176 - Will oil be higher for longer? | Rhett Bennett of Black Mountain Co.

Energy Week

Wall Street projects a “higher for longer” era for oil prices
ttps://www.worldoil.com/news/2021/10/22/wall-street-projects-a-higher-for-longer-era-for-oil-prices
- An era has to be long enough to change how the industry functions
- Citigroup Inc. said in a report this month that crude below $30 and above $60 looks unsustainable in the long-term.
- Ed Morse thinks prolonged over $50 will bring 7 million bpd on the market
Nearly half of American companies say they are short on skilled workers
https://www.cnn.com/2021/10/25/economy/business-conditions-worker-shortage/index.html
- will "labor shortage" (companies' inability to hire workers) create permanently elevated business costs?
Solar and Wind Force Poverty on Africa
https://www.wsj.com/articles/solar-wind-force-poverty-on-africa-climate-change-uganda-11635092219
- Africa can’t sacrifice its future prosperity for Western climate goals
- Neo-imperialism to impose a narrative that Africa can't access fossil fuels and must be consigned to solar/wind which isn't nearly as effective at providing electricity.
- OPEC is sympathetic to this message. Will Africa save OPEC? Can OPEC save Africa?
Tesla shares rise after Hertz says it will buy 100,000 electric vehicles
https://www.cnbc.com/2021/10/25/tesla-shares-up-on-news-hertz-will-purchase-100000-electric-vehicles.html
- Good idea for Hertz because Teslas will be a big draw for people who want to drive Teslas on vacation.
Ahead of COP26, Saudi Arabia Resists Calls to Cut Oil Investment
https://www.wsj.com/articles/ahead-of-cop26-saudi-arabia-resists-calls-to-cut-oil-investment-11634911150
Special Guest Rhett Bennett of Black Mountain Co.
https://www.blackmountainoilandgas.com
- Drilling situation in the US: real issues from labor situation. Labor is always a bit of an issue in Permian, but also in Eagle Ford. On the drilling side as well. Supply chain issues, also exacerbated for oil industry because of severity of downturn.
- metals aren't available to implement transition in the way needed for transition
- Sees oil over $100, higher natural gas prices this winter
- Price increases will drive activity higher. Private companies are drilling a lot, public companies more constrained.
- "If you are private, it's a beautiful scenario." Inputs on the cost side of the ledger haven't risen nearly as much as the returns side of the ledger.
- Haynesville wells pay for themselves in 90 days - but they are quite dry, Permian wells are more heavily oil weighted.
- 2022 budgets: lots of E&Ps will want to increase drilling activity 20-30% and will want budget increases of similar amount. But will also have inflationary pressures that will hit production targets and so many will fall short.
- E&Ps did better consolidating during downturn that service companies so there's still a lot of competition in service sector
- Consequences of capital starvation. Shale is a treadmill. If you hop off, looking at 50-60% decline rate.
- Underground carbon sequestration (CCUS) - will it be economical without legislation on carbon tax in the US? CCUS in Australia - lots of capacity for sequestration in Australia.
- Lots of countries don't have the right geology to inject and store carbon. Potential for this to become an import/export industry.
- Sees battery tech as competitive with ICE engines. Problem is materials and minerals.
- Metals and mining has had capital starvation for decades now. Average mine takes 7 years to go from discovery to production.
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