August 22, 2025
Things I Learned This Week as Summer Wanes
School is back in session, everyone is home from Aspen, Vail and Gstaad. The traffic has returned. Time to leave the pool and margaritas behind and get back to the grind. Okay, there is still time for margaritas, but that is a given.
Topics. This week brought several important developments for our industry. Earnings season is winding down, oil and gas prices are both “shouldering” lower and companies are beginning to think about 2026 plans. It feels like staring into a black hole of uncertainty. September is just over a week away, which means conferences are about to start. Investors are just as uncertain as management teams, so presentations will be interesting but full of caveats. Wide-eyed optimists will be ignored, as will the perpetual bears who claim our industry is over. We know it isn’t, but history shows that “unsustainable” trends can last a very long time. I count myself in the mildly optimistic class. AI is going to hit every industry harder than most people expect. Data centers are already the hottest play in private equity, with a $25 billion, 1,200-acre project recently announced. Stranded natural gas seems to be the ticket. Today, you can’t even read a menu without someone claiming an “AI business model.” The term is overused, but the reality wave is coming and we don’t have the power to support it. Coal is off the table, wind and solar remain unreliable enough and new nuclear is still six to ten years away. That leaves natural gas as the clear winner. Some argue that natural gas isn’t benefiting yet, but it is similar to LNG plants because until they actually start working, they don’t need the gas. Once they start up, demand for natural gas will increase. Data centers are still under construction, but when they open, it will be “Katy bar the door” for natural gas demand. Just wait.
One Victory. The One Big Beautiful Bill Act (OBBBA) has mandated increased offshore lease sale activity, providing a big boost in certainty for our industry. More than 30 offshore oil and gas auctions will offer blocks in the Gulf of America and Alaska’s Cook Inlet. “A predictable leasing schedule means more American energy, more American jobs and stronger U.S. security,” said Energy Workforce President Tim Tarpley. “Offshore development doesn’t just power the Gulf, it powers the entire nation. Every single state benefits from the supply chains, workforce and revenue that come from offshore energy. With this schedule in place, America can keep leading, keep investing and keep energy affordable.”
Another One. Obsidian Chemical Solutions, a leading provider of specialty chemical solutions for completion operations, offers customized formulations for stimulation, acidizing, drill-outs, cementing and produced water treatment, enhancing asset integrity and optimizing production. Founded in 2018 and headquartered in Midland, Texas, Obsidian has been acquired by SNF Group, a specialty chemical company based in Andrezieux, France. SNF employs 8,800 people worldwide, including 2,450 in the United States, with products that contribute to treating, recycling and preserving water, saving energy and reducing carbon footprint. Obsidian was advised on the transaction by PPHB. Well done guys!
Improved Image. I had lunch this week with a good friend outside of our industry who has been reading up on it. She asked a very good question and offered an even better solution. She pointed out that “fracking” has become a highly negative word for many people and most don’t even know what it actually is. Her suggestion was to drop the word “fracking” and substitute it for a more accurate, all-encompassing term that is likely to be received more positively. “Stimulation Services.” Those of us in the industry will say we already use that term. We don’t even think about it. If you ask any person on the street, except those in Houston or Midland, about “fracking,” you are likely to get a negative response. Truthfully, they don’t know what it really means. But if you tell the person on the street that you are in the “stimulation services” business, you are likely to get a much better immediate response. Since they don’t know what fracking is, they can have the same lack of knowledge about “stimulation services” but with a far more positive better initial reaction. Since it also encompasses acidization, it is an even more accurate term. So, I am going to try substituting the term and see how it goes. We should all give it a try. And thanks, BF.
Big Ouch. Tech has taken a hit in the past week. The "Magnificent Seven" tech companies including Apple, Nvidia, Tesla, Microsoft, Alphabet, Amazon and Meta Platforms, saw massive losses. Our first reaction might be, “so what?” After all, our sector has taken hit after hit. But in the real world, it shows we are small potatoes. These seven companies lost over $750 billion in market value in a single day. $750 billion. That kind of move in our industry would wipe out the entire market caps of Exxon and Chevron. Gone in one day. Suddenly, that three percent weighting of the S&P makes more sense. New tariffs, trade wars and recession are all top concerns, but many point to a Reuters report suggesting weak corporate returns from AI investments, along with comments from industry leaders about excess buildout in the space, as key factors. The high-flyer Palantir lost $73 billion in value in a single day. Wow.
The Shape of Things to Come. A company is building an off-grid power generation project to support data centers and AI operations. The project is designed to avoid grid interconnection delays and regulatory hurdles. Pacifico Energy is developing the campus on the 8,000-acre GW Ranch, which will be capable of generating 5 gigawatts by 2030. Power will come from combined-cycle natural gas turbines with advanced battery storage. The company has raised more than $5 billion in equity and debt financing for renewable projects and already has 1 gigawatt of solar in operation, with another gigawatt of offshore wind underway, in addition to the GW Ranch project. Pacifico is a privately held investment firm that seeds and manages real asset-based companies, maintaining controlling interests in renewable and traditional energy development platforms, as well as vertically integrated independent power producers (IPPs) worldwide. The key here is “behind the meter.” The GW Ranch project in Pecos County will supply direct power to AIO data centers without relying on the grid, ensuring cost certainty for power going forward. This is where the industry is headed and stranded natural gas is a fantastic energy input for “behind the meter” projects. Plan ahead.
They Aren’t Alone. Another $25 billion data center power project is moving forward. The company will develop a 1.4GW data center campus in Shackelford County, Texas. Vantage is building a complex that will be home to 10 data centers, spanning 3.7 million square feet across 85 acres of buildings. It is expected to open in the second half of next year. The project, named Frontier, will use liquid cooling and utilize a closed-loop chiller system, which requires minimal water for cooling. “Texas has become a critical and strategic market for AI providers. In particular, the launch of our Frontier campus with 1.4GW of GPU compute capacity marks a watershed moment for Vantage.”
And… Crusoe Energy, in partnership with Blue Owl Capital and Primary Digital Infrastructure, is building a 3.4-megawatt center for Oracle and OpenAI just 100 miles away near Abilene. To say this is a growing business is an understatement. That makes three data centers and over $53 billion of spending. Welcome to the new world of power.
PPHB U.S. Energy Market Highlights:
Commodity Prices: WTI crude oil is currently $62.71 per barrel (down ~0.5% week-over-week) and natural gas is $2.84 per MMBtu (down ~3.7% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.4 MM BOPD (down ~0.1% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories decreased by ~6.0 million barrels week-over-week vs. an estimated decrease of ~0.8 million barrels.
Frac Spread Count: There are currently 167 frac spreads operating in the U.S. (an increase of 4 spreads week-over-week).
Onshore Drilling Rig Count: There are currently 524 drilling rigs operating in the U.S. (no change week-over-week).
Big News, Buried on Page 7. Hamas has accepted a temporary cease-fire nearly identical to the one that Israel proposed in July. Back then, Hamas added demands that made the deal impossible to meet. Now they’re accepting it. There is still no agreement to release the remaining hostages or hostage remains. I think it’s amazing that people expect any country to simply give up on rescuing its citizens who have been kidnapped and taken prisoner. That’s not how the world works. Still, a temporary cease-fire is better than nothing. This comes on the heels of Israel stating it plans to take over Gaza City and take control of Gaza to end Hamas’s rule. The deal Hamas has now accepted would release 10 hostages in exchange for a 60-day pause in fighting and the release of Palestinian prisoners. Now we wait to see whether Israel accepts the temporary truce. Releasing 10 hostages out of the remaining 50 (with only about 20 believed to still be alive) is token at best and unlikely to dissuade Israel from further action. If Hamas releases all remaining hostages, it loses the only leverage it has. Israel says it won’t stop fighting until Hamas gives up political and military control of Gaza. Meanwhile, no country is stepping up to take in Palestinians and Israel has decided to assert control over the entire area. Hamas is doing everything it can to stay in power. Maybe the placement of this story on page 7 of a global publication is indicative of their low expectations for success. The saga continues.
Everything LNG. U.S. LNG exports reached record levels last month, driven by strong demand from both domestic industrial consumers and European buyers. But there is a problem. Pipelines. The growth of LNG exports is threatened by insufficient pipeline capacity in a market with no shortage of natural gas. The expectation is that now, with Mr. Trump in office, delays in pipeline approvals will ease, but it will be a race between need and capacity. All it takes is time and money, but neither is likely to bridge the gap completely. Add to that the new mandates requiring U.S.-flagged and U.S. built LNG tankers and there could be an issue. From 2029 onwards, 1% of U.S. LNG exports should be shipped on U.S.-flagged and U.S.-built vessels. The rub: of the 635 LNG tankers currently in operation, there is currently only one that transports U.S. gas under a U.S. flag! LNG exports from the U.S. to Europe between January and August this year rose 22% compared to the first eight months of 2024. That kind of growth is very hard to keep up with. Total U.S. LNG exports to Europe increased by a stunning 61% from a year earlier, in part due to depleted natural gas storage in Europe from lower wind and hydroelectric output. Natural gas prices in Europe reached an average of $8.34 per Bcf over the first eight months of the year and prices may climb even higher, according to the EIA. “It’s not about the availability of gas, it’s about transportation,” said a Cheniere executive. There are about half a dozen new liquefaction facilities currently under construction on the Gulf Coast, but pipeline development is nowhere near keeping pace with demand growth.
Appeal. The Consumer Financial Protection Bureau (CFPB) was formed in 2000, championed by Massachusetts Senator Warren. Many have seen it as an impediment to business while others say it is a protection for consumers. Regardless, the Trump Administration started reducing the size and scope of the agency soon after the election. The National Treasury Employees Union sued to block the reforms and lost in court. The D.C. Circuit Court of Appeals found that you can’t sue the administration on what it plans to do or what it might do, only what it’s done. It was decided that piecemeal layoffs or announcements of reforms do not warrant the injunction that was issued. They’re trimming down so the agency will continue. These injections get a great deal of press when they’re announced, but when the courts find in favor of the other side, it’s hard to find in the press. This will also be used as a precedent for all other lawsuits that have been filed against the Trump Administration by unions. Good or bad, the administration roles on.
Kangaroo. The International Court of Justice (ICJ), the UN's highest court, issued a landmark advisory opinion affirming that countries have a legal obligation to limit greenhouse gas emissions and address climate change. This ruling strengthens the legal basis for holding countries accountable for their climate actions and could lead to increased climate litigation, particularly in national courts. The ruling links climate action to the protection of human rights, including the right to a clean, healthy and sustainable environment. The opinion is advisory, not a mandatory court order nor binding, but that won’t stop litigators from saying otherwise. While not explicitly stated, the ruling could pave the way for claims for reparations for climate-related damages, particularly from vulnerable countries.
Back Pocket Cooling? U.S. consumers have run up more than $1 trillion in credit card debt. One credit reporting company noted that there has been a “meteoric rise in credit card debt” over the last couple of years. But now, that rise is starting to become more moderate. Not going down, just not going up as quickly. Why? Everything, from the resumption of student loans payments to credit card companies getting a little pickier over who they give cards to. Credit card use increased during COVID and shrank slightly when it ended. But as the economy recovered, so did spending, with growth in credit card use increasing 7x since 2022. Personal loans have spiked as credit card growth slowed, and some of that was for debt consolidation. It grew 18% in Q1 of this year from the year before and now totals almost $260 billion. With credit card rates around 22%, a lower rate consolidation loan makes sense, but that is obviously not the only use for personal loans. You start to understand why people seem so blasé about the $34 trillion in national debt. If my government can borrow so much to fund its lifestyle, why can’t I? If it all comes home to roost at the same time, we have some serious issues.
Nukes. It is becoming increasingly popular to be in the nuclear business. We have written extensively on SMRs (Small Modular Reactors) and their future in the U.S. The industry believes it will start booking commercial revenues in less than 10 years, and Mr. Trump is working to shorten that timeline by talking about putting nuclear power on the moon by 2030 to combat China and Russia. If we can put one on the moon in 5-6 years, commercial use in the U.S. could be closer than some think. Project Pele is now 6 years underway, tasked with the goal of designing, building and demonstrating a prototype mobile nuclear reactor within year five. The work is being done by the Department of Defense's Strategic Capabilities Office, the U.S. Department of Energy (DOE), the Nuclear Regulatory Commission and the U.S. Army Corps of Engineers, as well as with the cooperation and guidance from industry partners. Two companies have been selected to develop the final design of the mobile, high-temperature gas 1.5MWe microreactor.
Consolidation Across Energy. Northwest Energy and Black Hills are merging to create a $15.5 billion enterprise. In an all-stock tax-free merger, the deal will create a pure play that is vertically integrated and capable of providing utilities to over two million customers across eight states. The combined companies plan to spend over $7 billion over the next four years, primarily building new electric and natural gas infrastructure. This is all due to the increase in electric power demand being seen across the U.S. and world as a result of the advances in technology. In particular, the data centers are required to run AI models that are populating and expanding at an amazing rate. Consolidation isn’t just for oilfield services or E&Ps, but for every segment of the energy sector. While energy is only a small part of the S&P, it’s becoming increasingly obvious that energy and power are critical to the economy of the U.S. and the world. Whether people like it or not, most of that energy and power is being generated by hydrocarbons. As we said before, alternative energy sources such as solar and wind are additive to power sources but are incapable of replacing hydrocarbon base generation. Considering the unreliable nature of wind and solar energy, there is only one source that can be the basis of our power generation. 82% of our energy is generated by hydrocarbons in the U.S. That percentage may go down even though the absolute volumes could go up. But regardless of all these details, reliable energy generation capacity must increase. Natural gas will again be a “bridge fuel”, though this time it may be bridging from coal to nuclear. The reactor core.
They’re Back. SPACs. A Special Purpose Acquisition Company. They were very hot a few years ago and then hit the ice. Some found something to buy, others didn’t. For a while the wave crested, but now it appears back. In our sector, Charlie Leykum, a very well-known investor, has started a SPAC. Talon Capital Corp. was set up to potentially acquire assets in the E&P, power, technology and infrastructure sectors. Broad, but many SPACs are. The IPO is expected to raise $225 million and once they find a deal, a second round of financing is generally required. Former OFS executive Bernard Duroc-Danner’s SPAC, Pyrophyte Corp, bought a Canadian silicon company Sio Silica Corp, and now has started his second SPAC, raising $175 million, with the goal of, “focus(ing) our search on identifying companies in the energy sector that constitute critical links in the supply chain for, and/or service, the growing segments from the full spectrum of the energy ecosystem.” It is a difficult effort but regardless, a capital source that dried up a couple of years ago may very well be back.
Snippets.
UK inflation climbed to an 18-month high due to surging food, fuel and transport prices, putting the Bank of England under pressure to reconsider the pace of interest-rate cuts.
Natural gas production in the Lower 48 has gone up to 108.1 billion cu ft daily since the start of August, breaking the record it set in July, at 107.9 billion cu ft.
Putin made Trump talk about getting rid of mail-in-ballots - MSNBC.
Bold New Advocates. For many years, I have contemplated on how we can best educate Americans on the benefits of using emerging technologies in oil and gas. It’s been a frustrating failure for decades. For a long time, the CEO of one of the largest oil companies told the API that it wasn’t necessary, whereas the chemical industry is showing bunnies hopping across beautiful green fields winning the hearts of consumers. We’ve gotten better since then, but the rhetoric against us has increased at a much higher volume. Everyone knows how vilified our industry has been for most of the last 15 years. If something goes wrong in the world, it is invariably our fault, and only recently have courts been judging such incidents with this reality in mind. It will be to our continuing benefit, but that doesn’t help the education side. The TV show, Landman, could easily be as big a win for our industry as it is for Paramount. 40 years ago, Dallas was just the place where JFK was assassinated. Now it is a thumbs up shout of JR from everybody in the world. Every little bit helps. But I was very encouraged by a piece I saw recently. We’re getting a shout out from a state that is clearly been a beneficiary of the natural gas boom and is only now becoming more vocal about those benefits with the lure of reliable power and new data centers. Pennsylvania now firmly joins the fold. Here is Why. Electricity demand is projected to grow by 100-200% over the next three years as demand for data centers grows. Proximity to a reliable and cost-effective energy supply is critical for hyperscale data center developers, power producers, and advanced manufacturing systems. The Marcellus provides that. In fact, natural gas provides 60% of the state’s electricity, but that is only 14% of its production. It ships power to places like Massachusetts who won’t allow drilling or pipelines. They’re just fine with buying power generated from natural gas.
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.
