#19

Monday, March 7, 2022

I had discussions with some friends this weekend regarding Elon’s above tweet. Some of my friends are the smartest people I know…..and in all honestly, some of them are the dumbest people I know. But I’m committed to diversity and like to surround myself with both sides.

A particular friend (one of the smarter ones) gave some good arguments for why the above tweet may be a little off or unrealistic. His overall thoughts were the following:

• There’s no solving the oil problem.
• If the West refuses Russian oil, that’s more than 10% of supply that’s gone.
• There’s not enough drilling in the US that can be done to solve that issue.
• The only real solution is massive demand destruction.
• Gas is pretty much not profitable except in the best locations, at current prices.
• And we can’t export it anyway so doesn’t really solve the European issue.

I agree with some of his points above. Maybe North America can’t completely fill the Russian gap solely overnight. But there are still ways for us to participate in a meaningful way. As for the economics….

• I believe that companies can certainly still make money in this environment.
• If you can’t make money at $100+/barrel (…currently at $121/barrel as of writing this) you shouldn’t be in business.
• But he’s speaking mainly about gas wells, so that’s reasonable.
• Not sure the exact % off top of head, but given amount of wells that are producing both oil and gas, economics would be more favorable…..vs straight gas well.

Drilling new well aren’t the only way to increase production either. There’s a significant amount of production that can be ramped up through the following:

• Ramp up drilling plans for wells that are already approved (ok…..yes, these would be new wells).
• Turning wells that have been shut-in back on (not abandoned wells but wells that have been temporarily shut in)
• Speed up the appropriate current wells that are already running/producing. (Faster hertz/speed tends to = more production. Key words here, “appropriate wells”.)
• Adopt a faster well life-cycle management plan…..fancy way of saying switch to more effective forms of artificial lift systems (one’s that can produce higher volumes, faster and more efficiently!) #ESPs

Capacity constraints are still going to be a challenge and still needs to be addressed. And we both certainly agree this won’t be possible (to the level required) without better support from both the federal and state level.

As mentioned in BW#13 (story #3) energy security is national security, which trickles down to global security. There are things (both big and small) that can be done to better rebalance the global power structure (so the world isn’t so dependent on Russia) and ensure a responsible energy transition! But for any of those things to happen, there absolutely must be long term and strategic decisions made to ensure the above can happen (think federal and state policies, regulations, etc…).

Although these may not be decisions anyone may want to make, sometimes we need to accept……desperate times call for desperate measures.

This one is short and sweet. Carl Icahn, a husband, father, billionaire, and activist investor/shareholder (to name a few). Icahn is known for being a menace to some companies. He looks for companies he believes are undervalued with the opportunity to appreciate over time…..largely by pressuring management of said company to make decisions he wants made. I’m not totally against the idea of these activist investors, so long as they are aiming to do what’s seen as right by a reasonable person. But still, these corporate raiders can don a harsh image at times.….leaving some people rooting against them.

If you’re one who is against these corporate raider types, then you may like to hear that Icahn didn’t get the changes he was demanding when he took an aggressive stake in Occidental Petroleum (although he still made money so can’t be too mad about it). Here are some bite-sized nuggets I find interesting…..

• He started off with a 2.5% stake in the company and later upped it to 10% when the shares fell at the beginning of the pandemic. Stakes he’s been holding for almost 3 years.
• He originally jumped onto this “opportunity” because he wasn’t a fan of Oxy outbidding Chevron at the time for Anadarko Petroleum.
• During the time of his holding the share, he was able to realize around $1B in profit (….yes, with a B).
• Uncle Warren Buffett helped Oxy with the financing of the deal via $10B.
• Buffet has liked what he’s been seeing so has since been buying up more shares of the company as they are now up significantly.
• Shares for the company are +120% over the last 6 months, +38% over the last 1 month, +30% over the last 1 week, and already up almost +1% so far today.

If interested, you can read more of the full story HERE. Also, Icahn is only about 5 foot 7 inches tall. See….short and sweet.

A longer post for someone deserving, IMO. Coach Mike Krzyzewski, aka Coach K (…..thankfully there’s an abbreviation!!) is the head basketball coach for the Duke Blue Devils. A team he has commanded for the last 42 years. He’s considered one of the greatest basketball coaches of all time with a resume to back it up. Don’t believe me?

• A Naismith Hall of Fame coach
• 5-time national champion
• 6 gold medals as head coach of the US Men’s National Team
• 12-time Final Four participant
• 12 National Coach of the Year honors
• 13 ACC regular season championships
• 15 ACC tournament Championships
• 35 NCAA tournament bids
• 97 NCAA Tournament wins
• 126 weeks ranked No.1 in AP poll
• 517 ACC wins
• 1,097 victories at Duke
• And ….1,170 career wins

With a majority of the above holding the record for said category. Anyways…..he’s pretty decent.

Coach K has meant a lot to the dominance of Duke basketball. And he’s meant a lot to the game of basketball itself. And with this being his last season coaching before retirement, Saturday was his last home game at Cameron Indoor Stadium, which also happened to be against rival North Carolina Tar Heels. All this quickly made the game a “must attend and witness” type of event. So much so, there ended up being some interesting nuggets worth mentioning.…

• The average ticket sold for his final home game was said to be $7,400….higher than the average Super Bowl ticket just a few weeks ago at $5,823.
• With the top priced ticket apparently being auctioned off at $250,000!!! 🤯
• Even with real estate booming across the nation, the hottest piece of real estate may have been in the campground near the stadium, dubbed as Krzyzewskiville (the area students’ campout in tents to secure a good seat in the stands once the arena opens).
• Students get into the games for free…..hence so many tents popping up in Krzyzewskiville to get in first and ensure a good seat in the premier student section. Students were camping out for months for this game.
• The tents had a dozen of students per tent with hundreds of tents present.
• And given the supply/demand dynamics at play, the appraised real estate value of this crazy pop-up tent village was estimated for around $20M…..and only for a moment in time.

Coach K has led a stellar track record, leading successful basketball programs. And doing so with the highest level of respect and reputation anyone could ask for.

Amazing. Simply amazing. For that, we thank you Coach K and we do not apologize for this longer post.

Deuces. ✌️