Daily Standup Top Stories
China Could Approve 100 New Nuclear Reactors by 2035
China could keep the pace of approving at least 10 new nuclear reactors over the next 10 years, a domestic industry group says, as the country has been accelerating the approval and construction of nuclear […]
Why No One Wants California’s Orphaned Oil Wells
Full financial assurances from buyers for well clean-up costs have stalled all 37 proposed oil well sales in 2023. 41% of California’s wells are idle or orphaned, with clean-up costs estimated at $2.8 billion. The […]
Highlights of the Podcast
00:00 – Intro
00:54 – China Could Approve 100 New Nuclear Reactors by 2035
02:46 – Why No One Wants California’s Orphaned Oil Wells
06:55 – Markets Update
07:32 – EIA: Weekly Petroleum Status Report
09:00 – Crescent Energy Announces Accretive Central Eagle Ford Bolt-On
11:12 – Outro
Follow Stuart On LinkedIn and Twitter
Follow Michael On LinkedIn and Twitter
– Get in Contact With The Show –
Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.
Michael Tanner: [00:00:11] What’s going on, everybody? Welcome into the Thursday, December 5th, 2024, edition of the Daily Energy News. Beat Stand up. Here are today’s top headlines. First up, China could approve 100 nuclear reactors by 2035. Next up, why nobody wants California’s orphaned oil wells. I will then job very quickly cover what happened in the oil and gas markets. Talk a little bit about the EIA crude oil inventory numbers and touch on the latest M&A activity, specifically in Eagle Ford. Bolt on opinion as at then we will let you guys get out of here. Stu is out on assignment today, so I am rocking the final solo show of the week, guys. Let’s go ahead and kick us off. All right. [00:00:54][43.1]
Michael Tanner: [00:00:54] First up, China could approve 100 new new nuclear reactors by 2030. 35. Unbelievable. We’ll read a little bit here from the article. China could keep the pace of improving at least ten new nuclear reactors over the next ten years, according to a local domestic industry group. As the companies begin to accelerate the approval and construction of these new power plants. China is looking to commit to a, quote, realistic target of about ten new approval wells in each year through 2035. That’s according to Con Jisoo, the deputy secretary general of the Chinese Nuclear society. He’s told that to Bloomberg nef at their summit in Shanghai earlier this week. You know, really what they’re struggling with is the massive amount of air pollution from all their coal fired power plants, which they have ramped up buying coal over the last couple of years. To give you guys an idea, over the past ten years, China has added about 34GW of nuclear capacity in the last ten years, which is actually kind of crazy considering all of the other sources that they’ve come from. You know, this is a big step in the, in my opinion, coming from China as they’ve ramped up their coal production and coal importing, It’s great to see them pivoting towards nuclear. You know, currently they’ve got 57 operational nuclear reactors with a total capacity, about 55.7GW, as well as another 30 reactors under construction with a combined capacity, about 32GW. And that’s according to the World Nuclear Association. Yet they are going to need private investment. And that is also, according to our friends over the Chinese nuclear society. And that’s where it gets interesting When you talk about China, It’s a government run. It’s a government, a communist government run. So where are these private investment coming? Is it a public private partnership? How does all that look like? It remains to be seen. But China is diving into nuclear, and I think it’s great considering they do deal with an air pollution problem. [00:02:45][111.3]
Michael Tanner: [00:02:46] Let’s jump to the next one here. Why nobody wants California’s orphaned oil wells. I mean, I wouldn’t want them either. Basically, what’s going on there is there are a huge amount of deals that are in the process of being approved because of this or 2023 Orphan Wild Prevention Act. Basically, the reason why that’s holding up all of these deals is basically it requires the state’s oil and gas supervisor to approve the transfers of these marginal oil and gas wells. Only once the acquirer has has has on hand the full cost of, well, plugging in abandonment, abandonment and site restoration covered by some sort of bond or other financial assurance mechanism. You know, according to this is Kathleen Rotten Sadr, who’s the California state director for the Environmental Defense Fund. As marginally productive wells are increasingly sold to companies without the resources to retire. We now have an insurance policy if they go bankrupt and disappear. I mean, again, basically what they’re trying to do is as wells go down the value chain, they become less and less valuable. They get sold to smaller, smaller companies. Eventually you get to a point where an operator buys it. They don’t have the ability to plug it. So when they go out of business and are able to sell the well, then it becomes a taxpayer problem. And this I mean, the orphan wells are a huge problem in all of the United States, not just California. I do think what this is doing is holding up some you know, this is holding up, obviously, M&A in California. We were at a conference last month talking about war orphan in Ida Wells. And there’s really no good solution for all this, you know, obviously liabilities. We need to figure out how to handle that, but we need to figure out a way, in my opinion, for the free market to figure it out. And that’s where I think, you know, a lot of times it’s like, well, let’s just throw government money at this. Well, the government, as we know, is never terribly efficient when it comes to this. Never. When’s the last time you heard somebody say, I love that my tax dollars are going towards worthless stuff everyone hates. So there’s a lot of money getting thrown around these orphan wells. And they’re they’re spending like $5 billion to plug six wells. That’s not how much it costs. There’s some there’s some pork, as always. So I again, I think what we have to figure out in order to make these things out, because you’re going to see this happen in other states. So this isn’t just a California brawl. This is going to be a problem that is happening Countrywide is how can the free market, the capitalist, the invisible hand, according to Adam Smith, how can the free market figure out how to do something with these orphaned wells, Either make them productive? Probably not really, but all but not really make an orphan while productive. It’s why it’s an orphan. Well, so then. How do we get them plugged via the free market? Is it a nonprofit? Is there other things? There’s a lot of interesting ideas floating around. I encourage everybody to take a look at that. Basically, you know, California, because of this, has stopped all of this. You know it. You know, the other issue, you know, they kind of play to counter this is friend of the show, Chad Hathaway. He owns Hathaway LLC, which is a company that’s actually refurbishing oil wells in Kern County. He told Capital and Maine via email that the California regulation places such high costs on abandonment and remediation that it makes transfers impossible, unaffordable and economically unfeasible to buy. And so what he’s basically saying is they’re way over pricing what it cost to plug a well. And it could be interesting. I mean, to give you an idea there, you know, as of according to the California regulator, they’re sitting on about $13.2 billion of onshore decommissioning costs for dried up wells. And it’s about double the expected profits from those oil and gas wells, which is somewhere about 6.3 billion. So there is an interesting shift there. Who knows if that’s true or not? But again, this is an issue that’s happening countrywide, so we’re going to have to take that into account. [00:06:09][203.6]
Michael Tanner: [00:06:10] Let’s go ahead and jump over oil and gas finance guys. Before we do that, let’s quickly pay the bills. As always, the news and quote unquote analysis you just heard is brought to you by said websites doing the team. They do a tremendous job making sure that website stays up to speed. Everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. Also hit the description below for all the links, the timestamps links to the articles. You can also hit us up on substack, The energy news beat@substack.com Thank you to all of our premium subscribers there. You can also again invest in oil dot energy newsbeat.com guys taxes are so 2023 move into 2024 stop paying taxes become Billy Bob Thornton in oil Mac invest in oil and gas for more information or how to reduce your tax burden. It is up invest in oil energy news beat.com. [00:06:54][43.7]
[00:06:55] Let’s go and look at the markets real quick. Those S&P 500 and Nasdaq both finished around all time highs. S&P was up about 6/10 of a percentage point. Nasdaq up 1.2 percentage points, two and ten year yields, Absolutely. Flat dollar index, flat, Bitcoin up 2.5 percentage points, $98,000. Mainly after adding new SEC commissioner is a crypto enthusiast. Oil prices were actually down about two percentage points down to 6854. Brant was only down about one percentage point 7276. Natural gas basically flat on the day. But but did did see a sort of a choppy early trading session. It’s sitting just above $3 at $3.04. You know,. [00:07:32][36.8]
Michael Tanner: [00:07:32] I think there’s two things that are kind of weighing on oil prices right now. We actually did see oil and put this chart up here, crude oil inventories. We did see about 5.1 million barrel draw from the oil stocks here in the United States from a crude oil stay box, which did support prices. But really, I think what the market is, is waiting for is the OPEC production cut decision, which is supposed to come two day. This meeting is happening basically on Thursday. As you listen to this. And it’s even though it’s likely the extend output cuts, it definitely does show that there is there is an oversupply. You know, Matt Smith, Kepler’s lead oil American oil analyst, said this in a quote, While a delay to unwinding production cuts is expected, the rhetoric out of this meeting is going to have the biggest sway. And what’s that rhetoric? Well, that is that is the reason which this is also interesting. A single bank today sold a large volume of U.S. oil futures contract in the early afternoon on Wednesday. Sources told Reuters pushing prices down more than 1% within minutes of causing traders to scramble to decipher the reason. That’s, again, very interesting. You actually see that in the trading stakes here. And there is a big stick there in the afternoon at about 11:00 that dropped it just above 6958, all the way down to 69 or 6860. So about a dollar swing there, which is a pretty crazy. Again, the ceasefire that theoretically has happened between Israel and Hezbollah is pretty is on shaky ground right now. South Korea, nothing really crazy’s going on there. That’s not quite an intermediate. [00:08:59][87.7]
Michael Tanner: [00:09:00] The only other thing interesting I saw today was Crescent Energy. They announced a, quote, accretive Eagle Ford bolt on acquisition. They go ahead and paper up Richmond Energy for an upfront consideration of $905 million plus future oil price considerations. It’s pretty unbelievable here, guys. So, you know, again, $905 million, 100 million of that in stock. The other 805 million in cash. Most of that is funded via the credit facility, via their credit facility. They also have $170 million, basically contingent payments, basically 15 million per quarter. And in 2026 and 12.5 million per quarter in 2027, for which the WTI price is either equal to or greater than 70 or 15 million per quarter and 2026 if it’s greater than 75. So they’ve got a little bit of price consideration. They don’t know if that will happen per se. But to give you guys an idea, this basically expands their footprint, which is currently Frio at of Kaluza, LaSalle and McMullen Counties, which is mostly a bunch of Eagle Ford production. The transaction was valued at at a pretty mild 2.7 x EBITDA, which is actually pretty. Pretty interesting relative to what you expect. You know, that’s a little bit of a lower multiple than I think we’ve seen on a lot of stuff. They basically get about 20,000 BOE per day of mainly oil way to production. And this is my favorite quote, 140 well-understood high return locations and immediately compete for capital and extends Crescent’s low risk inventory life. Pretty interesting. 140 well understood high return allocations those eight PUDs folks that’s just a location that’s a step on the map. But they’re well understood. I love a good new i r term i r guy the week I’m who is this year? I don’t know. You think they have the air guy on here but shout out to you guys. Great term there well understood location but what’s understood about them. I’d like to know that you know they also say that you know, the leverage doesn’t does it? They don’t go crazy. They still maintain their investment grade. And so it’ll be interesting to see how this plays out. The Eagle Ford is is is really cooking and cooking and grooving right now. So, yeah, I think crashing off the back of papering up silver but was just trying to, you know, continue to make a larger position within that. [00:11:12][131.4]
Michael Tanner: [00:11:12] So with that guys that’s about all I’ve got. We will get out of here and let you get back and enjoy your Thursday. We appreciate you guys sticking with us. I’m actually out next week. I’m in Florida. I’m at an investor conference, but I’m in Florida, so I’m kind of on vacation. I’m kind of not still be rocking solo shows all week. And we will go ahead and be back in the chair the following week. But I appreciate guys have a great week will be the see on Saturday for the weekly recap and then Stu will be back in the chair Monday. [00:11:12][0.0][657.5]
– Get in Contact With The Show –
