Imran Khan and Jeremy Pate, Swan Energy, react to the recent news of Chevron purchasing Nobel Energy and how that will impact the oil and gas industry.
Jason Spiess: Excellent, thank you for joining us today here. And I’ll tell you guys, I’m on the road here, coming back from, uh, Living the Crude Life live recording session in Greeley, Colorado, trying to get my piecemeal news. You know, I got Steve Harvey giving me news at the gas pumps, and so I’m getting bombarded with so much noise I don’t know which way is left. But I did see a headline – “Chevron Buys Noble,” and they’re going to lay off something 70, 75, 80 percent of their employees. Depends on which headline you read. Guys, I-I’m sure you guys are into this because you guys have so much happening where you’re being an extremely aggressive American company right now and it seems like this global— I don’t know what we want to call it if it’s from the top down or what, but it’s happening, guys, it’s happening. Talk to me about your reactions to the Chevron-Noble news.
Jeremy Pate: Well, it was definitely an eye-opener. Um, I-I anticipated Noble was one company that was a prime candidate to get, uh, bought out or acquired or merged with somebody else. I did not see it being Chevron, but I do love the transaction from a Chevron point of view. It gives them a foothold in the DJ where they can rival their biggest, uh, um, nemesis Oxy, uh, so they offset that. Um, in-in addition, uh, Noble has some very good assets and acreage positions in Colorado and they’ve, they’ve done very well. The DNC costs are low there. They have hot— they have very good wells that are, you know, anywhere from eight hundred thousand to them, uh, one million EUR. Um, so I love that on-on from the Chevron perspective. Um, Noble, they just did what they had to do to kind of get out from under everything. Um, you know, they weren’t going anywhere. They needed— uh, they were kind of spinning their wheels with their stuff in Israel and some of their overseas stuff. Um, this is a great deal for Chevron and all stock transactions.
Jason Spiess: Trying to keep up with a lot of this is-is, um, pretty, pretty difficult, you know, with these mergers that happen because these are big, big mergers, you know. And I saw another one and I-I didn’t have time to make notes. Like I said, I’ve been in the car traveling, and I got my dog with me and trying to keep, you know, everything going. And it was an acronym company. It was a couple billion dollars. I don’t know, it’s time for a game show to see if either one of you know which I’m talking about because it was— it was, honestly, it was like a secondary headline news after the Chevron one, but it was, um. I don’t know. It wasn’t PNG or PRG because I know I saw a bareback rodeo guy and that’s where I got PRG from, and I’ve been doing some photoshop work and I know that’s why I got PNG from. Does either one of you know what I’m talking about? There was a kind of another big merger in the last week.
Imran Khan: I think you’re talking about NRG, right?
Jason Spiess: That’s it, NRG. All right, NRG. At least what Meatloaf said, “Two out of three ain’t bad.” I got two out of the three acronyms.
Imran Khan: Two letters, man, that was good. That’s very good.
Jason Spiess: Uh, talk to me about your reactions on that.
Imran Khan: Well, they’re, they’re, uh, a little bit different, uh, than the whole deal with Chevron. Uh, they’re on the electricity side, but Direct Energy, uh, who’s owned by Centrica, uh, it’s a, it’s a British company. Actually, I know we’ve been talking a lot in the, in the past podcasts in regards to globalization and a global economy. Uh, this is definitely a direct, uh, look at that pretty much the same way. Um, so NRG is picking up Direct Energy, I believe for something like, um, 3.6 billion. Um, something to that affect, so I think it’s-it’s gonna be a big, uh, big number and probably, uh, some some layoffs and things like that going to be occurring, uh, in-in that space too.
Jason Spiess: Imran, thank you for bringing up the word layoffs, because you just reminded me I gotta keep Mr. uh, Jeremy accountable, because one of the questions I asked you, Jeremy, was about layoffs and, uh, you know, 70, 75, 80 precent, something like that and I think you kind of skirted over it, in my opinion. I’m not sure but, uh, I do want to get back to that about, about the layoffs because, um, you know, obviously the-the easy answer is-is that, oh, it’s terrible and, you know, it’s happening so fast. And in the past, you know, these big mergers, it would have been a couple of years of a gradual layoff phase, but COVID makes it so immediate. And there’s some easy answers, but I want to see if either one of you guys know about solutions for some of these people out there that are getting laid off that are having the real-life problems. Because every media outlet out there is going to tell you exactly what I just told you over the two-month period. So, when I lost my business back in 2009, 2008 it was, I had a publishing business, so first of all, we got crushed by the internet, and then secondly, I had the unfortunate, uh, timing of having a real estate publication. And so, after my 30th bankruptcy notice from a builder, developer, realtor, or modeler type, well, I knew I that was the end of the road for me. So, I basically had to shut that business down, and the irony is, the way that I kind of piecemealed my living through that was I helped a guy set up what was known as a, like a real estate trust. It was where, where just people would put in money and they would go buy a shopping mall or something like that. That’s the basic version, I-Reit or something like that it was called. And I’ve always wondered if the oil and gas industry ever has anything like that where— I know I can’t go in and buy a rig. There’s no way. But maybe I got, you know, if I got 25, 35, 100, 1000, 200,000 lying around in-in-in some form, whether it be liquid or even if it’s a severance package or something like that. Do you guys know of anything out there like that where people can, uh, you know, invest into rigs? Because, listen, these big companies, Warren Buffett, these guys are— they’re buying stuff for a reason. They’re buying stuff for a reason, because it’s a buyer’s market right now. So anyway, uh, don’t know if you agree or disagree with what I just said, but the main part was, is if you guys know of any, uh, you know, kind of investment solution ideas out there, yeah.
Jeremy Pate: Yeah, so, Jason, the-the terrible part about that acquisition is, like you said, and I kind of in my remiss I did kind of gloss over that and, uh, but the, you know, Nob— 80 percent of Noble’s workforce is going to be laid off and, uh, that’s, you know. All those families that, um, had a-a normal monthly income are now going to be without an income. And some of them may get packages; some of them may not. However, uh, you know, Swan does have a program that could help them out, and we can we can help them out, uh, through their 401k. Most of these people will have a 401k that they’re going to have to roll out of the Noble 401k and into an IRA or something like that. And how we can help them is that we have a program they can roll their 401k into, uh, tax-free into another 401k. They can— they, they can— they can invest into oil wells through Swan and that could provide them with monthly income that they could use, utilize to support their family, uh, going through this crisis.
Jason Spiess: So you guys do have something like that. I always wondered if that was out there and, um, I guess talk to me a little bit about the program. How long have you guys been doing this? Is this something that, you know, you do for yourself? Uh, do you guys do it for your employees? You know, just give me a little bit of a, uh, I guess ex-extracurricular context.
Jeremy Pate: Well, so, we’ve been doing this for ten years under Brandon, uh, Davis, our CEO, but, uh, this is a, uh, just a typical way we do business with our partners. We have around 682 active partners, uh, that are that partnered up with Swan in drilling and development of our, our own assets and we make it feasible for them to utilize their 401k, uh, with-without having any tax implications, um, to-to directly invest into our oil wells with us, which then, in turn, provides them with monthly income for several— many years to come on down the line. So, the thing is like— uh, let me give you an example. If a guy working for Noble was to get laid off and he estimated that he was going to have to withdraw 100,000 dollars from his 401k to support his family for the next six months to a year, he could actually take that 100,000 dollars from his 401k, roll it into, um, a 401k that is affiliated with us, and then use that as a direct investment into a-a parcel of oil wells that would provide him in return, for an example, four to five thousand dollars a month in monthly income for the next several years, you know, ten, 15, 20 years.
Imran Khan: Well, the other part of it, too, is right now, um, government has some programs where you can actually pull money out of your 401k without any penalties, uh, because of what the state of the economy too. So, uh, from from an income standpoint, obviously, you know, Americans need income and need to be able to have the cash flow that’s out there, and to your point, Jason, um, you know, why-why can’t the average guy be able to buy low and sell high like we are, right? So, I think that’s one of the big keys there that, um, you know, that-that our partnerships allow, uh, across the board. So, you can have a percentage of, uh, one well. You can have a percentage of ten wells. Um, so there’s definitely some different opportunities there that, um, you know, provide income stability. Uh, I think that that’s, that’s going to be key in the coming months as we’re going to be hearing a lot of the news that we’re seeing right now from the-the Oxies, the, uh, Chevrons, the NRGs of the world.
Jeremy Pate: Let’s face it. Let’s face it, Jason, uh, if a guy takes out a hundred thousand dollars of his 401k, uh, to support his family, that’s great. That’s what he has to do, but that’s a dry hole, right? I mean, that’s just money that is going to go, uh, away as soon as, as soon as it runs its course. But if they were to invest that 100,000 dollars into a set of oil wells with Swan, that’s money that’s going to continue to provide for them and their family, like I said a while ago, for ten, 15, 20 years.
Jason Spiess: Well, I just think it’s-it’s pretty cool to be able to say that, yeah, I got some oil wells. Yeah, you know, kind of ‘I’m JR Ewing, I’m Jerry Jones,’ you know. I mean, hey man, I’m in the media and I-I’ll exaggerate. I’ve watched pro wrestling. I know Vince McMahon taught me, so there’s a little bit. You know, well, the President of the United States, he did, you know, he’s in the WWE Hall of Fame and he did headline WrestleMania twice, so, uh, it’s a lot to be said about that. So anyway, but well, that’s really cool that there is a program out there and you guys actually opened up— you’re basically— you’ve, in my— I guess the way I’m understanding this is that, at some point, you must have opened up your employee program to others, um, or-or you brought it in because it was so successful in the outside world and said, “Hey employees, this is so successful for our CE— from our CEO that, uh, you know, we should probably be a part of this too.” So, either way it’s, um, it’s been proven and that’s what I’m get— I’m getting at, is that if you’ve been doing it for ten years and you’ve kind of got that checks and balances out there where both sides can kind of invest in there and keep you guys on your toes. That’s, that’s a pretty neat concept for the average person, really, to get involved, because, I mean, I’m looking at this, you know, 20, 30, 40-dollar oil. Boy, it only seems like it’s going to go up over the next ten years. Really, it does overall.
Jeremy Pate: Well, and consider that consider that in-in-in, with this comment, Jason, that our current project that these people could invest in is profitable at 22 dollars a barrel, so if they were to invest today, they’d be making a profit of 18 dollars on every barrel that, that we produce with us.
Jason Spiess: How does that work? Now, okay, so they just, they call you guys, I suppose, and-and-and you kind of set things up from there? But, um, do-do you know like a timeline? And you know, don’t get into the details, because that’ll put people to sleep, but, um, if you got like a bullet point kind of timeline of expectations that somebody would kind of know. I mean, is that, is that anything that you could do over you know this type of format or…?
Jeremy Pate: Absolutely. We lay it all out. We provide them with a confidential information memorandum that details the entire project. It even lays out the timelines for them, um, gives them a reasonably good expectation of what they can expect in return for us.
Jason Spiess: Okay, okay, uh, anything else about that program, I guess, that, uh, you should probably, you know, we should let people know or you felt that we we missed or anything?
Jeremy Pate: Um, you know, really, it’s just, it’s a good, you know— I just kind of repeat what, what, uh, I said earlier. You know, it’s a good idea. It-it could be a good idea for some families that are looking at— they’re going to need to withdraw money from their 4— their savings, their 401k to support their family. Um, you know, at that point, they don’t know whether they’re going to be laid off for six months, a year, 18 months. That’s something you just don’t know. You don’t know how oil and gas is going to go or or what direction your career is going to go from that point so by making a move like this you-you give yourself an opportunity to have monthly income for your family and their future for years to come.
Imran Khan: And I think one of them—
Jason Spiess: Sorry.
Imran Khan: I was just going to say, one of the big things, you know, a lot of these folks, you know, they’re, they’re probably degreed folks that have done so much schooling, and you know schooling does a great job of, uh, sharing with you how to be able to obtain a job and work a job. One of the things that, you know, I feel that in our, in our systems that it is lacking is the financial aspect of things and understanding a lot of what needs to be learned from, you know, daily finance cash flow and things of that nature. And I think a lot of our, our programs and even our, our sim as, uh, Jeremy mentioned, you know, it provides a lot of those details and explains things based on, uh, different price points. To your point, you know, we’ve got, uh, a deck that we provide that gives you an analysis of, you know, what to expect if you know oil is at 25 dollars a barrel versus if oil is at 45 dollars a barrel, and, um, looking at what, uh, September numbers look like in, uh, uh, in-in the futures market, it looks like it’s going to be closer that— 45 dollars is what it’s looking like in-in-in the coming months so that’s good to see.
Jason Spiess: I would like to transition into a pop quiz question here, because I’m not sure, well I’m not sure if either one of you are qualified to answer this or not. I know Brandon is, uh, Brandon Davis, your CEO, he seems to be the one that answers, uh, the trucking question anytime it comes down the pipe, but, um, I-I did want to— I, you know, I’m out on the road and I’m traveling and this type of thing, and-and I do travel quite a bit, uh, like many people do in, um, you know, Texas. It’s just, you know, when you’re, when you’re in the oil and gas you-you travel from play to play and sometimes you gotta drive two hours to a rig sometimes. So, um, this is the first trip that I’ve been on that I’ve seen over two— I mean, this is pretty rare for me to see a truck that’s empty. A big semi hauler trailer that’s empty. That either doesn’t have a-a-a trailer behind it or it’s got a flatbed completely empty. I bet I’ve seen 20 of them from Colorado to the Bakken and, um, that tells me that a lot of truckers out there are working twice as hard for half the pay. So, I’m not sure if, uh, you guys know an update from, uh, the trucking world as you see it from, uh, you know, the ivory towers up there, but here from the road, it didn’t look too good, guys.
Imran Khan: Well, I think it’s a transition phase right now, too, Jason, um, you know, I— from, from what we are seeing, we’re-we’re definitely seeing, as what we’ve been talking about. A lot of the-the companies that have the opportunity to be able to emerge and join are doing that prior to getting into a bankruptcy type of situation, uh, but with that said, you know, I think in the next coming months, you’ll see a lot of changes. I know from our our, uh, inject, uh, company that, uh, does a lot of our trucking and-and water hauling, um, things are definitely picking up on our side. Um, there’s definitely a lot of new contracts that we’ve been looking at. Uh, we’ve actually hired several folks, uh, to be able to better manage the amount of business that we’re seeing right now, so I think, um, it-it’s probably a-a transition phase that, you know, that happens in the market, and as we kind of go through and-and hit the bottom and-and come back up, you have to kind of see these things and-and get back into where we need to get to.
Jason Spiess: Anything else that we, uh, should talk about this week? Those are my basic things: the, uh, the big mergers and layoffs and if there’s any solutions for people and then of course the trucking update. Like I said, that’s an anecdotal observation I had, and thank you for the pop quiz answer on that. Um, but the, uh, uh, mergers and acquisitions, just kind of summary on that. Um, you guys have a great program. It sounds like that if somebody, uh, wants to roll over— and it’s-it’s roll over their 401k, if I heard you correctly. So just kind of a quick summary of the program and how people can contact you and and get investing in oil wells.
Jeremy Pate: Well, as far as giving us, uh, contacting us, they can go to our website. Uh, our phone number’s there at Swan Energy INC dot com. Uh, they can, they can reach out through the contact me page. Uh, there’s also a phone number. They’re more than willing to give us a call between business work here from eight o’clock to six o’clock every day. Uh, they can also find us on, um—
Imran Khan: Instagram.
Jeremy Pate: Instagram or Facebook on one of our pages there and they can, they can fill out the information page and one of our sales reps, our business development guys, will give them a call back. Um, you know, so we’ve got multiple forms that they can get in touch with us. Uh, the easiest is just to call our front desk and say, and ask for, um, the sales team and they will, they will help them get facilitated with all the information they need to make an informed decision of their own.
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