October 17, 2025
Things I Learned This Week Casting in the Snow
Cruising down the South Fork of the Snake River in Wyoming was great. Plenty of fish, bald and golden eagles and amazing scenery. A little snow kept things interesting. A couple of good friends and I spent a few days chasing rainbows, browns and cutthroats around the area with some decent success. Fly fishing is the perfect escape, where the only thing on your mind is hooking that next trout. Now, as we trade the fly rod for a 28 gauge, our thoughts turn to quail. If anyone needs help with their bird population this year, or wants to talk energy outlook after a day of watching dogs work, let me know!
Outlook. The macroeconomic and geopolitical factors shaping oil and gas dynamics this year are likely to remain in play. As producers begin reporting their third-quarter results, investors will be looking for early insights into 2026. Energy sector earnings begin this week, and with oil and natural gas prices where they are, the outlooks are likely to be muted, delayed and hopeful. Keep in mind that oil companies rely on the futures strip to develop their forecasts and right now is not a good time.
Finally! The remaining hostages have been released by Hamas. Two years. If the hostages had been released earlier, or of course not taken at all, the destruction of Gaza would not have taken place. If you take my people, I will move heaven and earth to get them back. Most of us would. The Israelis did. But rather than ending the conflict, Hamas is now attacking and executing its political rivals in Gaza. Hostages freed, Israel pulled back and Hamas is still finding people to seize and execute. Really? It should also be noted that the UN admitted that 85% of food shipments into Gaza were seized by Hamas and never delivered to the people. And who are the bad guys?
Down but Not Out Still Hurts. General Motors is recognizing what many of the other auto companies are starting to realize. Demand for EVs are sinking. Some will report that sales are still going up, but what they really mean is that they are still selling vehicles, just at an ever-falling rate. All the companies producing electric vehicles had expected losses to ease as volumes increased, eventually turning a profit. But if scale-up doesn’t happen, the losses per vehicle persist. Look at Rivian. Everyone loves the trucks, but the company lost over $125,000 on every truck it sold last year. It was helped by billions from the U.S. government and Volkswagen, but the production volume needed to break even or make money looks increasingly out of reach. This challenge extends across the industry. GM is taking a $1.6 billion charge after looking over $4 billion last year on electric vehicles and is now reducing its manufacturing capacity. This is not a good sign for higher volumes to offset losses. The end of the $7,500 federal credit hurts, but EV sales were slowing even before that change. The landscape is being reset. It will be interesting to see whether consumer choice or government mandate wins out in the end, but for now, global political forces are leading to more losses and less capacity.
Not Alone. Ford is reporting losses driven by tariffs, fires and slack EV sales. A fire at a plant that produces 40% of the aluminum used in auto manufacturing isn’t expected to be back online until next year. That is a billion-dollar setback. Tariffs are expected to cost $2 billion, while EV-related issues account for about $5 billion. Porsche, Mercedes and Volkswagen are also facing difficulties in China, where they are competing against cheaper, government-backed Chinese EVs. These vehicles are fun to drive, though not nearly as emissions-free as environmentalists claim, and they will continue to have a place in the auto landscape. But the go-go period of accelerating sales appears to have ended.
We are Good. I have been preaching this for years. It can be a curse. If you aren’t good, no one uses your business and you disappear. But if you are good, you help your customers make more money. So, you develop technologies that improve every part of the crude oil and natural gas exploration and production process, by doing more and more with less and less, benefiting the customer base in very tangible ways. But what happens to the good service, supply and support businesses that made those dramatic gains in productivity and efficiency possible? “Decimated” doesn’t even begin to describe it. They have worked themselves out of a job.
Boots on the Ground? We have written a great deal about the concentration of firepower in the Caribbean under the pretext of combating drug trafficking. Battleships, fighter planes and bombers made for land warfare, not marine drug interdiction, have been placed on the scene. The fifth drug boat in the region has now been destroyed, and it is widely understood that President Maduro of Venezuela is involved in the drug business. We have raised the bounty on Maduro’s head to $50 million. Don’t be wildly surprised if, in the next few weeks, you wake up to find that the U.S. is aiding in the liberation of a country ruled by a dictator who has lied to and misled both the U.S. and his own people. There has been a political move to limit U.S. activities, especially in terms of targeting alleged drug smugglers, but it wouldn’t take much to trigger our military. Stay tuned.
No Fun. I was driving to physical therapy this morning and listening to the news. A peace deal has been struck between Israel and Hamas, Trump and China are back and forth, gold and silver have hit new highs and oil is trading at $58.22. Damn. Mr. Trump has been talking about $50 oil to help offset tariff-related inflation and boost his chances in the midterm elections, and it appears he’s getting closer than anyone expected. The EIA and others are saying that the current oversupply (which sounds better than “glut”) will continue into next year. No, it isn’t sustainable, but we remember when one company said the market at the time wasn’t sustainable, and it stayed that way for three years. It won’t take that long this time, but it’s still no fun. But we are optimists!
Wide Eyed. In fact, we are such optimists that when OPEC+ floods the market with oil, returning shut-in production on an accelerated basis, we rejoice! The more oil they put on the market now, the less they will have to put on the market later, and with less oil to release in the future, the long-term price outlook looks even better. There is some convoluted thinking in all that, but it just goes to show that we remain optimists about our industry, even in the toughest times.
Ouch. The chart below shows the progression of Brent futures over the past couple of weeks, highlighting not only the current month’s weakness but also how the entire forward curve for oil prices is being reset.
PPHB U.S. Energy Market Highlights:
Commodity Prices: WTI crude oil is currently $57.34 per barrel (down ~6.6% week-over-week) and natural gas is $3.04 per MMBtu (down ~11.8% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.6 MM BOPD (up ~1.0% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories increased by ~3.5 million barrels week-over-week vs. an estimated increase of ~0.3 million barrels.
Frac Spread Count: There are currently 175 frac spreads operating in the U.S. (a decrease of 4 spreads week-over-week).
Onshore Drilling Rig Count: There are currently 529 drilling rigs operating in the U.S. (a decrease of 2 rigs week-over-week).
Bail Out. Many are up in arms over the U.S. bailing out Argentina to the tune of $20 billion to stabilize the peso. When you are the healthiest and others are struggling, you help if you can. The argument has been that the $20 billion could be used for more domestic purposes, and we understand that, but be ready. In the next two to three years, it is increasingly likely that we will have to bail out France and the U.K., and it will cost far more than $20 billion. But if we don’t, no one else can, and the U.S. economy cannot afford for the world to fall into a depression caused by failed OECD states. Don’t be surprised when you read about it.
Transitioning. Shell Oil started making the transition from an oil company to a natural gas company several years and acquisitions ago. They are moving their headquarters to the UK alone, after a UK/Netherlands joint listing before. And now they announced a $2 billion natural gas development project in Nigeria. With everything that is happening in the world of energy and power, it is starting to really look like a good transition!
More Oil. OPEC+ Group boosted production in September by 630,000 barrels per day (bpd) from August, completing the return of 2.2 million bpd cuts that began in April, putting total production at 43.05 million barrels per day. Saudi production now sits at nearly 10 million barrels per day, up almost a quarter of a million barrels since this summer. Russia raised its production by 148,000 bpd to 9.32 million bpd. Kazakhstan is exceeding its OPEC+ quota of 1.55 million bpd by over 3,000,000 barrels per day. According to the International Energy Agency, IEA, Saudi Arabia and its OPEC+ partners have less than 4 million barrels per day of unused capacity, according to the latest estimates from the IEA.
Snippets.
ExxonMobil CEO Darren Woods said the company is cutting back European investments due to restrictive climate regulations, while praising President Donald Trump’s energy policies for supporting oil and gas growth.
Siemens Energy, GE Vernova and Mitsubishi Heavy are the three biggest gas turbine manufacturers and all are increasing capacity. The three have been caught flat footed by an acceleration in orders over the last few years.
And More From the Agency. According to the IEA, the crude surplus next year could reach 4 million barrels from the 3.3 million barrel surplus we have this year. In the IEA's view, supply is rising far faster than demand, with supply now expected to rise by 3 million barrels per day, while demand growth is expected at only 710,000. The agency noted that, "this is well below historical trend, as a harsher macro climate and transport electrification make for a sharp deceleration in oil consumption growth". IEA is more bearish than the industry, but with WTI at $58 and Brent below $62, they may be right.
ESG on the Ropes. The EU’s legal committee voted to water down the corporate sustainability law, which has not been popular with oil companies such as Exxon, who had claimed that the rules hurt their competitiveness in Europe. The old rule was that failure to comply with regulations could cost you as much as 5% of total global revenues. That is not palatable at all. The Exxon CEO said it was "the worst, most irresponsible legislation I've ever seen passed anywhere in the world." The EU now seems willing to water down the ESG rules, making them mandatory only for companies with 5,000 employees or more and with at least €1.5 billion in turnover, compared to the current law which requires companies to comply if they have 1,000 or more employees and more than €450 million in turnover.
Aggies. Ever since one of A&M’s cadets chased the SMU cheerleaders off the field with sabers drawn, loving A&M has been a challenge. But I have a very large number of Aggie friends, so I try. After beating Florida and going 6-0, one stat really struck me. A&M has had over 100,000 fans at their last 10 home games. Damn. Impressive. Well done.
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.
