This week on Mining Money, Jeremy Pate and Imran Khan of Swan Energy discuss the calm before the storm in regards to investments.
Jason Spiess: Thank you, gentlemen, for joining us this week on Mining Money, a weekly segment gaining popularity all over the interweb, especially overseas, I’m noticing. So that’s kind of interesting. I did want to ask this week about just actually careers and the oil and gas industry, and then I wanted to ask you guys about some fourth quarter stuff as well. Because I know a lot of times people are looking for ideas, either to invest, because otherwise they got to pay some sort of capital gains tax or not capital gains tax, but some sort of extra tax at the end of the year, if they don’t invest it. There’s all kinds of different tax incentives that are involved with the investing, uh, and rollovers and things like that. So, Jeremy, I’m glad you’re joining us this week because I know you like to handle those types of questions. Uh, Imran, talk to me a little bit about the career fair that you guys had. I’m glad that you guys did that, because the two things I wanted to ask you about was, one, what’s going on out there in the vibe of the workers, and number two, is the connection, you know, with the average folk and that sort of thing. These career fairs tend to be a good place for the oil and gas industry to connect with the average person and also within the industry too.
Imran Khan: Thank you so much for having us, Jason. Yeah, so, we did a career fair day a couple days ago. It was definitely different, I guess, during COVID than than what-what Iíve seen in the past. But, uh, you know, we-we did multiple sessions to kind of make sure that, uh, people were separated out and, uh, you know, we-we talked with, uh, quite a few different groups, some-some great potential folks. Um, a lot of what I saw was folks that were in oil and gas and other avenues of-of oil and gas kind of wanting to want to get into some of these other areas that we’re in with respect to the sales aspect of selling deals. Um, you know, a lot of, a lot of younger guys that, um, you knowó I had a guy that was from Exxon. There was, uh, there was a few people that were from Halliburton. Uh, a lot of folks that have a lot of good knowledge from oil and gas standpoint, uh, that-that may be, may be good from-from our perspective to talk with our partners and potential partners. I think, uh, that’s probably a-a key point. I know you-you mentioned a little bit about, uh, the, uh, investments and, uh, the-the fourth quarter. Right now, you know, people are getting geared up for taxes and all of that and, you know, a lot of folks that, you know, that-that are making 250, 300k and, uh, are paying a third of that in taxes. You know, if you, if you participate in, uh, general oil and gas avengers(?) where you’re actively participating, uh, all of the intangible costs that are associated with drilling, um, are written off the first year, so that’s really a big big deal there. Um, you know, so there’s potential for folks that are, uh, making investments with us to be able to, uh, write off a big portion of that. Um, you know, I know I said all of that but there’s a certain portion that’s intangible and certain that’s tangible that-that, uh, uh, gets written off there, and-and I think it’s important to be able to reflect on that. And, you know, in the, in the current times, a lot of folks have gone through some changes in how they’ve been doing, uh, their-their family economics and budgeting and things, and I think it can give them, uh, an opportunity to be able to, uh, make some good investments and, um, you know, kind of move forward, uh, from that standpoint and end the year with a nice bang.
Jason Spiess: I couldn’t agree more that people are starting to change their family dynamics when it comes to their checkbook and some of their different budgetary things. But companies are doing that too, whether it be shared office space or getting into these telecommunication, uh, video conferencing, all kinds of different things. Whether it’s saving money or not, I don’t know, but it’s definitely shifting some dollars into some different areas and that brings up, like, a lot of these mergers and different acquisitions and that sort of thing that is happening. I read today Canadas just had a slew of them in the last month. And, Jeremy, talk to me a little bit about, you know, what’s going on out there in the marketplace. You know, you, you’re out there shaking the trees and-and working the phones pretty hard out there, so you got your ear to the ground. You know, there’s a lot of flurries happening and people are changing their-their monetary spending habits and things like that. So, talk to me about what’s good. What are people saying out there in the oil and gas world about investing right now?
Jeremy Pate: You know, it-it’s kind of calm. There’s not a lot of talk about it. I think there’s a littleó still a lot of trepidation in the market, um, obviously with the dip that we saw in oil prices, uh, this week. You know, I think anything that anybody says is a little bit opinionated and speculative. The good thing is-is the gas seems to be holding its own and seems to be taking, uh, its own commodity position in different from what oil prices do. Uh, you know, there’s not big swings in gas right now, maybe a few cents here and there. Uh, I have a lot of optimism, as you know, toward natural gas. I feel like that it’s going to be a, it’s going to be a big player and it’s going to rebound very quickly, uh, probably a little bit more quickly than what oil has. I mean, just look at it. I mean that gas has rebounded by, what, fifty, sixty cents?
Imran Khan: It was That’s insane, I think, when we were.
Jeremy Pate: It got down yeah, yeah, dollar-forty-nine is what it got down to. It’s at, uh, 228 right now. It’s dipped to about four cents today, but, you know, the thing is it’s not dipping 20, 30 cents, 15 cents. You know, you’re seeing single digit, you know, downward cycle as far as oil goes. Uh, you know, look, the-the Chevron and Noble Chevron’s acquisition of Noble was a big, you know, optimistic front that happened here recently and-and not surprising at all. Uh, they picked up a good acquisition with that. Noble worked very hard to get themselves back in the black and in a respectable P&L form, so that was a good pick up for Chevron. You know, I-I can’t, uh, can’t knock them for doing that.
Jason Spiess: Stemming off of your natural gas comment and looking at the Permian Strategic Partnership They just released a-a report and they’ve got the Permian very positive in the bright future. You know, the Bakken didn’t have a very good future in terms. I just talked to Justin Kringstad that he didn’t have a very good outlook for next year. He said he didn’t think he’d come back to pre-COVID numbers where the Permian is looking a little bit opposite down there in Texas, and this, of course, is from the Permian strategic partnership. And we’re looking at having some of those folks on to talk a little bit more about it. But the reason I bring it up is natural gas was brought into the plate and, Imran, you talked a little bit about these tax incentives and I want to tie the two together in that these tax incentives you talked about are like first quarter write-offs. And right now, Jeremy, you mentioned there’s a little bit of calm out there. Well, to me, this seems like the calm before the energy storm, meaning that we’re about ready to springboard into some big things here. And all of a sudden, if you can have some tax write-offs and these mergers and acquisitions that have happened over the last several months, they come to fruition. Now, I think 2021 is going to be kind of a-a big year for oil and gas. I really do. Um, I think right now, and I’m not just saying this because you guys are on the line, I-I do think right now is a very good time to get your foot into that energy investment. Because it is one of those times where next year people are going to be kicking themselves, saying, Geez, I wish I would have got in when the getting was good. So, Imran or Jeremy, either way, I mean, you guys can go whichever direction you want with that because it wasn’t really a question as much as some observations.
Imran Khan: You know, it’s, uh. I was reading some sort of article the other day and they mentioned on there if a Ferrari was 50 percent off, would you buy it? And obviously the consumers, everyone says, Yeah, heck yeah, you know, if I can get a 300,000-dollar Ferrari for 150, why not? Right now, at the same time, when oil and gas is down, or Apple is down, or any of these these different commodity items that are out there are down, and they fit down 50 percent, do you buy it? And everyone really thinks twice about it and it’s no different. And that’s one of the things in the Ferrari is, actually. Obviously, it’s a depreciating asset, right? It’s funny, because, you know, when you think of investing, and you think of investing your money into something like oil and gas and getting in at these times that are out there, you know, people are really questioning quite a bit. And yeah, you never know what the price is going to go down to, but, you know, seeing where it’s already gone to earlier this year and the slow climb up, I feel as we’re, as we’re seeing the trend that’s like two steps forward and one step back and two steps forward and one step back. But overall, it’s been in a positive light. And if you look at the Nymex and if you look at the forward pricing and things, you know, next year, regardless of how the elections go, it’s looking like it’s going to be in the 50-dollar range. You know, we’re doing all of our estimates for our partners and our future partners at 40-dollar pricing or below to be able to make sure the economics work at those lower numbers. But hey, if it goes up 10, 15 dollars on top of that ñ which the-the Nymex is predicting, and-and-and other, uh, other companies out there like Bloomberg and all are-are saying ñ then we should be able to-to see that same level of, uh, benefits that-that we have and-and other folks that are out there.
Jason Spiess: When we take a look at what’s going on out there in the marketplace, Iím going to ask everybody to take a step back, and-and again, this is, this is something where you need to ask yourself, if somebody’s going to throw 50 or 100,000 bucks at an investment, do you want to do that alone or do you want to do that with others? And my understanding is that you guys are pooling together investors, or you have the ability to do that in order to kind ofó safety in numbers and safety investment in numbers to mitigate the risk the best you can in a very high-risk industry. Is-is that a correct statement, Jeremy?
Jeremy Pate: Yeah. I-I think anytime you-you get a a group of people or group of companies together to set forth in a joint venture or a JOA a joint operating agreement ñ that you minimize your-your cash outlay, as well as your exposure to those investments or those projects. Yeah, um, and then, and then once you, once you see that this is going to be a viable and successful path forward for everybody, I think that everybody can find their own way and their own comfort level is monetarily, so to speak.
Jason Spiess: And just, and just to give you guys an example, this has happened in my industry before, in the media industry, where in-in Colorado, the Rocky Mountain News and the Denver Post they did a JOA for about 20 years. So did the Detroit Free Press and the other Detroit paper, because it was in their best interest to share a sales staff, actually, instead of having competing shale staff sales staff. It was easier for them just to share one and then pay off the editorial departments based on circulation numbers. That was a way that they were able to sustain themselves for a number of years past. The reason I bring it up, the reason I bring it up is that the safety in numbers when it comes to investors and that sort of thing has been around for a while. Because, quite honestly, you’re going up against Warren Buffett a lot of times. You know, Warren Buffett bought that pipeline as soon as it went under, as soon as they sold it, for a reason. And I saw this when the internet came in to the media world is that those that were able to hang on through the really difficult times made it. And I wanted just to bring that up because, right now, I think the energy industry is going through one of those times. You brought up the natural gas thing earlier and that’s just ready to explode. But it needs, you know Sometimes it-it takes a little bit of time and I think the average person should probably be aware of that. And, you know, does that, I don’t know, I don’t know, again, if there’s more of a question or a comment, but I just wanted to point out that right now it just seems like the safety in numbers works pretty well.
Jeremy Pate: Uh, I totally agree. You know, we are even putting together projects, uh, with JOAs with other operators right now. That’s one thing that really focus on partnering up with, you know, another operator or two other operators to go complete a project and, you know, then bring a-a host of investors into that project too. So, I think we’ve really spread our wings as far as net-networking go, it goes right now. And weíre-we’re kind of trying to do a lot of different networking on a lot of different multi-faceted levels, bringing other partners in as well as bring other operators in, uh, in order to tackle, you know, bigger, more, bigger, more dynamic projects.
Imran Khan: If you look at the majors even, right, you know, BP doesn’t go off and do things on its own. Uh, Shell doesn’t go off and do things on their own. These guys all partner with each other to be able to grow themselves further, right, and-and at the same time, what does that do? That-that helps de-risk the actual, uh, the-the actualó yeah, what’s out there. So, I think that’s one of the big things that, you know, we’ve been focusing on. Rather than doing something that is just, uh, one well or two wells, we’re looking at different types of exposures depending on what what type of project we’ve got. Sure, we’ve got those two but then we’ve got opportunity to be able to invest in a set of ten or 20 wells, and you just own a percentage of them. So, at the end of the day, you know, as long as a decent number of them do well, you-you’ve got a good return coming out of it. And from that standpoint, too, we’re-we’re working with operators that are billion-dollar companies so they’re not out there to-to-to fail. They’re-they’re out there doing these campaigns because they do them and they make money for their investors and that’s what we’re looking to do too, from our partner standpoint.
Jeremy Pate: Absolutely.
Jason Spiess: And Iím going to throw in one more piece of, uh, I guess information that I believe and Iíll get your opinion on it. Because I believe that the oil and gas industry is one of the best investments right now, and that’s one of the reasons why we’ve, we’re doing this Mining Money segment. Because the mining industry has been profitable for about ten years overall inó 15 years, actually. It’s been a job creator in a number of different things but when you take a look at what’s going on and wható Even during a pandemic, the amount of plastics and different nylons and that sort of thing went up. So, no matter what’s going on, the actual daily use of oil and gas petroleum products is not going away anytime soon. They might reduce it and they might try to reduce it, but at the end of the day, the-the extraction and harvesting of oil and gas I do not believe is going to go away in my lifetime. And-and the only way that that’s going to go away is that means our lifestyles are going to go in the dark, and we were going to experience some sort of lifestyle change where you and I are no longer talking and we got to take a horse and buggy to meet each other somewhere in Kansas City. Well, seriously, you know what I mean, guys, like, let’s just take a step back and-and put our common-sense hat on here and say, ìListen, oil and gas is probably, right now, one of the best opportunities in the history to buy.î That’s crazy for me to say. I would never say anything like that, but anyways, go ahead. Talk about the, you know, the, I guess how if you agree or disagree that, uh, it’s going to stick around for a while just off of the sheer daily products and the transportation and the Amazon delivery and etcetera.
Jeremy Pate: Yeah, so, you know, Jason, I was listening to Jimmy Barrettís radio show this morning coming to work, and he had I-I can’t remember the guy but he was, um, oil and gas expert, so to speak, from he might oh, he was from Chevron. I can’t remember his name. But, you know, one that Jimmy posed that same question to this guy, right, with Chevron and the guy says, You know oil and gas isn’t going anywhere. Do you realize that 93 percent of everything that we touch on a daily basis is a derivative of oil and gas industry? Think about it: your plastics, your keyboards, even in your car, your-your fuel, your oil that you use, but also the parts that are made to, made for that car. You know, um, and one thing you’ll never hear Elon Musk do is talk bad about oil and gas. I challenge anybody to google Elon Musk’s comments and see if he ever says anything bad about oil and gas. And there’s one reason why, because Elon’s a very Well, first of all, Elon Musk is either a time traveler or an alien, one or the other, but, um, the guy is very, very intelligent; probably, he might very well be the smartest intelligent person on, human being on this planet. And he doesn’t ever knock oil and gas, because he knows that if a law was passed tomorrow that we would move fully towards EVS ñ electric vehicles. We would need twice as much oil and gas as what’s being produced today to accomplish that goal.
Jason Spiess: My understanding is that his big battery farm in Nevada is 90 percent gas. That it’s, at the big battery farm that he charges these Tesla batteries, 90 percent of the energy comes from gas, the other ten percent from solar. That’s my understanding. Iíve-Iíve read that in Popular Science magazine, so you’re right. (Unsure if this last sentence is Jason or one of the other guys. Lots of talking over each other here.)
Jeremy Pate: Yeah, you notice he doesn’t use wind farms, right?
Jason Spiess: Well, yeah, he doesn’t bite the hand who feeds him. He’s a smart guy. You’re right; he might be the smartest guy, yeah. He’s-he’s projected as this big environmentalist but he knows that, you know, so.
Jeremy Pate: Iím telling you, the guy’s an alien or a time traveler or both. One or the other.
Jason Spiess: That’s so funny how I-I hear that a lot more than I probably should.
Jeremy Pate: [Laughter]
Jason Spiess: Well, I mean, you know, I just I heard it when I was in Colorado last time. I heard it when I was in Dickinson. There’s always somebody in some crowd that says it, so I’m just telling you, I hear it a lot more than I probably should by people who are not connected, unless you guys are all in the same chat room. I’m not sure, but, uh.
Jeremy Pate: Yeah, I don’t, I don’t know.
Imran Khan: Same chat roomÖ
Jeremy Pate: Yeah, right? That guy right there is like, ten steps ahead of everybody, you know? I mean, it’s just, it, you know, I Honestly, renewables technology and the technologies that Elon is even putting out there right now are so far ahead of their time that other industries can’t catch up, right? And, uh, the-the technologies that they have to pull from other industries, uh, to custom fit for their stuff, it just, you know, it’s-it’s not We’re in an awkward place right now where it doesn’t all mesh very well. There’s not a lot of synergy but, you know, in, with time that’s going to get there. You know, it’s just, right now, is not, you know, renewables are not profitable. They, you know, they’re not economically viable for the consumer, you know, and-and that’s, and-and that’s yet to be worked out, you know, and that’s the reason why oil and gas is going to be around for a long, long time.
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