SD vs MN on Clean Energy

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South Dakota clashes with Minnesota on clean energy, coal plant closures

ConocoPhillips sues over Biden’s oil and gas drilling ban in Alaska

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:15] What’s going on, everybody? Welcome into the Tuesday, July 9th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, South Dakota clashes with Minnesota on clean energy and coal plant disclosures. Next up ConocoPhillips sues Biden administration over oil and gas drilling ban in Alaska. Next up moving over to the UK labor 2030 net zero grid target visable question mark. Well, really, at what cost? This is an interesting title that makes it hard to read, but this will cover some of the craziest that’s going on in the UK right now. Next up and I mix oil and gas discovery off the Mexican coast. Very interesting. And then finally in the news segment US fuel prices set for volatile summer. Stu, then toss to me I will quickly cover what happened to oil and gas prices today. Kind of down mainly due to the fact of hurricane hurricane barrel barreling down, pun intended on the Texas coast in fear of some demand supplies. And then we also got a fresh new M&A deal Devon Energy snapping up breaks in mill. A little foreshadowing we did in the Deal Spotlight episode I recorded a few months back with John Farrell. So nice cover, all that and a bag of chips guys. As always, I’m Michael Tanner, joined by Stuart Turley. Where do you want to begin? [00:01:34][79.0]

Stuart Turley: [00:01:34] Hey, let’s start with our buddies up there in South Dakota. Love me some. South Dakota. South Dakota clashes with Minnesota on clean energy coal plant closures. As gas and electric companies transition away from fossil fuel, South Dakota officials stress reliability of resources in extreme weather. They get cold up there. Besides having to play poker, you know, to, you know, to try to warm up. This is really kind of interesting. A border war is between South Dakota and Minnesota on how to handle the tax policies. Appropriation and pandemic response could spill over into renewable energy in the future. Oh yeah. Let’s listen to this. The Democratic Minnesota legislator in 2023 passed a law in 2023 requiring all electric utilities in the state to produce only carbon free energy by 2040. [00:02:30][55.3]

Michael Tanner: [00:02:31] Now they’re just making up terms. What is carbon. [00:02:33][2.3]

Stuart Turley: [00:02:34] Free? Carbon free means absolutely zero carbon being put into the atmosphere. And how do you do that? Nuclear unless you’re going to start, you know, going out and making nuclear nuclear’s the only thing that can do. [00:02:46][12.9]

Michael Tanner: [00:02:47] That nuclear plants had to burn some fossil fuels. And really so this comes back to scope one, scope two, scope three. I just have carbon free. Oh what does it even mean right. [00:02:56][9.4]

Stuart Turley: [00:02:57] You know, what you have to do is plant all the farmland that you can in Minnesota and you’ll be carbon net zero in Minnesota. I could solve this in about 2.5 seconds. Xcel energy 3.7 million electrical customers include about 100,000 South Dakotans based in Minneapolis. So that’s why it is now impacting each other. It’s not because one side’s gonna have the coal plant, have the air go by. But you know what, Michael? With over 75 volcanoes going around the world, net zero is not going to happen. [00:03:33][36.6]

Michael Tanner: [00:03:34] Yeah, I love this article. We actually put the the full PDF that was sent by the president of Xcel Energy who’s over or no. This is to prove who’s this from. This is from the commissioners over in Minnesota to write Xcel Energy, who I’ve been. [00:03:50][16.1]

Stuart Turley: [00:03:50] Asking for, Gary Hansen and Chris Nelson. [00:03:53][2.9]

Michael Tanner: [00:03:54] I will admit, I back in Colorado, I was a longtime Xcel Energy customer. I do like them. Obviously regulated monopoly. They’re part of the Midcontinent Independent System Operator or Miso grid and they’re. Yeah, it’s it’s very interesting, you know, closing coal to spin up. It’s going to be very interesting. [00:04:10][16.4]

Stuart Turley: [00:04:11] Listen to this. Miso is going to estimate that 103GW of generation will be closed over the next 19 years. 80% of that is dispatchable. How are you going to replace 80% of your grid dispatchable energy you can’t. [00:04:30][19.0]

Michael Tanner: [00:04:30] Get you get a bunch of mice on treadmills just losing their mind. [00:04:33][2.7]

Stuart Turley: [00:04:34] It’s still not dispatchable. I mean, you’re going to go harder. Yeah. You’re running for. Geez. We’re geez. Anyway. [00:04:40][6.7]

Michael Tanner: [00:04:41] All right. What’s next? [00:04:41][0.6]

Stuart Turley: [00:04:42] Let’s go to Conoco Phillips. This is important. ConocoPhillips sues over Biden’s oil and gas drilling ban in Alaska. Michael, this is important because of the Chevron deference Supreme court ruling. This is important. This is the fourth major anti deep state legislation through regulatory action. And ConocoPhillips is now stepping up to it a I love Alaska B I love the environment C. Phillips does a great job drilling for a low cost energy and they need to go drill turn them loose. Congress did not authorize BLM to promulgate sweeping regulations that thwart and prevent the production of petroleum through the end PRK, Conoco Phillips said. Yet the rule contains numerous new provisions that elevate resource preservation over energy production and effectively turn the petroleum reserve into a de facto wilderness area, which development is outright prohibited. Here. Here’s the thing. Why are they doing this when they aren’t saving the whales that you love to kill? I mean, you would think that the wind farms would have the same kind of regulatory actions on them. [00:06:00][77.8]

Michael Tanner: [00:06:00] The real question is, is, is is this in light of the Chevron decision? Yes. So this so my point is this is exactly why not having executive and regulatory agencies cover this stuff is critical. Because if the if a new if a different administration was in there, this rule may or may not exist. And taking that power away from the regulatory agencies and putting it back in the proper functions, which is the democratically, the democratically also put that it’s the democratically elected Congress and the courts is a much better system. But I vote I think you’re going to see a lot more of these type of cases now that that Chevron decision is overturned. Obviously, Alaska, with 1.8 million acres of state and federal leases that ConocoPhillips could drill on, including 1 million net undeveloped acres. There’s a lot that could be developed there. [00:06:50][50.0]

Stuart Turley: [00:06:51] The Alyeska pipeline is, I believe, it’s past its retirement date that they had projected, and it’s only about 20% used. They could still pump out a lot of oil down there. And I would rather have California buy oil from Alaska and truck it down and buy it from America and know that it’s not coming from Iran or China. Sorry. Yes. All right. Next article Labor’s 2030 net zero grid target is feasible. Really? And at what cost? I mean, you almost have to sound like Scooby Doo. Really? Chris Skidmore, how would you like to have that name? Former UK cabinet minister for energy and Chair for the Net Zero review. As stated that achieving the 2030 net zero targets is feasible. But listen, Michael, only with absolute commitment from the new labor government and the new labor government is all in on green. They are firing up every Green New Deal thing that they can. And here’s where they’re getting it in. Even worse, on a different article. They’re going to be putting in what’s called virtual power plants. Those virtual power plants are nothing more than another control scheme, so that they can have your refrigerators and everything else to shut off if you have a bad week. [00:08:18][86.9]

Michael Tanner: [00:08:18] Yeah. I mean, you already don’t have AC in in the UK, which is fair. But now they’re going to they’re they’re slowly going to shut off your heat and just make you build your own fires. It’s literally taking a step backwards. I mean, there’s going to be a massive investment in renewable energy. I mentioned this on the show yesterday. You’re going to see oil and gas companies that are based in the UK moved their public listings right to the United States stock exchanges. It’s an absolute guarantee. It’s going to be very interesting to see what this new administration does, because this is a huge shift in leadership. I mean, the UK obviously has been a little bit more liberal. I mean, the Conservative Party over in the UK isn’t necessarily what we would. [00:08:58][39.3]

Stuart Turley: [00:08:58] Do for a minister. [00:08:58][0.4]

Michael Tanner: [00:08:59] Here in the United States. But there’s this is swung all the way for the first time since I think Tony Blair back in 1997, was the last time they had a labor. You know, Prime Minister, it’s going to be crazy. I love that this the the the this guy. They have a the UK cabinet minister for energy is also the chair of the net zero review. What how how how can I want that job. [00:09:23][23.7]

Stuart Turley: [00:09:23] Oh yeah. Where are you. Yeah it’s a it’s a fast. And the World Economic Forum that the new UK prime minister is buddies with the the World Economic Forum. So let’s go to the next one here Ian I makes oil and gas discovery and off Mexico coast. This is pretty cool Italian energy group Ian I opens that new Deb and it is discovered in this arrested basin about 63km off the coast of Mexico. It says on Monday. It’s pretty cool. They call block nine 300 to 400 million barrels of equivalent MBO. That’s pretty darn cool, dude. [00:10:03][40.2]

Michael Tanner: [00:10:04] Yeah, it’s it’s pretty big there. 5050 joint venture partner over there with Repsol. And I’ve made a bunch of different discoveries off the Gulf of Mexico, but that’s in what’s called Mexico. You know, in the Mexican territory per se. Quote from any says the overall estimate of resource in place currently exceeds 1.3 billion boe barrels of oil equivalent, which includes gas. So again, as we talked about on the deal spotlight, when you hear BOE think scam because they’re shoving in gas and gas is worth nothing. So if you’re just going to combine, you know, but that’s for another time. This is going to allow and I do advance the study store future hub development. Hey, you know the world needs more oil and gas. So I you know, this is great. Great for Mexico. They’re going to not have to produce this stuff, right. You know, they’re just gonna be able to take a royalty off. This is going to benefit, you know, the the world population but specifically world oil demand and supply, but also really going to help Mexico get some much needed funds. So all around great. [00:11:00][56.4]

Stuart Turley: [00:11:01] I think it’s fantastic. Yeah. Let’s go to the next article here. U.S. fuel prices set for summer. Volatile volatile summer. Here’s where it gets a little funny. It says in the article that they’re set for more volatile summer. This year is expected busier than her usual hurricane season, and already high temperatures could weigh in on refinery production. Listen to this the Gulf Coast hosts more than 47% of the U.S. petroleum refining capacity, as well as 51% of the natural gas processing plant. Wow. So anytime you have a barrel making landfall today, who knows how bad it’s going to be? But you sure? It depends. If it’s a category five hurricane season, they say there’s what, 18 already named storms that are stacked up? [00:11:52][51.8]

Michael Tanner: [00:11:53] Yeah, they’ll find a way to. They’re already finding a way to make sure this is this is because of climate change. So. [00:11:59][5.7]

Stuart Turley: [00:11:59] Oh yeah. [00:11:59][0.3]

Michael Tanner: [00:12:00] We’ll keep you up to speed on that. A lot of temperatures, you know, higher temperatures this summer though, that are definitely forecast though is the main cause for this. You know, you’re going to see about 50% of that petroleum refining capacity shut down because of this. It’s definitely going to kind of swing everything. It’s going to swing oil prices, as we’ll see in a bit. [00:12:15][15.7]

Stuart Turley: [00:12:15] So and the Biden administration, with their infinite wisdom, destroyed the gasoline reserves strategic reserve up there. And that is going to cause more volatility. [00:12:28][12.8]

Michael Tanner: [00:12:29] Yeah. No, you’re absolutely right. This is why having the Strategic Petroleum reserve, the strategic gasoline reserve is critical to take out this volatility. But because we’re looking for a political win and the Biden administration is looking for a political win, they’re willing to basically put the U.S. consumer at risk of these volatile prices. So they say don’t bite the hand that feeds you. You learned that as a young kid. Well, we’re learning that lesson the hard way. Oops. [00:12:55][25.3]

Michael Tanner: [00:12:55] All right. Well we’ll jump over to oil and gas prices. But before we do that guys, we got to pay the bills. Thanks for checking us out here on the world’s greatest website, dot Energy News beat.com. All the news and analysis that you hear is brought to you by said website. We appreciate Stu and the team who keep this website up to speed. Everything you need to know to be the tip of the spear. When it comes to the energy in the oil and gas business. You can also hit the description below this podcast and find all the links to the articles links to the timestamps. You can also follow us on the Energy News beat.substack.com link below in the article. And if you haven’t realized this before, we go ahead and run the show every morning having recorded it, recorded it the afternoon prior. So if you want tomorrow’s news today, sign up for our Substack. We go ahead and run all of the articles that we cover on this podcast and run that first thing on the Substack, so you can go ahead and get Tomorrow News Today available exclusively on our Substack. Go ahead and subscribe to make sure you stay up to speed with that. You can also check out the description below for dashboard.Energynewsbeat.com. [00:13:55][59.4]

Michael Tanner: [00:13:58] I think the other thing that is, is interesting, Stu, is, is, you know, talking about Hurricane Beryl and what’s it going to do to oil prices and natural gas prices, considering what all this refinery, you know, what’s going up is going to be interesting. Before we get into oil prices, though, we’ll just quickly check in. Overall stock market fairly flat today, to be honest. After 4 or 5 days of of insane upward movement, things have kind of flattened out today, only basically flat for the S&P 500. Nasdaq up about a 10th of a percentage point two year yields up a quarter of a percentage point. Ten year yields down a quarter of a percentage point. So short term outlook actually looking fairly good. Dollar index up a 10th of a percentage point. Bitcoin up 1.1 percentage points. Still out still below 60,050 6504. As we record this oil prices down about one percentage point as we record this here in the afternoon. 8218 Brant oil only down a quarter of a percentage point 8599. Trending right along that 86 mark. Natural gas price is actually up about two percentage points, again, mainly due to the fact of a forward looking supply which is going to be somewhat restricted. So it’s always good, always good for for natural gas prices. But getting back to to oil prices, you know mainly why prices are easing as we said hurricane barrel no pun in. Tended for, you know, oil price per barrel. You know, a lot of U.S. refineries being shut in and ports along the Gulf of Mexico. But there’s also hopes of a possible cease fire deal going on in Gaza right now, which, again, is going to reduce worries about global crude oil supply disruptions. I think the other thing, you know, this year. Warren Patterson ING Analyst While this puts some offshore, he’s speaking about specifically Texas and the hurricane, while this puts some offshore oil and gas production at risk, the concern when the storm makes landfall is the potential impact it could have on refinery infrastructure. Again, this this cease fire plan going on in Gaza being mediated by Qatar and Egypt. So I’m not the most confident that. Exactly. Facial expressions, if you’re watching this on YouTube said everything it was. [00:16:02][124.7]

Stuart Turley: [00:16:02] A I pulled a Scooby. [00:16:03][0.7]

Michael Tanner: [00:16:04] Was it was a Scooby. Something interesting to see there again. If nothing concrete comes from those ceasefire talks, some of that geopolitical strain is going to continue to stay that obviously we saw France move left wing a little bit. So again, some of this net zero stuff like we’re seeing in the UK is going to come into effect. The only other thing that really happened today was we got a nice little M&A action here. Devon Energy announced this strategic acquisition in the Williston Basin by go ahead and swooping up private oil and gas come and cap back Grayson Mill Energy beefing up its back in position. They go ahead and authorized share repurchases a share repurchase program about $5 billion. But let’s go ahead and read some of the transaction highlights. Again. This is from their press release. So say everything with a grain of salt. You got to start each highlight with an A with with a nod to the accretion immediately accretive to financial markets. You know they love to say that they they acquired these assets at less than four times EBITDA, which means it was just right up there at buy 3.99 multiple, which is pretty interesting. Beefs up their back in position, adds about three. Basically, their total pro forma oil production will be at 375,000 barrels per day, goes ahead and adds about 307,000 net acres, which is about 70%, an average of 70% working interest. The production that was acquired from those net acres, or via Grayson Mill, was about 100,000 boe per day, which is about 55% oil. They expect to realize about $50 million in annual cash flow savings from operational and marketing efficiencies. Yikes. Got about 500 gross locations and 300 high quality refract candidate. We’ve we’ve we’ve deep so low in the bottom of the barrel now in terms of where we’re going with these acquisitions that we’ve got a highlight refract candidates. And I don’t want to you know, I’m really trying to to to set up. And we’re definitely going to set up a deal spotlight on this. But if you’ve got a highlight refract, candidates. [00:18:02][118.5]

Stuart Turley: [00:18:03] Know you’ve had me at the highlighting of the EBITDA. I mean, when you talk about earnings after and excluding exploration, that’s a common metric. [00:18:13][9.6]

Michael Tanner: [00:18:13] I just think of it. [00:18:14][0.5]

Stuart Turley: [00:18:14] It is, but it’s non-GAAP. That is a warning sign to me. I as soon as I hear that I go dig for certain parts of the financial. [00:18:21][7.6]

Michael Tanner: [00:18:22] Yeah. So Devin’s claiming on a pro forma basis, their inventory up there in the Wells to basin will be extended by up to ten years at a constant development pace of three operator rigs. Super interesting. There’s a decent amount of midstream ownership that comes into play here. You know, you know, Gracie Mill owned about 950 miles of gathering systems, an expensive and an extensive network of disposal and crude oil storage terminal. So that’s pretty good there. You know, pretty interesting. You know, they were able to to buy this for mostly cash, 3.5 billion of that 5 billion price was paid in cash. And they issued about 37 million shares valued at about 1.57 billion. That cash portion is financed a little bit through cash on hand in debt to be super interesting. Here’s the thing. If you listen to the deal, spotlight that John Farrell and I did when we covered cord and and or plus, you’d notice that this was kind of our next acquisition target for the BOC. And we actually spent a little bit of time at the end of that episode looking at Grayson Mill and trying to figure out who may swoop in and get that. We actually thought maybe it was marathon. All that being said, I think it was pretty obvious. You your end cap, who’s the private equity company that owns Grayson Mill. You were looking to shop this for as much as you can. I think for Devin it’s it’s interesting you you know, Devin was was floated around there as somebody who was going to make one of these mega mergers or mega deals. You know, they were talked about with all of the other big boys that were being talked about there, and instead they, they settled for a for a smaller, you know, acquisition of Grayson Mill, obviously 5 billion. Is it small? But it’s going to be interesting to see what they decide to do from here and where they go. I think Devin you know, they they’ve had their their, their troubles over the years. They they’ve kind of found their footing in the, in the last least in the most recent years. The difference is though, they’re heavy in the Delaware Basin. And now this sort of splits them. I mean obviously if you’re if you’re at Grayson Mill, it’s probably good because they’re still going to need your. Operational knowledge because they’re not necessarily a huge back end player. They are a little bit of a back end player, but I think ultimately it’s going to be super interesting. But, you know, good for everybody at Grayson Mill. I know a lot of people that work there. They do really good work there on the forefront of a lot of really cool stuff when it comes to technology, when it comes to, you know, enhanced oil recovery, all that stuff. So excited for that team. I think Devin had to do something. I think they were probably in on a lot of other acquisitions will be, you know, we’ll never know this, but it’ll be interesting to know where this was on the line of their potential acquisitions from there. So super interesting. But that’s really all I’ve got. Stu. What up. Well, what do you got for us? Anything else to close us out? [00:20:52][149.5]

Stuart Turley: [00:20:52] Oh, just buckle up and enjoy the Democrats implosion. And it’s a sad day also as well to watch the implosion. So you know is Biden going to step down. I don’t know. Is he going to step aside not have Jill has anything to do with it? I don’t know, but he’s. [00:21:10][18.1]

Michael Tanner: [00:21:10] I think if if Biden takes a cognitive test, we’ll take cognitive tests and we’ll see who. We’ll see how it all lines up. [00:21:17][6.4]

Stuart Turley: [00:21:17] Now, you’re now you’re playing mean. [00:21:18][1.4]

Michael Tanner: [00:21:19] Well, he might beat me. Are you never with me? You never know. [00:21:22][2.6]

Stuart Turley: [00:21:22] I don’t know me. Me either. I’m like. [00:21:24][1.6]

Michael Tanner: [00:21:24] Biden. I’m better. I’m only good between the hours of ten and four. [00:21:27][2.8]

Stuart Turley: [00:21:27] But I’m like. I’m more like Toby Keith. I’m good once, as I always was. [00:21:32][4.2]

Michael Tanner: [00:21:32] Nothing like leaving it with the Toby Keith reference, guys. But with that, we’re going to let you get out of here, get back to work, start your Tuesday. We appreciate everybody checking us out here on the world’s greatest podcast energy newsbeat.com for Stuart Turley I’m Michael Tanner. We’ll see you tomorrow for. [00:21:32][0.0][1253.7]

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