August 15, 2025
Things I Learned This Week Driving Through Amarillo
Flat. First, there are a lot more wind turbines in West Texas than in Northeast New Mexico or Southern Colorado. I didn’t count them all, but I would have to guess there were at least 15 to 20 times as many going from Dallas to Amarillo than there were going from Amarillo to Boulder, Colorado. My son, Henry, is back at school for what we all trust will be his last year! I’ve already booked a graduation trip for him, along with his sister, to Cairo and the Nile. If we go without a diploma? Egypt has crocodiles, right? Something we found interesting was that we didn’t drive too much through oil country. There was Amarillo and the Panhandle. Otherwise, not much. We drove past a lot of farming land on the first half of the trip. The second leg was not much different. It used to be that Midland was the land of the independent operator — not anymore. The Eagle Ford’s economic impact is minimal in the big city of San Antonio. Houston is the international headquarters and command center for offshore operations. Now, Amarillo is in the running for the home of the independents. That made driving through Amarillo more interesting. And no, neither of us attempted the 72-ounce steak!
Politics. I understand that President Trump is meeting with Mr. Putin this weekend. I have always been either too smart or too stupid to predict oil prices, and I have no intention of starting now. This is compounded because no one has a clue what either of these volatile personalities might do. The impact on oil prices? Got a coin in your pocket? The world is over-supplied. We are urging our friend, India, to quit buying Russian oil. That will not happen. It is the economy, stupid. Less Russian oil, less Iranian oil, less Venezuelan oil and, before you know it, you have $100 oil! If that becomes the case, then I have some oceanfront property in Nevada you can look at. Best of luck for all involved but don’t get too carried away. Remember, increased oil production might come up as a condition for the ceasefire, so at least we may get an economic consolation prize.
Free At Last. A South Carolina judge has dismissed Charleston’s climate lawsuit, delivering a decisive setback to the climate litigation campaign. This ruling follows a trend of similar dismissals in New York, Pennsylvania, New Jersey and Maryland due to the idea that climate policy is a national issue and not something individual states can pursue. Judge Roger Young justified his ruling, stating “under Plaintiff’s theory, any emitters of, or contributors to, greenhouse gas emissions — such as airlines, automotive manufacturers, power companies and agricultural companies — could be liable for contributing to global climate change… as with the list of plaintiffs, the list of potential defendants thus appears boundless. Already, scores of states, counties, and municipalities have sued a hodgepodge of oil-and-gas companies for the alleged weather-related effects of climate change. If these lawsuits were successful, municipalities, companies and individuals across the country could bring suits for injuries after every weather event”. This is a win for the industry and a loss for plaintiff lawyers.
More Sand. There have been a number of sand-related deals. U.S. Silica went public, Hi-Crush’s Permian Operations sold to Altas and ProFrac took on $800+ million for its sand mines. Atlas is buying related businesses that complement its mining and logistics operations. So, it was no surprise when Iron Oak, who has acquired a combination of companies in the last few years, announced that they were buying a Northern White mine to service the Utica and Marcellus. So is natural gas really back, or is this a bet on the future? It was not that long ago when Wisconsin-sourced sand was the dominant proppant for every basin. Then, usable sand was found in the Permian, which set off a buying frenzy. We have now come full circle. Iron Oak now owns the non-Permian assets of Hi-Crush, which includes the three million tons per year plant in Wyeville, Wisconsin. This puts Iron Oak’s total capacity at 37 million tons per year. That’s a lot of sand.
A Couple a Week. It went from “who is going to get bought next?” to “what will the majors drop into the market?” We wrote about this last week, but the buyer at that point was unknown. To refresh, Conoco bought Marathon last year for $22 billion and are now selling Marathon’s former Anadarko assets to pay down debt. The lead buyer is Flywheel Energy, which is in a private partnership with Stone Ridge Energy and Kayne Anderson’s private energy fund. According to one source, Flywheel has made more than $2.1 billion in acquisitions since 2017. Another puts it at $2.7 billion in the Fayetteville alone after the Southwestern acquisition, along with their assets in the Rockies and Mid-Continent. And now, they are getting even bigger with this deal. Stone Ridge Energy is headquartered in Morgantown, West Virginia.
Headlines.
Lower oil prices may slow down U.S. output by year-end.
The Department of the Interior will revoke three documents that limit oil drilling in the National Petroleum Reserve in Alaska.
60% of Pennsylvania's electricity generation comes from natural gas, and Pennsylvania is the largest electricity exporter in the country.
More of the Same. The first chart below shows the EIA’s opinion of future oil production balances, with the second from the IEA showing basically the same thing. There aren’t expected to be any shortages of oil at least through next year. That does not mean either one is right, but it does reflect the current expectations of the “leading authorities.”
PPHB U.S. Energy Market Highlights:
Commodity Prices: WTI crude oil is currently $63.03 per barrel (down ~2.1% week-over-week) and natural gas is $2.95 per MMBtu (down ~4.1% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.3 MM BOPD (up ~0.2% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories increased by ~3.0 million barrels week-over-week vs. an estimated decrease of ~0.9 million barrels.
Frac Spread Count: There are currently 163 frac spreads operating in the U.S. (a decrease of 4 spread week-over-week).
Onshore Drilling Rig Count: There are currently 524 drilling rigs operating in the U.S. (a decrease of 1 rig week-over-week).
More. BKV went public almost one year ago and is currently the largest player in the Barnett Shale. And now, they are jumping on the growth merry-go-round, buying another chunk of the basin with the $370 million acquisition of Bedrock Energy Partners, a Mountain Capital portfolio company with operations in the Barnett, West Texas, Mid-Con and Utica, totaling 97,000 acres and some midstream assets. The $370 million price tag is expected to be funded with $110 million of seller issued equity and $260 million from the company’s reserves based lending.
And Again. Last week we discussed the announced acquisition of Aris, a public water company, by Western for $1.3 billion. I have long been a fan of Bill Zartler, the Executive Chairman of Aris Water Solutions and Chairman and CEO of Solaris Oilfield Infrastructure. His wife, Angela, has also been very important to Bill’s success. And congratulations to Amanda Brock, the CEO and President of Aris. Many of us have expected water IPOs to be the next wave of energy-related equity, but they are consolidating instead. Western already has a water business, and the latest earnings announcement by Aris was met with an analyst’s reaction – “Positive. As we have grown accustomed to, ARIS reported another strong quarter, highlighted by a modest EBITDA beat but FCF that topped consensus by a wide (+$27MM) margin. Overall volumes exceeded expectations including record produced water, more than offsetting slightly weaker margins.” Whether it be equity raises or buyouts, expect to see more water deals in the coming days.
Slow Though. In terms of M&A activity in the E&P sector, the statistics show it to be a disappointing year so far. This is very different when compared to the last couple of years where all the smaller players in the Permian were gobbled up by bigger companies. The lack of opportunities and targets is because of that consolidation wave. It’s one of the reasons for the slower activity this year. We are also seeing stronger M&A activity in other basins since the pickings in the Permian are small, but it isn’t the same scale of valuation. It has also been a bifurcated market. Oil deals have slowed, with company valuations down 34% from last year. Meanwhile, natural gas deals have increased due to the higher prices and more certainty of domestic supply and demand. We have commented on the deals that have been announced, with a number of them occurring this week. But numbers don’t lie, and the numbers indicate a slowdown… Especially when you take the massive deals out of the equation. But I think that Conoco’s divestiture of their Anadarko assets may be foreshadowing acceleration in the market. Conoco is selling the assets that Marathon owned in the Anadarko. They say they’re using the proceeds to both pay down debt and pursue higher margin opportunities. Assets that are “low margin” to a major oil company can be great opportunities for independents. With all of these giant deals in the last twelve months, it may be that you don’t see a dribble of small properties out there, but instead, entire basins. EOG for Encino to get the Utica is an example. It will be a fun year to watch.
Did You Know? Engine hood designs are required to have similarities in design, in terms of their height, shape and structure, primarily due to regulations and research aimed at improving pedestrian safety. That is one reason why so many cars look the same today. It constrains the designer. Studies have shown that vehicles with higher, more vertical front ends pose a greater risk to pedestrians. Vehicles with hood heights greater than 40 inches are about 45% more likely to cause pedestrian fatalities compared to those with hood heights of 30 inches or less and a sloping profile.
Bloodied. The frac market has been touch-and-go. We published a chart of the frac spread count last week, and it resembled free fall. Pricing is dropping faster than activity. While most can hunker down and wait it out, others are having issues. This week, Fort Worth-based pressure pumping company, ProFrac, announced a $75 million equity offering, and the stock dropped 25% in after-market trading. The stock was $8.20 at the end of July, and the offering was at $4 a share. The proceeds will be used to repay outstanding borrowings under the company’s senior secured asset-based revolving credit agreement, to pursue potential investment opportunities and for working capital and other general corporate purposes. Net debt to FCF is estimated at 9.3x, compared to the industry median of (0.7)x, and FCF to interest is (1.9)x compared to an industry median of (4.6)x. The correct amount of debt for an OFS company other than working capital management? Zero. Business is tougher these days than some people think.
Not Dead Yet. CAFE standards have not been completely eliminated, but recent legislation has effectively eliminated fines for non-compliance, making enforcement of these fuel economy standards largely moot. This change has significant implications for automakers and environmental policy.
Not Just Dove. Argentina’s Vaca Muerta Shale has been a very dominant shale play in South America, but has been plagued by politics, labor unions, low prices and too few production outlets. But that last point is starting to change. The country is doubling its LNG export capacity with the addition of a second Floating LNG (FLNG) system. No need for expensive trains on land. This is all done by a ship at sea. The vessel will be deployed off the coast of Río Negro, Argentina, by late 2028 and will operate alongside the first vessel, which is scheduled to begin operations in Q4 2027. This will make it the 6th FLNG vessel operating worldwide. The technology was slow to take off, but seems to be gaining speed. The export capacity of the two vessels will be about 1 Bcf/day and will cost about $6 billion to put into service. Between that, logistics, support and operations, it is estimated that they will be all in for $15 billion over the next 20 years.
Remember back in March when we were happy?
Blown Away. A Lot. Ørsted, Norway’s largest offshore wind developer, and Equinor, Norway’s national oil and gas company, joined forces to build the largest offshore wind project ever. Ambitious. Equinor bought into Ørsted about 10 months ago in 2024, acquiring a 10% stake for $2.3 billion. Calling the investment “countercyclical,” Equinor was hedging its bets. So far, they have lost about $1 billion, but it’s early still. Ørsted has canceled two large offshore wind projects in New Jersey and is moving ahead with at least one other project off the coast of Rhode Island and Connecticut. Now, it has a funding issue as a result of several of Mr. Trump’s efforts. Project financing has gone away and Ørsted has to finance its project from its own balance sheet. As a result, it just announced a $9.3 billion rights offering to fund the Sunrise Project. It isn’t all Trump, though, that has killed several East Coast wind projects. The companies entered into power contracts with stable public utilities, but by the time they deliver, they will be underwater relative to the prices signed 4-5 years ago. However, that was needed to provide the project financing, which Ørsted now cannot access.
Chinese Water Torture. Equinor is involved in one huge offshore wind project with SSE Renewables and Vårgrønn. The project is named Dogger Bank and is located about 100 miles off the northeast coast of England. It will have an installed capability of 3.6 gigawatts, enough to power 6 million homes. It is planned to be the largest project ever. The Norwegian government submitted a report to the Petroleum & Energy Ministry, which is financing part of the project. The report concluded it will be unprofitable and will remain unprofitable for its 35-year operating life. Knowing you are going to lose money for the next 35 years has to be a drag.
Well Done!
From The Department of Energy:
Energy prices have been down from last year!
Gasoline is down 9.5%.
Energy commodities are down 9%.
Energy is down 1.6%.
Thank you, POTUS!
Nukes. As anyone who reads me knows, I am a fan of nuclear. If you can put one on a submarine that is safe for U.S. servicemen, then putting one in a big metal building outside of Odessa should be an easy call. In the past, we have written that between design approval, testing and permits, it would take about ten more years before the next generation of nukes, called SMRs, start contributing to the power mix. But could it happen sooner? Last week, the President made an observation and a promise that could significantly accelerate their commercial entry into the market. We need to beat Russia and China to the Moon, and the key challenge there will be power. Solar will not work, leaving nuclear as the only viable option. His goal is to have nuclear power operating on the Moon by 2030. That isn’t to say it will happen, but there is more money, more interest and more momentum for nuclear development. That makes it more likely we will see SMRs deployed earlier than the 10-year window we once expected.
Venezuela Blows It Up. The Biden administration lifted sanctions on Venezuelan oil to lower gasoline prices and improve Democrat election results. The strong-arm “President” of Venezuela had to promise to hold free and fair elections and respect the opposition. He broke his promise almost immediately, and the Biden Administration did nothing, which emboldened Maduro. Better understanding the power of oil these days, Maduro claimed that the 1899 Paris Arbitral Award, a treaty that had set boundaries for countries in the region, was void and laid claim to part of oil-rich Guyana, where Exxon has set records. In January, he announced upcoming elections that included large parts of Guyana in the voting geography. Maduro mobilized troops to the border, and they remain there even after constant global criticism. Venezuelan gunboats approached one of Exxon’s offshore facilities. Now, as Exxon adds another Floating Production, Storage and Offloading (FPSO) unit, Venezuela's Foreign Ministry has presented a verbal notice to Guyana's government rejecting the start of operations. Maduro is flexing his muscles, but he may find that dealing with Mr. Trump instead of Mr. Biden is not quite the same.
This is BIG. It may sound like just another administrative order, but its impact could be incredibly far-reaching. Last month, President Trump issued an Executive Order that negatively impacts the renewable power industry. I’ve included the key aspects of the Executive Order below:
Ending Subsidies for Wind and Solar: The order explicitly states the goal of eliminating subsidies for these energy sources, characterizing them as expensive, unreliable and dependent on foreign supply chains.
Directing the Treasury Department: The Treasury Secretary is instructed to terminate the clean electricity production (Section 45Y) and investment (Section 48E) tax credits for wind and solar facilities and to implement enhanced Foreign Entity of Concern (FEOC) restrictions outlined in the OBBBA.
Reviewing Regulations at the Department of the Interior: The Interior Secretary is directed to review existing regulations, policies and practices to eliminate any preferential treatment for wind and solar compared to other energy sources and to ensure accurate evaluations of their impact.
Stricter Interpretation of “Beginning of Construction”: The order emphasizes preventing manipulation of eligibility for tax credits by requiring a substantial portion of a facility to be built, rather than relying on broad safe harbors.
Basically, the Treasury was directed to tighten long-standing guidance used to determine whether projects can qualify for clean energy tax credits, a move that will significantly change the economics of projects by removing some of the preferential treatment we’ve seen in recent years. More than 2,500 announced wind and solar projects, with a combined generating capacity equivalent to roughly 383 nuclear reactors, could be affected by the Treasury Department’s decision, according to Atin Jain, an energy analyst with BloombergNEF. So, we either run out of power, reverse these changes almost immediately or other forms of energy will fill the gap. It’s all a matter of economics and returns, with natural gas in the near term and nuclear soon after.
Perception. For many years, I have won drinks in bars by betting people they don’t know the second half of the saying “great minds think alike,” a term we all know and use. The retort to the phrase? “Fools never differ.” I was reminded of that recently.
“China’s lithium futures and spot prices reached more than an eight-month high.”
“Elevated lithium production and overcapacity have crashed lithium prices by more than 80% since 2022.”
What a Difference 25 Years Makes. Grocery delivery. Tried it? Exploding in popularity. I witnessed it last week when a grocery store order showed up in 30 minutes and I didn’t have to drive anywhere. Amazon grocery delivery is doubling its capacity this year alone to service 2,300 different towns and cities. A woman yesterday at Safeway, who was filling bags from a lift, said their business is at least twice what it was a year ago. Estimates put the additional cost at about 10 percent, but before you think that is high, remember the last time you paid at a restaurant and the tip choices started at 20 percent? We tried this 25 years ago, but the dot-com bust ended it. An overnight success after only a quarter of a century!
Near-Term Reality. I am a big fan of Chris Wright, one of the smartest people in our industry in my humble opinion. As we have written extensively, virtually everything the current administration is doing to the oil and gas industry is a long-term positive. Long term. I also understand the need to get oil prices down before the midterm elections, which has already been successful, with gasoline down almost 10 percent over the last year, tempering any inflation from other Trump policies. The slowdown in drilling activity reflects today’s lower prices, the time remaining until the elections and the need to be cash flow positive. So, what do you do? Constrain capital spending. This is the result.
Scale. Having spent several years as a working scientist, I recently saw a headline that bothered me. I actually turned the page but had to turn back to read the article. Fake papers are flooding scientific journals. In my decades as a researcher and analyst, honesty, directness and integrity were always most important. Your reputation is the most valuable thing you have. So the idea that scientific journals are being “taken over by paper mills” bothered me. Paper mills are businesses or individuals that charge fees to publish fake studies in legitimate journals under the names of desperate scientists whose careers depend on their publishing record. I assumed there were always a bunch of gadflies. This could be much of nothing. Then the numbers started jumping out at me. It is estimated there are 32,700 paper mills operating globally. “The entire structure of science could collapse if this is left unaddressed,” said a Northwestern University physicist. One publication alone retracted more than 11,300 papers that appeared compromised. I had no idea of the scale. I’m at a loss for what to say.
What Have We Come To? Off-track betting, the local casino, poker. We will gamble on anything. When I first went up to Massachusetts to manage a seismic vessel working George’s Bank, I was stunned by how, even in hotel bars, people would bet on anything, like how many times a pitcher would go to the resin bag in an inning. But that feels so yesterday. This is where we are today.
Any and all comments, arguments and rebuttals are welcome!
In addition to my association with PPHB, I serve on three private company boards. Merit Advisors is a property valuation company and I have long been a fan of optimizing how a business is run, not just the tools we make. Merit is in the business of savings companies’ money, actual cash, by doing a much more in-depth and realistic view of equipment and reserve valuations and I am very impressed with their work. I am also on the advisory board of Preng & Associates, a leading executive search boutique that specializes in all things related to Energy & Power. Nova is a gas compression company run by a very dynamic CEO with a very strong board and ownership.
I serve on the Advisory board of the Energy Workforce & Technology Council (formerly PESA), the National Ocean Industries Association (NOIA), and the Maguire Energy Institute at SMU my alma mater.
jim
214-755-3914 | james.wicklund@pphb.com
Leveraging deep industry knowledge and experience, since its formation in 2003, PPHB has advised on more than 180 transactions exceeding $11 Billion in total value. PPHB advises in mergers & acquisitions, both sell-side and buy-side, raises institutional private equity and debt and offers debt and restructuring advisory services. The firm provides clients with proven investment banking partners, committed to the industry, and committed to success.
