When we talk about peak-to-trough cycles in the oil and gas industry, in your experience do most management teams recognize in the moment what stage of the cycle in the industry is currently in? Or is there a lot of disagreement and debate in any given year about what stage of the cycle it is? (E.g. it seems as though we are mid-cycle presently, off the COVID lows but at least few years away from peak CAPEX mania drill-baby-drill this-is-going-to-last-forever).
I would say historically it's a hard "no" on most oil & gas exec teams being cycle aware. The tendency has almost always been to get more bullish as cycle progresses up and through the peak...and then to become more bearish during the decline through the trough and early stages of recovery. So far, this cycle has bucked that trend...sort of...
I love your work here. Industry is hitting a nice sweet spot.
I disagree that the de-growthers are done trying. Bill C-59 just passed here in Canada, and NGOs and regulators are continuing to press forward. They are committed, funded, and will not stop until they are stopped.
The list of funders is incredible including Ford Foundation, Laudes, Rockefellers, and the list goes on. They are connected all the way up into OECD governments.
This is something I wish the industry would not dismiss so lightly.
Thank you Matt, and I always appreciative of your support and kind words.
No doubt the hard core activists will not stop. I would distinguish that from the increasing mainstream dissatisifaction with things like EV mandates and most other aspects of "climate action" that require actual tough choices to be made or higher costs to be made. Almost no one is for any of that.
On the new Canadian bill, if this stops ALL companies from having ridiculous ESG booklets, may be a blessing in disguise?
I am watching eagerly to see what the 'internationally recognized methodology' is. The jaded part of me says it will be anti O&G, but then I saw an article about the World Health Organization looking to silence all 'Health-Harming Industries', which is of course basically all of them. It is an interesting time to be alive.
I have been a reader and follower for a while and find the articles and perspectives insightful, helpful, always backed by thoughtful research and observations. Hence the recognition of MUSA strategy and execution were particularly gratifying.
This weeks article is on point and timely as well as we struggle in the E&P sector to balance growth, capex and hopefully expansion of cash on cash returns with fact one gets hammered for capex growth. My belief, unsurprisingly, is that a huge component of balance sheet management should include long term, consistent share repurchase. This is harder in the upstream sector as it must be underpinned by solid earnings.
In any event, I enjoy the articles and took the opportunity to share last weeks MUSA shout out with my management and board.
Madison, It is great to hear from you and thank you so much for the comment. It is really impressive to see what MUSA has done since spin. I remember covering the former integrated oil, and hard to believe how much value there was in separating the businesses. Regards, Arjun
Hello Arjun,
When we talk about peak-to-trough cycles in the oil and gas industry, in your experience do most management teams recognize in the moment what stage of the cycle in the industry is currently in? Or is there a lot of disagreement and debate in any given year about what stage of the cycle it is? (E.g. it seems as though we are mid-cycle presently, off the COVID lows but at least few years away from peak CAPEX mania drill-baby-drill this-is-going-to-last-forever).
J
I would say historically it's a hard "no" on most oil & gas exec teams being cycle aware. The tendency has almost always been to get more bullish as cycle progresses up and through the peak...and then to become more bearish during the decline through the trough and early stages of recovery. So far, this cycle has bucked that trend...sort of...
I love your work here. Industry is hitting a nice sweet spot.
I disagree that the de-growthers are done trying. Bill C-59 just passed here in Canada, and NGOs and regulators are continuing to press forward. They are committed, funded, and will not stop until they are stopped.
The list of funders is incredible including Ford Foundation, Laudes, Rockefellers, and the list goes on. They are connected all the way up into OECD governments.
This is something I wish the industry would not dismiss so lightly.
Thank you Matt, and I always appreciative of your support and kind words.
No doubt the hard core activists will not stop. I would distinguish that from the increasing mainstream dissatisifaction with things like EV mandates and most other aspects of "climate action" that require actual tough choices to be made or higher costs to be made. Almost no one is for any of that.
On the new Canadian bill, if this stops ALL companies from having ridiculous ESG booklets, may be a blessing in disguise?
It could be. That would be the best case.
I am watching eagerly to see what the 'internationally recognized methodology' is. The jaded part of me says it will be anti O&G, but then I saw an article about the World Health Organization looking to silence all 'Health-Harming Industries', which is of course basically all of them. It is an interesting time to be alive.
Thank you for sharing your thoughts about the energy sector! Have a good weekend
thank you!
Arjun:
I have been a reader and follower for a while and find the articles and perspectives insightful, helpful, always backed by thoughtful research and observations. Hence the recognition of MUSA strategy and execution were particularly gratifying.
This weeks article is on point and timely as well as we struggle in the E&P sector to balance growth, capex and hopefully expansion of cash on cash returns with fact one gets hammered for capex growth. My belief, unsurprisingly, is that a huge component of balance sheet management should include long term, consistent share repurchase. This is harder in the upstream sector as it must be underpinned by solid earnings.
In any event, I enjoy the articles and took the opportunity to share last weeks MUSA shout out with my management and board.
Madison Murphy
Madison, It is great to hear from you and thank you so much for the comment. It is really impressive to see what MUSA has done since spin. I remember covering the former integrated oil, and hard to believe how much value there was in separating the businesses. Regards, Arjun