
is that when I've chatted with

427
00:23:47,680 --> 00:23:51,080
like oil physical oil traders
who deal with Chinese, the

428
00:23:51,080 --> 00:23:54,120
buyers and various other folks
and run this by them and say,

429
00:23:54,120 --> 00:23:57,080
hey, is it possible that they're
actually using more oil than

430
00:23:57,080 --> 00:24:00,160
they're saying and just messing
with the satellite data

431
00:24:00,160 --> 00:24:03,080
providers who they hate because
they call them liars every day

432
00:24:03,200 --> 00:24:05,880
in their lives.
And they anyone domestically

433
00:24:05,880 --> 00:24:09,160
that does that, they get sent to
re education camps or worse.

434
00:24:09,440 --> 00:24:14,560
And so the the physical traders
all are like, hey, yeah, they're

435
00:24:14,560 --> 00:24:16,760
probably lying to us.
They do this all the time on our

436
00:24:16,760 --> 00:24:20,200
physical trades with them.
And so of course they would, if

437
00:24:20,200 --> 00:24:21,920
this would be advantageous to
them, they would lie.

438
00:24:21,920 --> 00:24:24,720
And so again, like, are they
definitely making up their

439
00:24:24,720 --> 00:24:27,120
storage numbers?
I'm not sure, but it looks most

440
00:24:27,120 --> 00:24:29,720
likely to me that they're
probably using a little more oil

441
00:24:29,720 --> 00:24:32,720
than people are thinking because
it doesn't make a lot of sense

442
00:24:32,720 --> 00:24:36,520
that they would want to store.
I think the numbers are like 1.6

443
00:24:36,680 --> 00:24:39,280
billion barrels of oil.
Like what are they doing with it

444
00:24:39,280 --> 00:24:42,360
and why would they do that?
But if they have people think

445
00:24:42,360 --> 00:24:45,160
that they're doing that, then
they can potentially buy their

446
00:24:45,160 --> 00:24:48,440
oil for let's say $10 a barrel
less because there's sort of

447
00:24:48,440 --> 00:24:53,160
this perceived extra storage and
embarrass the satellite data

448
00:24:53,160 --> 00:24:55,960
providers.
Eventually when when this does

449
00:24:55,960 --> 00:24:58,400
sort of become better
understood, it's like the

450
00:24:58,400 --> 00:25:00,480
American Express salad oil
scandal, right?

451
00:25:00,480 --> 00:25:03,240
No one could imagine that they
would mess with these tanks and

452
00:25:03,240 --> 00:25:04,760
stuff and then they mess with
it.

453
00:25:04,760 --> 00:25:06,800
And there's this huge, huge
economic benefit.

454
00:25:06,960 --> 00:25:11,080
And I think the benefit would
accrue in terms of 10s of

455
00:25:11,080 --> 00:25:14,400
billions of dollars a year if
they were doing this.

456
00:25:14,400 --> 00:25:16,800
And so anyway, that's probably
the craziest theory that I have.

457
00:25:17,520 --> 00:25:20,560
But also, like, I tried to chase
it down by talking to the folks

458
00:25:20,560 --> 00:25:23,480
that actually are engaged in
this physical market and trying

459
00:25:23,480 --> 00:25:24,800
to, they all think it's
hilarious.

460
00:25:24,800 --> 00:25:27,000
And they're like, yeah, this is
basically like how they

461
00:25:27,000 --> 00:25:30,520
negotiate with us on buying
individual cargoes and stuff

462
00:25:30,520 --> 00:25:32,480
where they'll like pretend like
they're not interested and then

463
00:25:32,480 --> 00:25:36,000
show back up last minute to buy
stuff or various other sorts of

464
00:25:36,040 --> 00:25:38,560
practices that you don't
normally do with regular trade

465
00:25:38,560 --> 00:25:42,200
partners.
I'm curious to understand the,

466
00:25:43,040 --> 00:25:47,960
the, the cost curves just just
from a general perspective in,

467
00:25:48,560 --> 00:25:50,680
in mining, there's, there's,
there's so many undeveloped

468
00:25:50,680 --> 00:25:54,760
copper projects, but the, the,
the, the party line forever was

469
00:25:54,880 --> 00:25:57,480
you need $5 copper for, for
these things to actually get to

470
00:25:57,640 --> 00:26:01,200
FID and they're at $5 copper.
But I'm waiting for the FID S to

471
00:26:01,200 --> 00:26:02,920
come.
I think it's, it's now $6 copper

472
00:26:02,920 --> 00:26:03,960
that we need or something like
that.

473
00:26:03,960 --> 00:26:07,760
But if I just to like understand
as as the oil price goes higher,

474
00:26:07,760 --> 00:26:10,360
like what are the, what are the
new sources of supply that kind

475
00:26:10,360 --> 00:26:14,040
of come online or, or or even
just like if I, if I think of

476
00:26:14,040 --> 00:26:17,600
the lowest cost kind of category
of oil versus higher cost by the

477
00:26:17,600 --> 00:26:20,960
different buckets of production,
how should I conceptualize that?

478
00:26:22,720 --> 00:26:25,520
So everyone thinks they're the
low cost producer.

479
00:26:25,920 --> 00:26:30,400
And so it becomes a little
complicated because the lowest

480
00:26:30,400 --> 00:26:35,080
cost producers on an operating
cost basis are probably US shale

481
00:26:35,080 --> 00:26:37,920
producers just on an operating
cost basis.

482
00:26:38,000 --> 00:26:41,800
But the problem is they have to
go, you invest a lot, yeah,

483
00:26:41,800 --> 00:26:45,200
CapEx issues, royalties, various
other issues that they have.

484
00:26:45,440 --> 00:26:48,920
But the just pure production
cost, once you have a shale well

485
00:26:48,920 --> 00:26:52,960
on, it costs astonishingly
little money to actually produce

486
00:26:52,960 --> 00:26:55,440
it, especially if you're let's
say in the Eagle Ford like near

487
00:26:55,440 --> 00:26:57,760
the Gulf Coast.
I mean, really it costs very,

488
00:26:57,760 --> 00:27:01,040
very little money.
And some of the highest cost oil

489
00:27:01,920 --> 00:27:06,400
is, I'm going to get so much
Flack for this in Saudi Arabia

490
00:27:06,520 --> 00:27:08,720
and certain other countries
where people say, oh, it's like

491
00:27:08,720 --> 00:27:10,440
so cheap.
But you look at their actual

492
00:27:10,440 --> 00:27:13,440
numbers and their fiscal break
evens and so on, on an operating

493
00:27:13,440 --> 00:27:15,600
cost basis, it's astonishingly
high.

494
00:27:15,960 --> 00:27:20,560
And so the incremental barrel to
bring on would be probably

495
00:27:20,760 --> 00:27:22,960
Canadian oil sands, you know,
heavy oil.

496
00:27:24,640 --> 00:27:26,360
And there it's a little
complicated because there's a

497
00:27:26,360 --> 00:27:31,040
little oil they can bring back
on or add that's very, very

498
00:27:31,040 --> 00:27:32,960
cheap.
And then there's a lot of oil

499
00:27:32,960 --> 00:27:36,600
that would require much higher
prices for a long time, probably

500
00:27:36,600 --> 00:27:38,880
similar to the copper thing
where you'd need to be able to

501
00:27:38,880 --> 00:27:42,720
lock in, let's say $100 plus oil
and then have five years to be

502
00:27:42,720 --> 00:27:44,440
able to bring on some of these
bigger projects.

503
00:27:44,640 --> 00:27:46,720
These oil sands, they just look
awesome.

504
00:27:46,720 --> 00:27:50,400
It's like the intersection of
mining and oil all at once.

505
00:27:50,640 --> 00:27:55,640
So cool.
Yeah, I think these days people

506
00:27:55,640 --> 00:27:58,080
aren't building new oil sand
mines anymore.

507
00:27:58,080 --> 00:28:01,280
They're doing steam assisted
gravity drainage, which is

508
00:28:01,280 --> 00:28:04,360
basically, I think people do
this similar sorts of stuff with

509
00:28:04,360 --> 00:28:08,520
like lithium and certain other
certain other minerals where

510
00:28:08,520 --> 00:28:11,920
they'll they'll they'll brine
extract essentially deposits

511
00:28:11,920 --> 00:28:14,920
rather than try to.
And this is, this is sort of

512
00:28:14,920 --> 00:28:19,280
steam brine extracting oil.
But yeah, it's, it's

513
00:28:19,280 --> 00:28:22,200
fascinating.
And actually, I don't have a lot

514
00:28:22,200 --> 00:28:25,720
of exposure to that, but I have
some exposure and it's a, it's a

515
00:28:25,720 --> 00:28:28,800
very interesting, it's sort of
its own world, but Canada has

516
00:28:28,800 --> 00:28:31,640
their own issues which are are
hard to express in terms of

517
00:28:31,640 --> 00:28:36,080
dollars per barrel of let's say
OpEx or you know, various other

518
00:28:36,080 --> 00:28:39,680
costs because they won't build
new pipelines.

519
00:28:39,680 --> 00:28:44,040
And it's sort of this country
that I mean, the US is a little

520
00:28:44,040 --> 00:28:46,280
like this where we're trying to
pretend like we're this big oil

521
00:28:46,280 --> 00:28:48,600
consumer, but we're a net
exporter of oil.

522
00:28:48,720 --> 00:28:51,040
So we have our president running
around trying to keep the oil

523
00:28:51,040 --> 00:28:54,800
price down when we're basically
like not that different from

524
00:28:54,800 --> 00:28:57,840
some other oil net exporters who
really need a higher oil price

525
00:28:57,840 --> 00:29:00,400
to have a thriving to have a
thriving economy.

526
00:29:00,640 --> 00:29:03,240
And Canada is like that too,
where they're they're sort of in

527
00:29:03,240 --> 00:29:05,400
denial.
They basically steal all the the

528
00:29:06,040 --> 00:29:09,560
royalty money from Alberta and
Saskatchewan and redirect it

529
00:29:09,560 --> 00:29:12,840
towards social welfare programs
and various other government

530
00:29:12,840 --> 00:29:16,840
priorities in Eastern Canada.
And they at the same time as

531
00:29:16,840 --> 00:29:19,800
they're sort of redirecting
those revenues, they're also

532
00:29:20,040 --> 00:29:24,520
blocking pipeline projects and
then nationalizing them and of

533
00:29:24,520 --> 00:29:26,160
course making them three times
more expensive.

534
00:29:26,160 --> 00:29:28,080
Because when you get the
government involved in trying to

535
00:29:28,080 --> 00:29:32,000
help, that obviously leads to
predictable consequences.

536
00:29:32,240 --> 00:29:38,760
And so it's sort of the oil in
Canada right now after it grows

537
00:29:38,760 --> 00:29:41,000
by another, let's say a few
100,000 barrels a day is going

538
00:29:41,000 --> 00:29:43,880
to be landlocked or at least you
they're going to need to rail it

539
00:29:43,880 --> 00:29:46,680
out rather than pipe it out,
which dramatically increases the

540
00:29:46,680 --> 00:29:50,480
transportation costs.
So Canada has some real non, not

541
00:29:50,480 --> 00:29:54,840
purely cost related issues with
getting its oil production.

542
00:29:54,880 --> 00:29:58,320
Higher.
So if we look to the market now,

543
00:29:58,520 --> 00:30:01,000
I think I think a lot of people
would be fascinated to, to kind

544
00:30:01,000 --> 00:30:04,680
of hear that a lot of the the
Super majors, the exons of the

545
00:30:04,680 --> 00:30:08,200
world trading at or near all
time highs, which is pretty

546
00:30:08,200 --> 00:30:10,200
remarkable.
And I think to your point, it's

547
00:30:10,200 --> 00:30:14,160
it's reflective of the previous
CapEx cycle and the consequences

548
00:30:14,160 --> 00:30:18,200
of that getting, getting sharp,
you know, starting to focus on

549
00:30:18,240 --> 00:30:21,000
on capital returns to
shareholders and all these sorts

550
00:30:21,000 --> 00:30:23,320
of things.
But I'm really curious, Josh, if

551
00:30:23,320 --> 00:30:25,840
we, if we go through the kind of
baskets from the, the big

552
00:30:25,840 --> 00:30:28,120
producers to the smaller
producers to the offshore

553
00:30:28,560 --> 00:30:32,560
services names and the the
royalty names, how you kind of

554
00:30:32,560 --> 00:30:35,840
think about relative value and
and value against other parts of

555
00:30:35,840 --> 00:30:38,240
the market through through those
and if anything's kind of

556
00:30:38,240 --> 00:30:41,760
screaming out at you right now?
Yeah.

557
00:30:42,240 --> 00:30:46,560
So the oil majors are really
expensive and it looks like it's

558
00:30:46,560 --> 00:30:51,640
sort of this combination of just
the passive market sort of

559
00:30:51,640 --> 00:30:58,160
moving the stocks higher along
with sort of this broad general

560
00:30:58,160 --> 00:31:00,200
stock market bull market that
we've had.

561
00:31:02,040 --> 00:31:05,360
And then I think part of it's
also that chemicals margins have

562
00:31:05,360 --> 00:31:08,280
been terrible and refining
margins really fell off a lot

563
00:31:08,280 --> 00:31:09,880
from where they were a few years
ago.

564
00:31:10,160 --> 00:31:13,960
And so you have sort of this
lagging sort of historical high

565
00:31:13,960 --> 00:31:17,720
earnings that the earnings have
been falling for these oil super

566
00:31:17,720 --> 00:31:21,200
majors as their stock prices
have been rising.

567
00:31:21,200 --> 00:31:24,720
So I think the optimist would
look at them and say, hey,

568
00:31:24,720 --> 00:31:26,760
they're pricing in much higher
oil prices.

569
00:31:27,080 --> 00:31:29,960
And the pessimists would say,
hey, these things are massively

570
00:31:29,960 --> 00:31:31,680
overvalued.
The market's wrong.

571
00:31:31,680 --> 00:31:34,320
It's broken and these things
need to collapse.

572
00:31:34,320 --> 00:31:38,320
And so I'm probably more of an
optimist than a pessimist, but I

573
00:31:38,320 --> 00:31:40,920
think that's sort of the the way
to frame it.

574
00:31:41,520 --> 00:31:44,200
There's weird claims that have
been coming out from these

575
00:31:44,200 --> 00:31:47,880
companies that aren't new by the
way, that they every year or two

576
00:31:47,880 --> 00:31:50,440
or whatever, Exxon or Chevron or
Shell, whatever, they'll say,

577
00:31:50,480 --> 00:31:53,800
ah, we have this big innovation
and it's going to lead to way

578
00:31:53,800 --> 00:31:56,280
higher production and way lower
costs.

579
00:31:56,280 --> 00:31:59,720
And it's magic.
And for most of my career,

580
00:31:59,720 --> 00:32:01,400
people just didn't believe this
stuff.

581
00:32:01,400 --> 00:32:04,520
But in the last year or so, I
think as the stocks of these

582
00:32:04,520 --> 00:32:07,120
companies have risen, they've
started to take them way more

583
00:32:07,120 --> 00:32:10,480
seriously.
And so I'll pitch my newsletter

584
00:32:10,480 --> 00:32:12,160
for a second.
I watch this newsletter sort of

585
00:32:12,160 --> 00:32:14,960
as this like fun side project.
And one of the benefits is I can

586
00:32:14,960 --> 00:32:17,800
go through and see what I think
about stuff without getting

587
00:32:17,800 --> 00:32:20,640
completely, you know, attacked
and, you know, called all kinds

588
00:32:20,640 --> 00:32:22,040
of names or whatever on social
media.

589
00:32:22,320 --> 00:32:27,200
And so one of my projects is to
sort of go through and and myth

590
00:32:27,200 --> 00:32:30,360
bust on some of the stuff and
show, hey, OK, you know, you say

591
00:32:30,360 --> 00:32:34,640
you've developed as a producer
this massive advantage on

592
00:32:34,640 --> 00:32:37,680
something that services
companies do and services

593
00:32:37,680 --> 00:32:40,400
companies are providing you.
And really it's actually a

594
00:32:40,400 --> 00:32:43,160
disadvantage and you're doing it
to get rid of some waste product

595
00:32:43,320 --> 00:32:45,560
that you couldn't dispose of,
for example, or whatever.

596
00:32:45,560 --> 00:32:48,440
So anyway, there's very weird
stuff that happens when stock

597
00:32:48,440 --> 00:32:51,040
prices go up a lot.
I mean, I would point to the

598
00:32:51,840 --> 00:32:55,760
silver miners and silver
recently where you had this, you

599
00:32:55,760 --> 00:32:58,000
know, I had AI had a view on
silver, which is like very rare

600
00:32:58,000 --> 00:33:00,760
to have a view on, you know,
stuff outside of oil and gas.

601
00:33:01,040 --> 00:33:04,160
And I thought that silver would
go up a lot when, you know, once

602
00:33:04,160 --> 00:33:05,880
it got over 50, I thought it
would go to 100.

603
00:33:06,000 --> 00:33:08,760
Once it got to 100, it was like,
OK, this is it got a little

604
00:33:08,760 --> 00:33:12,360
crazy in terms of the supply
demand balances and break evens

605
00:33:12,360 --> 00:33:15,840
on new supply and so on.
But what I thought was so

606
00:33:15,840 --> 00:33:18,080
interesting there was that there
were these narratives that

607
00:33:18,080 --> 00:33:21,680
showed up that were radically
different from what I've been

608
00:33:21,680 --> 00:33:25,200
hearing about silver and silver
miners and so on for a very long

609
00:33:25,200 --> 00:33:26,920
time.
And I think there's sort of a

610
00:33:26,920 --> 00:33:30,600
parallel here on some of these
oil super majors where there's

611
00:33:30,600 --> 00:33:33,160
these narratives from the
investor community that are

612
00:33:33,160 --> 00:33:39,080
showing up that are just very
hard to reconcile with reality.

613
00:33:39,280 --> 00:33:42,320
And then with like my
relationships with the service

614
00:33:42,320 --> 00:33:45,560
providers and other producers
and friends that own interests

615
00:33:45,560 --> 00:33:49,120
in their wells and, you know,
the pipeline companies.

616
00:33:49,120 --> 00:33:52,040
I mean, there's just, there's a
way that I've stayed in business

617
00:33:52,040 --> 00:33:55,440
over the last decade investing
in this terrible oil bear market

618
00:33:55,440 --> 00:33:58,320
that we've had for, you know, 8
out of the last 10 years.

619
00:33:58,320 --> 00:34:00,000
And it's through being able to
diligence this stuff.

620
00:34:00,000 --> 00:34:03,520
So anyway, so I guess you can
put me in the category of very

621
00:34:03,520 --> 00:34:07,920
much not finding value in the
oil 3 majors here and hoping

622
00:34:07,920 --> 00:34:09,800
that they're just pricing in
higher oil prices.

623
00:34:09,800 --> 00:34:12,719
Yeah, that's, that's the like
it's part of their, their

624
00:34:12,719 --> 00:34:16,760
relative out performance.
They're like the rotation into

625
00:34:16,760 --> 00:34:19,960
high commodities that, you know,
rotation out of, out of out of

626
00:34:19,960 --> 00:34:23,080
high PE stuff into lower PE
stuff that's finding it's way

627
00:34:23,080 --> 00:34:26,560
into, into harder commodities,
be it metals, be it the, the

628
00:34:26,560 --> 00:34:29,280
energy complex.
But also are they, are the

629
00:34:29,280 --> 00:34:34,280
equities already pricing in
higher, higher oil prices, which

630
00:34:34,280 --> 00:34:37,800
sometimes the equities do do
lead first, but they're, they're

631
00:34:37,800 --> 00:34:39,239
sometimes right in doing that as
well.

632
00:34:39,239 --> 00:34:43,120
Like I remember the, the lithium
equities like running before,

633
00:34:43,239 --> 00:34:46,360
like the the spot price ran and
it was right, you know, so

634
00:34:46,360 --> 00:34:48,560
sometimes there's some
informational advantage that

635
00:34:48,560 --> 00:34:51,000
gets expressed in the equities
before the commodity.

636
00:34:53,120 --> 00:34:55,400
Yeah, I think so.
I mean, I'm like I said, I'm

637
00:34:55,400 --> 00:34:58,480
more in the optimist camp on
this, but I would note that

638
00:34:58,480 --> 00:35:01,360
there's some of these weird
narratives around some of these

639
00:35:01,360 --> 00:35:05,360
oil majors that are just very
detached, I think, from reality.

640
00:35:06,800 --> 00:35:10,000
So if we keep going through the
chain services providers is one

641
00:35:10,000 --> 00:35:11,120
I'm really keen to get your take
on.

642
00:35:11,120 --> 00:35:14,680
We saw the transaction with
Transocean and and Polaris just

643
00:35:14,760 --> 00:35:19,280
just yesterday and that's one of
the number of consolidation type

644
00:35:19,320 --> 00:35:21,520
MNA deals we've seen in in the
space.

645
00:35:21,520 --> 00:35:23,080
What was your take on it?
Yeah.

646
00:35:23,240 --> 00:35:26,600
So I have exposure there and I
love the deal and I think it's

647
00:35:26,600 --> 00:35:28,920
good for both companies and it's
good for the sector.

648
00:35:28,920 --> 00:35:33,600
And ironically, it's sort of bad
for these oil super majors

649
00:35:33,600 --> 00:35:36,920
because there is going to be
price pressure from this.

650
00:35:36,920 --> 00:35:38,840
I think it's appropriate.
Hopefully it doesn't have too

651
00:35:38,840 --> 00:35:41,640
much pressure from antitrust
folks or whatever.

652
00:35:41,640 --> 00:35:45,960
But you know, I think Valeris
was a little too much of a price

653
00:35:45,960 --> 00:35:48,800
taker and Transocean has been
more of a price setter.

654
00:35:49,040 --> 00:35:52,680
And so it's great to see that
team going and, you know,

655
00:35:52,680 --> 00:35:55,240
getting control of this.
And I think generally oil field

656
00:35:55,240 --> 00:36:00,080
services has consolidated a lot,
as has oil and gas production,

657
00:36:00,080 --> 00:36:02,360
but the oil field services
companies have been way better

658
00:36:02,360 --> 00:36:06,640
about consolidating and there's
way fewer of these companies at

659
00:36:06,640 --> 00:36:10,080
scale doing these critical
services.

660
00:36:10,080 --> 00:36:14,120
And so I think we've seen this
phenomenal move in some of these

661
00:36:14,120 --> 00:36:17,120
oilfield services stocks.
Some of them I own and it's been

662
00:36:17,120 --> 00:36:18,960
wonderful and some of them I
don't own.

663
00:36:19,200 --> 00:36:21,840
And it's always funny how it's
rational for the ones you own

664
00:36:21,840 --> 00:36:23,640
and irrational for the ones you
don't own.

665
00:36:23,920 --> 00:36:28,040
But you know, some of these
services sub sectors have gone

666
00:36:28,240 --> 00:36:30,280
parabolic.
Like if you didn't know the have

667
00:36:30,280 --> 00:36:33,400
the stock ticker, you'd think it
was a gold miner or a silver

668
00:36:33,400 --> 00:36:37,520
miner or something or silver
junior and not a, you know,

669
00:36:37,520 --> 00:36:39,360
chemicals company or something
like that.

670
00:36:39,360 --> 00:36:42,880
So there's been real moves in
some of them and I think there's

671
00:36:42,880 --> 00:36:44,840
big moves coming in some of
them.

672
00:36:44,840 --> 00:36:48,360
I think I think the bulk of the
move maybe has happened maybe

673
00:36:48,360 --> 00:36:51,360
not in some of the largest
services names that are sort of

674
00:36:51,360 --> 00:36:54,320
in the, you know, S&P 500 or
whatever, some of the biggest

675
00:36:54,320 --> 00:36:57,120
indexes.
And then some of the specialty

676
00:36:57,120 --> 00:37:00,040
providers I think maybe have
outrun themselves a little bit.

677
00:37:00,720 --> 00:37:02,920
But you know, some of the
drilling rig stocks, some of the

678
00:37:02,920 --> 00:37:05,160
completion companies, some of
the offshore drillers.

679
00:37:05,360 --> 00:37:08,280
I think there's a lot of upside
potential there and I'm, I'm

680
00:37:08,280 --> 00:37:11,560
really excited about it.
And I think the the specifics

681
00:37:11,560 --> 00:37:16,600
around that are generally in
services for equipment heavy

682
00:37:16,600 --> 00:37:19,840
companies, you either get to buy
them at a big discount to

683
00:37:19,840 --> 00:37:24,280
replacement cost or at a low
earnings and cash flow yield

684
00:37:24,280 --> 00:37:26,960
type multiple.
And so right now you can buy

685
00:37:26,960 --> 00:37:31,840
them actually at reasonably
cheap cash flow multiples and at

686
00:37:31,840 --> 00:37:34,000
very big discounts to
replacement cost.

687
00:37:34,280 --> 00:37:39,080
And when I saw that and did
enough work on it that I know

688
00:37:39,720 --> 00:37:42,120
maybe know more about some of
these onshore drilling rig

689
00:37:42,120 --> 00:37:44,360
companies and some of the other
ones than people that have like

690
00:37:44,440 --> 00:37:46,480
focus on it for a while.
It's just like go down the the

691
00:37:46,480 --> 00:37:49,200
rabbit hole to the NTH degree,
get to meet a lot of the

692
00:37:49,240 --> 00:37:52,000
consumers of these services and
understand what's going on.

693
00:37:52,840 --> 00:37:55,280
I think they're wildly
compelling.

694
00:37:55,280 --> 00:37:59,040
And even though my primary focus
is on upstream oil and gas, I

695
00:37:59,040 --> 00:38:01,320
actually think some of these
services names, some of the

696
00:38:01,320 --> 00:38:05,600
smaller ones that haven't run as
much are just phenomenally

697
00:38:05,600 --> 00:38:07,600
compelling.
And I think you're seeing that

698
00:38:07,600 --> 00:38:11,240
in the the ETFs where, you know,
the OIHETF or whatever is

699
00:38:11,240 --> 00:38:14,320
starting to move.
And I think I think some of

700
00:38:14,320 --> 00:38:17,840
these sub sectors and some of
these specific companies are

701
00:38:17,840 --> 00:38:21,080
just astonishingly cheap.
There's reasons why they're

702
00:38:21,080 --> 00:38:23,120
cheap.
And I think that those reasons

703
00:38:23,400 --> 00:38:25,280
are moving into the rearview
mirror.

704
00:38:25,280 --> 00:38:28,680
And yeah, I think that's
probably, if I could pick a

705
00:38:28,680 --> 00:38:32,080
sector, services sector is
probably my favorite here.

706
00:38:32,360 --> 00:38:35,200
Trav, we're talking about value,
good value.

707
00:38:35,520 --> 00:38:37,200
We're talking about services
companies.

708
00:38:37,200 --> 00:38:39,000
My mind just jumps to Sandvik
Ground Support.

709
00:38:39,600 --> 00:38:42,560
Sandvik ground support is a
great value because it's best in

710
00:38:42,560 --> 00:38:45,480
class ground support and they
are a service provider to the

711
00:38:45,480 --> 00:38:47,920
resource industry.
In our case though, mining

712
00:38:47,920 --> 00:38:50,360
companies, what we're talking
about with Josh, oil companies,

713
00:38:50,360 --> 00:38:53,440
but Sandvik at the forefront of
the innovation when it comes to

714
00:38:53,440 --> 00:38:55,200
ground support.
Couldn't agree more.

715
00:38:55,240 --> 00:38:58,400
Our beloved industry, right?
I'm going to tell you about two

716
00:38:58,400 --> 00:39:02,000
of their latest innovations.
Some of these are tried and

717
00:39:02,000 --> 00:39:03,600
tested and just brought to the
forefront.

718
00:39:03,600 --> 00:39:06,840
Some of these are very modern.
So the convergence monitoring

719
00:39:06,840 --> 00:39:09,840
system, mate, Chuck these in
every underground mine and you

720
00:39:09,840 --> 00:39:12,560
can go from manual testing to
automated testing.

721
00:39:12,560 --> 00:39:15,600
That is 2026 in an underground
mine you.

722
00:39:15,600 --> 00:39:16,720
Learned about this on Derek
here.

723
00:39:16,720 --> 00:39:17,920
It's LinkedIn profile didn't.
You.

724
00:39:17,920 --> 00:39:19,640
I did.
I highly recommend giving Derek

725
00:39:19,640 --> 00:39:21,160
Heard a follow on LinkedIn.
What?

726
00:39:21,160 --> 00:39:22,800
Else did you find out there?
Plates.

727
00:39:23,120 --> 00:39:27,280
Plates are the unsung hero of
ground support, much more

728
00:39:27,280 --> 00:39:29,680
advanced than a dinner plate.
We're talking about galvanized

729
00:39:29,840 --> 00:39:32,800
steel plates that you need
underground at your minds.

730
00:39:32,800 --> 00:39:35,560
We talk a lot about the cables,
the bolts, these sorts of

731
00:39:35,560 --> 00:39:37,440
things.
They they grab all the fanfare,

732
00:39:37,440 --> 00:39:38,800
mate.
But it's the plates you need.

733
00:39:39,120 --> 00:39:41,640
You want them to be strong and
you want them to endure forever

734
00:39:41,640 --> 00:39:45,040
there so that you have a
reliable and safe underground

735
00:39:45,040 --> 00:39:47,240
operation.
So get in your orders, download

736
00:39:47,240 --> 00:39:49,000
the app, or give Derek Hurt a
call today.

737
00:39:49,600 --> 00:39:52,560
Go Sandvik ground support, go
Sandvik the offshore.

738
00:39:52,600 --> 00:39:57,280
Like it's not, it's not hard to
comprehend how a lot of these, a

739
00:39:57,280 --> 00:39:59,920
lot of these service providers,
they, they benefit from a

740
00:39:59,920 --> 00:40:03,200
capital cycle of investment.
And it's, it's so easy to to

741
00:40:03,200 --> 00:40:06,520
conceptualize how, how the
earnings can explode as a

742
00:40:06,520 --> 00:40:09,720
capital investment cycle, You
know, returns with a, with a,

743
00:40:09,840 --> 00:40:11,680
with a, with a more constructive
oil price.

744
00:40:12,880 --> 00:40:15,880
Yeah, the, the mining services
names here in in Australia have

745
00:40:15,880 --> 00:40:18,640
just gone gangbusters.
And maybe we're going to see the

746
00:40:18,640 --> 00:40:22,000
same with, with these kind of
services names that, that you

747
00:40:22,000 --> 00:40:26,160
look at, Josh, if, if we there's
two other kinds of dynamics on

748
00:40:26,160 --> 00:40:30,600
the, on the valuation front, I'm
curious to know about 1 is the

749
00:40:30,600 --> 00:40:32,600
royalty companies.
I think for a lot of people who

750
00:40:32,600 --> 00:40:35,600
are new to the space, that's a,
that's a kind of go to one given

751
00:40:35,600 --> 00:40:38,520
the, the dynamics you have been
protected against costs and

752
00:40:38,520 --> 00:40:40,280
these sorts of things.
How do you see the value there

753
00:40:40,280 --> 00:40:44,480
at the moment?
So I'm pretty biased on that in

754
00:40:44,480 --> 00:40:48,920
the sense that I get to see a
lot of private oil and gas deals

755
00:40:48,920 --> 00:40:52,440
sitting here in Houston and I
get to see friends go and

756
00:40:52,440 --> 00:40:55,920
assemble these royalty and
minerals and non op portfolios

757
00:40:56,200 --> 00:41:01,040
and then vended them to public
companies at 3X or 5X or

758
00:41:01,040 --> 00:41:03,720
whatever the total cost of
assembling these portfolios.

759
00:41:04,040 --> 00:41:07,520
And then those public companies
trade at twice the value that

760
00:41:07,520 --> 00:41:10,360
they're paying for these assets.
So it's like accretion all the

761
00:41:10,360 --> 00:41:16,440
way up, but it sort of looks
more like trading sardines than

762
00:41:16,440 --> 00:41:18,520
eating sardines.
And I think the devil's in the

763
00:41:18,520 --> 00:41:21,400
details on a lot of these
specific companies in terms of

764
00:41:21,680 --> 00:41:24,720
what I would avoid.
And I don't know that I want to

765
00:41:24,720 --> 00:41:27,280
go into sort of the extreme
negatives about some of them.

766
00:41:27,280 --> 00:41:31,360
But I think just the broad
observation would be if I wanted

767
00:41:31,360 --> 00:41:34,640
to go start, let's say
Transocean, which again I have a

768
00:41:34,640 --> 00:41:38,400
beneficial exposure to and I'm
not recommending or one of these

769
00:41:38,400 --> 00:41:42,240
onshore land rig companies or
some of these specialty services

770
00:41:42,240 --> 00:41:44,760
companies.
It would be almost impossible

771
00:41:44,760 --> 00:41:48,640
even if I had a lot of access to
capital to go and create a

772
00:41:48,720 --> 00:41:52,320
viable competitor.
Some of these companies, it is

773
00:41:52,840 --> 00:41:55,200
extraordinary.
It's not easy anymore to

774
00:41:55,200 --> 00:41:58,160
assemble a replacement for some
of these publicly traded mineral

775
00:41:58,160 --> 00:42:00,640
companies.
But for my purposes, if I really

776
00:42:00,640 --> 00:42:03,920
wanted minerals exposure that
was broad, I could just go buy

777
00:42:03,920 --> 00:42:07,520
it and I could underwrite it and
I could probably buy it for 1/3

778
00:42:07,520 --> 00:42:11,200
of the cost of what most of
these publicly traded minerals

779
00:42:11,200 --> 00:42:14,200
and royalty companies trade at.
And so I don't know that that's

780
00:42:14,200 --> 00:42:16,560
true on the mining royalties
side.

781
00:42:16,800 --> 00:42:19,360
And I think people just don't
really pay too much attention to

782
00:42:19,360 --> 00:42:20,920
it.
I will say that there are a lot

783
00:42:20,920 --> 00:42:22,840
cheaper now than they were three
years ago.

784
00:42:22,840 --> 00:42:26,400
There was sort of this like
weird almost bubble in minerals

785
00:42:26,400 --> 00:42:28,560
and royalties and that sort of
popped a little.

786
00:42:28,560 --> 00:42:32,440
And now I'd say there's more of
that on the oil super majors,

787
00:42:33,600 --> 00:42:36,520
but it's still just not, you
know, if it's not at a big

788
00:42:36,520 --> 00:42:40,000
discount to replacement cost, I
don't know why I do it in the

789
00:42:40,000 --> 00:42:42,480
commodity space.
I wonder if one of the big

790
00:42:42,480 --> 00:42:45,440
differences between the mining
royalty codes and the the oil

791
00:42:45,440 --> 00:42:49,280
royalty codes, the the mining
royalty codes have have been

792
00:42:49,280 --> 00:42:53,160
tremendous outperformers.
And one of the reasons for that

793
00:42:53,160 --> 00:42:57,360
is because that they capture
mispriced optionality.

794
00:42:57,360 --> 00:43:01,840
A lot of the large, the large
perspective, you know, mines

795
00:43:01,920 --> 00:43:05,200
their reserves life minor and
they say that that it's, it's X.

796
00:43:05,200 --> 00:43:08,960
But in reality the deposit is it
can it continues.

797
00:43:08,960 --> 00:43:11,160
They find more stuff really
proximate to it and none of

798
00:43:11,160 --> 00:43:14,200
that's kind of captured in the
in the, you know, in the

799
00:43:14,200 --> 00:43:18,280
reserves case that you that the
the royalty deal is struck on.

800
00:43:18,520 --> 00:43:21,440
But that optionality can it can
be enormous in the most

801
00:43:21,440 --> 00:43:26,160
prospective deposits, there can
be 3-4, five, 10/12/20 times

802
00:43:26,440 --> 00:43:29,360
more reserves that were that
were ever reported.

803
00:43:29,360 --> 00:43:31,960
So and the royalty companies are
a wonderful mechanism of

804
00:43:31,960 --> 00:43:33,480
capturing that and not getting
the cost.

805
00:43:33,480 --> 00:43:35,560
So they've outperformed, but I
wonder if in the in the oil

806
00:43:35,560 --> 00:43:38,840
world, there's there's a much
more kind of concrete

807
00:43:38,840 --> 00:43:42,800
understanding of what the the
geological reserves are and then

808
00:43:42,800 --> 00:43:45,160
that depletes over time.
And it's not like this new

809
00:43:45,160 --> 00:43:47,320
proximate discovery that's
that's huge.

810
00:43:49,280 --> 00:43:51,400
So, so I don't want to
miscommunicate.

811
00:43:51,400 --> 00:43:54,480
I love royalties.
I think they're fantastic and I

812
00:43:54,480 --> 00:43:58,160
actually think they're, it is
maybe a case even more to own

813
00:43:58,520 --> 00:44:02,560
oil royalties or oil and gas
shale royalties than owning

814
00:44:02,760 --> 00:44:04,800
mining royalties.
Because the technology

815
00:44:04,800 --> 00:44:08,920
improvements and improve
recovery factors and then zones

816
00:44:08,920 --> 00:44:12,960
going becoming more economic as
prices rise over time or you

817
00:44:12,960 --> 00:44:16,680
know, technology improves may
actually be better in some

818
00:44:16,680 --> 00:44:18,200
areas.
I mean, the, the first thing

819
00:44:18,200 --> 00:44:22,320
that came into mind was a friend
who bought land for, let's say,

820
00:44:22,480 --> 00:44:25,360
I think it was like $1000 an
acre and it wasn't even, I think

821
00:44:25,360 --> 00:44:27,800
it wasn't even a royalty.
I think it was just non OP, you

822
00:44:27,800 --> 00:44:31,360
know, just picked up a few acres
as a part of a deal and resold

823
00:44:31,360 --> 00:44:35,040
them for something like 100
times that recently, despite the

824
00:44:35,040 --> 00:44:38,040
oil price being, I think it was
at like 55 or something where he

825
00:44:38,040 --> 00:44:42,920
sold there just a few acres and
you know, not, you know, earth

826
00:44:42,920 --> 00:44:44,640
shattering.
But hey, you know, it doesn't

827
00:44:44,640 --> 00:44:48,520
take very many acres to sell at
that price to pay for a lot of

828
00:44:48,520 --> 00:44:53,560
mistakes and to, you know, have
a lot of money in your pocket.

829
00:44:54,080 --> 00:44:57,880
So I don't know, I think I think
it's not, it's not an

830
00:44:57,880 --> 00:44:59,920
observation that these things
aren't good.

831
00:44:59,920 --> 00:45:03,040
It's more of an observation of,
hey, if I want to be in oil and

832
00:45:03,040 --> 00:45:06,920
gas for, let's say, inflation
protection and for cash flow and

833
00:45:06,920 --> 00:45:10,600
distributions, does it really
make sense to own something at a

834
00:45:11,040 --> 00:45:15,360
3% cash flow yield or 2% cash
flow yield, especially if I can

835
00:45:15,360 --> 00:45:19,240
go buy minerals at, let's say,
an 8% yield or 10% yield.

836
00:45:19,240 --> 00:45:22,120
And yeah, it's smaller, but in
many ways that's actually better

837
00:45:22,120 --> 00:45:25,000
because I could actually know it
more and I can choose to buy

838
00:45:25,000 --> 00:45:27,600
those minerals in a place where
there's, let's say, 10

839
00:45:27,600 --> 00:45:30,760
potentially economic zones
versus a place where there's,

840
00:45:30,800 --> 00:45:33,800
let's say, one or two
potentially economic zones.

841
00:45:33,800 --> 00:45:38,680
So I think there's a lot of
specific diligence and sort of

842
00:45:38,680 --> 00:45:41,840
specific variation and potential
value, which I think is actually

843
00:45:41,840 --> 00:45:45,360
quite similar on the mining
royalties and stream side where,

844
00:45:45,560 --> 00:45:48,000
you know, it really matters
which mine you're in or so on,

845
00:45:48,000 --> 00:45:51,000
on those.
So I, I, I didn't want to come

846
00:45:51,000 --> 00:45:54,040
off at all as a negative.
I mean, similar to the oil super

847
00:45:54,040 --> 00:45:56,120
majors, I think it's fantastic
to be integrated.

848
00:45:56,120 --> 00:46:00,720
I think it really, if you do it
well, you can really benefit

849
00:46:00,720 --> 00:46:03,560
from that integration.
I just don't like paying a lot

850
00:46:03,560 --> 00:46:06,560
for it and I don't like it when
they're actively destroying

851
00:46:06,560 --> 00:46:10,520
value, bidding up assets that
are non core to their business

852
00:46:10,520 --> 00:46:14,320
model and having to pay, you
know, again, in a sort of like 3

853
00:46:14,320 --> 00:46:18,040
or 4% free cash flow yield type
price in order to buy them.

854
00:46:18,520 --> 00:46:21,080
You want that, that cheap or
free optionality that, that

855
00:46:21,080 --> 00:46:24,600
totally stacks up and and makes
sense You're your perspective as

856
00:46:24,600 --> 00:46:28,360
well on three, four, 5% free
cash flow yields versus higher

857
00:46:28,560 --> 00:46:31,440
actually brings me to, to the
last question I had on, on

858
00:46:31,440 --> 00:46:34,400
valuation as well.
When we've kind of screened and

859
00:46:34,400 --> 00:46:38,000
looked around the world at some
of these energy names, a lot of

860
00:46:38,000 --> 00:46:41,600
the ones that are presenting
kind of 10% free cash flow

861
00:46:41,600 --> 00:46:44,800
yields and, and even higher and,
and in some cases even on a

862
00:46:44,800 --> 00:46:48,640
dividend yield basis.
It's not in the US.

863
00:46:48,640 --> 00:46:53,240
It's on weirder and more
eclectic exchanges like in, in

864
00:46:53,240 --> 00:46:56,440
Norway or in on the LSA and
these sorts of parts of the

865
00:46:56,440 --> 00:46:58,720
world.
How do you see the value

866
00:46:59,320 --> 00:47:02,720
divergent across different
markets and across different

867
00:47:02,720 --> 00:47:07,240
parts of the world?
So the last category we didn't

868
00:47:07,240 --> 00:47:11,200
talk about were the small cap,
oil and gas producers and large

869
00:47:11,200 --> 00:47:12,360
cap.
And so the large caps are I

870
00:47:12,360 --> 00:47:15,080
think a little more expensive.
The smaller caps are quite cheap

871
00:47:15,080 --> 00:47:17,240
and I really like them.
They're probably my second

872
00:47:17,240 --> 00:47:21,440
favorite category here, a second
to some of the smaller service

873
00:47:21,440 --> 00:47:24,640
companies.
And I mean, we own, I've written

874
00:47:24,640 --> 00:47:28,400
about from a newsletter I own
for my fund, a number of

875
00:47:28,400 --> 00:47:31,800
producers at double digit free
cash flow yields here in the US,

876
00:47:32,120 --> 00:47:35,400
in Canada and various other
jurisdictions.

877
00:47:36,520 --> 00:47:41,360
I'm pretty worried about the
risk of having exposure to

878
00:47:41,520 --> 00:47:45,440
various European countries where
a number of them have imposed

879
00:47:45,520 --> 00:47:51,160
drastic taxes and other sorts of
regulations and, you know,

880
00:47:51,400 --> 00:47:54,440
exposure even in countries in
Europe that have been less

881
00:47:54,440 --> 00:47:58,160
extreme.
The political leanings in many

882
00:47:58,160 --> 00:48:01,880
of these countries are such that
it would not be, it might be a

883
00:48:01,880 --> 00:48:04,560
surprise to the, let's say
investors and industry

884
00:48:04,560 --> 00:48:08,840
participants in XYZ oil rich
country in Europe that they

885
00:48:08,840 --> 00:48:13,680
would impose a large additional
tax or tariff or whatever on

886
00:48:13,680 --> 00:48:17,680
their, you know, whether it's
CO2 emissions or, you know,

887
00:48:18,480 --> 00:48:20,960
whether it's a additional
production tax or so on.

888
00:48:21,600 --> 00:48:24,960
It might be a shock to those
folks that that would happen,

889
00:48:24,960 --> 00:48:27,600
but I would think that should be
the baseline, right?

890
00:48:27,600 --> 00:48:31,000
That these people that don't
like the thing, say they don't

891
00:48:31,000 --> 00:48:33,160
like the thing, but make money
from the thing, would want to

892
00:48:33,160 --> 00:48:35,840
make more money from the thing
from a government perspective

893
00:48:35,840 --> 00:48:40,080
for their social programs and
have these evil oil producers

894
00:48:40,360 --> 00:48:43,840
that they're making all their
money from keep a little less of

895
00:48:43,840 --> 00:48:46,480
their money.
So I see a lot of risk in some

896
00:48:46,480 --> 00:48:48,880
of those jurisdictions that
others don't share.

897
00:48:48,880 --> 00:48:53,280
And I hope I'm wrong, but I
just, I have trouble getting

898
00:48:53,280 --> 00:48:56,560
comfortable with investing in
places where they hate the

899
00:48:56,560 --> 00:48:59,080
thing.
I mean, frankly, like Canada is

900
00:48:59,080 --> 00:49:02,520
hard enough for me, but they
just have some structural issues

901
00:49:02,520 --> 00:49:05,480
in terms of punishing these oil
companies too much where some of

902
00:49:05,480 --> 00:49:08,360
these European countries don't
have those those issues with,

903
00:49:08,880 --> 00:49:12,480
with doing that.
So, you know, I, I actually see

904
00:49:12,520 --> 00:49:15,720
a lot of benefit to investing
here in the US to investing in

905
00:49:15,720 --> 00:49:20,120
Canada, to investing in certain,
let's say South American or West

906
00:49:20,120 --> 00:49:23,760
African or various other
countries that from a

907
00:49:24,480 --> 00:49:26,560
jurisdiction perspective, you
know, they might be a little

908
00:49:26,560 --> 00:49:30,640
dangerous to let's say go visit
on vacation, at least parts of

909
00:49:30,640 --> 00:49:33,320
them.
But from a jurisdiction and risk

910
00:49:33,320 --> 00:49:38,120
perspective, they seem very,
very unlikely to dramatically

911
00:49:38,120 --> 00:49:41,600
change the fiscal deal
essentially on the production.

912
00:49:41,880 --> 00:49:49,040
So that's what I'm looking for.
Looking ahead, Josh, what do you

913
00:49:49,040 --> 00:49:52,280
think your your, your
reflections will be 12 months

914
00:49:52,280 --> 00:49:54,480
from now?
How do you expect that the next

915
00:49:54,480 --> 00:50:00,360
12 months to look in oil?
So I've been very bad at short

916
00:50:00,360 --> 00:50:03,600
term stuff.
I used to, I actually I bought

917
00:50:03,600 --> 00:50:05,680
this little crystal ball and I
like to like show it.

918
00:50:06,160 --> 00:50:07,800
My short term crystal ball is
broken.

919
00:50:08,920 --> 00:50:12,960
And you know, when I look back,
we launched my investment firm

920
00:50:12,960 --> 00:50:17,680
about 10 1/2 years ago and I
think we're up something like

921
00:50:17,680 --> 00:50:23,720
100% net versus the small cap
oil producer index is down 65%

922
00:50:23,720 --> 00:50:28,240
or so net, you know, via like
PSCE, this small cap ETF, even

923
00:50:28,240 --> 00:50:32,680
the large cap ETF for energy I
think is up like 30 or 40% from

924
00:50:32,680 --> 00:50:35,160
where we launched.
So we've done really well over a

925
00:50:35,160 --> 00:50:39,360
decade plus, but there have been
many individual, let's say 6

926
00:50:39,360 --> 00:50:42,280
month to 18 month periods where
we've materially underperformed.

927
00:50:42,560 --> 00:50:49,080
And so I would not rely too
heavily on any of my short term

928
00:50:49,080 --> 00:50:50,720
observations.
I try to come up with them.

929
00:50:50,720 --> 00:50:54,480
I try to think through things as
carefully as I can and have as

930
00:50:54,480 --> 00:50:57,800
accurate forecast as I can.
And I think there's just so much

931
00:50:58,160 --> 00:51:01,560
uncertainty in the oil and gas
markets that they just sort of

932
00:51:01,560 --> 00:51:05,720
embarrass everyone over time.
And so when I think about what

933
00:51:05,880 --> 00:51:08,760
I'll be looking back on, I'm
sure I'll be like, hey, how

934
00:51:08,760 --> 00:51:13,120
could I have gotten XY or Z, you
know, price prediction wrong or

935
00:51:13,120 --> 00:51:16,960
missed this local price
differential blowout or

936
00:51:16,960 --> 00:51:21,120
tightening or this big discovery
or, you know, this discovery

937
00:51:21,120 --> 00:51:24,240
that people were excited about,
you know, turning out to be not

938
00:51:24,240 --> 00:51:26,920
there.
And my goal is to just try to

939
00:51:26,920 --> 00:51:28,520
catch as much of that as
possible.

940
00:51:28,520 --> 00:51:30,920
But those are the sorts of
categories where I'd expect,

941
00:51:30,920 --> 00:51:34,520
which is basically everything to
expect to be wrong on.

942
00:51:34,520 --> 00:51:37,000
And therefore, starting with
the, you know, the Charlie

943
00:51:37,000 --> 00:51:40,520
Munger style inverting, just
start with like, hey, OK, here's

944
00:51:40,520 --> 00:51:43,920
what I think here's let me go
find the 10 reasons why it might

945
00:51:43,920 --> 00:51:47,000
be wrong and then try to kill as
many of those as possible.

946
00:51:47,000 --> 00:51:49,920
And if I can, then maybe I'll
talk about it and express it

947
00:51:49,920 --> 00:51:55,080
financially.
And if not, then then not.

948
00:51:55,080 --> 00:51:58,080
And I guess just very
specifically the one thing that

949
00:51:58,080 --> 00:52:01,760
I think matters maybe more for
oil markets than any other thing

950
00:52:01,760 --> 00:52:06,320
right now beyond sort of just
the basic demand question of,

951
00:52:06,320 --> 00:52:09,560
hey, does demand grew up by a
million barrels a day or not, is

952
00:52:09,640 --> 00:52:15,280
if the US bombs Iran, and I know
it sounds sort of dramatic, but

953
00:52:15,440 --> 00:52:19,680
the US president did promise
repeatedly to intervene in these

954
00:52:19,720 --> 00:52:23,440
protests in Iran.
And people went out and died.

955
00:52:23,520 --> 00:52:28,120
And the US has been building up
equipment and military equipment

956
00:52:28,120 --> 00:52:30,920
in the area.
And so, you know, I think it's

957
00:52:30,920 --> 00:52:33,880
not too much of A leap to say
that that might happen.

958
00:52:33,880 --> 00:52:38,040
And if it does happen, I think
it could spiral and lead to a

959
00:52:38,480 --> 00:52:41,200
very different, if we were
talking at this time next year,

960
00:52:41,560 --> 00:52:45,440
I'd say that's probably the
biggest single difference in

961
00:52:45,440 --> 00:52:48,120
terms of what the oil market
will look like in a year is if

962
00:52:48,440 --> 00:52:52,560
the US gets proactively
physically involved more than

963
00:52:52,560 --> 00:52:55,960
just what we did in June of last
year where we bombed one thing

964
00:52:55,960 --> 00:52:58,640
or a couple things, declared
victory and and went away.

965
00:52:58,920 --> 00:53:02,200
And so I think that's really
that's why the geopolitical risk

966
00:53:02,200 --> 00:53:06,120
is sort of getting priced in a
little despite what people are

967
00:53:06,120 --> 00:53:08,320
worried about from a short term
fundamental perspective.

968
00:53:08,320 --> 00:53:12,240
And I think that's probably the
big question and I think I think

969
00:53:12,240 --> 00:53:15,560
the US does it.
I wasn't, you know, I would

970
00:53:15,560 --> 00:53:19,040
definitely not say for sure, but
you know, I'd say, let's say 60%

971
00:53:19,040 --> 00:53:22,760
chance that we do it.
And I think the world might look

972
00:53:22,800 --> 00:53:25,760
very different, especially from
an oil market perspective a year

973
00:53:25,760 --> 00:53:29,840
from now on the back of that.
That's a that's a fascinating

974
00:53:29,840 --> 00:53:32,320
perspective and, and something
for, for everyone to kind of

975
00:53:32,320 --> 00:53:35,000
think through.
Josh, appreciate you, you making

976
00:53:35,080 --> 00:53:37,680
your time available for us and,
and sharing your perspectives.

977
00:53:37,680 --> 00:53:40,560
I think you've, you've helped us
get up to speed on, on energy

978
00:53:40,560 --> 00:53:43,080
on, on oil and what the
landscape looks like.

979
00:53:43,080 --> 00:53:44,160
And we're, and we're grateful
for that.

980
00:53:44,160 --> 00:53:45,480
So thank you.
Yeah, thanks.

981
00:53:45,640 --> 00:53:49,240
Thanks for having me on.
You've had a great set of folks

982
00:53:49,240 --> 00:53:51,960
on here, so I appreciate getting
included in that.

983
00:53:52,040 --> 00:53:54,320
A massive thank you to our
fantastic partners Sand at

984
00:53:54,320 --> 00:53:57,880
Ground Support Interlinks,
exceed capital at the top of the

985
00:53:57,880 --> 00:54:00,080
show and focus the platform by
market tech.

986
00:54:00,080 --> 00:54:01,880
Check them out.
Go Australia.

987
00:54:03,120 --> 00:54:06,720
Now remember, I'm an idiot.
JD is an idiot if you thought

988
00:54:06,720 --> 00:54:08,960
any of this was anything other
than entertainment.

989
00:54:09,400 --> 00:54:11,520
You're an idiot and you need to
read our disclaimer.