"So if you are trying to avoid purposely or accidentally turning into a cycle rider, there must be some different course of action that is needed going forward relative to past cycles." Perfectly captured the issue - cycle riders would say that it's hard to see how a commodity industry selling a product that is fungible can ever really be an industry where specific companies generate above-average returns over many cycles. That makes Exxon and Shell's historical performance that much more impressive!
Question: could this cycle be genuinely different than past cycles because ESG and shareholder pressure to restrain capex may significantly prolong this upcycle?
Thank you. I am very hesitant to declare "this cycle [could] be genuinely different..." I would say that I think I do think various E&Ps could become the new super majors in terms of having sustainably better ROCE/FCF/dividends/etc. i.e., you definitely do not HAVE to be integrated to generate good returns. That said, it may take longer, but I would expect capital discipline to erode at the sector level.
Arjun, thanks for letting me relive those exciting cycle rider days of the 1990's!
As you know, the wind turbines work most of the time down here in the Lone Star State. Particularly along US90 or I-10 in West Texas. We just don't put them up in Big Bend
Loved PPP. I remember Paul von Wagonen. I think West Texas is the one region where there is meaningful wind and solar and electricity prices are low...which is why I haven't thought the issue is renewables per se...but like everything, you can't make a blanket statement that we need 100% of it everywhere and somehow it is low cost everywhere. It clearly isn't...West Texas is one of the regions it does work well.
Paul still kicking. Lives down the block from us. Best thing about the West Texas wind farms is that they are intermingled with the pumpjacks! Great juxtaposition.
Please send my regards, even thought there is no chance he'll remember me as I was about 25 years old at that time...I was on the buy-side at JPMIM in those days and joined Textor on all his Hosuton trips which of course is how we met and how I know Paul.
Great article and yes on wind and solar farms in the California desert...appalling indifference to the extraordinary natural scenery. If one can ever engineer it, the desert the morning after a torrential rain will shake even the most dedicated atheist with the absolute explosion of flowers, color and wildlife and by the midday sun it is gone...poof. White Mountains are a good spot.
Thank you J J. I get that there are plenty of other developments in this area. But boy does that non-moving wind farm really jump out. Joshua Tree National Park was amazing.
Yes an other worldly place...and I just read somewhere, perhaps the WSJ, that 358 odd wind projects have been killed by local communities over the last few years
"So if you are trying to avoid purposely or accidentally turning into a cycle rider, there must be some different course of action that is needed going forward relative to past cycles." Perfectly captured the issue - cycle riders would say that it's hard to see how a commodity industry selling a product that is fungible can ever really be an industry where specific companies generate above-average returns over many cycles. That makes Exxon and Shell's historical performance that much more impressive!
Question: could this cycle be genuinely different than past cycles because ESG and shareholder pressure to restrain capex may significantly prolong this upcycle?
Thank you. I am very hesitant to declare "this cycle [could] be genuinely different..." I would say that I think I do think various E&Ps could become the new super majors in terms of having sustainably better ROCE/FCF/dividends/etc. i.e., you definitely do not HAVE to be integrated to generate good returns. That said, it may take longer, but I would expect capital discipline to erode at the sector level.
Arjun, thanks for letting me relive those exciting cycle rider days of the 1990's!
As you know, the wind turbines work most of the time down here in the Lone Star State. Particularly along US90 or I-10 in West Texas. We just don't put them up in Big Bend
Loved PPP. I remember Paul von Wagonen. I think West Texas is the one region where there is meaningful wind and solar and electricity prices are low...which is why I haven't thought the issue is renewables per se...but like everything, you can't make a blanket statement that we need 100% of it everywhere and somehow it is low cost everywhere. It clearly isn't...West Texas is one of the regions it does work well.
Paul still kicking. Lives down the block from us. Best thing about the West Texas wind farms is that they are intermingled with the pumpjacks! Great juxtaposition.
Please send my regards, even thought there is no chance he'll remember me as I was about 25 years old at that time...I was on the buy-side at JPMIM in those days and joined Textor on all his Hosuton trips which of course is how we met and how I know Paul.
Great article and yes on wind and solar farms in the California desert...appalling indifference to the extraordinary natural scenery. If one can ever engineer it, the desert the morning after a torrential rain will shake even the most dedicated atheist with the absolute explosion of flowers, color and wildlife and by the midday sun it is gone...poof. White Mountains are a good spot.
Thank you J J. I get that there are plenty of other developments in this area. But boy does that non-moving wind farm really jump out. Joshua Tree National Park was amazing.
Yes an other worldly place...and I just read somewhere, perhaps the WSJ, that 358 odd wind projects have been killed by local communities over the last few years