March 28, 2025
Things I Learned This Week on Both Coasts
Plugging Away. The Power and Energy business continues to plod along. The oil and gas subset of that is doing okay as well, but only okay. Everyone is hopeful, but we can’t say exactly what it is we are hopeful for other than an easier and less volatile life. Good luck. Though to be fair, we are not being volatile now and really haven’t for a while. Heck, I’m almost starting to miss it. We went on a steady drop, plateaued for a bit and then started to ever so slightly fade. But it can’t get much worse and still have a business. Geez, I hope that sentiment ends up being right. It is our own fault. We developed and continue to develop the technologies that allow us to produce record amounts of oil and natural gas even as rig count appears in secular decline. Everyone is taking it slow, doing it right, being efficient and it takes fewer and fewer people and less and less time. When those come together, strides are made. So, all is good, with the hope of great, hopefully sometime soon. Head down.
I Am Hard To Impress. I have been to more countries than years I have been alive. I have stayed at fabulous resorts in Bali, Thailand, Turkey, the UK and others as well as across the US. I guess you could say I am somewhat jaded. Or was. The SoCal reference last week referred to my last weekend. I was not impressed, but blown away. I spent three days at the Cal-a-Vie Health Spa in the hills outside of San Diego. Small, with only about 30 rooms, set in the hills surrounded by vineyards, I had one of my most memorable escapes. 3 mile hike before breakfast or a leisurely walk around the golf course. More treatments and activities and classes than it is possible to indulge in with only three days. There were several people older than me and many younger. I have never eaten so well in ages and it was all fabulous, to say nothing of healthy. The Meditation Center is a former French convent from centuries ago that was dismantled and shipped here. I will quit raving for now but if I ever had a recommendation of where to spend a week, this is it. Perfect. And owned by a Texan. Icing on the cake.
Then the Swamp. Then I crossed the country and spent three days with my 21 and 23 year old “kids” in Washington DC. Cherry blossoms, gorgeous weather, really no protestors. All good. My kids have no idea how cool it is for me to have them both for dinner three nights in a row, at their age. Thanks guys.
He Did Something. A couple of years ago the Biden administration, in an effort to lower gasoline prices, agreed to lift sanctions on Venezuela’s oil industry, worth billions to the then-fragile Maduro presidency. In return, Maduro promised to hold “free and fair” elections and allow all parties to participate. Of course, as soon as he figured out “oil leverage”, he went after parts of Guyana. And his opponents were jailed and banned from the election. And nothing happened. Till now. This week, Mr. Trump issued an Executive Order imposing a 25% tariff on goods from any country that imports Venezuelan oil and gas. Regardless of who likes us or not, the economic clout of the US is significant. Very significant. We are 6x the size of Germany in terms of GDP and as big as China, India, Japan and Germany added together. That is clout. Getting caught cheating could be punitive. Mr. Trump is now framing it as retribution against Venezuela for its high migration-out and the continued hostility to the US and its interests. Chevron, who’s license was reinstated under Mr. Biden, is now shutting down operations. The problem is the web of global trade. Venezuela exports oil and gas to a variety of countries, including China, Russia, India, Spain, France and others. Implementation might be tough. But that doesn’t really help Venezuela.
And They’re Off!! The Oil and Gas Journal puts out a weekly view on different topics. The March 26th issue stoked my interest. Below are headlines from that one piece.
Cheniere reaches substantial completion at CCL Stage 3 Train 1
Rio Grande LNG boosts planned capacity to 45 million tpy
NextDecade signs agreement with Baker Hughes for Rio Grande LNG trains
US DOE issues export permit extension to Golden Pass LNG
Venture Global sanctions Plaquemines LNG Phase 2
Woodside, China Resources sign 15-year LNG supply deal
Woodside highlights growth projects, notes Louisiana LNG partnership talks well under way
ADNOC signs LNG sales and purchase agreement
Secretary Wright, at CERAWeek, grants LNG export extension to Delfin LNG project
Positive to the Last. “(The) sentiment for natural gas is slightly better with incremental LNG capacity in North America set to come online later this year and through 2026. Providers have begun noting a modest uptick in natural gas rig and frac inquiries for later this year. We think the order of magnitude could be up to 20 rigs for the industry.” That is from a very good and experienced analyst. We don’t disagree with the number. But look at where we are today. We are throwing a party because natural gas prices, after being in the ditch for 2+ years, are looking 60%-75% higher this year. Fabulous!! But efficiencies have improved so much over the last decade or two that we can meet those increases in demand by adding “up to 20 rigs”. A lower bar than in the past.
PPHB U.S. Energy Market Update Highlights:
Commodity Prices: WTI crude oil is currently $69.92 per barrel (up ~2.7% week-over-week) and natural gas is $3.93 per MMBtu (down ~2.8% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.6 million barrels per day (up ~3.6% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories decreased by ~3.4 million barrels week-over-week vs. an estimated increase of ~1.5 million barrels.
Frac Spread Count: There are currently 215 frac spreads operating in the U.S. (an increase of 3 spreads week-over-week).
Onshore Drilling Rig Count: There are currently 576 drilling rigs operating in the U.S. (no change week-over-week).
5-Star. Voyager, the owner of portfolio company VooDoo Energy Services with operations mainly in the Haynesville, made an investment in Tejas Completion Services, operating primarily in the Permian, combining operations under a single banner. We would expect the combined operations and financial savvy will be a consolidator in the market. PPHB acted as Advisor to Tejas.
Another One. PPHB acted as the advisor to zdSCADA on its sale to Quorum. zdSCADA is a leading provider of cloud-based SCADA solutions, enabling E&P and midstream operators with real-time monitoring, control, and reporting services. Well done!
Catching the Train. Capital raises by the oil and gas industry have been limited for some time now. Oil company consolidation numbers have been impressive and made stock market news, but most were stock deals and had little or no reliance on the equity or debt public capital markets. I can name only a handful of IPOs in either E&P or OFS over the last several years. As it turned out, the same was true of capital market activity in other sectors as well. Reports are that markets, especially in the AI and cyber security sectors, are getting more active. 66 IPOs have been filed, a 27% increase from the same period last year, according to one source. 46 IPOs have priced in 2025, up 53% over Q1 of 2024. We see where the more industrial-focused companies, in water, power and midstream, will participate, which is a clear positive for those sectors. More traditional oil & natural gas focused sectors will probably sit this one out for now.
Snippets.
Iraq has reached an agreement with BP for the redevelopment of the Kirkuk oil fields, with the initial phase including production of more than 3 bboe – one of the largest projects in the region.
An EU ban was issued last year on Russia. LNG transshipment has finally taken into effect, as the region’s reliance on Russia drops as other sources expand.
Does a 25% tariff on new Porches increase demand/price for used 911’s already in the US? Asking for a friend.
Best Headline. Banker Dreams of M&A Riches Are Getting Dashed in the Trump Era – Bloomberg
Another. India Turns Away Russian Oil Tanker As Sanctions Evolve
Follow Up. Delfin LNG has been issued its license to own, construct, operate, and eventually decommission a deepwater port, to export LNG from the United States. Party! The Deepwater port facility would be about 40 miles offshore from the Louisiana coast. What makes it more interesting is that MARAD (Marine Administration to you landlubbers) and the US Coast Guard worked with about 15 different federal agencies along the states of Louisiana and Texas to approve this application. That’s a lot of red tape. The License is being issued in accordance with the “Unleashing American Energy” executive order signed by President Trump. We already have the Louisiana LOOP for oil. This will be the first offshore deep water LNG export terminal. Only a few months in and progress is already being made.
Three Wasted Years. Just Stop Oil, focusing on human-caused climate change, is the UK group who have famously blocked roads and thrown tomato soup on Vincent van Gogh’s popular, and exceptionally expensive, Sunflowers. Sprayed orange paint over a number of banks and car dealerships, over the past three years. Oh, and then there was the defacing of Stonehenge. (Is nothing sacred?) They have decided to change tactics and no longer indulge in the disruptive, often illegal, and completely ineffective actions of the past. And look at what you have accomplished. 16 members were imprisoned last year alone. And hated by most every motorist. Ignorance has its costs.
Megatron. You probably have read, and I hope not impacted, by the recent shutdown of Heathrow airport. A couple of transformers blew up and killed all power to the airport. One was brought back online fairly quickly, but two others were badly damaged and probably need to be replaced. The problem is that none are available. The backlog of one of the most critical elements of the electrification of the world is well over a year. Sweeping announcements of power generation from wind, solar, natural gas and others sound great, but without more manufacturing capacity, it can't happen. Reality meets politics. And the extended supply times are likely to get worse. A transformer. And not the robotic kind!
Titles. An environmental scientist, Michael Mann, and his lawyer filed and won a defamation suit against two people , Rand Simberg and Mark Steyn, for comments made in an op-ed piece. Mann claimed the jury’s decision was “a victory for science and a victory for scientists.” This week, a federal court said the scientist and his lawyer acted in “bad faith” and “made false representations to the jury and the Court regarding damages stemming from loss of grant funding.” Scientist? And some people wonder some are skeptical. Rather than comment on the merits of the case, now settled, what I found interesting was Mr. Mann’s title at Penn State. Mr. Mann is the “presidential distinguished professor of earth and environmental science and director of the Penn Center for Science Sustainability and the Media” as well as Penn’s “inaugural vice provost for climate science, policy, and action”. And we thought Vice President or Managing Director was cool!
It’s the Little Things. Baker Hughes announced winning an open tender bid for a major, multi-year fully integrated completions systems contract with Petrobras. That is a big deal and a very well written press release by one of the industry’s top IR teams (CM, you owe me a beer). According to the company it “will leverage Baker Hughes’ innovative completions technology portfolio and extensive experience in Brazil to optimize production across multiple deepwater fields”.
“A range of technologies from Baker Hughes has been specifically tailored to meet the needs of Petrobras’ offshore developments.”
“Deepwater, high pressure wells require an unmatched level of reliability, and our completion technologies have proven themselves in these harsh environments.”
And the first, the very first piece of technology specifically called out, in the press release, which obviously had a major impact on Baker’s win of the contract? An interval control valve. A Premium interval control valve, but… It enhances “reliability in high flow rate wells”. I don’t know the term or magnitude of the contract but tens of millions and several years at least. And the differentiating technology, specifically called out by the winner of the project? The new SureCONTROL interval control valve. It is just one of many great and wonderful technologies of Baker Hughes. But if you ever wondered about the value of digital/mechanical technology, you should know better now.
Commodity Trading. From John Kemp:
Investors have cut their near-record bullish position in U.S. natural gas as a combination of milder weather and high prices curb consumption and result in an unusually early increase in inventories.
Hedge funds and other money managers sold futures and options equivalent to 351bcf in the two major contracts based on prices at Henry Hub over last week.
Fund managers have sold in three of the last four weeks, reducing their combined position by a total of 650bcf since February 18.
The Covey. A couple of weeks ago, we wrote about meeting Bill Brown and seeing his Big Easy development west of Houston. An oilfield service entrepreneur turned resort mogul. Fascinating guy and beautiful spot. David de Roode and I did a podcast with Billy. Here is the link for the Oilfield 360 episode.
Progress! Bloomberg Green analyzed transcripts of S&P 500 company earnings calls going back to 2020, tracking mentions of more than a dozen terms including climate change, global warming, ESG, clean energy and green energy. On average, companies are talking about the environment 76% less than they were three years ago.
Lufkin Sold Again. Lufkin sold its North America downhole business to Q2 Artificial Lift Services to focus more on software, automation and surface gear. Q2 picks up the downhole pumps, rods, and team, boosting their capabilities in artificial lift.
Any and all comments, arguments and rebuttals are welcome!
In addition to my association with PPHB, I serve on three private company boards. Merit Advisors is a property valuation company and I have long been a fan of optimizing how a business is run, not just the tools we make. Merit is in the business of savings companies’ money, actual cash, by doing a much more in-depth and realistic view of equipment and reserve valuations and I am very impressed with their work. I am also on the advisory board of Preng & Associates, a leading executive search boutique that specializes in all things related to Energy & Power. Nova is a gas compression company run by a very dynamic CEO with a very strong board and ownership.
I serve on the Advisory board of the Energy Workforce & Technology Council (formerly PESA), the National Ocean Industries Association (NOIA), and the Maguire Energy Institute at SMU my alma mater.
jim
214-755-3914 | james.wicklund@pphb.com
Leveraging deep industry knowledge and experience, since its formation in 2003, PPHB has advised on more than 180 transactions exceeding $11 Billion in total value. PPHB advises in mergers & acquisitions, both sell-side and buy-side, raises institutional private equity and debt and offers debt and restructuring advisory services. The firm provides clients with proven investment banking partners, committed to the industry, and committed to success.
