Major M&A Wave Predicted in Oil Industry – Ernie Miller

Major M&A Wave Predicted in Oil Industry – Ernie Miller

hey everyone I’m Jeremy Safford you’re watching Kito news don’t forget to hit that subscribe button for the latest now this year the oil Market has seen some growth in demand but it’s cuts from OPEC and Supply disruptions that are really pushing prices up and we’re also seeing geopolitical tensions in the Middle East and Europe adding more pressures and of course adding a layer of complexity to Global energy security and the oil and gas market dynamics now on the natural gas front the US is dealing with an oversupply that’s broadly affecting everything from the electricity cost to the US Commodities we’re going to find out what that means joining us to unpack all of it today is Ernie Miller CEO of verd clean fuels Ernie brings uh Ernie brings over 25 years of experience in the energy sector with a deep focus on innovative solutions for using stranded natural gas which we will get into in a little bit but Ernie thanks for joining us today thanks jemy happy to be here yeah I appreciate your time and I kind of want to give a little bit of a macro talk let’s start by discussing the Dynamics of the oil sector I mean as I said in the given that the global oil demand is projected to grow somewhat modestly in 2024 yet Supply disruptions and OPEC plus Cuts continue to push prices higher give our audience the lay of the land here where are we right now in the global oil Market well you know it’s a uh it’s a complicated environment I I think we’re going to see demand growth uh probably slow a bit you know we’ve we’ve really we’re dealing with some uh some whack luster macroeconomic conditions in a in a high inflation High interest rate environment we’re also dealing with a a post-pandemic recovery that uh you know that’s running out of steam and um and it you know all these factors are are contributing to slower to slower demand growth and you know on the on the other hand we are we we’re seeing Supply disruptions that that that’s going to have you know kind of the opposite effect on pricing and then and then of course we’re always you know one we’re always one geopolitical then away from you know $140 crude pick a number you know and um and so and that you know that that whole whole factor is is playing into into the equation as well yeah you know that volatility in the Market’s been quite quite outstanding to watch how do you see these Dynamics affecting the global energy security especially given tensions in you know key oil producing regions we talked a little bit about the Middle East I mean are teams in the boardrooms of the majors just watching things carefully here or they focused on other things no no they’re certainly watching watching you know very closely and you know when you when you think about uh overall uh o overall oil production you know you you’ve got 11 12% coming out of coming out of Russia that’s that’s an absolute wild card today you’ve got you know another another large Shunk coming out of the Middle East that that’s obviously a um another another uh point of point of risk and um and you know we’ve we we’ve got the obviously the the situation in Israel with with Hamas and how uh and how other Regional players like Iran may may or may not uh you know jump into the fry you know I think the uh I think the market really held its breath when when we we had the uh the Iranian drones heading over towards uh towards Israel and I think it you know Collective sigh of relief when the response was you know from from Israel was was measured and um and and so you know we’ve we’ve got a u we’ve got a geopolitical environment that’s that’s very that’s very tough very complicated between Russia and the Middle East you know we it’s It’s Not Unusual to have to have to have one but maybe maybe both in play at the same time is uh is is particularly uh particularly tough and then um you know and then and then all the all the more macro economic factors that are that are driving driving things as well right right tell me a little bit there talk to me a little bit about you know the global dependence on oil obviously this isn’t going away anytime soon I think people understand that but could these volatile Dynamics lead to new geopolitical alliances or maybe further conflicts within these regions that are oil Rich it it it’s it certainly could and and you know for all the talk that’s gone towards um you know towards a and easing on on the Reliance of oil the the fact the fact is that the numbers just don’t bear any of that out it’s um yeah you know I read something the other day that that we haven’t we haven’t even seen peak oil yet and so um or PE oil Demand yet and so oil is is going to continue to you know for the foreseeable future to be uh to to really be the biggest part of of the the energy the energy sector even even as the the transition to to cleaner and alternative you know lower carbon um Solutions continues to develop o oil is is oil will be king for a long time to come yeah absolutely and I think people are starting to get that I mean we saw this obviously when uh Russia went into Ukraine we saw this energy scarcity happen in Europe that really brought to Spotlight this talk about the energy trans you know this revolution in green energy and we realize that we couldn’t meet those demands and those goals as quick as they could I’m curious though you know with the US reaching near level uh near record levels of oil production not seen since before the pandemic when all of this kind of happened how sustainable do you believe that this growth is with the Biden administration’s energy policies I you know I think that the I think that this growth and you know these these levels and and growth from here is is quite sustainable uh frankly you know the Biden Administration has has you know there’s been a lot of talk about about restrictions and and uh you know slowing down development and and you know to a degree you know there there might be um there there might be less in the way of of exploration of new of of of new potential fields and formations but you know we the the industry is getting so much better at at producing what we what we have you know um that you know fracking Technologies are have have come along and we’re and we’re seeing much more uh much more production out of these you know out of these Legacy reservoirs that we’ve ever seen and I I believe that that will continue I think that the industry will will continue to get more and more efficient at extraction and um and we’ll be able to we’ll be able to you know use existing existing production and produ producing basins and producing areas to uh to extract increasing amounts of oil for quite some time yeah and I mean there’s so much down there it’s fascinating you and I need to unpack a little bit about that new technology but before we do that could the increase in production help the US expand its share in the global market here or are there substantial challenges that might hinder it no I think it I think it certainly can um I I think it’s it it certainly can we’ve got uh you know ba basins like uh like you know the permium Basin here in in in West Texas are just you know continues continues to grow and we’re you know you’ve seen some you’ve seen some major Acquisitions uh out there Exon is acquired Pioneer D back is acquired you know the the there’s a there’s a long list of of consolidations by by the majors which you know to me indicates that uh you know these are these are going to become really core assets that uh that that they’re going to going to be extracting from from a time and I think I think the ability to uh to you know to to grow those producing areas is is going to you know is is going to enhance the US’s position as a as a net exporter of of oil you know on the global stage okay was it the capital crunch or the access to Capital or how expensive it was that kind of made this whole m&a you know boom happen within the industry do you see that continuing at these prices I think I think that that drives I think that drives a lot of it I mean if you’ve got the the the bigger companies have lower cost have a lower cost of capital and better access to it and and um you know those those smaller more midsized players that that that that can’t uh that can’t access capital in the same way um you know that those those assets need to be on a on a platform that that have access to uh to to everything needed in order to really you know really accelerate the production and out of those out of those basins so I think that that I think that that that that drives a lot of it yeah okay is that going to continue Ernie I mean I’m curious especially because we had such profitable companies here for quite a while I mean we are seeing some some oil and gas issuers uh giving out dividends increasing dividends now that we’re where we are is the m&a going to cons continue on this consolidation phase or do you think that there’s going to be more explorers out there well I think that I I think that there’s a probably another round of of consolidation that’ll that’ll come um and I and I and and I expect to see some some really big deals come come out of that you know they this started was you know sort of the the the the the smaller lower tier companies that uh that did some consolidation and then kind of the medium I me it’s uh the medium companies and now and now we’re we’re starting to see some really big transactions I think there’s some even larger larger ones coming and um and and so you know from the from that regard I I expect kind of another another round of of big consolidation to happen but that that then opens the door for you know for for some some for for the the explorers to kind of start over again and yeah and you know you’re gonna you’re gonna see some some small small players out there willing to willing to take some risk and do some things that the that you know that the larger larger companies are going to be focused on and and that’ll that’ll start it all over again yeah well I mean I know you’re not a you know obviously you’re not an investor advisor here or anything and you’re not giving Financial advice but you are an Insider in this industry and you’re a veteran in it talk to me about investor opportunities within that I mean if we’re going to see a consolidation phase where are you pledging your bets well uh definitely definitely oil um I I would I I I am much more bullish bullish oil than I am Am gas I think we’ll get into that in a minute but U and and so you know companies that uh that that come to mind you know that have performed you know incredibly well over the last couple years to you know uh diamondb uh energy for example in the operating in the peran Basin has has has had a remarkable run and and has has been able to you know participate in this u in that that that early consolidation and um and so you know I I i’ I’d be I’d be pretty heavily focused on on o producers you know the the the the permium Basin in particular um you know is uh is is one place I think there’s a lot of value to be to be made yeah absolutely okay let’s talk a little bit about natural gas you know the US faces a natural gas glot with significant excess production how is this all going to go with Biden’s new restrictions on LNG uh domestic gas prices talk to me a little bit about where are we yeah well as as as you know gas prices have been extremely low for the last uh for the last several you know several quarters and uh and then we we just we just saw a pretty good bump and uh as the as the May contract rolled off and we we got into into you know coming into in the summer you know we here we’ve had a we had a very mild winter and uh gas inventories were were well above their fiveyear seasonal average I think it was north of 30% above their the fiveyear average so so we’ve got abundant supplies um you know that that I think is offset to a degree by the by the expectation that demand is is will will increase um over over the next couple years and and Supply um you know driven primarily by the very low prices is going to remain relatively flat so we we could see a uh you know some Ballance coming into the supply demand um you know the supply demand structure as as uh as as demand as demand increases and Supply kind of slows that um you know that that’ll be that that will be slowed by um by the associated gas uh production out of places again like the peran and you know you into Basin in Utah where uh where economics are are entirely driven by oil production and gas is just sort of a byproduct to be dealt with um you know so that that just brings more really cheap gas into the market so I expect to see gas um you know strengthen a bit over over over time but I I do kind of expect to see it remain below $3 $3 in mcf or so um you know cly through through the rest of the year and probably mostly 25 okay so we got all the supply I mean what what’s the plan here I mean do you think that these policies will benefit the US economy by keeping Energy prices lower or are they going to hinder development to the sector well it uh you know it’s it’s got to hinder development of of the of the sector I me you know um we’ve we’ve we’ve got we we’ve we’ve got extremely low PR gas prices so uh so you know gas gas producers are are are you know getting getting squeezed you know relative to their cost of production that that of course will drive demand though cheap you know cheap gas is going to drive demand and and you know so there’s the old saying nothing fixes low prices better than low prices and yeah you know the rest of that is true too nothing fixes high prices better than high prices and so um you know I I I see a um I I see a continue uh I think we’re continue to have a an over Supply SI situation um and and I and I believe that the you know that the the associated gas from oil production is is going to you know is is going to continue to kind of weigh on weigh on that and um and and so you know we’re gonna we’re going to find ourselves in a in in a I I believe we’re going to be in a relatively low natural gas price environment for a while but I don’t think it’s going to be dollar a half low it’s going to be right three right just below this three I mean it’s sitting here Trading around 217 now uh let’s let’s get into it a little bit more in terms of some of the policy makers I mean it seems like everyone’s been fighting uh oil and gas for quite a while it correct me if I’m wrong maybe turned a page here people are understanding that it’s not going to be as quick to get to this revolution as we call it I mean Canada’s opened up a new Pipeline and it’s being urged by world leaders to increase LG exports how do these compare I mean how do you view this development in relation to policies uh you know it’s it’s it it’s that’s a really that’s a that’s a very interesting question the you know is when you think about natural gas historically in in my mind has been more of a regional Regional commodity I mean you you can move natural gas around the US even around North America to a degree but but um you know but but natural gas is is typically not touched by say the geopolitical happening in the middle East that might be that might be really driving oil now as we you know as we introduce more and more LNG um natural gas can maybe start to behave a little bit more more like uh more like oil and be more of more of a global commodity I think you know we’re a long way before there’s enough of a contribution you know from from LG to to Really to really make that happen but um but it’ll it’ll start to contribute a bit um and you know the the Biden Administration you know um wanting to restrict or or limit LG uh development and Export out of the Gulf of Mexico is you know is is is really kind of threw a wet a wet blanket over over the you know the hopes for again I go back to the premium Basin and all that Associated gas um know Associated the the the west Texas trading Hub yesterday was traded at negative $649 wow um so so you know gas if you don’t have firm transport out of the Basin you know West Texas producers were just getting killed on their on their natural gas and and you know the the idea that that that gas could go to to Corpus Christi and get get liquefied and and out into the global market would be a a fantastic benefit for for those producers and the you know as Biden Administration has tried to put the squeeze on that and and slow those activities down it’s it um it’s really got leaving producers to look to other other alternatives for you know for that natural gas and yeah absolutely yeah yeah so it’s a it’s a it’s a really it’s an interesting Dynamic and then you you brought up uh you brought up Russia’s invasion of Ukraine and everybody in the UK having to take cold showers you know I mean that’s a that’s a not sustainable yeah not sustainable and and something that could be mitigated by by more LG out of Canada and out of the US but you know that’s a that’s a really that’s a economic proposition to produce gas in in in North America you spend the money to to transport it to a con compress it enough to liquefy it and put it on a ship to to Europe that that’s that’s not a a cheap fuel by the time it gets there right and you know when you think about Canada and the US they’re typically Partners I mean they’re the biggest trading partners and and when we also think about it not usually competitors you and I know if you go to Calgary or in Edmonton or even anywhere in Elberta and some of su sketch when you you run to people that are working for us oil and gas companies so could Canada’s increasing role in the LG exports influence us energy strategies I think it I I I think it should I think that you know I think that um I I I think that that that the the US Administration should should look and see you know that’s gas is gas is getting is getting exported to these markets and it it it why shouldn’t it be you know why shouldn’t it be our gas um yeah and and you know I think the limiting limiting that and access to those global markets is is incredibly shortsighted for you know for any admiss to U try to affect that kind of policy yeah going to be interesting with an election year here taking place as well uh Ernie we talked about your veteran veteran probably isn’t a word but you know what I mean being in this industry for a very long time uh in your experience what are the most critical factors that energy companies must consider today I mean we got this geopolitical complex environment uh to navigate everything that’s happening right now with regulations geopolitics what’s the most critical factors you know I I I we I was chatting with somebody about this about this earlier in the day and and you know we the the the industry I I think really really needs to to remain very um very disciplined in their in their in their use of use of capital and U and and and then you know the financial markets and and and debt and and not um not fall into the same to the same trap that that the industry has has slipped into time and time and time again and maybe it’s maybe it’s just unavoidable you know in a in a in a competitive market um you know you’re you’re you’re always you’re you’re driven by shareholder value and um and you know shareholder shareholder value and and market value may be may be you know two different things and and and might not be consistent with one another so you know I think that um I think that the industry needs to needs to really try to try to maintain its its capital discipline and not U and not let itself you know fall into the uh fall fall into the Trap where they you know where we we see oil prices you know slip back into into the 40s and you know heaven forbid 30s uh just based on the Bas on every on overspending and and and um you know bringing more to the market that they can handle yeah knock on wood we’ve definitely seen that environment before a lot of people without work too okay let’s talk a little bit uh before I let you go because I can talk to you all day here already let’s talk about how to stay alive in this industry I mean if we are going to be going towards this new sustainable approach this Greener economy we’re being more cautious of how you know carbon offset how do some of these new technologies work I mean I know that your company is converting flared and Stranded natural gas into usable products yes yeah yeah so that’s uh that that’s that’s great thanks for thanks for giving me the opportunity to tell you a little bit about about ver day so um our our our company is focused on on disadvantaged natural gas so we have a we have a partnership with diamondb energy and the and the permium Basin and we are we’re we’re taking associate of gas that that is you know that’s it’s it’s disadvantaged it doesn’t have firm transport out of the Basin it might be trading at that negative negative value on certain days but we we have a process to turn that natural gas into just commodity grade gasoline and so what that does for producers is allow them to really to shift their their natural gas exposure for for something that looks looks and trads a lot more like WTI and um and and in a lot of producing basins that’s a that’s a trade that producers would want to make all day long and so um you know we’ve we’ve got uh we’ve got a project coming together with Diamondback where we’ll take about 34 million cubic feet of gas a day to produce about 3,000 barrels of gasoline a day and um and there are similar opportunities in the in the uh in the uent Basin in Utah and in the appalation Basin in Pennsylvania and um and and so that’s that’s that’s our Focus that’s a global global opportunity that we’re very excited about you know the U and and that that um that process you know can can mitigate flaring it um you know any molecule of gas that you can consume in the perum Basin is likely a molecule of gas that doesn’t get flared somewhere so there’s you know that uh that DEC carbonizes every molecule of hydrocarbon that that that Diamondback is producing in in the base and so it’s a you know it’s a it’s a great economic story um for for producers and it’s it’s got a really strong uh you know strong environmental argument as well that um that that oil and gas producers really can participate in this in this decarbonization yeah in this new global economy too uh are oil and gas producers keeping up are they investing enough into R&D um yeah yes I think that you know it um it’s it’s amazing it it’s it’s amazing to me to see you the the the companies that are are really active in the in the energy transition and and it’s um you know the the names that you see are all the all the major ma major players in in traditional Upstream EMP so everyone from aranco and shell and BP and Exxon you know these these these guys are these are the players that have the technology and and have the knowhow they’ve been dealing with carbon for you know for for for decades and U and and you know the these are the companies that are going to drive the the energy transition forward yeah well said Ernie Miller CEO Verde clean fuels joining us from Texas today thanks for your time sir this was helpful I appreciate it great thank you for having me yeah we’ll see you soon I’m Jeremy sapper for all of us here at Kito news thanks for tuning in and if you care about the real market news and not just the normal narrative be sure to subscribe and to tell your friends as well I’ll I’ll see you next time [Music]

Jeremy Szafron, Anchor at Kitco News, interviews Ernie Miller, CEO of Verde Clean Fuels, to discuss the complexities of the current oil and natural gas markets. They discuss the effects of OPEC cuts, supply disruptions, and geopolitical tensions on global oil prices and energy security. Miller shares insights on the U.S. reaching near-record oil production levels and the sustainability of this growth amid the Biden administration’s renewable energy push. The conversation also covers the U.S. natural gas glut, the impact of LNG export restrictions, and Canada’s role in the global energy market. Miller also elaborates on the technological advancements in converting flared and stranded natural gas into usable products, highlighting the environmental and economic benefits.

00:00 – Introduction
00:58 – Global Oil Market
02:22 – Impact of Geopolitical Tensions on Energy Security
04:12 – Future Role of Oil in Global Energy
05:37 – U.S. Oil Production Sustainability
07:03 – U.S. Role in Global Oil Exports
08:02 – M&A Activities on Oil Market
10:52 – Challenges in the U.S. Natural Gas Market
15:30 – Biden Administration’s Energy Policies
22:11 – Advances in Natural Gas Utilization Technologies

#EnergySecurity, #OilMarket, #NaturalGas, #LNGExports, #GeopoliticalTensions, #EnergyPolicy, #KitcoNews, #EnergyMarket, #OilProduction, #RenewableEnergy #oilandgas #bidenadmin
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