Recruiter’s View

When the world needs energy, Fantasy Fuels won’t cut it.  After suffering threats and insults for years, Big Oil is turning in record profits.  Proof of a trend: Oil & Gas companies are reducing their exposure to renewables.

In a kind of mania, much of the free world chose to abandon traditional energy sources.  Imagining they were saving the planet, they committed to “renewable energy.”

That decision was something of a suicide pact; giving up energy we do have, in exchange for energy we might someday develop.

Communist nations have a different attitude.  While we debate Zero Emissions, Communist China is building coal-fired power plants, right now.

Europe Creates Demand

Europe survived the 2022 winter, using an energy policy called Luck.

Fully committing to a “renewable energy” strategy, based on wind and solar power, Europeans guaranteed they would have an energy shortage by disposing of…

• nuclear power
• coal
• hydraulic fracking
• oil and gas

Naturally, their…

• energy production fell and
• prices skyrocketed.

Going into the 2022-23 winter, Europeans knew they had limited ability to heat buildings.
And they had even less ability to pay for it.

Luck provided the saving grace…
Last winter was unusually warm.

BP Gets The Message

BP is one of the largest companies in the world.  Based in London, it is an oil and gas multinational, perfectly positioned to help with Europe’s energy problems.

Or, at least, it was.

BP doesn’t stand for British Petroleum, anymore.
In 2001, it was re-branded as Beyond Petroleum.

BP hasn’t forgotten its oil and gas roots.
But it has invested aggressively in “transitioning.”

This is another company that has paid dearly for going the ESG route.

CEO Bernard Looney understands that he’s on the wrong side of the power curve.

• Europe is paying top dollar for oil and gas, while
• BP is investing in low-profit renewables.

How do you make money doing that?

In a bold course correction, Looney announced on Feb 06 that he would back off his transitioning plan and increase his production of oil and natural gas.

That fast, BP’s share price jumped 8%.

Shell Divests

Shell came to a similar conclusion.  After delivering a record $40 billion net profit last year, Shell saw no good reason why it should linger in low-profit renewable power businesses.  (And, no, pretending to be green is not a good reason.)

Recently, Shell has been selling off weaklings and losers.  In fact, Shell is avoiding unprofitable new projects, even if they might seem politically correct.

In a May 18 article, Bloomberg quotes Steve Hill, Executive VP of Shell Energy:

“The things we’ve been less successful with, we need to scale back or stop.”

The Opposition To Big Oil

I want to interrupt, here, for a short reality break.

It would be easy to think that the CEO of a major corporation would be rewarded for delivering profits to the shareholders.  Think again.

Regulators, Activists, Politicians, and Grifters all have to be subdued.

Independent action may be a bold show of integrity, but it doesn’t always end well.
You can get your head handed to you.

In a world that denies the value of hydrocarbons, major producers have seemed meek and withdrawn.  They likely posed as renewable energy fans, just to quiet the opposition.  They built solar panels and wind farms, but critics questioned their sincerity.

Until recently, Big Oil has done little to defend its existence.

That’s understandable.  Starting with Obama, the U.S. government has taken it upon itself to drive these corporations out of business.

May I introduce you to Glass Lewis.

Glass Lewis

Founded in 2003, Glass Lewis reviews the performance and behavior of corporations around the world.
Their reports advise investors of critical proxy votes on corporate policy.
This is where ESG scores get their teeth.

Glass Lewis has “1,300+ clients, including the majority of the world’s largest pension plans, mutual funds and asset managers, who collectively manage more than $40 trillion in assets.”

So, this isn’t just an editorial board.  When Glass Lewis tells a CEO that he isn’t addressing climate change, that’s not just an opinion.

They are effectively pointing a $40 trillion cannon at that leader’s head.

Push-back takes guts.

When Big Oil flatly questions Glass Lewis —in writing—  then we’ve moved into a whole new ball game.

ExxonMobil Pushes Back

In a recent SEC filing, ExxonMobil gave up all pretense, essentially calling Net Zero bunkum.  I think that was the technical term.  I could be wrong.

I’m providing a link to ExxonMobil’s May 17 filing with the Securities and Exchange Commission, responding to the 2023 Glass Lewis Proxy Report.  (See, especially, the document’s page 3.)

And I would like to thank David Blackmon for pointing this out.

In its response, ExxonMobil uses these two abbreviations…

• IEA – International Energy Agency
• NZE – the Net Zero Emissions by 2050 Scenario

That should help you with this quote from the filing…

“Glass Lewis apparently believes the likelihood of the IEA NZE scenario is well beyond what the IEA itself contends: that the world is not on the NZE path and that this is a very aggressive scenario. It is clear that the IEA NZE does not, by the scenario authors’ own assessment, meet the level of likelihood required to be considered in our financial statements. Likewise, it is highly unlikely that society would accept the degradation in global standard of living required to permanently achieve a scenario like the IEA NZE”

ExxonMobil’s Bottom line: Net Zero isn’t happening, and nobody honestly thinks it is.

Where That Leaves Us

Oil producers are in an interesting position.  Despised by their own governments, drillers and refiners have been under assault for a long time.

Roughly a year ago, I wrote that Biden doesn’t like oil and gas, but he needs it.

• On his first day in office, President Biden killed the Keystone Pipeline
• He restricted drilling permits, and
• Even if we were drilling, the U.S. is short of refining capacity.

I concluded, “This is an industry ripe for explosion under a different administration.
Conditions are not favorable, for now.”

Since then, Biden made history, draining our Strategic Petroleum Reserve.

• He sold 180 million barrels of oil last year and
• Reduced the SPR supply to its lowest level since 1983.

At the same time, our President went around the world, begging for oil.
He got nothing.

Clearly, there’s an appetite for energy.
Europe and the U.S. are very nearly tapped out.
Add in a war in Ukraine, with
China testing our military weakness every day.

There’s a huge demand brewing, and Big Oil can smell it.

A Gift From The Saudis

We’re in an inflationary environment.
Perhaps, that’s why the threats and insults against the Oil and Gas industry are starting to fall away.

Our “trust me, it’s a dollar” fiat currency hasn’t been backed by gold for decades.
But we did have the petrodollar, named for a powerful agreement that U.S. dollars would be used to settle worldwide oil trades.

Russia and Saudi Arabia are working hard to break that standard.
It isn’t so hard, really, if we’re not even planning to produce oil.

Would things change, if we actually did try to produce oil?

It looks like the Saudis just made it easier.

They need $80/barrel oil.

Oil has been trading in the low 70’s.

To hit their $80 target, the Saudis have announced a production cut.

Beginning July 1, the Saudis say, they will cut production by one million barrels per day.

That gives every other oil producer a combined head start of 30 million barrels a month, without hurting existing prices.

Thank you, Saudis.

Recruiter’s View

Oil producers are seeing demand intensify.
Threats are softening.
Prices are rising.

If Oil & Gas gets its swagger back,
We could be looking at strong markets, lasting for years.

Expect hiring to grow with the effort.

-TD