May 23, 2025
Things I Learned This Week Which Was Not Much
Shoulder Month. Oil and natural gas news is as scarce as hen’s teeth, as my sainted Mother used to say. Earnings are over, so no more explicit guidance in either direction is coming soon. Oil prices are in “no man’s land,” low enough not to be noticed, and high enough that you just can’t sell out yet. The donation of a $400 million airplane from one of the biggest LNG exporters in the world bears some mention, but there is really nothing Mr. Trump’s administration can do to stifle Qatar’s LNG expansion, since the market needs the supply, and we won’t even mention that the country’s partner is Exxon. So, not only was it a shoulder month for natural gas demand, but it was also a shoulder month for any real news about the industry.
Hope, Undefined. The oilfield services contracts signed last week still deserve a spot in the news, and as soon as some companies start articulating exactly what happened, we will discuss it further. The Middle Eastern countries, especially the UAE and Saudi, are already significant customers of those service companies, and the Middle East was one of the few geographies around the world that was expected to see OFS spending growth.
57 to 64. It’s not an NBA score. Maybe at halftime. It isn’t hockey. Not even the Dallas Stars are that good! It is where oil prices have been for the last month. $57 to $64. It hit the bottom end of that range when OPEC+ announced it was going to accelerate oil production, bringing more supply onto the market. They decided on 411,000 BOPD for May, rather than the 133,000 that had been expected. They are now considering doing it again by putting another 411,000 on the market in June. While we in the industry don’t like that, we would like higher prices and not lower prices, the current administration, who just cut multi-billion dollar deals with OPEC+’s top member, wants lower oil prices. It won’t last forever. It isn’t sustainable. It is a question of when and how long. I would use the mid-term elections as a goal post.
Drum Roll Please. Clean energy. It has to be a real thing since the government has been funding it with trillions of dollars. Some of that might be going away. The budget bill that was passed by the House seems to apply some breaks. To say it is controversial is an understatement. According to one side, the BlueGreen Alliance’s Executive Director said, “The GOP caved to the MAGA extremists in their party so they could screw over America’s workers to stuff the pockets of billionaires.” Not exactly politically neutral. Energy Innovation said that the bill would cost the U.S. more than 830,000 jobs by 2030, and 720,000 more jobs by 2035. These numbers do not account for the likely cancellations of planned clean energy manufacturing facilities. It does not matter that the premise is non-economic and only being used as a jobs program. Not to mention, all participants are required to be unionized.
Clean Energy Stocks. The majority of the clean energy stocks took a hit on Thursday. Sunrun dropped 33% and Complete Solaria fell nearly 22%. Enphase Energy, Maxeon Solar and Solar Edge Technologies dipped between 10% and 16%.
Chopped Off. The bill would advance the ending of IRA tax credits for clean energy projects years earlier than initially planned, making some projects unable to use the tax credit, resulting in cancellation. You only get the credits for the next three years, and all future projects have to begin construction within 60 days of the bill’s passing. And importantly, it eliminates the “transferability” of tax credits that historically enabled developers to sell their tax credits and use the funds to finance their projects’ construction. It also increased the restrictions on using tax credits for any project associated with “foreign entities of concern,” which includes companies linked to China, who unfortunately dominate the broader clean energy supply chain. None of this constitutes any alarm on my part. Mr. Trump warned of cutting spending out of the inappropriately named “Inflation Reduction Act” when he ran for office. Now it is being done. And some of the industry’s early adopters and advocates include some of the oil companies themselves. It will be interesting to see how “green” everyone stays in the face of worsening economics near-term. Our industry’s mentality has never been waiting for others to follow, but by leading, sometimes in a brash fashion, we can establish the narrative.
Say Okay. We said last week that one of the things that President Trump gave to the Middle East was permission. Permission to buy things that they haven’t been able to buy in the past. The “Dispersion Rule,” which limited where high-end computer chips could be sold, was quietly removed, allowing the President to aid Abu Dhabi in its transformation away from just having oil. The idea? A 10-square-mile campus, one of the largest in the world. Permission to import up to 500,000 of Nvidia’s top-tier AI chips annually starting in 2025. U.S. companies will operate the site and provide cloud services, with AWS and Qualcomm already tied to related projects. It creates economic and technology ties that, along with the rest of the Middle East trip by President Trump, was to try and blunt the efforts of China in the region.
No Compromise!! But a little horse-trading is okay. So, the President puts offshore wind on hold. There is a $5 billion offshore wind project by Norway’s Equinor, that got put on hold. That power was destined for the State of New York. New York has not allowed the construction of any new natural gas pipelines that would bring natural gas from Pennsylvania and Ohio into the state. The Governor of New York has made some very strong arguments on why her state doesn’t want natural gas. What a dilemma!?! The outcome? Some good horse-trading. The President lifted the pause on the Equinor wind project, and the Governor agreed to allow pipelines into the state. Wind continues, more reliable baseload and peaking from natural gas, heating oil and coal become displaced and boom! All of a sudden, it is all a good idea. Practicality always wins in the end. It’s just how long it takes to get there sometimes.
PS. Massachusetts is shutting down its LNG import facility, expecting to make that up by offshore wind as well. What do we need from them?
Ping Pong. Oil is down today because Iran is going to work with the rest of the world on uranium enrichment. And it’s up the next day because the Ayatollah changed his mind and wanted to build nukes. Then back down the next day, as an Iranian diplomat had a headache, and after Aspirin and Excedrin, he felt better. Think of ping pong. Or a Yo-Yo. Call me when the signing takes place.
Widespread. “Apple Eyes Brain Chip for Control of Devices” – WSJ. Musk already has Neuralink, a brain implant designed to connect directly with the brain, allowing users to control devices and potentially restore lost functions by monitoring and stimulating brain activity. Neuralink also enables users to control computers, smartphones and other devices simply by thinking. Think it, and it shall be so. Wow. The iPhone is almost 18 years old. Think back 20 years. Maps, letters, phone books, a couple of pizza places delivered. What will the next 10 years be like if Moore’s Law continues? This technology? Mainstream in a couple of years.
Performance Based? Usually, it is the oil company who takes credit for anything good that happens in operations, and they only give the OFS companies the credit if it isn’t good. So, you must believe that Halliburton did a pretty fine job on a recent project. Rhino Resources drilled two exploration wells in Namibia and shared the credit with Halliburton. Citing “a collaborative approach and integrated services, seen as instrumental in the operator’s drilling success” was the feedback from the meetings. As an indication of the area’s potential, Halliburton has local infrastructure and operations in-country doing the entire project. “This success is an example of what’s possible when world-class technology, local collaboration and a shared long-term vision come together” said a Halliburton executive. The two companies opened the Rhino-Halliburton Technology Centre last year at the University of Namibia (UNAM) Southern Campus to advance geoscience education and research. These are the lengths our industry goes to helping the Indigenous people thrive. It also speaks well of Namibia’s future.
Only There. San Francisco Department of Health’s new “fat positivity expert” has been hired to fight “weight stigma” in the city. Virgie Tovar claims telling overweight people to cut back on cake is rooted in “misogyny” and is a form of “oppression.”
A Big Deal. Remember when the USGS announced that there was a 100+ year natural gas supply from the unconventional reservoirs? It was a bonanza for all involved and helped people understand our industry, even if just a little bit. Well, here it comes again. So, it turns out that underneath Wyoming, Colorado and Utah are an estimated 473,000,000 barrels of oil and 27 trillion cubic feet of natural gas. That matters. “This new USGS assessment underscores the role of American energy resources in strengthening our energy independence and driving economic development across the West,” said Secretary of the Interior, Doug Burgum. The Mowry Composite Total Petroleum System, a geologic grouping in Southwestern Wyoming and parts of Colorado and Utah, holds deposits of a shallow, prehistoric ocean which covered most of the Rocky Mountain region. We aren’t going away anytime soon.
Free My People. In the UK, the government has a windfall profits tax on the North Sea oil business. It is now at 78%. Imagine. Well, now more than 2,500 business leaders have called for an “immediate end” to the UK government’s Energy Profits Levy in an open letter. “Dear Prime Minister, it is almost exactly a year since you publicly insisted that your party’s plans for the North Sea would not cost jobs. On 7th May, the largest independent operator in the UK Continental Shelf, Harbour Energy, announced plans to cut its workforce by 25% with 250 jobs in Aberdeen being placed at risk,” it states.
“This is a devastating blow for the economy across the region, and the government should be concerned with continued job losses in the North Sea. The UK’s long-term energy security is threatened.”
“It is estimated that the levy has, so far, cost 10,000 jobs since its inception, whilst in the same period the price of Brent Crude oil has nearly halved.”
“This, along with the fact that in the last 10 days a further 300 jobs have been lost across our region at subsea engineering supply chain firms, serves as an important reminder that our energy sector is highly integrated.”
“In short, we are at grave risk of losing the world-class company and skills base that will be required to deliver offshore wind, green hydrogen and carbon capture projects.”
“Please confirm an immediate end to the Windfall Tax and unlock the investment required to protect jobs, generate economic growth and greater energy and national security for the UK.”
Another Monday? Wednesday afternoon, driving to dinner, NPR chimed in with their view of the day. The stock market was down, the bond market was down, the dollar was down and oil was down. Had enough yet?
PPHB U.S. Energy Market Highlights:
Commodity Prices: WTI crude oil is currently $61.20 per barrel (down ~1.2% week-over-week) and natural gas is $3.64 per MMBtu (down ~1.4% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.4 MM BOPD (up ~2.2% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories increased by ~1.4 million barrels week-over-week vs. an estimated decrease of ~0.9 million barrels.
Frac Spread Count: There are currently 193 frac spreads operating in the U.S. (a decrease of 2 spreads week-over-week).
Onshore Drilling Rig Count: There are currently 563 drilling rigs operating in the U.S. (a decrease of 1 rig week-over-week).
The Engine Sputters and Stalls. It has run out of steam. The engine? Electric Vehicles. Don’t misunderstand, electric vehicles will be a part of our lives forever. Currently they’re ~7% of our automotive lives. It was a land rush 3 to 4 years ago as government handouts and government mandates killed the market for internal combustion engines. Every car company went all in, announcing new models, plants and battery factories. The arrow was pointed up and to the right at a pretty steep angle. Every company, except Tesla, has lost money so far, with Rivian losing $140,000 on each truck it sells and GM and Ford losing more than $40,000 on each of theirs. But with sales stalled, and now falling, the likelihood of “scaling up” and “making it up on volume” is very low. Last month, EV sales dropped 5% and ICE sales were up 10%. Reliability, cost of battery replacement, risk of fire, limited distance, lack of charging stations and costs. Did I miss anything?
Alert! Congress has denied a waiver to the State of California, who had set its own emissions standards in addition to those set by the federal government. 11 other states adopted laws mirroring California. It was the primary driver of EV production and sales in the state, and 11 others. This erases those higher standards, allowing automakers to ramp up EV sales in a less mandated, if mandated at all, environment. No word yet if the other 11 states will follow suit, but it is likely.
Piling on. Honda plans to reduce investment in electric vehicles by more than $20 billion in the coming years as EV demand growth slows. That was the headline. It’s going to postpone a huge project worth $11 billion in Canada for at least two years, citing slower sales. It was also noted that the timing for construction of dedicated EV facilities is being reviewed. That’s called “deciding how much to cut.” When they lower their previous target ratio of EVs and they announce it, then you know cuts are coming and now we’re starting to get an understanding of the magnitude. I remember for the last several years, you could’ve filled a 20-page weekly with stories about electric vehicles and it was all up and to the right. Then, you started seeing the small chinks in the armor. It’s like the hype of ESG, it was loud and all-consuming for a while and is now just a quiet part of our business. Electric vehicles will continue to be sold. So will all other vehicles. It’s just now increasingly obvious that EVs are not going to take over the world, at least not anytime soon. We can put that to bed. Now, change a few of the incentives…
To The Moon! Africa has established its first space agency. The African Space Agency opened last month as part of the African Union and is headquartered in Cairo. The agency will coordinate existing national space programs and aims to improve Africa’s space infrastructure by launching satellites, setting up weather stations and making sure data can be shared across Africa and beyond. “Space activities on the continent have been happening in a very fragmented fashion,” said Meshack Kinyua, an Africa space policy veteran who now oversees capacity-building at the agency. “The African Space Agency brings a coordination mechanism and economies of scale; it puts all members of the African Union at an equal level in terms of gathering data that they can access according to their needs.”
In the Shadows. So, we all read about the Russian sanctions, and China and India buying all the Russian oil, even though there are penalties and tariffs included in the sanctions for anybody buying or transporting that oil. We all know that. What I didn’t realize was the size of what is called the “shadow fleet.” These are the ships that move oil, skirting the western sanctions. The EU has targeted nearly 350 shadow fleet ships that move oil and stolen Ukrainian grain. One source puts the number at more than 400. It’s always interesting to learn the scale behind the headline. This education comes as the EU is imposing a fresh round of sanctions that target the shadow fleet. They certainly have their work cut out for them.
Do Overs. Another round of the same game. But this time one side has a different player. President Biden cut a deal with Venezuela’s President Madura a couple years ago. The U.S. would end the sanctions allowing Venezuelan oil to be sold and shipped to the U.S. In return, Venezuela would allow free and fair elections and would become more open in its politics. It was worth billions to Venezuela, and of course there weren’t fair elections. Opponents were jailed. The new taste of power was such that Maduro started making moves on Guyana and citing an error in a 125-year-old treaty. We got used and used badly. But in February, President Trump revoked Chevron’s license to produce and export Venezuelan oil, and Chevron is one of the biggest producers in the country. Ouch. All of a sudden, President Maduro’s money source gets cut short and what a surprise. He becomes more compliant. He’s allowing deported immigrants back into the country from the U.S. Several of his opposition leaders have been holed up in the Argentine embassy and are now being allowed to safely leave the country. The key part was the release of a U.S. Air Force Veteran who had been imprisoned in Venezuela. The previous administration played softball with an autocratic leader, and now the game appears to be switched to hardball. And Mr. Trump’s up to bat.
Moving Mountains. Exxon made a discovery off the coast of California years ago, the Santa Ynez Unit, and just after starting production, there was a leak, and it was completely shut down in 2025. Along comes a SPAC, headed by Jim Flores of Flores & Rucks and Plains Resources (owner of the finest stone house in Houston, Mr. Golden Touch). Mr. Flores bought the field from Exxon and financed the bulk of the sale. He takes over the field and hopes for an increased return of production operations. This week, about 6,000 BOPD from six wells marks the return to production after 10 years. This went so well that the company, Sable Offshore, plans to produce from another 44 wells on the Heritage platform and 26 more wells from the Hondo platform. Repairs and testing have been done to the existing pipeline capacity, with 7 out of 8 already tested and approved. He is back, off to the races with another magic trick.
Batten Down. June 1st is the beginning of hurricane season. Forecasters are again predicting a year of above-normal storm activity. For the last few years, it was going to be a barnburner of a year for hurricanes, but it was barely a campfire. But they do cause damage. From 1980 to 2024, tropical storms and hurricanes caused at least $1.5 trillion worth of damage and killed at least 7,211 people in the U.S., according to the NCEI.
Again? “Oil Falls as Trump Says Russia, Ukraine to Start Ceasefire Talk” this is the 25th time oil has fallen on the exact same headline.
For My Canadian Friends:
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.
