How Easy Money Enabled The Shale Evolution

Published on
December 23rd, 2019
Duration
43 minutes


How Easy Money Enabled The Shale Evolution

The Exchange ·
Featuring Danielle DiMartino Booth and Tracy Shuchart

Published on: December 23rd, 2019 • Duration: 43 minutes

Danielle DiMartino Booth, CEO of Quill Intelligence, and Tracy Shuchart of family office Capital Benoit have teamed up on a new report exploring the role of monetary policy in advancing the shale industry. In this conversation with Real Vision's Ed Harrison, DiMartino Booth and Shuchart (perhaps best known as @chigirl on Twitter) examine the stunning correlation between the Fed's balance sheet and U.S. oil production, the explosion of high yield issuance in the sector, and the impending wall of maturity. Filmed on December 11, 2019 in New York. You can find more detail in their report here: https://www.realvision.com/schuchart-dimartino-booth-report.

Comments

Transcript

  • wj
    wiktor j.
    29 December 2019 @ 23:03
    Dont give up your petrol cars yet. I was looking at a Volvo t8 hybrid BUT: I asked the dealer when to replace batteries? Volvo only gives warranty on batteries for 100 000 km. Then I asked him since we “try” to live in a recycling world. Once I've changed the batteries do you have a plan to recycle them? Can I see your plan? He looked at me in shock and didn’t have an answer. It is now 4 months and still didn’t call me back. Just to add some more green news to EVS> On a German grid it was calculated that an electric car had to go 100 000 KM before it could be considered C02 efficient! (This is due to the terrible C02 inefficient batteries). Make your own conclusion but I have decided on a Porsche Cayenne > its more green!
    • SC
      Sam C.
      3 February 2020 @ 11:28
      Cayenne > in style too
  • MK
    Munira K.
    30 December 2019 @ 08:29
    Nice charts however Tracy struggled to get her points across clearly. The 3 way conversation seems less effective - works better if there are opposing views.
  • HO
    H2 O.
    29 December 2019 @ 21:34
    I am soooooooo tired of listening to kvetching about Fed and CB policy, especially the kind that has been consistently and fundamentally wrong about asset prices. It is all noise and no signal, ever. This view predicts doom on both sides of rate cycles, which may improve their odds of being right at some point, but so far has just been wrong. The GFC was a huge deal, but looking for it - rather than normal cycles in anything - around every corner is capital destructive.
  • dp
    david p.
    27 December 2019 @ 22:02
    Most of those companies will be out of business and leave behind polluted water tables for the locals to deal with. The Fed and the banksters truly are the enemy of the people
  • JS
    James S.
    27 December 2019 @ 03:56
    Firstly: As someone who lives in Texas and works heavily with energy companies, I was disappointed in the lack of specificity in some of the respondents' answers to basic questions about the industry in this discussion. Secondly: Yes, many people are expecting lower energy prices in 2020 and layoffs, but the ~$200B of expansionary capex in refining and ethylene plants is a major driver of capex growth going forward. You cannot simply look at the upstream segment while ignoring the midstream and downstream segments when attempting to analyze the health of the industry as a whole. Thirdly: There was very little discussion emerging technologies in the oil patch, specifically carbon sequestration and carbon dioxide flooding, to enhance oil recovery and elongate the well life cycle. All in all, this was not my favorite real vision piece.
  • CL
    Chris L.
    25 December 2019 @ 00:19
    This was kind of hard to follow and whatnot. I mean, the content worth taking in is not nuanced and whatnot.
    • RP
      Ryan P.
      27 December 2019 @ 00:15
      Be better
  • BC
    Burton C.
    26 December 2019 @ 05:20
    Answer to the question of when was the last refinery built in the USA..... 1976
    • CM
      Chris M.
      26 December 2019 @ 05:53
      Thank you. "Years Ago" wasn't the best answer. Neither was the cost "billions". Appreciate info that is a little closer in accuracy.
    • CL
      Chris L.
      26 December 2019 @ 17:37
      I followed Chigirl on Twitter and she followed me for a bit. Everyone spoke highly, and I'm sure she deserves it. But I've seen some really weird tweets like one where she though the SPX was a dollar denominated index.
  • JA
    John A.
    26 December 2019 @ 15:41
    XLE current;y has a P/E ratio around 7. Question is, is the ugliness priced in? At these prices, I am a buyer. If it goes lower, I’ll be buying more.
  • UJ
    Ulf J.
    26 December 2019 @ 06:34
    There is a technology for us to use but when will they release it.... the big question is for the investor is the timeline we already started the transition, which way they choose for energy is an open question. https://www.youtube.com/watch?v=KsPLmb6gAdw&t=2639s
  • FD
    Franbcois D.
    25 December 2019 @ 21:32
    I liked this exchange, glad to see the concept back on RV. I didn't get the impression Ed was out of place, he moderated the conversation very well. Keep up the good work RV team.
  • AH
    Andrew H.
    23 December 2019 @ 15:56
    So what does this mean for MLPs?
    • DK
      D K.
      25 December 2019 @ 07:04
      They’re not going away anytime soon. But... I’d be careful tying your investments to those highly dependent on shale oil transit.
  • AK
    Ado K.
    24 December 2019 @ 01:01
    Great breakdown, long term oil just seems like a rough play with electricity based vehicles and machinery on the ramp up. This in combo with low short term profitability makes you wonder who will actually buy oils stocks and based on what narrative.
    • MC
      Minum C.
      24 December 2019 @ 15:23
      I will buy oil stocks. I will also sell some short. Be long the ones that have assets with long reserve lives and low decline rates. These companies are earnings and cash flow positive at current prices. Be short the ones that rely on capital markets to raise money just so they can plow it into the ground and suck out Earth's black gold without a whole heck of long-term capital allocation discipline. The order of events goes something like this: 1) high yield spreads widen out as BB catches up to CCC; 2) wall of debt for high yield E&P names cannot be rolled over easily; 3) a few casualties occur and this takes out the supply that was relying on friendly capital markets; 4) meanwhile demand for crude oil chugs along and some EV enthusiasts realize there is a difference between refined gasoline and crude oil; 5) crude prices rise but not enough to enable high debt E&Ps to clean up their B/S; 5) the E&Ps with long lived reserves continue minting it. Happy holidays.
    • DK
      D K.
      25 December 2019 @ 07:03
      Go stand on a busy freeway overpass during evening rush hour anywhere in a major US city. Just watch the cars for an hour. Multiply that by what, maybe 10,000x? Now imagine trying to replace all that rolling infrastructure in a country where the avge worker earns less than $53k/yr. throw in how many vehicles have to be financed for 7 years now, the love of SUV’s, the need for trade in $$’s to get a down payment on another vehicle, and the (at least currently expensive) cost of that new EV car. We are a very very LONG way away from where you think we will be soon.
  • EC
    Earl C.
    25 December 2019 @ 05:36
    A lot of excellent RV regulars. IMHO Danielle DiMartino Booth runs away with the 2019 RV MVP with this one. She fires out very important information like a rapid fire fully automatic rifle. Loved getting Tracy's insights & Ed was solid. Got a ton out of this, thanks to all involved.
  • DC
    Darren C.
    25 December 2019 @ 00:30
    A welcome return for The Exchange.
  • DH
    D H.
    25 December 2019 @ 00:20
    I agree with Gary G. This should a forum for these experts to speak without interruption. It is one thing if a legit SITG expert is engaging them in a two-way discussion. He inserts his own opinion into discussions as if they are uncontested facts. It is passive-aggressive to the audience and annoying. Also dropping in comments designed to show his knowledge instead of letting the experts speak. Let these people discuss the market without interrupting them with your agenda based and discussion derailing "comments." His questions spend more time saying stuff than asking.
  • GF
    Gordon F.
    25 December 2019 @ 00:11
    Some oil minister of one of the OPEC countries is reported to have said, "The stone age didn't end because we ran out of stones, and the oil age won't end because we run out of oil." What I have understood from this interview (and other sources) is that the shale revolution has put an effective cap on the future price of oil. Shale oil may be uneconomic at $40-60, but if it starts to get close to $100, shale oil will start coming on line again, and production can be ramped up rapidly. The technology has been developed - and continues to develop - and there are a LOT of shale oil deposits around the world, not just in the US, although ours are massive. Social and political pressure are also pushing away from more oil use, so I think the quote at the beginning is true. Oil demand will not drop suddenly, but will probably peak over the next decade or less, and we will not again see sustained prices over $100 or so (in today's dollars). The Oil Age will taper off with recoverable oil still in the ground. This is certainly not what I believed or expected ten years ago, or even five, but that now appears to be the way we are heading.
  • AS
    Amitesh S.
    24 December 2019 @ 02:01
    I got an impression that it was disjointed and incoherent..
    • GG
      Gary G.
      24 December 2019 @ 20:53
      I agree, mostly because the Moderator (Jake??) is just unwatchable for me. His purpose is primarily to ask questions and facilitate, but I doubt that he has ever asked a question in less than 30 seconds. Nothing succinct about him; he rambles and stumbles all over the place, in every one of the videos in which I have seen him. Unbearable. I had to take a break, just to be able to finish.
    • GG
      Gary G.
      24 December 2019 @ 21:09
      Re my post below, not “Jake”. His name is Ed Harrison. For me, unwatchable.
  • JB
    Jason B.
    24 December 2019 @ 20:35
    Pension funds also subsidized the shale oil bubble. Other than EOG Resources, none of the other publicly traded US shale oil producers have consistently generated free cash flow despite having enormous amounts of capital available for over 7 years and many producers drastically cutting their costs in the last 7-10 years. I remember when the Saudis and OPEC were highly confident in 2013 that refusing to cut production and allowing oil prices to go well below $65/barrel would bankrupt all of the US shale oil producers. We may still get a lot of bankruptcies in the coming years, but many of these companies have endured for years longer than expected.
  • BG
    Bruno G.
    24 December 2019 @ 16:38
    Ed is great. Makes a topic that I have little interest in, interesting.
  • AC
    Andrew C.
    24 December 2019 @ 11:12
    Hmmmm. Potentially a great exchange, but I was left a little frustrated. How much to build a new refinery? "Billions". What does that mean? 2 or 12 or 20? A simple question to an industry specialist.... also, if price changes fundamentals, what happens to shale oil companies when/if the price heads back to $100? I suspect it won't change much, as they were not profitable in 2013, but costs (personal and materials) were higher then also. So maybe,...
  • WB
    William B.
    24 December 2019 @ 02:35
    Great guests and great Exchange..
  • RM
    Richard M.
    23 December 2019 @ 15:51
    Excellent discussion Ed - and you are right this will play out in a major way in 2020. Please make sure this topic is one of the "thematic "weeks"" special you all are starting to run! Have a super holiday and really look forward to staying with you all next year!
    • CO
      Craig O.
      24 December 2019 @ 01:10
      One piece of "Oil Week" should be the good, bad and ugly of MLPs.
  • RA
    Robert A.
    24 December 2019 @ 00:01
    Nice to see “The Exchange” format back. Always liked the flow that develops.
  • BA
    Bruce A.
    23 December 2019 @ 07:58
    A lot of good information but a bit disjointed compared to most RV vids. A summary/ recap would help at the end of the video. What I took away was: 1) easy money made the 'Age of Abundance' through shale oil investment and innovation. 2) cheap oil from 2015 to now hasn't reduced production or helped shale company margins. Balance sheets are in a precarious place with credit ratings showing the stress. 3) lack of cap ex, some bankruptcies, and some consolidation will eventually reduce oil production and result in a more sustainable oil price (higher). 4) rationalisation in the industry is costing jobs and will kill a major contributor to the US growth cycle 5) energy sector should bottom in 2020/2021 but the US economy may be slowing more dramatically than currently anticipated so US 10yr yields may fall (prices rise)
    • PU
      Peter U.
      23 December 2019 @ 10:28
      excellent recap!
    • PM
      Park M.
      23 December 2019 @ 18:26
      Excellent summary. Helped me a lot. Thanks.
    • EH
      Edward H. | Real Vision
      23 December 2019 @ 21:23
      Bruce, you’re right; a summary helps. Yours was excellent.
    • BM
      Bryan M.
      23 December 2019 @ 23:08
      Excellent summary Bruce. So - you are hired and somebody, pay the man!
  • db
    don b.
    23 December 2019 @ 23:07
    Stocks have already started to move up but still deep value in international conventional producers with exposure to Brent.
  • fT
    forecast T.
    23 December 2019 @ 21:33
    Best work on shale from an industry perspective. I’ll def be eyeing the “adults in the room” making acquisitions between 2020 and 2021.
  • Sv
    Sid v.
    23 December 2019 @ 19:51
    Excellent panel. Thank you.
  • WM
    William M.
    23 December 2019 @ 19:12
    another perfect discussion among three really bright people. excellent...thank you
  • CB
    Chris B.
    23 December 2019 @ 18:53
    New ESG focus and mandates will make it more difficult for E&P related names to roll their debt. Players still willing to re-finance these entities will extract a higher price.