September 5, 2025
Things I Learned This Week Tooling Around Texas
Passings. My good friend, Shel Erikson, is a member of St. Hubertus with me and one of the CEOs I covered as an analyst. He departed from us a few weeks ago and there was a celebration of his life this week. But it was not a sad gathering, actually. Shel was an amazing guy, great father, husband, grandfather and leader of our industry. It was truly a celebration. I had the honor of having one of his grandsons, Ryan, helping edit and format this weekly for many months. To the entire family, we all feel as gifted as you do for having him in our lives.
And Again. Peter Kinnear was another very good friend, a long-term attendee of the Christmas luncheon, Soiree Group and the former President & CEO of FMC Technologies, in addition to being on several boards. Most of all, he was a great man with a wry smile. He left us last month. I was asked once why FMC’s stock was down when the new CEO gave the same presentation Peter had made years prior. When Peter originally made it, the stock went up, but this time, it didn’t. I answered that with the same wry smile he used to give me. You just knew he was sandbagging you! His lovely wife preceded him, and you are all dearly missed.
Bird of Peace. Labor Day was also opening day of dove season in parts of Texas. I was asked once by a friend from Boston why we hunt dove. Because they taste good, was the obvious reason. But don’t you Bostonians worry. This week in Hondo, Texas, about five hours from Dallas, the four dove I saw in two days escaped unharmed. Darn. Then on to Houston and back home on Friday. My Texas Tour.
Subdued. The U.S. onshore rig count hit a new cycle low this week and the forward crude oil strip is around $63 a barrel. The good news? Mr. Trump’s desired $50 oil price is not likely to be seen. The bad news? It could stay under $70 for a while, or, if you believe the futures’ strip, forever. Natural gas, the hydrocarbon even haters have trouble hating, is at $3.75 going forward, and that was up almost 7% in a single day this week. But before the death dirges start, companies can coin money at $3.75. So save the tears for the oily guys, not the gassy ones.
PPHB U.S. Energy Market Highlights:
Commodity Prices: WTI crude oil is currently $63.97 per barrel (down ~1.0% week-over-week) and natural gas is $3.06 per MMBtu (up ~4.1% week-over-week).
Crude Oil Production: U.S. crude oil production is currently ~13.4 MM BOPD (up ~0.9% year-over-year).
Crude Oil Inventories: U.S. crude oil inventories increased by ~2.4 million barrels week-over-week vs. an estimated decrease of ~2.0 million barrels.
Frac Spread Count: There are currently 162 frac spreads operating in the U.S. (a decrease of 3 spreads week-over-week).
Onshore Drilling Rig Count: There are currently 521 drilling rigs operating in the U.S. (a decrease of 2 rigs week-over-week).
Snippets:
The E&P universe trades at a 2025E EV/EBITDA median multiple of 4.2x.
September 7th’s OPEC+ meeting will decide to either increase market share and add increased pressure to prices or to limit changes and push the price. The former is consensus.
10 counties in the Permian Basin have accounted for 93% of U.S. oil production growth since 2020.
Mike Wirth, CEO of Chevron, said that, "when the world stops using oil and gas, we’ll stop looking for it."
“The methane intensity of oil and gas production in the Permian basin declined more than 50% during the 2022-2024 period." – S&P Global.
Kazakhstan plans to invest a good chunk of their oil wealth into AI infrastructure.
Humor. What is the difference between a deer hunter and a quail hunter? The deer hunter drives an F-250 and the quail hunter flies his plane.
“What Sticks Out in the Data?” By Capital One.
The natural gas market hasn’t been this undersupplied since January.
L48 daily gas production has declined from its recent all-time high.
U.S. oil production volumes rose to record levels in June.
Crude positioning hasn’t been this bearish since the months leading up to the 2008 Great Financial Crisis.
The North Sea. Like many mature basins, the North Sea has been in decline, with long-term projections indicating a potential fall of ~7-11% annually going forward. Oil production fell by 11% in 2023-2024, though new projects like Shell's Penguins and BP's Murlach are expected to cause a temporary increase in output in 2025 and 2026. The current “windfall profits” tax rate is 78%. And with Brent oil prices below $70, there isn’t much “windfall,” though, that hasn’t deterred the tax rate. The industry is pushing for more investment to maximize production from existing reserves, saying that the high taxation isn’t appropriate for a mature producing area. Nonetheless, climate activists push for a halt to new fossil fuel projects to meet climate goals. The Labour Party of the UK proposes to increase the windfall tax to finance their energy transition plan and create jobs in future industries, while the Tory’s and industry calls for support to maintain production. Conservative leaders declared that the regulatory system is “strangling the North Sea.” Time will tell. Considering the dramatic economic crisis currently underway in the UK and stories out on potentially needing an IMF or U.S. bailout in the next few years, the likelihood of any tax relief is remote near-term.
Rumors Were True. Crescent Energy will acquire fellow shale player, Vital Energy, in an all-stock transaction valued at about $3.1 billion, which elevates the company into the top 10 independent producers. The combined companies will have more than a decade of high-quality inventory in the Eagle Ford, Permian and Uinta Basins. All the E&P deals seen over the last 18 months have been on an amount of inventory far greater than current production or cash flow. One interesting note is that Crescent has its roots in real estate, where Chairman John Goff started working with Richard Rainwater years ago to build a real estate empire that diversified into oil and gas. They have obviously done a very good job.
The Axis of Evil is Back! The leaders of North Korea and Russia have joined the president of China at a parade in Beijing. Think of all the photo ops we are going to get fed. The trio, led by China, takes away any expectation that any trade deals or agreements with China would be adhered to. The parade and attendant events did not include President Trump or many European leaders. Those who did attend were the leaders of Iran, Pakistan, Indonesia, Malaysia and others. South Korea’s head of the National Assembly attended. I am reminded of the lyric “battle lines bein’ drawn.” It could easily be seen increasingly like “us versus them”. But this is just a parade, right?
An Alternative. BRICS was created as an alternative to the Western-dominated global order. It advocates for greater representation of emerging economies, coordinates economic policies, promotes the use of local currencies to reduce reliance on the U.S. dollar and seeks to establish alternative financial and economic systems to challenge Western-controlled institutions such as the IMF and World Bank. The name comes from its founding members: Brazil, Russia, Iran, China and South Africa.
Current full members:
India
Egypt
Ethiopia
United Arab Emirates
Indonesia
Partner countries:
Belarus
Bolivia
Cuba
Kazakhstan
Malaysia
Nigeria
Thailand
Uganda
Uzbekistan
As one political commentator put it, BRICS’ gatherings provide a powerful optic as the group positions itself as the leader of countries seeking to upend the U.S. dominance in the international order.
Power Ranger. A recent report said that U.S. power developers are planning to sharply boost natural gas and hydropower generation capacity while cutting back on plans to add new solar and wind farms. Currently, developers have more than 114 gigawatts of natural gas-powered capacity under construction or in pre-construction (to qualify for tax benefits), which is more than twice the level of a year ago. Natural gas plants make up about 46% of currently operational U.S. power capacity and 36% of capacity in the construction and pre-construction phases. Total solar capacity under construction or in pre-construction is around 92,000 MW, down from around 112,000 MW at the same stages in 2024.
New News. I hadn’t realized this. We've been playing footsie with Venezuelan President Maduro for some time. The Biden administration lifted sanctions in exchange for lower gasoline prices in the U.S., getting only a promise from Maduro to hold fair elections. Of course, he never had any intention of doing so and hasn’t. Trump, meanwhile, is taking a different tact. Largely unnoticed, an amphibious force has been stationed offshore of Venezuela, officially tasked with drug interception but clearly capable of onshore operations. I also hadn’t realized that the U.S. has had a bounty on Mr. Maduro for the last several years and we just raised it earlier this month to $50 million. I’ve watched the John Wick movies and seen what people would do for $10 or $15 million. Imagine turning all those people loose in Venezuela with a $50 million payout showing on their phones. That's the John Wick we need to film. If only it would get started.
Fired! ConocoPhillips plans to cut 20% to 25% of its workforce, with most of the reductions happening this year. The $17 billion Marathon acquisition likely contributed and included both employees and contractors. “We are always looking at how we can be more efficient with the resources we have.” Chevron has already cut 9,000 and now that the Hess deal is done, expect more. Is it AI? Not yet. This is just how the oil business turns. If I buy you, send me all the legal documents and operating data from the wells and acreage you own. That is all. All those people, including geologists, geophysicists, landmen, field hands and accounting teams are not needed. In E&P, consolidation reduces the need for people. And it will continue. With AI, it only gets worse.
And It Spreads. Sand, that is. Spearhead Sand, in partnership with Liberty Energy, announced the successful completion of Canada’s first wet sand frac for Parallax Energy in the Western Canadian Sedimentary Basin.
Call an Uber. An average of 30% of accidents in the Permian Basin involve commercial vehicles, compared to a national average of 10%. This has been a persistent problem ever since frac sand demand skyrocketed in the Permian. Now comes Aurora. Aurora’s self-driving freight technology has logged 3 million miles, with the only incidents caused by human-driven vehicles crashing into them. The trucks are equipped with 18 cameras and LIDAR that can detect vehicles, pedestrians, bicyclists and construction zones. The driverless trucks already operate between Dallas and Houston, with routes expanding. Atlas is also using automated trucks for sand delivery and this is expected to be the wave of the future.
Kudos. Accurate Meter & Supply is a leading distributor and service provider of water, sewer and drainage products for municipal, residential and commercial infrastructure. The Company distributes a broad range of waterworks products, including meter systems, pipes, valves and fittings, fire protection equipment, hydrants, manholes, meter boxes and backflow devices. It also offers a wide range of technical services such as meter services, precast vaults, backflow prevention, leak detection and flow testing. The company was sold to private equity fund, Quad-C Management, with PPHB advising Accurate on the deal. What makes this transaction even more interesting is that it involved an industrial company. Synergies always exist. Way to go guys.
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 200 transactions exceeding $15 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.
