Blog - Page 2 of 6 - 1keystone.com

Conflict with Financial Goals — Another Installment — Is Big Oil Doing Enough?

May 11, 2023 Article by Jeffrey Price

Tuesday’s Wall Street Journal (May 9) lead story hit the nail on the head (https://www.wsj.com/articles/big-oil-has-150-billion-in-cash-and-investors-want-a-share-b5cdea35?st=kmn8twtikurvdoj&reflink=desktopwebshare_permalink). This story, rehashing the breathtaking profits generated by “Big Oil” in ’22 and now 1Q23, zeroes in on why aren’t oil companies spending more to boost daily production. Here is a critical excerpt:

“President Biden has called on producers to ramp up output in a bid to lower prices at the pump. “These balance sheets make clear that there is nothing stopping oil companies from boosting production except their own decision to pad wealthy shareholder pockets and then sit on whatever is left,” White House Assistant Press Secretary Abdullah Hasan said.

But investors have favored financial discipline, and executives are increasingly compensated based on shareholder returns. It marks an about-face in the U.S. oil patch, where companies for years chased production growth by tapping gushers of crude in regions such as the Permian Basin in Texas and Bakken shale in North Dakota.”

The basic point is that Boards of Directors have recalibrated their priorities to build value through shareholder distributions which means an abandonment of the historic mantra that has driven this industry for decades, “Build value through the drill bit”. That’s a depressing thought for companies positioned to service a vibrant and growing O&G industry. And that’s what we offer – Pecos industrial property to buy so that the critical service & supply sector can be domiciled in modern facilities. And, Reeves County and the greater Delaware Basin are the epicenter of America’s push to halt the invasion by the anti-democratic USSR (ooops! Made that mistake again!). As much as the oil industry wants to complain about the Democratic-led federal government, it is strange times to see the liberal-leaning government jawboning for more oil and the conservative-leaning oil industry resisting. What an upside-down world!

We urge you to check out this article through the link above (you do not need a WSJ subscription to view this).

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.

Dirty Secret: Green Energy “Panacea” Revisited – Implications of Raw Materials Requirements for EVs

May 9, 2023 Article by Jeffrey Price

The panacea that is ascribed to a world that has migrated away from gas-powered automotive transportation to EVs has a dirty ~~little~~ big secret. In a nutshell, the disruptions to the environment and societies associated with magnitudinal increases in consumption of key elements (e.g., lithium, cobalt, and copper) are going to be colossal. Here’s another in an intensifying trickle – actually a flow – of articles about adverse repercussions of the transition to electrified personal transport, this one from the Wall Street Journal https://www.wsj.com/articles/net-zero-will-mean-a-mining-boom-electric-cars-minerals-oil-fossil-fuels-climate-change-policy-cb8d5137?st=wsk1xit42bvh24y&reflink=desktopwebshare_permalink. Places like the Congo, Bolivia, Argentina, and New Guinea are going to experience huge impacts – good and bad.

Add to those concerns this fact: Much of these raw materials when they are refined flow through China. The global strategic implications are colossal. Are any of the “leaders” clamoring for EVs giving thought about that “detail” while stampeding us to drive an EV? In my mind – as I witness the nasty Ukrainian War – it’s a pretty dumb strategic idea to shift our purchases of oil from ourselves to lithium batteries from Beijing. Russia is ill-equipped to win the Ukrainian War in no small part because the world is not tethered to its oil & gas. China is very well-endowed to prevail in a Taiwan conflict. Hello!? Wake up!

That’s why the Permian is so geopolitically strategic! It’s the reason the Russian oil ain’t so critical. In wading through this minefield of conflicting energy policies, we at First Keystone Pecos Industrial Park remain committed to providing infrastructure to support the U.S. domestic oil & gas industry by offering industrial land for sale in Pecos, Texas. We are part of the solution…not part of the problem!

In closing, we would suggest some due diligence be conducted by the EV advocates who earnestly want to cut down on carbon emissions by devoting some of their attention to the unintended consequences of their efforts.

Fact Check: What is the Real Policy of the Biden Administration Towards Fossil Fuels?

May 5, 2023 Article by Jeffrey Price

So many disparaging remarks are tossed around in casual conversations throughout the Permian Basin about the “terrible” policies of “what the Biden Administration does to” the oil & gas industry. Yet, with all the angst and complaining, it is difficult to really put one’s finger on a set of tangible policies and regulations that have hurt the industry. Indeed, an argument can be made that the Administration is methodically backing America’s fossil fuel industry as part of a grander geopolitical strategy in not only fighting a war in Eastern Europe, but in workibg to contain advances of autocratic regimes. For example, take a look at this article https://www.nytimes.com/2023/04/06/climate/oil-gas-drilling-investment-worldwide-willow.html?searchResultPosition=9 published by the New York Times on April 6, 2023 which lays out concrete steps taken by the Biden Administration that are part of hydrocarbon-friendly policies. This article is in contrast to those widespread disparagements freely aimed at “the feds”. Sure, the government is cracking down on methane emissions, but that’s the equivalent of regulating discharges of untreated sewage. One would hope they’re regulated! Isn’t it incongruous that Biden is jawboning the industry to pump more oil? And, it’s funny – but it’s not – that the left-wing of the Democratic Party criticizes him, too! Isn’t it funny – but it’s not – that many of the U.S.-flag leading producers are hanging back and curtailing year-over-year growth? What is it about this picture that’s backwards?

This is why the Permian – an outpost in the U.S. with less than one million residents – is arguably one of the Top 5 strategic sites in U.S. territory! On the opposite end of the size continuum, First Keystone is a tiny contributor that helps to lay the groundwork to strengthen American’s oil & gas industry – we do it by offering to industrial buildings for lease in Pecos, TX. We’re in a geopolitically crucial region!

The Biden Administration also has plenty of overt inducements designed to speed up America’s transition to “green energy”, but those moves do not cancel out these near-term policies that are meant to spur the U.S. forward to The World’s #1 position as an oil producer. They demonstrate a real politik approach to oil taken by the center-leaning Biden Administration.

Preventing Disastrous Energy Shortages — Another Installment – Is Big Oil Doing Enough?

April 6, 2023 Article by Jeffrey Price

A recent Economist piece covering the jaw-dropping profits earned by the Super-Major Oil Companies shines an unflattering light on this industry’s approach to both supporting independence and building shareholder value (https://econ.st/40LXXmx). In a nutshell, the 5 Super Majors earned $150 billion in profits last year with over half of that amount being used to buy back stock. Just what does a “buy-back” mean? It means that the highest and best use for cash in these companies is to reduce the float of stock. In other words, plowing profits back into the business pencils out as an inferior priority. And, this is what companies in declining industries do. It’s what Blockbuster Video did. Ditto Gannett (newspapers), Sears & Roebuck, and more. Those are classic financial management behaviors in a declining industry.

Yet, unlike all those industries, the oil industry is wildly profitable. But evidently, management doesn’t see its core business as an attractive avenue for deploying cash. In a nutshell, they are setting the course toward shrinking the industry. There are, however, smaller & more nimble E&Ps who are growing. They are at the heart of the surge in the rig counts in the Reeves/Delaware sectors.

We at First Keystone aim to support all those companies, big and small, who are investing capital into the greater Delaware Basin and we are accommodating that growth by offering for sale or lease industrial buildings located in Pecos, Texas.

Is Big Oil Doing Enough? — A Shining Example of a “Patriotic” Drilling Program

March 2, 2023 Article by Jeffrey Price

Investing in increased oil & gas production should be a national goal as part of the increasingly intense war raging across much of Ukraine. A thrust of that war effort is to replace plentiful crude oil and natural gas coming from Russia. Our “friends” in Saudi Arabia are conspicuously sitting on their hands. Our enemies (e.g., Iran) are gleeful.

The world’s swing producer – that would be the Permian Basin – can absolutely move the needle by ramping up. We have opined already on the CapEx policies of Big Oil, and reiterate our disappointment. However, there is one conspicuous exemplar that is “stepping up”, and that would be Continental Resources. An advertisement that this now-private company placed on the back cover of Oil & Gas Investor speaks for itself – we applaud Harold Hamm’s patriotic stance in this time of America’s biggest challenge since the Korean War. In fact, we support this type of expansion effort by leasing industrial/warehouse facilities in Pecos, Texas.

Like Continental, we at First Keystone are supporting the war effort: We offer high-quality industrial buildings for sale or lease in Reeves County, Texas.

In closing, it is most interesting to note the direction taken by Harold Hamm which diverges significantly from that charted by the Boards of Directors and Senior Management of big publicly-traded oil companies. Back in 1942, shortly after Pearl Harbor, big industry in the U.S. became laser-focused on the war effort – it was that commitment that made possible the decisive U.S.-led defeat of Axis powers. We commend Harold Hamm and Continental for not forgetting that 80-year-old historic lesson.

Managing the Conflict Between “Going Green” and Preventing Disastrous Energy Shortages – Drill, Maybe, Drill

February 23, 2023 Article by Jeffrey Price

Political polarization which seems to be wafting across many industries has certainly not spared the oil & gas sector. Too often, we have heard rank-and-file oil executives rant about the Biden Administration and its onerous policies “harming” the domestic oil & gas industry. Let’s do a quick fact-check! It turns out that the Biden Administration has issued the same number of drilling permits (to date) as did the Trump Administration as reported in this article in The Economist recently. Surprised? The article goes on to point out that leasing is down, but as best as any educated observer can see, the industry has plenty of drill sites to develop for the intermediate future. Directing ire at the Democratic administration over leasing has little or nothing to do with today’s urgent challenges. Another key takeaway from this fact-check is that characterization of Biden as being in the back pocket of left-wing Democrats (or “socialists”) couldn’t be more inaccurate.

We at First Keystone support responsible energy development coming from many different sectors. Most importantly, our own contribution is to build high-quality warehouses for lease in Pecos, Texas, so that our world-class service companies can support the best oil & gas companies in the world right here in the Permian Basin.

In fact, mainstream Democrats understand that fossil fuels are a necessary component of a comprehensive – and rational – energy policy. Biden, who is doing a superlative job of leading democracies to stand up to autocracies, knows that plentiful oil & gas is a strategic weapon. He is not wandering into any blind-alley of “renewables”.

Increasing Government Activism in the Oil & Gas Sector

February 5, 2023 Article by Jeffrey Price

Needless to say, the established global patterns in energy production, transport, refining, and consumption were severely disrupted at the outbreak of the Ukrainian war one year ago. As that war has played out, course corrections of increasing severity due to embargos, sanctions, sabotage, and bottlenecks have emerged. Thus, traditional customers for Russian oil and gas have had to look for new sources or alternative ways to accomplish their requirements. Through all this, new consumers are emerging for Russian oil & gas. Ditto American NG! All in all, patterns are changing radically.

An article from the January 12^th Wall Street Journal entitled “Why Governments Are Pushing Deeper Into Energy Markets” (https://www.wsj.com/articles/energy-markets-governments-security-11673450650?st=isopbo266urv4h9&reflink=desktopwebshare_permalink) is a good read if you care to get down into the weeds of public policy as it pertains to energy – which has expanded as a result of this war.

The war has prompted many governments, including the U.S., to become much more pro-active in domestic and international markets. For example, the United States has chosen to draw down its Strategic Petroleum Reserve (SPR) by 180 million barrels – that’s a big number to replace! That draw-down had the effect of softening upward pricing pressures which naturally helped to dampen the severity of inflationary spikes that peaked in 3Q22. We at First Keystone remain focused on delivering high-quality industrial buildings for sale in Pecos, Texas in order to enable the American oil & gas industry to solidify its strategic position as THE worldwide leader in energy.

Thinking ahead, will the U.S. government really lower the barriers to permitting much-needed NG pipelines? Expediting construction of pipeline infrastructure would be a huge factor in weaning Europe off of Russian gas. An “all-hands-on-deck” approach to the Ukraine War calls for this! Other governments are also expanding their energy activism. For example, Germany outright nationalized several gigantic natural gas distribution companies! The Netherlands is giving consideration to reinvigorating its famous Gronigen natural gas field which has been virtually shut down over concerns of seismic activity. These forces will undoubtedly impact where oil & gas prices will be trending this year and probably next. Often, the best intentions can result in unexpected consequences as was proven in the 1970s. The quasi-embargo placed on the Russian crude oil is certainly among the most audacious moves. In contrast, check out our recent blog posts on the reticence of many U.S.-based oil & gas companies to support the war effort.

An Inconvenient Truth

January 26, 2023 Article by Jeffrey Price

The Economist published a fascinating article, An Inconvenient Truth, on the worldwide crusade to contain global warming at a level of no more than 1.5°C (compared to pre-industrial averages) (https://www.economist.com/interactive/briefing/2022/11/05/the-world-is-going-to-miss-the-totemic-1-5c-climate-target). Indeed, this magic number has often been portrayed as something akin to a gigantic cliff. The Economist article quickly points out that this number is not a “cliff”; more importantly, the article points out that there is actually a gradual degradation in climate stability as the world creeps up toward the 1.5°C level and beyond. It continues on to point out that worldwide warming very well could overshoot that threshold, but be brought back by carbon containment and sequestration – pretty interesting stuff. Notably, the report points out that the 1.5°C line of demarcation is purely arbitrary, and indeed, that line was based in part on emotion and politics – once again, interesting.

Finally, the article points out several more inconvenient truths that fossil fuels have a role to play as does nuclear. This article should be mandatory reading for all – both left-wingers and dyed-in-the-wool global warming deniers would each gain an improved grasp of The Big Picture. Indeed, if oil and gas leaders acknowledged what is going on, that act would be a giant step towards rehabilitating the unwarranted villainous image of a vital industry.

In wading through this minefield of conflicting politics, we at First Keystone Pecos Industrial Park remain committed to providing infrastructure to support the U.S. domestic oil & gas industry by offering industrial land for sale in Pecos. It’s part of the solution…not part of the problem!

Oil Prices Are Likely to Stay Steady This Year…With a Couple of Big Ifs

January 17, 2023 Article by Jeffrey Price

Most everyone asks this question: What’s the price of oil going to be? Indeed, there is an avalanche of articles that purport to cover this topic, but this article from the WSJ on January 16^th was one of the best renditions of what “the market” will look like this year – https://www.wsj.com/articles/oil-prices-likely-stay-steady-this-year-11673555621. We recommend especially careful reading of the section on U.S. output. It provides statistical back-up to the points we have been making on this Blog for many months now that the U.S. shale industry has lagged in responding to the worldwide geopolitical situation and to the market itself. In fact, during the course of 2022, the U.S. shale sector came up well short of the EIA forecast for U.S. growth. And the reasons are exactly what we have been bemoaning: Senior management is fixated on shareholder payouts. In contrast, First Keystone Pecos Industrial Park continues to do its small part to support the “war effort” by constructing new warehouses for lease in the Delaware Basin that will support light industrial activities necessary for the oil & gas industry to function competitively.

It is really a shame that an industry that has a predilection to wrapping itself in the flag seems to be oblivious to the tragic situation going on in Eastern Europe. If they participated in a genuine wartime national effort, as was the case in the early 1940s, this industry would be galvanized into action instead of congratulating itself on record shareholder payouts. And the financial tragedy of their approach is that with Russian oil production appreciably reduced, any kind of upward production would translate into windfall profits for the industry. Anyway, we could go on and on, but this article is a must read!

Crack in the Dike at OPEC

January 10, 2023 Article by Jeffrey Price

No less an authority than Daniel Yergen has weighed in on the attempt by western democracies to force upon the Russians a bifurcated crude oil market. He did it via an Op-Ed piece in the Wall Street Journal published on December 26, 2022 (https://www.wsj.com/articles/putin-cant-count-on-the-global-oil-market-price-cap-revenue-production-cut-friedman-biden-eu-russia-energy-11672065849?reflink=desktopwebshare_permalink). It appears that the west has initially gained modest success in forcing the Russians to endure prices that are running roughly $15-$20 per barrel less than Brent Crude. This is not a massive discount, but it is an involuntary arrangement which is unprecedented price control. De facto it undermines OPEC’s power. Recently published statistics indicate the Russians have had to cut back production by roughly 2MM BOPD. This shift – thought to be dubious – is, at least initially, working.

What Yergen did not go into is the direction of the overall crude oil market in the next two or three years. That’s the more interesting issue because the fundamental signs are that new supplies are not being brought on fast enough to keep up with demand. That’s due in large part to lackluster CapEx plans across the U.S.-based shale producers; although Exxon is upgrading as it reports plans to increase output by 20% in the next few years. (Chevron has a similar story, too.) Demand, however, is The Wild Card because China’s abrupt reversal on Covid lockdowns is creating economic turmoil. The overriding issue for the near term is the degree to which the Chinese economy will slow down. And, no one can make a reliable prediction about that factor at this time. Offsetting possible softness from China is the struggle that the U.S. Government will face as it attempts to replenish the 180,000,000 barrels of crude that were utilized last year from the Strategic Petroleum Reserve.

Helping to ramp up U.S. production, we at First Keystone lodged in Pecos (Texas) continue to support the strengthening of the U.S.-based supplies of crude by offering state-of-the-art industrial buildings for lease in Pecos (Reeves County), TX. So, oil prices could be soft or they could soar! We’ll be monitoring these critical moving parts and keeping you informed as this new year plays out.