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Welcome to Big Digital Energy with Chuck Yates, Mark Meyer and Kirk Coburn. Weekly news in energy covering oil and gas and cleantech.
00:00:01 [Speaker 1]
Hey, everybody.
00:00:01 [Speaker 1]
Welcome to BDE Big Digital Energy.
00:00:05 [Speaker 1]
We are here
00:00:06 [Speaker 2]
What's up?
00:00:07 [Speaker 1]
We are here with no Mark Meyer.
00:00:12 [Speaker 2]
Mark, we're gonna miss you.
00:00:14 [Speaker 2]
We know that you're dealing with some, personal matters that are not fun.
00:00:18 [Speaker 2]
So our hearts and prayers go you and family.
00:00:21 [Speaker 1]
Ab absolutely.
00:00:24 [Speaker 1]
Later in the episode, I'll find the joke you wrote about raising campaign funds for your chairmanship of the IEA or whatever whatever your joke was.
00:00:35 [Speaker 1]
It was a pretty good one.
00:00:36 [Speaker 1]
If Mark's gonna write a joke, we need to make sure we deliver it.
00:00:40 [Speaker 1]
So
00:00:41 [Speaker 2]
That's right.
00:00:41 [Speaker 2]
He's campaigning for for chairman of the IEA.
00:00:46 [Speaker 2]
That's what he's that's what he's doing today.
00:00:48 [Speaker 2]
So we'll give that to him.
00:00:49 [Speaker 2]
There we go.
00:00:50 [Speaker 2]
Deliver very well, but it is what it is.
00:00:52 [Speaker 1]
Yeah.
00:00:53 [Speaker 1]
We kinda kinda kinda stumbled in.
00:00:55 [Speaker 1]
Alright.
00:00:56 [Speaker 1]
Brent is at a 108.
00:00:59 [Speaker 1]
Trump has torched the peace deal.
00:01:02 [Speaker 1]
JPMorgan officially threw up their arms and said, what the hell?
00:01:07 [Speaker 1]
We don't even know how to forecast oil anymore.
00:01:10 [Speaker 1]
What say you, Kirk?
00:01:13 [Speaker 2]
Man, there's so much going on.
00:01:15 [Speaker 2]
I mean, the the Hormuz Hormuth.
00:01:18 [Speaker 2]
Is that what we're calling it now?
00:01:20 [Speaker 2]
It's like vermouth, but it's it's it's wet, Hormuth.
00:01:25 [Speaker 1]
It's probably salty.
00:01:27 [Speaker 1]
So It's probably salty, and Yeah.
00:01:30 [Speaker 2]
Bare on the shale shale floor should weigh in on this.
00:01:35 [Speaker 2]
So what's going on?
00:01:37 [Speaker 2]
What's going on is we're in month eight, Chuck.
00:01:41 [Speaker 2]
Let let that sit for a minute.
00:01:43 [Speaker 2]
Month eight of going back and forth on this conflict.
00:01:47 [Speaker 2]
And the market is still whipsawing.
00:01:50 [Speaker 2]
8% down on deal rumors, 3% up on deal rejection.
00:01:56 [Speaker 2]
We just saw it yesterday.
00:01:57 [Speaker 2]
So let me tell you what's happening.
00:02:01 [Speaker 2]
The physical trading houses are printing money.
00:02:05 [Speaker 2]
So Vital reportedly cleared 15,000,000,000 last year and is on pace to beat that this year.
00:02:13 [Speaker 2]
Trafigura, Gunvor, Mercuria, all of them are capturing the arbitration between where the barrel is, and we've talked about this, and where the barrel needs to be.
00:02:23 [Speaker 2]
So when Brent is a $105 and West Texas Intermediate's 93, that $12 spread is pure margin for these trading houses.
00:02:36 [Speaker 2]
It's really that's really what's happening.
00:02:40 [Speaker 1]
The it still makes no sense to me that we're not worse off.
00:02:48 [Speaker 1]
It still feels to me the price of oil should be a lot higher.
00:02:54 [Speaker 1]
And when you go out and you look at the future strip, I mean, I'm I'm looking at WTI right now.
00:03:03 [Speaker 1]
It's at 91.
00:03:05 [Speaker 1]
The twelve month strip's at 81.
00:03:08 [Speaker 1]
The twenty four month strip is at 77.
00:03:11 [Speaker 1]
The sixty month strip's at 69.
00:03:14 [Speaker 1]
Sorry.
00:03:15 [Speaker 1]
I just had to say that number.
00:03:19 [Speaker 1]
But it just doesn't I mean, the market is still just viewing this as a tiny blip, and this is not fundamentally restructuring anything.
00:03:30 [Speaker 1]
So I don't know.
00:03:32 [Speaker 1]
I mean, this is not something that goes away even if the conflict stops.
00:03:40 [Speaker 2]
No.
00:03:40 [Speaker 2]
I think no.
00:03:41 [Speaker 2]
I think you're right, Chuck.
00:03:42 [Speaker 2]
I think the the the fundamentals have been baked into the numbers.
00:03:47 [Speaker 2]
We know there's this conflict in The Middle East.
00:03:50 [Speaker 2]
The US and Iran are just going back and forth.
00:03:53 [Speaker 2]
Nothing's really happening there.
00:03:57 [Speaker 2]
And so at the end of the day, you've got Saudi.
00:03:59 [Speaker 2]
They've got their pipeline back on.
00:04:01 [Speaker 2]
We know Russia's down for the Ukraine.
00:04:04 [Speaker 2]
We know that oil's tight.
00:04:06 [Speaker 2]
We know distillates.
00:04:07 [Speaker 2]
We're gonna talk about it a little bit, the distillates number in The US.
00:04:12 [Speaker 2]
All this seems to be baked in, if you will, and it's just margins now.
00:04:17 [Speaker 2]
That's what I see.
00:04:18 [Speaker 2]
Now, there might be a lot of bigger changes once cold weather really hits and once we get the crop inventories and the price of food on our table jacks and spikes up.
00:04:32 [Speaker 2]
But I think a lot of that's starting to be baked in now.
00:04:36 [Speaker 1]
Yeah.
00:04:36 [Speaker 1]
The it just seems like, you know, Chicken Little was right once.
00:04:44 [Speaker 1]
I mean, the sky the sky did actually fall.
00:04:47 [Speaker 1]
You know?
00:04:48 [Speaker 1]
So, yeah, it just feels like feels like we should be a little more worried than we are.
00:04:56 [Speaker 1]
The one thing, the one thing I I saw, and I only really saw the the headline of it, and I wanna read more about it, is Will Van Lowe has come out and said there's gonna be a new world or order in the wake of the Middle East turmoil.
00:05:12 [Speaker 1]
You know, he says the world's never gonna be the same.
00:05:15 [Speaker 1]
It's behind the firewall on on hearts, so, I may have to ping Will to to steal a copy of it.
00:05:23 [Speaker 1]
But, anyway, it's it's gonna be interesting to to see what happens now that we've kind of rattled things up.
00:05:31 [Speaker 2]
Any direction on where the world order is going, Chuck?
00:05:34 [Speaker 2]
Let's, I'm just let's give me a little bit more flavor of what you think that means.
00:05:39 [Speaker 1]
Well, of course, it means we're underinvesting in oil and gas, so you should give more money to private equity in oil and gas.
00:05:47 [Speaker 1]
That's that's usually where those stories start.
00:05:50 [Speaker 1]
You know?
00:05:51 [Speaker 1]
We, we haven't hit that far bottom because my phone is not wrong in terms of, hey, Chuck.
00:05:56 [Speaker 1]
You want back in the game?
00:05:57 [Speaker 1]
We you know?
00:05:58 [Speaker 2]
We raised another fund, and we need you.
00:06:01 [Speaker 1]
Yeah.
00:06:01 [Speaker 1]
Or
00:06:01 [Speaker 2]
chat.
00:06:02 [Speaker 1]
Or we want yeah.
00:06:03 [Speaker 1]
We wanna go raise another fund.
00:06:05 [Speaker 1]
But, now we talked about this.
00:06:07 [Speaker 1]
They're gonna run pipelines to try to avoid certain areas.
00:06:12 [Speaker 1]
The the key's gonna be the rebuild on the refining capacity because it's not gonna happen in The United States, and that's gonna be really disappointing that we're gonna just let that go to other parts of the world.
00:06:26 [Speaker 2]
Well, I mean, you're you're almost not solving the problem because the the the sort of these, you know, first world countries, they environmentally don't want, any any anyone to build a new refinery.
00:06:41 [Speaker 2]
So and if you're a CEO of one of these independent but public publicly traded oil and gas companies, that's the worst decision.
00:06:50 [Speaker 2]
You know, we talked about this multiple times about, you know, that the the refining is a hedge, and and you make money only when when there's turmoil and prices are high.
00:07:03 [Speaker 2]
Most of the time, that's not where you make your margin.
00:07:07 [Speaker 2]
So it's gonna go to these second or third world countries where there's, by nature, turmoil, and we've got the this great invention called the drone that can come from you and me could do it, but but drones can go anywhere and destroy anything at any moment.
00:07:25 [Speaker 2]
So I think volatility is here to stay.
00:07:29 [Speaker 2]
That's Yeah.
00:07:29 [Speaker 2]
That's probably the headline, which is great for for us.
00:07:34 [Speaker 2]
I mean, it's
00:07:35 [Speaker 1]
been shocking the lack of volatility since the shale revolution if you really think about it.
00:07:40 [Speaker 1]
I mean, we've been fairly, fairly stable.
00:07:45 [Speaker 1]
And, anyway, the the other thing about Van Lowe is he called it for a Manhattan project type thing on energy security, and he also brought the grid on into it about how it sucks and all.
00:07:59 [Speaker 1]
I still like my big inch project from last week or whatever I called it.
00:08:07 [Speaker 2]
Do you think like, remember, maybe even 10 ago, it's like software and hackers are gonna take down the grid.
00:08:15 [Speaker 2]
Now we don't even need high-tech that high-tech.
00:08:18 [Speaker 2]
You just send a drone in to take out the the grid.
00:08:21 [Speaker 2]
You can send a million drones, like, and take out the grid.
00:08:26 [Speaker 2]
So that's an ongoing discussion.
00:08:28 [Speaker 2]
I always kinda laugh at it until it happens.
00:08:30 [Speaker 2]
So, hopefully you know?
00:08:32 [Speaker 2]
We just survived, by the way, here in Nantucket, a huge nor'easter.
00:08:38 [Speaker 2]
But, growing up surfing hurricane swells, you know, it, it was much ado about nothing, but I was excited to be in the giant storm.
00:08:48 [Speaker 2]
And I think we're I mean, if if we take this to oil and gas, we're in a major giant storm, I think.
00:08:55 [Speaker 2]
And the fact that we're we're talking about sort of these marginal dips in pricing when you have this huge supply constraint.
00:09:05 [Speaker 2]
I'm a little shocked, and maybe this is the calm before the storm.
00:09:09 [Speaker 2]
What do you think, Chuck?
00:09:11 [Speaker 1]
The, yeah.
00:09:13 [Speaker 1]
No.
00:09:13 [Speaker 1]
I mean, it it just feels like we're at the lowest level of storage ever.
00:09:18 [Speaker 1]
I think we've finally figured out China's cut into a lot of their storage, so maybe they don't have the the barrels sitting around there.
00:09:27 [Speaker 1]
We're not gonna build storage in The United States.
00:09:30 [Speaker 1]
That's just, like, game over.
00:09:33 [Speaker 1]
Hopefully, we will refill the, the, the SPR.
00:09:40 [Speaker 1]
But, you know, doing that at a $100 oil sucks versus, when we could have done it during the first Trump administration at, what, 32 or 34, wherever it was.
00:09:52 [Speaker 1]
So yeah.
00:09:53 [Speaker 1]
No.
00:09:54 [Speaker 1]
I mean, potentially, volatility's back.
00:09:57 [Speaker 1]
But, again, go look at the forward strip.
00:10:00 [Speaker 1]
It's headed back down to 69.
00:10:05 [Speaker 2]
Well, tell me a little bit.
00:10:06 [Speaker 2]
Can you hear me, Chuck?
00:10:07 [Speaker 2]
Yeah.
00:10:08 [Speaker 2]
Tell me a little bit about our next story is about the diesel export ban.
00:10:13 [Speaker 2]
So what's happening in The US, Chuck?
00:10:16 [Speaker 2]
Because this plays right into volatility, and I'll tell you why.
00:10:21 [Speaker 1]
Alright.
00:10:21 [Speaker 1]
So, basically, powers that be came out and floated the idea.
00:10:26 [Speaker 1]
We played clip last week of banning diesel exports.
00:10:31 [Speaker 1]
And, the, the thought there was if we don't send diesel away, it'll get cheaper here in The United States.
00:10:40 [Speaker 1]
I think everyone has kinda come out with Chris Wright arguably shaky on it, but still saying, hey, mister president.
00:10:50 [Speaker 1]
I'm not sure that'll really work.
00:10:53 [Speaker 1]
Scott, Bessemer came out and said, hey.
00:10:57 [Speaker 1]
You know, not gonna work either.
00:10:59 [Speaker 1]
So I think that has been put down as a as an idea, but it was at least floated that we weren't gonna export any diesel in an attempt to try to keep prices down.
00:11:15 [Speaker 2]
Well, here's what I think is the is the huge concern, and it may kinda makes sense.
00:11:22 [Speaker 2]
I mean, the strongest case for a ban is American farmers and truckers are paying $6.53.
00:11:30 [Speaker 2]
Let's give it that.
00:11:32 [Speaker 2]
Diesel while US refiners export one and a half million barrels a day to Europe, And Europe's share of our diesel exports is actually 50% this month, up from 30% last year.
00:11:47 [Speaker 2]
So the farmer in Iowa sees their diesel bill double while tankers to to of a while while the tankers that are filling up on the Gulf Coast refineries are selling to Rotterdam.
00:12:00 [Speaker 2]
So it kinda feels wrong, Chuck, in some ways.
00:12:05 [Speaker 2]
The price is real.
00:12:06 [Speaker 2]
The pain is real.
00:12:07 [Speaker 2]
And every politician within five or miles of a farm is hearing about it, and that's why they're talking about this this this giant diesel ban in in Washington DC.
00:12:18 [Speaker 2]
But here's what happens, and go back to 1973 when, our peanut farmer banned soybeans, exports.
00:12:30 [Speaker 2]
So here's the problem.
00:12:32 [Speaker 2]
You you ban diesel exports.
00:12:34 [Speaker 2]
US refiners can no longer sell to Europe or Latin America.
00:12:38 [Speaker 2]
So what happens?
00:12:39 [Speaker 2]
Domestic diesel storage fills up because one and a half million barrels a day that was leaving is now here.
00:12:46 [Speaker 2]
That sounds good.
00:12:47 [Speaker 2]
Right?
00:12:48 [Speaker 2]
Refiners cut production because they have nowhere to put the diesel.
00:12:52 [Speaker 2]
You can't run a refinery into full tanks.
00:12:55 [Speaker 2]
So the physics, of course, don't allow it.
00:12:57 [Speaker 2]
So what happens?
00:12:58 [Speaker 2]
When refiners cut their diesel production, they also cut gasoline, jet fuel, and every other product that comes out of the same barrel.
00:13:07 [Speaker 2]
So you you don't just refine diesel.
00:13:10 [Speaker 2]
So because a barrel of crude, you you create multiple, multiple products.
00:13:16 [Speaker 2]
So gasoline prices go up because the refiner cuts production.
00:13:24 [Speaker 2]
And so now what you're dealing with is every global buyer who depend on The US finds another supplier.
00:13:30 [Speaker 2]
This is what happened with soybeans.
00:13:32 [Speaker 2]
And so what happened to the soybean market in The US?
00:13:35 [Speaker 2]
Destroyed.
00:13:37 [Speaker 2]
So I think what happens if we ban diesel is that absolutely somewhere else in the world is gonna build refining capacity.
00:13:48 [Speaker 2]
Absolutely, we're gonna lose our competitive bent here.
00:13:54 [Speaker 2]
I think it's a very big, big, problem if we do ban, diesel exports even though right now it sounds like a great idea.
00:14:05 [Speaker 2]
What do you think?
00:14:06 [Speaker 1]
Yeah.
00:14:06 [Speaker 1]
I mean, it's basically, you can get a barrel of oil or refined products anywhere you want in the world.
00:14:14 [Speaker 1]
I mean, we've talked about this.
00:14:16 [Speaker 1]
Right?
00:14:16 [Speaker 1]
You just turn the tankers here, turn the, tankers there.
00:14:21 [Speaker 1]
It's so incredibly independent, interdependent that if you think banning exports is gonna lead to a glut here, no.
00:14:31 [Speaker 1]
It's gonna find a way to leak out.
00:14:33 [Speaker 1]
Other people are gonna do what you said, change product mixes, etcetera.
00:14:38 [Speaker 1]
Mhmm.
00:14:38 [Speaker 1]
It's just a stupid idea.
00:14:41 [Speaker 1]
One of the things that, governor Abbott did yesterday to help try to reduce, diesel prices, He, he is allowing dyed, which is off road untaxed diesel now to be used on Texas highways.
00:14:59 [Speaker 1]
And I'm not a diesel expert, but, dye is, dyed diesel is supposedly what you use the farmers use in tractors, etcetera.
00:15:11 [Speaker 1]
You can now truckers can use that.
00:15:14 [Speaker 1]
And what that really does is because it's not taxed, you're saving it's in effect a tax cut, and you say the truckers will save 24.4¢ on federal excise tax plus 20¢ on state tax.
00:15:33 [Speaker 1]
So in effect, you're kinda cutting taxes 40 call it 45¢ on diesel that truckers can use, and that's at least an attempt to help.
00:15:46 [Speaker 2]
Temporary.
00:15:47 [Speaker 2]
I don't I don't yeah.
00:15:48 [Speaker 2]
I think it's a temporary bump, but, again, it doesn't solve the bigger issue.
00:15:54 [Speaker 1]
Yeah.
00:15:54 [Speaker 1]
I mean, if you want we all know economics.
00:15:57 [Speaker 1]
Right?
00:15:57 [Speaker 1]
If you want lower prices, you have to produce more of it, period.
00:16:02 [Speaker 1]
And we've taken whatever seven, eight, 9% of the world's refining capacity offline because of these wars.
00:16:10 [Speaker 1]
We have less of it.
00:16:11 [Speaker 1]
Guess what?
00:16:12 [Speaker 1]
Prices go up.
00:16:13 [Speaker 1]
This isn't rocket science.
00:16:16 [Speaker 2]
And here's what's happening just to get a small plug and and owed to Mark.
00:16:22 [Speaker 2]
But while congress is debating banning diesel exports, do you know what they voted for this week?
00:16:29 [Speaker 1]
No.
00:16:29 [Speaker 1]
Lay it on me.
00:16:32 [Speaker 2]
They voted to regulate college sports.
00:16:35 [Speaker 2]
So while we have diesel at $6 almost $7, inventories are at a forty year lows.
00:16:43 [Speaker 2]
The SPR is draining.
00:16:46 [Speaker 2]
Europe is getting nothing, which I don't care about per se.
00:16:50 [Speaker 2]
Congress is spending time on the floor debating whether a 20 year old quarterback can transfer to Alabama in midseason.
00:16:58 [Speaker 2]
And if you're a head coach, you can't quit midseason.
00:17:02 [Speaker 2]
I mean, that's what they're debating.
00:17:04 [Speaker 2]
They wanna control college sports now.
00:17:06 [Speaker 2]
And I'm like, are you kidding me?
00:17:08 [Speaker 2]
You know?
00:17:09 [Speaker 2]
And we've said this, and I've said this over and over because I love the quote.
00:17:12 [Speaker 2]
Milton Friedman said, if you put the federal government in charge of the Sahara Desert, in five years, there'd be a shortage of sand.
00:17:21 [Speaker 2]
That should sit with everybody.
00:17:23 [Speaker 2]
Like, while we're talking about massive cost, and we haven't seen the cost flow through yet, but they're gonna hit.
00:17:30 [Speaker 2]
They're gonna hit.
00:17:32 [Speaker 1]
Well and it's a bipartisan thing.
00:17:34 [Speaker 1]
It's it's not just the Republicans.
00:17:37 [Speaker 1]
It's not just the Democrats.
00:17:38 [Speaker 1]
I think the senate, 77 senators voted in favor of, this regulation.
00:17:46 [Speaker 1]
And so I, yeah.
00:17:49 [Speaker 1]
You know, what's the who who who fiddled while Rome burned or whatever?
00:17:56 [Speaker 1]
Whichever one of them.
00:17:57 [Speaker 1]
Yeah.
00:17:58 [Speaker 1]
The I
00:17:59 [Speaker 2]
think if you're a politician and you see these high prices, that's sort of the, I've gotta say the right things to my constituents to stay elected, but it's still not a good idea.
00:18:10 [Speaker 1]
You know, we've kinda talked all along on BDE that Trump's just a low price guy, period.
00:18:15 [Speaker 1]
He always has been.
00:18:16 [Speaker 1]
That should be no surprise to us.
00:18:19 [Speaker 1]
I mean, this is the time for the industry to because, you know, the one thing he will let us do is activity.
00:18:26 [Speaker 1]
Right?
00:18:26 [Speaker 1]
We could go lay a pipeline anywhere we wanted.
00:18:29 [Speaker 1]
We could, like, lay power lines wherever we wanted.
00:18:32 [Speaker 1]
This is where the industry needs to get together and say, okay, mister president.
00:18:37 [Speaker 1]
We can lower, diesel prices, gasoline prices, but you need to let us build refineries.
00:18:45 [Speaker 1]
We need thirty day approval on it.
00:18:47 [Speaker 1]
We need thirty years where no windfall taxes.
00:18:51 [Speaker 1]
Give me some limited liability on lawsuit stuff just so they can't slow it down.
00:18:58 [Speaker 1]
I'm not saying get rid of all the product liability soft guard safeguards, but definitely get rid of, get rid of the ability to slow this down.
00:19:08 [Speaker 1]
And let us just go build a bunch of refineries.
00:19:11 [Speaker 1]
Let us build a bunch of pipelines here and there.
00:19:13 [Speaker 1]
Let us lay power lines everywhere because he you know, Trump's got two years left, and maybe we could even build public support for this.
00:19:24 [Speaker 1]
It's US jobs.
00:19:26 [Speaker 1]
You know, it's infrastructure in The United States, which seems to be, popular.
00:19:32 [Speaker 1]
And then let's go ahead and just say, and this is the path to to lower product prices.
00:19:37 [Speaker 1]
And it gives the industry a bunch of great places to spend capital, upgrade their infrastructure, etcetera.
00:19:45 [Speaker 2]
You know where it would be the ideal place to do this, Chuck?
00:19:49 [Speaker 2]
We just lay a pipeline from Pennsylvania to Long Island, and then the the the Golden whatever we call the Gold Coast becomes Refinery Row.
00:20:01 [Speaker 2]
That'd be hilarious.
00:20:02 [Speaker 1]
Oh, that would be that would be awesome.
00:20:05 [Speaker 1]
Big big part.
00:20:07 [Speaker 2]
In Nantucket, South Thor, I'll see all these tankers floating by as they go to Europe.
00:20:11 [Speaker 1]
Yeah.
00:20:12 [Speaker 1]
That's probably true.
00:20:13 [Speaker 1]
You probably don't want that.
00:20:14 [Speaker 1]
But the, the the folks up in the office buildings in New York looking out at the sunset because the pollution from the refineries gives us the most gorgeous sunsets in the world, hands down.
00:20:28 [Speaker 2]
You know, when I was a young kid because my grandfather, was in oil and gas out in the he was he was out in the field keeping the pipe, moving.
00:20:40 [Speaker 2]
My dad worked on on, onshore and offshore rigs, when he was young before he became a tech guy.
00:20:49 [Speaker 2]
But what's interesting is when you're in one of these giant buildings in Downtown Houston and you look east, it is the most magnificent like, I just think it's magnificent to see all those chemical plants.
00:21:05 [Speaker 2]
They're I mean, it's just it's just amazing.
00:21:08 [Speaker 2]
And then the sunset, you're right.
00:21:10 [Speaker 2]
It's just it's actually breathtaking in some ways.
00:21:13 [Speaker 2]
Yeah.
00:21:14 [Speaker 2]
Like, awe inspiring.
00:21:16 [Speaker 1]
Port Aransas, hell, let's go all the way over to New Orleans.
00:21:20 [Speaker 1]
I mean, it's ugly as shit.
00:21:22 [Speaker 1]
I mean, it it just screams to let's industrialize all this.
00:21:26 [Speaker 1]
So I got no problems with that.
00:21:29 [Speaker 2]
So I was thinking about you, Chuck, because BP comes back to shale.
00:21:35 [Speaker 1]
Is this crazy or what?
00:21:39 [Speaker 2]
So BP is evaluating US shale acquisitions in the 2 to $5,000,000,000 range, including a possible look at Devon's Eagle Ford assets.
00:21:49 [Speaker 2]
That's the story.
00:21:50 [Speaker 2]
See, BPCO Meg O'Neil pushing the company back towards oil and gas growth.
00:21:57 [Speaker 2]
Here's what's interesting.
00:21:58 [Speaker 2]
The Eagle Ford angle is interesting because BP already knows this acreage.
00:22:03 [Speaker 2]
Like, they were in the Blackhawk JV with Devin, until 2025.
00:22:10 [Speaker 2]
So they've been there.
00:22:10 [Speaker 2]
They drilled it.
00:22:11 [Speaker 2]
They completed it.
00:22:12 [Speaker 2]
They produced it.
00:22:14 [Speaker 2]
They know the decline curves, the rock quality infrastructure.
00:22:18 [Speaker 2]
This is not a blind acquisition.
00:22:19 [Speaker 2]
I mean, it's a homecoming.
00:22:21 [Speaker 2]
Right?
00:22:22 [Speaker 1]
Right.
00:22:24 [Speaker 1]
Yeah.
00:22:24 [Speaker 1]
No.
00:22:24 [Speaker 1]
I mean, it's it it feels a little bit like, getting divorced and then buying a, a house next door to your ex wife.
00:22:34 [Speaker 1]
There's a little bit of little bit of that maybe going on, but, you know, kudos to, to Meg.
00:22:39 [Speaker 1]
What are we on is this is this CEO number five since 2020?
00:22:44 [Speaker 2]
I think it's seven.
00:22:46 [Speaker 1]
Yeah.
00:22:46 [Speaker 1]
I think I think so.
00:22:47 [Speaker 1]
And so kudos of let's at least go buy some oil and gas assets to your point that we know something, about I have no insider knowledge on this at all, but does this put Apache back on the, on the table?
00:23:01 [Speaker 1]
Because Apache basically accumulated all the old Amaco assets, And I think they even ripped some of the, BP assets out of there during the Macondo, sell off where whatever.
00:23:15 [Speaker 1]
They sold 35 or $40,000,000,000 worth of assets to finance that.
00:23:21 [Speaker 1]
So interesting homecoming.
00:23:24 [Speaker 1]
Also be interesting to know why they walked away.
00:23:28 [Speaker 2]
Here's here's see, you threw yourself under the bus, Chuck, on buying a house next to your ex.
00:23:34 [Speaker 2]
I was giving you a praise because this is something you would know about.
00:23:38 [Speaker 2]
You live in the nicest house in Richmond, Texas, which means you never left the neighborhood.
00:23:44 [Speaker 2]
You just upgraded the kitchen.
00:23:47 [Speaker 2]
BP could have taken a page from the Chuck Yates rich dad playbook.
00:23:52 [Speaker 2]
Never leave a good ZIP code.
00:23:54 [Speaker 2]
Just renovate.
00:23:55 [Speaker 2]
Instead, they sold the house, moved to London, got a 78% tax rate, sold Castro, killed Beyond Petroleum, and now they're back looking at the same acreage they walked away from, but now it costs $4,000,000,000 more.
00:24:14 [Speaker 2]
That's that's what's so interesting about how much value they've destroyed as a public company.
00:24:23 [Speaker 1]
Gave gave away, Alaska to to Hillcorp.
00:24:28 [Speaker 1]
You know?
00:24:28 [Speaker 1]
And, I say this with all admiration to Hillcorp.
00:24:32 [Speaker 1]
If you have sold to them, you have given it away.
00:24:36 [Speaker 1]
The shrewdest shrewdest buyers on the planet.
00:24:40 [Speaker 1]
And I do appreciate the compliment.
00:24:42 [Speaker 1]
We're deep into the, the house remodel.
00:24:45 [Speaker 1]
I need to send you a bunch of pictures.
00:24:47 [Speaker 1]
So what I've what I've kinda circled in on is each room is now a theme.
00:24:53 [Speaker 1]
So the dining room is gonna be the garbage room, the band the band, the gar garbage.
00:25:00 [Speaker 1]
The artist who painted a big, painting for me in there was inspired by, garbage.
00:25:07 [Speaker 1]
And so we're gonna, make it very much the garbage room.
00:25:12 [Speaker 1]
And then, we've got, my closet, which is gonna be an exact replica of the Rothko Chapel because that's where I used to hang out with my kids.
00:25:23 [Speaker 1]
My, bathroom is gonna be basically My Chemical Romance, the black parade.
00:25:30 [Speaker 1]
I'll send you I'll you know what?
00:25:32 [Speaker 1]
I should send Jacob photos of all this while, while I'm while we're talking.
00:25:37 [Speaker 2]
But, anyway throw them up.
00:25:39 [Speaker 1]
Yeah.
00:25:39 [Speaker 1]
I I, I I appreciate the, the compliment on, you know, stay in the stay in the hood.
00:25:47 [Speaker 1]
Don't let
00:25:48 [Speaker 2]
Stay in the hood.
00:25:50 [Speaker 2]
You know, Shell should probably take a a a, you know, one of the, you know, pages out of that playbook.
00:25:57 [Speaker 2]
Alright.
00:25:57 [Speaker 2]
So what else is happening?
00:25:58 [Speaker 2]
We've got the behind the meter power roundup.
00:26:03 [Speaker 2]
Vistra Lumina signed a twenty year up to 207 megawatt deal to power New Era Energy and Digital Texas data center, sidestepping ERCOT interconnection queue.
00:26:18 [Speaker 2]
Anyo landed a 450 megawatt order to power data centers.
00:26:22 [Speaker 2]
I just talked to a a power, well funded power company.
00:26:29 [Speaker 2]
They're in, the Midwest looking at a data center now.
00:26:35 [Speaker 2]
Woodway Energy Infrastructure, I mean, we got the Generac Amazon deal, Amazon's Pecos County site.
00:26:43 [Speaker 2]
There's a ton of activity going on.
00:26:46 [Speaker 2]
A 101 gigawatts.
00:26:47 [Speaker 2]
Let that number register.
00:26:49 [Speaker 2]
101 gigawatts of behind the meter gas capacity announced in The US.
00:26:55 [Speaker 2]
57 gigawatts with equipment orders already in hand.
00:27:00 [Speaker 2]
Seven gigawatts under construction, Texas leads with 38 gigawatts.
00:27:05 [Speaker 2]
That's not a trend.
00:27:06 [Speaker 2]
That's a sector.
00:27:07 [Speaker 2]
That's an that that's a I mean, it's a coup for Texas if you know, unless you're one of the, people voting for the other side.
00:27:18 [Speaker 2]
But behind the meter gas power did not exist as a category eighteen months ago.
00:27:24 [Speaker 2]
Now it's the larger than the installed generation capacity of most countries.
00:27:30 [Speaker 2]
I think it's a incredible story.
00:27:33 [Speaker 1]
Well and, you know, it's why I was listening to the all in podcast yesterday kinda talking about the OpenAI and the Anthropic, IPO.
00:27:44 [Speaker 1]
There's a thought that two thirds of all this data center stuff is literally contracted to them.
00:27:53 [Speaker 1]
I think, in Anthropic's IPO, their s one leaked out, and they had it, you know, on London Times or one of the websites.
00:28:03 [Speaker 1]
And they made a statement in there that they plan to contract with, I think, 500 or $600,000,000,000 worth of data centers.
00:28:14 [Speaker 1]
So, I mean, if you're contracting to Anthropic and you're contracting to OpenAI, that is all training models to get better.
00:28:26 [Speaker 1]
Right?
00:28:27 [Speaker 1]
I mean, they do ancillary stuff, but that's not Chuck and Kirk's company running compute to do our AR or whatever.
00:28:37 [Speaker 1]
Right?
00:28:38 [Speaker 1]
So, it's it's crazy that that ultimately, all of this stuff being built, the two balance sheets supporting it are two private companies.
00:28:48 [Speaker 2]
I just talked to a big infrastructure fund this morning, And he I was asking him about sort of the the market the venture he's in venture capital market, and he said, it's anthropic, chat GPT, and he gave and, you know, maybe a Grock.
00:29:15 [Speaker 2]
He's like SpaceX.
00:29:16 [Speaker 2]
He's like, everything else is, like, underneath that.
00:29:20 [Speaker 2]
Like, from an activity perspective, it's them and then everyone else.
00:29:27 [Speaker 2]
He's like, it's unbelievable how the market for capital has completely changed around the this dynamic.
00:29:36 [Speaker 1]
Well and I'm gonna get this stat wrong because I'm trying to recall this after a weekend in New Orleans.
00:29:43 [Speaker 1]
But because I read it last week.
00:29:46 [Speaker 1]
I think the IPO valuation of just anthropic is gonna be larger than all of the IPO valuations of every company that came out of the .com revolution.
00:30:04 [Speaker 1]
So what their values were at the time of IPO, And anthropic being 2,000,000,000 $2,000,000,000,000 dwarfs all of them put together.
00:30:14 [Speaker 1]
Think of that.
00:30:14 [Speaker 1]
Amazon, Google, Facebook.
00:30:18 [Speaker 2]
Pets.com, living.com.
00:30:21 [Speaker 2]
We there's some great did you have any favorites that you knew were gonna just bomb off the off the get?
00:30:27 [Speaker 2]
I Do you have any favorite bombs?
00:30:28 [Speaker 1]
Petpet pets.com and that stupid fucking puppet commercial, there was no way that was gonna make it.
00:30:37 [Speaker 1]
I will say monster.com did the greatest single commercial I've ever seen.
00:30:43 [Speaker 1]
When I grow up, I wanna be a yes man.
00:30:45 [Speaker 1]
I wanna work all day.
00:30:47 [Speaker 1]
I wanna be replaced on a whim.
00:30:50 [Speaker 1]
That was
00:30:50 [Speaker 2]
So good.
00:30:51 [Speaker 1]
I want a brown nose.
00:30:53 [Speaker 1]
Yes, sir.
00:30:54 [Speaker 1]
Thank you, sir.
00:30:55 [Speaker 1]
Anything for a raise, sir.
00:30:58 [Speaker 1]
That was such we did get great advertising out of it.
00:31:02 [Speaker 2]
I had a bunch of colleagues go to work for living.com, and I thought, man, that's gonna be interesting.
00:31:08 [Speaker 2]
And now you now it's called Wayfair.
00:31:10 [Speaker 2]
I mean, supply chain Amazon really drove supply chain cost down.
00:31:15 [Speaker 2]
Wayfair is actually doing really well as a company.
00:31:17 [Speaker 2]
They're they're, just got into a major building in Boston here in my neck of the woods.
00:31:25 [Speaker 2]
So it's funny how it comes full circle, but you're right.
00:31:28 [Speaker 2]
And by the way, I gave a little bit of a negative, tip on GrokBot because I am so hooked on GrokBot.
00:31:39 [Speaker 2]
It's it's so dangerous, and I know you use it too.
00:31:43 [Speaker 1]
Yeah.
00:31:43 [Speaker 1]
I have not I have not put the put the pedal down as much as I should, but I've got a chief of staff set up.
00:31:50 [Speaker 1]
I'm starting to talk to it every morning.
00:31:53 [Speaker 1]
Maybe our first step will have it be controlling my dating life and, get that in order, and then then we'll turn it to, Collide in software sales.
00:32:03 [Speaker 2]
So I've been doing research on this because I work with fractional executives and solopreneurs, people that are running their own practice.
00:32:13 [Speaker 2]
And what's interesting is people are using AI more, but almost rising as fast is the amount of so it's not as it's not it's step function, actually, but but it's almost in step with.
00:32:28 [Speaker 2]
If you save twelve hours a week using AI, you're spending six hours correcting your AI.
00:32:37 [Speaker 2]
So there is AI debt that rises with how much you use it.
00:32:42 [Speaker 2]
Now it does make your life better, but it also creates a lot of debt.
00:32:46 [Speaker 2]
And it's super interesting.
00:32:48 [Speaker 1]
There's also a whole thing of AI psychosis going on.
00:32:52 [Speaker 1]
You get in there, you start coding, and you look up, and you've been at it for eighteen hours.
00:32:57 [Speaker 1]
I mean, my, my oldest daughter had a little bit of an episode on that where, like, we had to talk her down.
00:33:04 [Speaker 1]
You know?
00:33:05 [Speaker 1]
Hey.
00:33:05 [Speaker 1]
Hey, sweetie.
00:33:06 [Speaker 1]
Put down the computer.
00:33:08 [Speaker 1]
And I kinda get it.
00:33:09 [Speaker 1]
I mean, I'm, you know, I'm trying to drop a blog a week because that's what you have to be when you're a tech cofounder.
00:33:15 [Speaker 1]
You have to blog.
00:33:16 [Speaker 1]
And, I get in there and I start writing, and I'm and I look up.
00:33:20 [Speaker 1]
And, you know, seven hours later, I've been screwing around with a blog about my hair getting shaved and how it applies to recording meetings in the world of AI.
00:33:31 [Speaker 1]
So it is there there's definitely something to that.
00:33:35 [Speaker 1]
I think, when I was talking at the SPE and we were talking about AI, they said give us something in two or three years we're gonna be talking about we're not talking about today, and mine was the mental health aspects of AI and kind of just like social media took us down some bad rabbit holes.
00:33:54 [Speaker 1]
I think, I think we're gonna have to be careful on the AI front too.
00:34:01 [Speaker 2]
Oh, Chuck, I we all caught it, and I don't know if you tried to slip in this cofounder title we just heard.
00:34:10 [Speaker 1]
The, no.
00:34:11 [Speaker 1]
I've that's I've have I not told you this story?
00:34:15 [Speaker 1]
This is crazy.
00:34:16 [Speaker 1]
So we're we're out raising eight, you know, money eighteen months ago.
00:34:21 [Speaker 1]
And these VCs are sitting there going, okay.
00:34:24 [Speaker 1]
Who is this crazy guy that's on the cap table?
00:34:27 [Speaker 1]
He only bought shares, but he's down at the office every day.
00:34:32 [Speaker 1]
We're not paying him anything.
00:34:34 [Speaker 1]
That's just weird.
00:34:35 [Speaker 1]
We gotta get rid of him.
00:34:36 [Speaker 1]
We gotta get him off.
00:34:37 [Speaker 1]
And Colin's like, time out.
00:34:39 [Speaker 1]
Maybe the best Rolodex in oil and gas.
00:34:43 [Speaker 1]
Why do we need and the reason he's not taking a salary is we don't have any money.
00:34:47 [Speaker 1]
We're a classic startup.
00:34:49 [Speaker 1]
You know?
00:34:50 [Speaker 1]
What what do you want?
00:34:51 [Speaker 1]
And so, anyway, it was I mean, literally, we had one VC fund that just, like, wanted me out.
00:34:56 [Speaker 1]
Wouldn't even talk to us unless Colin bought me out.
00:35:00 [Speaker 1]
And I was laughing because I was like, with what money?
00:35:03 [Speaker 1]
But okay.
00:35:06 [Speaker 1]
But it was interesting.
00:35:07 [Speaker 1]
You changed my title to cofounder?
00:35:09 [Speaker 1]
It's all fine now.
00:35:10 [Speaker 1]
Now it's a great story.
00:35:12 [Speaker 1]
Oh, yeah.
00:35:12 [Speaker 1]
We got our cofounder XPE guy leading up sales for us, out talking to people every day, you know, kind of our knife and fork guy.
00:35:22 [Speaker 1]
Oh, okay.
00:35:22 [Speaker 1]
That's great.
00:35:23 [Speaker 1]
Yeah.
00:35:23 [Speaker 1]
And he's not taking a salary.
00:35:24 [Speaker 1]
And, oh, by the way, he had a crawfish boil at his house when we weren't gonna make payroll because we needed a place to have a party, and no bar would take credit for us from us.
00:35:35 [Speaker 1]
So, yeah, that's that's why I'm a cofounder.
00:35:39 [Speaker 2]
Man, leave it to the guys in VAST to be go from, you know, high it's so manic depressive on on how they view people.
00:35:49 [Speaker 2]
It's crazy.
00:35:51 [Speaker 2]
So funny.
00:35:52 [Speaker 1]
Hold on.
00:35:53 [Speaker 1]
But we got hold on.
00:35:54 [Speaker 1]
One one other thing real quick on data centers.
00:35:58 [Speaker 1]
I know there's a lot of pro.
00:36:00 [Speaker 1]
There's a lot of con.
00:36:01 [Speaker 1]
You know, pros are business, technology.
00:36:04 [Speaker 1]
Gotta win the race against China.
00:36:06 [Speaker 1]
Cons are there's some real land use issues there in terms of disrupting cattle, etcetera.
00:36:15 [Speaker 1]
The naysayers, I'm just gonna dismiss all their concerns.
00:36:19 [Speaker 1]
But, anyway, there's some real some reasonable people have right to to have opposition to this.
00:36:25 [Speaker 1]
The greatest thing, though, that data centers did, we had climate week this week, and nobody talked about the end of the Earth.
00:36:32 [Speaker 1]
All they did was talk about data centers for forty five minutes.
00:36:35 [Speaker 1]
So are we finally past Greta and having to deal with all this shit that the world's gonna boil over and we're all gonna be dead in three years?
00:36:45 [Speaker 2]
I mean, the concerns are are valid.
00:36:50 [Speaker 2]
But if you're a farmer and you're looking at your land and you're like, what per acre do I get the highest return on?
00:36:59 [Speaker 2]
How can you not look at a data center?
00:37:03 [Speaker 2]
I mean, it almost makes sense.
00:37:05 [Speaker 2]
There are some problems with data centers as well as with behind the meter project, which are a lot of data centers.
00:37:12 [Speaker 2]
And this year this, the ten year treasury hit 5.2%, the highest since 2007.
00:37:22 [Speaker 2]
So, something my and you remember 2008, and, of course, during the financial crisis, what happens is you never finance, you know, and with infrastructure projects, it's long term debt.
00:37:39 [Speaker 2]
That's the best way to finance these projects.
00:37:41 [Speaker 2]
And if the tenure goes from 4% to 5.2, that cost of debt goes up 30%.
00:37:49 [Speaker 2]
So it'll be interesting to watch as all these infrastructure projects and data centers.
00:37:56 [Speaker 2]
And I'm some of these are gonna be paying with it might be interesting to see how these companies are gonna finance these projects because I'm curious to watch if because of the oil crisis, I think and and the cost of of all goods and services are going way up.
00:38:14 [Speaker 2]
Of course, the treasury is gonna go up.
00:38:16 [Speaker 2]
They'll be entering to see how that sort of flows through some of these projects we've been talking about.
00:38:22 [Speaker 1]
Yeah.
00:38:22 [Speaker 1]
I mean, you can make a case that really the bull run of private equity was the fact that they were using 2% debt, period.
00:38:30 [Speaker 1]
You know?
00:38:31 [Speaker 1]
Basically taking yeah.
00:38:33 [Speaker 1]
Basically, just taking GDP style risk and doing it at 75, 80% levered.
00:38:40 [Speaker 1]
It's it's wild.
00:38:41 [Speaker 1]
I will get this story wrong, so this detail is almost uncertainly wrong.
00:38:47 [Speaker 1]
But I think it was Golden Corral that during COVID, 2020 went out and did, like, ten year bonds just because they needed liquidity with all the restaurants closing down.
00:39:03 [Speaker 1]
And they were obviously junk status, and they did ten year bonds at 5.1% interest in the middle of COVID.
00:39:13 [Speaker 1]
And today, the ten year treasury is 5.2.
00:39:17 [Speaker 1]
So the treasury is act actually put paying more than Golden Corral or Shoney's or whatever restaurant chain it was.
00:39:28 [Speaker 1]
That is just crazy.
00:39:29 [Speaker 1]
So, yeah, that the the project financing on that stuff's gonna gonna definitely impact it.
00:39:35 [Speaker 1]
Because the only way it works is if you finance it over the life of the assets.
00:39:39 [Speaker 1]
Alright.
00:39:40 [Speaker 1]
So now we're on back to my house.
00:39:42 [Speaker 1]
First things first, I called all three kids.
00:39:45 [Speaker 1]
I said, kids, I love you.
00:39:46 [Speaker 1]
You never hang out with daddy anymore.
00:39:48 [Speaker 1]
Screw you.
00:39:48 [Speaker 1]
You don't have a room in my house.
00:39:51 [Speaker 1]
So Sarah's room, I've turned into my workout room, and I've had custom made Eddie Van Halen wallpaper that's gonna go up.
00:39:59 [Speaker 1]
So that is my wallpaper right there.
00:40:03 [Speaker 2]
I love that.
00:40:04 [Speaker 1]
Alright.
00:40:05 [Speaker 1]
What's next?
00:40:05 [Speaker 1]
Okay.
00:40:06 [Speaker 1]
This is the garbage room.
00:40:08 [Speaker 1]
So you can see the painting up there, and then we're also gonna hang pictures of Shirley and Butch.
00:40:15 [Speaker 1]
I've got acrylic chairs that I'm gonna recover with kind of that charcoal gray type color, and then I'm a put a big pink furry sofa in there.
00:40:26 [Speaker 1]
And then I'll put a record player, and we're gonna have garbage albums.
00:40:32 [Speaker 1]
It's not a cup.
00:40:34 [Speaker 1]
Okay.
00:40:34 [Speaker 1]
This is the bathroom.
00:40:36 [Speaker 1]
This is my chemical romance, the black parade.
00:40:40 [Speaker 1]
And you've you've heard me talk about the black parade.
00:40:42 [Speaker 1]
It's a story of a young man dying of cancer.
00:40:45 [Speaker 1]
So that was kind of the soundtrack to my life with James Broach passing away, with cancer, and my best friend right now has cancer as well.
00:40:56 [Speaker 1]
So they're on tour, and I've gone twice to see him on tour.
00:40:59 [Speaker 1]
I'm gonna go see him again to to see because they're playing the album in its entirety.
00:41:06 [Speaker 1]
But, yeah, we're gonna go to the black parade for the bathroom.
00:41:10 [Speaker 1]
And then I think I got one more picture up here.
00:41:13 [Speaker 1]
Oh, this is my bedroom.
00:41:14 [Speaker 1]
So I want Andy Warhol with my bedroom.
00:41:17 [Speaker 1]
And you can see the Marilyn Monroe, painting back there.
00:41:21 [Speaker 1]
I'm gonna have an artist redo it with my three daughters.
00:41:26 [Speaker 1]
So each daughter will be
00:41:27 [Speaker 2]
Oh, that's cool.
00:41:28 [Speaker 1]
Ain't that cool?
00:41:30 [Speaker 1]
And then the the last photo, Jacob.
00:41:32 [Speaker 1]
Oh, that's big piece of stone.
00:41:34 [Speaker 1]
That's a 1,800 pound, marble.
00:41:38 [Speaker 1]
And you can't really the picture's not doing it justice, but there's some burgundy in it.
00:41:44 [Speaker 1]
And so, anyway, that's that's on the 2nd Floor.
00:41:47 [Speaker 1]
And then this is the final I will have a DJ room, and I have bought this DJ booth.
00:41:54 [Speaker 1]
And you know why I've been able to do this, Kirk?
00:41:59 [Speaker 1]
There is no woman in my life to tell me I can't do it.
00:42:04 [Speaker 2]
I was just thinking in the back of my head what my wife is thinking right now as I'm gonna show her these these photos.
00:42:11 [Speaker 2]
Yeah.
00:42:11 [Speaker 2]
She's a great decorator.
00:42:12 [Speaker 2]
She'll probably like some of it.
00:42:13 [Speaker 2]
So I'm gonna Love I was thinking she probably likes some of this.
00:42:17 [Speaker 1]
Love you, Holly, but, you can't you you don't get to tell me no.
00:42:21 [Speaker 1]
You get to tell Kirk no.
00:42:23 [Speaker 2]
That's true.
00:42:24 [Speaker 1]
So
00:42:24 [Speaker 2]
So I'm I'm we we got a reference because you know Marcus is is squirming right now
00:42:31 [Speaker 1]
Oh, yeah.
00:42:32 [Speaker 2]
Because we didn't cover all of the run of show.
00:42:35 [Speaker 1]
Right.
00:42:35 [Speaker 1]
We freestyled into all sorts of weird land and
00:42:39 [Speaker 2]
We got to show your house, which which I queued it up.
00:42:42 [Speaker 2]
Thank you.
00:42:43 [Speaker 1]
You did.
00:42:44 [Speaker 1]
You did.
00:42:44 [Speaker 1]
That felt very much like prime shale acreage that I was showing y'all.
00:42:49 [Speaker 2]
No matter how much Mark tries to control us, we figure out ways to weave and and we're just the entrepreneur.
00:42:56 [Speaker 2]
We're the guy Mark's the the dude in the vest that is sitting in the meeting looking at us two going, who are those two guys?
00:43:06 [Speaker 2]
Get rid of them.
00:43:08 [Speaker 1]
Who's who's children did we hire as interns?
00:43:12 [Speaker 1]
Why are they in my meeting?
00:43:16 [Speaker 1]
Well, cool, dude.
00:43:17 [Speaker 1]
When are you back in Texas?
00:43:20 [Speaker 2]
Next week.
00:43:21 [Speaker 1]
Okay.
00:43:22 [Speaker 2]
And, I I've got, you know, some investor meetings lined up.
00:43:26 [Speaker 2]
It's gonna be great.
00:43:27 [Speaker 2]
So I'm excited to get back.
00:43:29 [Speaker 2]
I miss I miss Texas.
00:43:31 [Speaker 1]
Yeah.
00:43:31 [Speaker 1]
No.
00:43:31 [Speaker 1]
I totally, we miss you as we miss you as well.
00:43:35 [Speaker 1]
So, we look forward to having you back.
00:43:37 [Speaker 1]
If you make it to Houston, love to do it.
00:43:39 [Speaker 2]
When's the rich I wanna make it to Richmond.
00:43:41 [Speaker 2]
When's that when's the event?
00:43:44 [Speaker 1]
So they are claiming that by Halloween, it will be done.
00:43:49 [Speaker 1]
I'm not buying that.
00:43:50 [Speaker 1]
So maybe plan on the Christmas party.
00:43:53 [Speaker 1]
I think I think I'm not gonna tell them that, I'm okay with them not being done by Halloween, but I think, I think I'm I think I'm safe to plan a Christmas party.
00:44:04 [Speaker 1]
They're making progress.
00:44:05 [Speaker 2]
You know, I had to get a driver's license last because mine expired in Texas and Massachusetts, and it was issued on exactly last Halloween.
00:44:17 [Speaker 1]
Oh, no.
00:44:18 [Speaker 1]
That's right.
00:44:19 [Speaker 1]
I remember.
00:44:19 [Speaker 1]
We talked about that.
00:44:21 [Speaker 2]
There you go.
00:44:22 [Speaker 1]
We talked about that.
00:44:23 [Speaker 1]
Cool, man.
00:44:23 [Speaker 1]
Well, always a pleasure, seeing you.
00:44:25 [Speaker 1]
We'll do it again next Tuesday.
00:44:29 [Speaker 1]
Oh, Crystal said there's something in private chats.
00:44:33 [Speaker 1]
I don't know what that means.
00:44:34 [Speaker 2]
Oh, I got it.
00:44:36 [Speaker 1]
You got questions?
00:44:37 [Speaker 1]
I'll take questions.
00:44:38 [Speaker 1]
You got five or ten more minutes?
00:44:40 [Speaker 2]
Yeah.
00:44:40 [Speaker 2]
Well, let's do it.
00:44:41 [Speaker 2]
I didn't see oh, there's a private chat.
00:44:43 [Speaker 1]
Where where is
00:44:44 [Speaker 2]
the private chat?
00:44:46 [Speaker 2]
We I I usually have it open, but I wasn't watching because we went freestyling.
00:44:51 [Speaker 2]
Did y'all talk about refining yet?
00:44:54 [Speaker 2]
Yeah.
00:44:55 [Speaker 2]
We did.
00:44:56 [Speaker 2]
Short refining about in detail.
00:44:59 [Speaker 1]
Short refining margin's good till we build more plans to stay the same.
00:45:06 [Speaker 2]
Comment from same guy with the same guy.
00:45:08 [Speaker 2]
The issue with AI, we just don't know how long and how big the AI cash flow machine will last.
00:45:14 [Speaker 2]
100%.
00:45:15 [Speaker 2]
That's actually a really good point.
00:45:17 [Speaker 2]
Manchester United '81.
00:45:21 [Speaker 2]
Maybe he played for Man U in '81.
00:45:24 [Speaker 2]
But thanks for that comment.
00:45:25 [Speaker 2]
That's actually a really good point.
00:45:27 [Speaker 1]
I I know who, I know who he is.
00:45:29 [Speaker 1]
He's actually a really sharp dude.
00:45:32 [Speaker 2]
Well, he asked another good question.
00:45:33 [Speaker 2]
What if the cost comes down so fast as each incremental AI program gives less and less incremental value, thus the start to cannibalize price.
00:45:43 [Speaker 1]
There is
00:45:44 [Speaker 2]
I mean go ahead.
00:45:45 [Speaker 1]
I was gonna say there is a whole case to be made here that AI, the frontier models, and what they're able to accomplish versus what you actually need.
00:45:58 [Speaker 1]
All the open source models today can probably handle 85% of what companies need.
00:46:05 [Speaker 1]
You can run those for free on your own Apple computers.
00:46:10 [Speaker 1]
You don't even need GPUs to do it.
00:46:13 [Speaker 1]
So there's a real thought here that AI could go the way of the telecom, all the fiber optic they laid.
00:46:21 [Speaker 1]
They laid it everywhere.
00:46:23 [Speaker 1]
They didn't earn a return on it.
00:46:25 [Speaker 1]
WorldCom and all those guys went broke.
00:46:27 [Speaker 1]
But at the end of the day, I mean, totally transformed our culture with the the conductivity.
00:46:32 [Speaker 1]
Right?
00:46:33 [Speaker 1]
And so AI could be the same thing.
00:46:36 [Speaker 1]
Frontier Labs no longer are able to charge premium prices for the best models on the planet.
00:46:43 [Speaker 1]
There's open source everywhere.
00:46:44 [Speaker 1]
Boom.
00:46:46 [Speaker 1]
They go bankrupt.
00:46:47 [Speaker 2]
You know, I mean, it's it's a little bit of a tech play, but it's also a content play.
00:46:52 [Speaker 2]
And that content is in some ways it reminds me a little bit of the music industry, Chuck, and just go with me for a second.
00:47:00 [Speaker 2]
Content was always really expensive.
00:47:02 [Speaker 2]
The labels charged a premium.
00:47:06 [Speaker 2]
You had to get rights, and then Napster came along.
00:47:09 [Speaker 2]
And then you had Emule after it that just completely destroyed the profit pools of the music industry.
00:47:17 [Speaker 2]
But profits didn't go away.
00:47:19 [Speaker 2]
They got redistributed.
00:47:21 [Speaker 2]
Other people like Spotifys, Apples, other types of distributors came in and reallocated those profits.
00:47:30 [Speaker 2]
And even the musician, their money wasn't made from signing record deals.
00:47:35 [Speaker 2]
Their money was moved to touring and making money on tours.
00:47:41 [Speaker 2]
So in many ways, this AI race, content is king, but it's the tech driving the content and what it produces.
00:47:50 [Speaker 2]
So if prices collapse, I think you'll just see recaps, and the profits will just be redistributed elsewhere.
00:47:58 [Speaker 2]
I don't see this necessarily being, what's gonna like, is it gonna crush the industry?
00:48:05 [Speaker 2]
No.
00:48:05 [Speaker 2]
It's just gonna redistribute.
00:48:07 [Speaker 2]
New companies will come up and take advantage of the the low cost processing power.
00:48:13 [Speaker 2]
That's what I see.
00:48:15 [Speaker 1]
You know, if you think back to the history of technology, the operating systems always seem to wind up grabbing a monopoly and then digging their way into the application level, and that's where they make their money.
00:48:31 [Speaker 1]
So go back to, you know, Microsoft DOS, and there used to be WordPerfect and Lotus one two three.
00:48:39 [Speaker 1]
Now all you know is Microsoft Excel.
00:48:41 [Speaker 1]
Or Yeah.
00:48:43 [Speaker 1]
Exactly.
00:48:44 [Speaker 1]
Now you know is Microsoft Word, etcetera, PowerPoint.
00:48:49 [Speaker 1]
And, you can look at I mean, Google basically did that with search.
00:48:54 [Speaker 1]
Right?
00:48:54 [Speaker 1]
They'd send you to your website.
00:48:55 [Speaker 1]
Now it's something ridiculous.
00:48:57 [Speaker 1]
Like, 65 percent of all Google search is routed to properties that they're hosting, something to that effect.
00:49:07 [Speaker 1]
You know?
00:49:07 [Speaker 1]
And so it's, you know, so do you wind up with Anthropic and OpenAI in effect just delving into the application level, and we've already kinda seen that.
00:49:18 [Speaker 1]
Right?
00:49:19 [Speaker 2]
That's what Amazon I mean, same same with the Amazon story.
00:49:23 [Speaker 2]
They're that's why in the beginning, some some experts and people that I know well had said you should put everything you're doing on a private AI Because what they'll do is they'll watch all the great ideas just like what Amazon does is they they see exactly what people are searching for and looking to buy.
00:49:45 [Speaker 2]
Smaller players pop up and start providing those goods and services to the people that wanna buy these things.
00:49:52 [Speaker 2]
And then Amazon says, oh, this market's big enough.
00:49:55 [Speaker 2]
We'll we'll come out with our own product and kinda destroy the producers.
00:50:02 [Speaker 2]
But we I think it's exactly what Claude and and and, Anthropic and some of the other guys are doing.
00:50:09 [Speaker 2]
They're gonna see what the great ideas are and get into the application layer like you were saying, but they're gonna watch what all the rest of us are typing in to see what's valuable.
00:50:19 [Speaker 1]
So when they But, Bailey
00:50:21 [Speaker 2]
go ahead.
00:50:22 [Speaker 1]
When they show up with a, with an offer for Clyde, the answer will be yes.
00:50:29 [Speaker 2]
Well, Clyde's is building private AI as well.
00:50:32 [Speaker 1]
So
00:50:32 [Speaker 2]
that's one of the that's one of the ways they're separating themselves from they're getting proprietary data from customers to power it.
00:50:42 [Speaker 2]
Right?
00:50:42 [Speaker 1]
Yeah.
00:50:42 [Speaker 1]
I mean,
00:50:43 [Speaker 2]
you tell you have to
00:50:44 [Speaker 1]
Yeah.
00:50:45 [Speaker 1]
No.
00:50:45 [Speaker 1]
I mean, at the end of the day, what we're finding time and time again is the harness, all the rules and loops and data that you're putting around the model means so much more than the model itself.
00:50:59 [Speaker 1]
So, I mean, in a lot of cases, things run better on a lower capability model.
00:51:07 [Speaker 1]
And it's that it's that harness that really matters and building it up over time.
00:51:12 [Speaker 2]
Bailey Midkiff, I used to think large scale data centers made economic sense, but after talking with Nebraska farmers last week, I'm reconsidering.
00:51:20 [Speaker 2]
With strong agricultural yields and high value crop insurance, does taking a single steady corporate check really justify giving up farmland with decades of built up infrastructure?
00:51:33 [Speaker 1]
It's a good point.
00:51:33 [Speaker 1]
Great.
00:51:34 [Speaker 2]
I mean, I would love to get Bailey to to come on the show and talk more about that.
00:51:38 [Speaker 2]
That's real interesting.
00:51:39 [Speaker 1]
Yeah.
00:51:40 [Speaker 1]
Because I I think Alon's right.
00:51:42 [Speaker 1]
Ultimately, we're potentially gonna build all these data centers in space.
00:51:46 [Speaker 1]
They're gonna be they're gonna be powered by solar.
00:51:50 [Speaker 1]
You've got the built in cooling.
00:51:52 [Speaker 1]
Right?
00:51:52 [Speaker 1]
You just open the door a little bit if you wanna get rid of the heat.
00:51:56 [Speaker 1]
And, and so you and he's proved that, he can do it with STARLINK, so it'll be interesting to watch.
00:52:05 [Speaker 2]
I really like that comment from Bailey.
00:52:07 [Speaker 2]
Good question.
00:52:08 [Speaker 2]
We don't know the answer.
00:52:10 [Speaker 2]
Let's talk about it more next week when Mark's here.
00:52:14 [Speaker 2]
This is one I'm not sure if it's a joke or not, so I'm I'm not gonna I'm not trying to be.
00:52:20 [Speaker 2]
But from someone, hi.
00:52:22 [Speaker 2]
I'm a petroleum engineering level 300 student from Ghana.
00:52:27 [Speaker 2]
Are petroleum engineers still being employed in the industry?
00:52:31 [Speaker 2]
Chuck, do you know the answer?
00:52:34 [Speaker 1]
I think we still kinda need them.
00:52:35 [Speaker 1]
Although, in fairness, you know, for the last fifteen, twenty years, it feels like they've been statisticians and not actual petroleum engineers.
00:52:45 [Speaker 1]
And given that we're focused the focus has gone back to conventional and potentially looking for new prospects.
00:52:53 [Speaker 1]
Some petroleum engineering and some fundamentals are definitely gonna be needed.
00:52:58 [Speaker 2]
Here's a softball for you, Chuck.
00:53:00 [Speaker 2]
What's your take on James Tallarico's stance on how we should, quote, ensure AI data centers do not disrupt communities or raise energy costs for Americans.
00:53:10 [Speaker 2]
Guarantee large energy users like data centers fund the infrastructure improvements they need rather than passing those costs on to consumers.
00:53:21 [Speaker 1]
You know, I'd it's it's like with most things.
00:53:23 [Speaker 1]
I'd love to see the details.
00:53:25 [Speaker 1]
That sounds really good.
00:53:27 [Speaker 1]
There's probably some reasonable guards you could put on here, that I don't think me, the libertarian, would have a problem with is, you know, things like things like you need a sound barrier.
00:53:41 [Speaker 1]
I mean, there there is disruption to cattle farmers if they're right next door.
00:53:47 [Speaker 1]
So maybe you need you know, just like we have distance from the edge of the lease line to drill a well, maybe you need distance from the edge of the lease line to to build your data center.
00:53:58 [Speaker 1]
That's probably not not a bad idea.
00:54:00 [Speaker 1]
Maybe even putting in place some things like, you need to be behind the meter, and, and you can interconnect to sell to, to ERCOT.
00:54:15 [Speaker 1]
There are probably some things like that.
00:54:16 [Speaker 1]
You ought to look at what the water requirements are and what that's gonna do to the locale.
00:54:21 [Speaker 1]
So there's probably some reasonable steps we can take.
00:54:24 [Speaker 1]
But the hysteria is just off the charts.
00:54:28 [Speaker 1]
And, you know, Bernie Sanders sitting there saying we're gonna ban it.
00:54:33 [Speaker 1]
What is he gonna do?
00:54:34 [Speaker 1]
Go into everybody's bedroom and steal steal, steal the AI off your phone?
00:54:41 [Speaker 2]
He'd like to.
00:54:43 [Speaker 1]
Probably so.
00:54:45 [Speaker 1]
Probably so.
00:54:47 [Speaker 1]
Well, cool.
00:54:48 [Speaker 1]
Is that it for our questions?
00:54:50 [Speaker 2]
I think that's it.
00:54:51 [Speaker 2]
I think we've, we've got about a 24 more, but we'll, cut those for next week and let Mark read them all.
00:54:59 [Speaker 1]
Exactly.
00:55:00 [Speaker 2]
And then create a better run of show next week.
00:55:03 [Speaker 1]
Or, actually, what Mark could do is maybe an addendum.
00:55:06 [Speaker 1]
He could read all these questions and answer them, and Jacob could put could put out a supplement to BDE.
00:55:14 [Speaker 2]
Great seeing you, Chuck.
00:55:16 [Speaker 2]
Thanks for sharing the pictures of the house.
00:55:18 [Speaker 1]
Absolutely.
00:55:19 [Speaker 1]
Thanks thanks for calling it the coolest acreage in Richmond because I really do think that.
00:55:25 [Speaker 2]
Well, I'm I'm waiting for the, the invite.
00:55:27 [Speaker 2]
We're doing a b d live b d there in a slumber party?
00:55:32 [Speaker 1]
We, we definitely should do the, from the DJ booth.
00:55:36 [Speaker 1]
We'll, from the DJ booth.
00:55:38 [Speaker 2]
Yeah.
00:55:39 [Speaker 2]
I'll get Kygo to come in.
00:55:41 [Speaker 1]
There we go.
00:55:42 [Speaker 1]
That would be awesome.
00:55:44 [Speaker 1]
Cool.
00:55:45 [Speaker 1]
Alright, man.
00:55:46 [Speaker 1]
Appreciate you, brother.
00:55:47 [Speaker 2]
BDE after hours is what it's called.
00:55:49 [Speaker 1]
BDE after hours.
00:55:51 [Speaker 1]
I love it.
00:55:51 [Speaker 1]
We'll get bomber to come, come, DJ it.
00:55:56 [Speaker 1]
Alright, Jacob.
00:55:57 [Speaker 1]
Take us out.
00:55:58 [Speaker 1]
Peace.