C.O.B. Tuesday

Today it was our pleasure to host the New Jersey Economic Development Authority (NJEDA) for an offshore-wind and infrastructure focused session. With Governor Murphy’s leadership, the NJEDA is working to position New Jersey as a hub for US offshore wind and the organization is currently managing the development of a 200-acre wind port off the southern coast of the state. Joining us from the NJEDA are Tim Sullivan, CEO, Jen Becker, Vice President, Offshore Wind, and Jonathan Kennedy, Vice President, Infrastructure/NJ Wind Port. Together, they have a great amount of experience in public policy and planning: Tim is a native New Jerseyan and his background is in investment banking. He was formerly Deputy Commissioner of the Connecticut Department of Economic and Community Development and the Chief of Staff to the New York City Deputy Mayor. Jen is a public policy strategist and urban planner with 25 years of experience and Jonathan has a public infrastructure and finance focused background with US and international experience. We were thrilled to visit with the team and dive into project details.   Our conversation started with Tim’s background and journey to joining the Governor’s staff and the NJEDA, the strategic and economic opportunities the wind port will provide, and how this wind port is unique in that it will host the infrastructure for both manufacturing and deployment/instillation of offshore wind. Jonathan shares his perspective on the commercial significance of the project, the state’s role in investing in the infrastructure, and the scale of the project. We then discuss the competition for offshore wind economic benefits and how the wind port has the potential to supercharge the South Jersey economy. Jen provides key information on the workforce involved and the state’s partnerships with schools, universities and labor unions to develop a talent pipeline. The wind port will not only help add offshore wind to the state’s power mix but will be a manufacturing hub for the wind industry and support tens of thousands of jobs. Another feature of the wind port is the potential for New Jersey to significantly increase domestic wind-related manufacturing and become an exporter of such products. The location is also well positioned in that the continental shelf is relatively shallow and allows for turbines to be installed 15 – 55 miles offshore. It also happens to be next to the Salem nuclear power plant which presents its own benefits (and challenges). Nuclear currently holds 40% of the state’s power mix and we discuss what the mix will look like in the future with an increase in wind and solar power. Overall, we are greatly impressed with this innovative and unique initiative and can’t thank the NJEDA team enough for sharing their insights.   Mike Bradley kicked us off by relaying that over the last week, markets have been directionless as they await Wednesday’s April CPI & PPI results. Markets also continue to worry about additional regional banking stress and an unresolved US debt ceiling limit. He also highlighted that WTI price over the last week was stable but still trades at the lower end of its 5-month trading range due to growing recessionary concerns. He then shared notable trends from Q1 earnings season including a disconnect between the financial market and demand for US refiners, oil service call discussion dominated by rig/frac drops and current/future pricing guidance, and wrapped with key themes from E&Ps. Jeff Tillery joined today’s session and chimed in with his thoughts on the OFS sector moving past Q1 earnings season.   We’re excited to follow the wind port project’s progress and hope you enjoy the discussion as much as we did!

Today we had the exciting opportunity to host George Bilicic, Vice Chairman and Global Head of Power, Energy and Infrastructure at Lazard. George has had a long and distinguished career including his time as a Partner at Cravath, as President of Sempra, and 20 years at Lazard in the investment banking business. We were thrilled to visit with him in our office in Houston.   Our discussion centered around Lazard’s recently released 2023 Levelized Cost of Energy, Storage and Hydrogen Analyses. As you will see, we picked a handful of what we thought were the key pages from the full report and asked George to walk us through them. We kicked off the broader discussion with George by getting more background on this now very well-known annual report, hit some of the key themes and predictions, and also discussed the process involved in gathering the data. One of the items we discussed was the analysis not just of the levelized cost of energy comparison but also the same analysis with the cost of “firming” added (to adjust for intermittency). George shares some of the feedback they’ve received about the report from around the globe and how the firm uses the work as a discussion piece with everyone from governments to investors to companies to university students. We also discuss his perspective on global attitudes around the IRA, Lazard’s recent Climate and Energy Transition Conference, supply chain risks looking forward, the difficulties in calculating total value, and the potential for consolidation in the alternatives/renewables/power/utility space. Toward the end of the discussion, we touch on Lazard’s recent formation of a Geopolitical Advisory Group and the rationale for the effort. We ended with asking George what an LCOE report might look like in ten years. As you will hear, he had a fun and interesting answer. Overall, we had a great visit with George and can’t thank him enough for joining us today.   Mike Bradley started the show by relaying that commodity and equity markets are very volatile, and to the downside, given poor recent economic data and uneasiness heading into Wednesday’s FOMC meeting. He highlighted several observations including an equity market (S&P 500) that’s been directionless and stuck in a very tight trading range. He shared that unlike the S&P 500, which is trading at the upper end of its recent trading range, WTI price is testing the lower end of its 5-month trading range, mostly due to growing recessionary risk concerns. He also emphasized that this will be an extremely heavy earnings week dominated by E&Ps, Midstream and Refiners. He concluded by highlighting two main themes to expect from E&P calls, lower 2H’23 oil service cost inflation and return on capital programs leaning more heavily into share buybacks. Brett Rampal also joined today and offered his nuclear perspective in the discussion as well.   Thanks to you all. We hope you enjoy!

We had a fantastic Africa-focused session today with Andrew Kamau, Managing Director of International Programs at the Energy Opportunity Lab, an initiative of Columbia University’s Center on Global Energy Policy (CGEP). Prior to joining the Energy Opportunity Lab, Andrew was the Principal Secretary, Ministry of Petroleum and Mining with the Government of Kenya and former Principal Secretary in the State Department of Petroleum with the Government of Kenya. He has over thirty years of experience in the energy, oil and gas, and mining sectors and is working to identify ideas and projects to empower people and communities with accessible energy solutions. Andrew joined us from Nairobi and is incredibly knowledgeable of the challenges and opportunities for increasing access to energy in Africa and developing countries.   We covered a lot of territory in our conversation starting with the current priorities of the Energy Opportunity Lab and what Andrew describes as a "leapfrog issue" with those who would like to see Africa skip fossil fuels and jump to renewables. We also discuss new LPG technologies that allow customers to pay as they go, how the US can get more involved with LPG projects in Africa, and the large amount of geothermal power in Kenya. Andrew flags that the competition between the US and Europe to advance renewable technologies is welcomed as it will ultimately help get those technologies to the rest of the world at a lower price. Andrew also shares his perspective on the sources of capital that may invest in developing Africa and the potential strings attached, the steps Andrew would take to unlock more economic development, and the realities behind mining in Africa. We then touch on the work the Energy Opportunity Lab is doing to develop investable projects and the initial funding needed to move an idea from "concept" to "bankable."   We are always particularly thankful for conversations focused on developing world energy needs. We learn a lot and we always refocus on the priority of eliminating poverty. Andrew’s answer to what the energy world looks like in ten years is particularly good. It was our absolute pleasure to host him and we are thankful for his time. Mike Bradley kicked us off by indicating that markets had been laser-focused on an end to FED interest rate hikes and perceived US banking "stability" post the Silicon Valley Bank Rescue but now have quickly shifted towards Q1 results and 2023 earnings revisions which could be headed lower. He highlighted several observations from this week, previewed some to expect next week, and wrapped by observing that this will be an extremely heavy week for energy sector Q1 results (dominated by natural gas E&Ps, offshore & onshore oil service companies and European & US Oil Majors). Jeff Tillery flagged an uptick in interest around turning deepwater back on.   As always, thanks to you all for your support and friendship!

We are thrilled to be sharing this Special Edition COBT with you. The new film "Nuclear Now" is just a week away from hitting theaters and we had the opportunity to not only see it early but also to visit with the film’s acclaimed director, Oliver Stone, as well as Professor Joshua Goldstein, the co-writer of the book that inspired the film ("A Bright Future: How Some Countries Have Solved Climate Change and the Rest Can Follow"). Oliver is an Academy Award-winning director, screenwriter, producer, and author of "Chasing the Light." As you may know, some of his renowned work includes "Scarface," "Platoon," "Born on the 4th of July," "Wall Street," and "Midnight Express." Professor Goldstein is an award-winning scholar of international relations and an expert on war and society. Mike Bradley, Brett Rampal and I had the pleasure of hosting Oliver and Josh, talking about the key aspects of the movie, and delving where we could into the broader issues the movie raises.   In our discussion, Oliver describes how a review of "A Bright Future" in the New York Times sparked his interest in nuclear as part of the solution to address climate change. It took two and a half years to create the film, which covers not only the history of how the technology was developed but also its high and low moments in popular perception. We touch on Oliver’s takeaways from studying different aspects of American society and the overall misrepresentation of nuclear power that the film aims to correct. Josh provides background on how nuclear power and nuclear war became conflated, much to nuclear power’s detriment. We also discuss Admiral Hyman Rickover and his development of naval nuclear-powered submarines, the Hollywood community’s unfortunate portrayal of nuclear that’s added to the narrative over the years, and the team’s experience finding experts to interview as part of the film. Oliver also shares his perspective on international cooperation around nuclear and both he and Josh comment on the significant amount of fact checking that took place to create the film. “Nuclear Now" is technical in its approach and goes into significant detail around historical, existing, newer and future potential nuclear technology.   Nuclear Now opens to the public on May 1st in select theaters across the US and Canada. The film will also be available via streaming at a later date – you can sign up for updates on that release. If you are interested in more nuclear content, last month Veriten debuted a podcast dedicated entirely to the world of nuclear, power, and industrial heat called Gener8. We hope you can take time to dig in and learn more.   We want to thank Oliver, Josh, and the team behind Nuclear Now for improving the conversation around nuclear energy, for injecting more optimism into the energy/environment/climate discussion, and for spending an hour with us engaging on the film. We hope you all enjoy the film as much as we did!

Today we had the pleasure of hosting Saul Kavonic, Head of Integrated Energy, Resources and Carbon Research at Credit Suisse Australia. Saul is very well-regarded in the Australian and Asian energy community and joined us from Melbourne (on his Wednesday morning!). He was formerly the Head of Oil, Gas, LNG and Energy at Wood McKenzie and is a chemical engineer by training. We had an excellent and sweeping discussion with Saul and it was fascinating to hear his perspective from Down Under.   Saul first provides context on today’s Australian energy scene, the country’s geopolitical relationships with other Asian countries including Japan, and the influence the current (and relatively new) government is exerting on energy investment. Australia greatly impacts Japan’s LNG supply and has a unique vantage point of being interdependent with Asia but aligned culturally and from a security standpoint with the West. We discuss long-term contracts and issues around them, supply chain in "old" and "new" energy both, investor attitudes, and the types of companies Saul focuses on in his research. Saul shared he enjoys meeting energy executives and investors throughout the region and frequently asks them "where would you put $100 in the energy and energy transition space?" He provides a number of interesting potential answers. We also mention the potential for resource-driven conflict in an increasingly tense world and hear the sentiment from the region. We ended with a quick around the horn summary of where Saul, Arjun and Mike would invest their $100. Their answers were interesting!   Mike Bradley kicked us off with a market update and reported that markets have been relatively quiet for the past 4-5 days with bonds and commodities trading sideways. He flagged earnings beginning this week for oil service companies and that he expects the focus to be on pricing trends. Mike also noted copper prices are not at all-time highs, although there has been consolidation, and that LME stock levels are 50-55% lower than last year and 65-70% lower than the 5, 7, or 10-year averages. He wrapped by suggesting oil and copper prices could increase significantly if there is no recession this year. Arjun Murti also joined today’s session and shared his takeaways from last week’s CGEP events in New York, observing refreshing realism and pragmatism from policy makers including a recognition that Europe’s gas crisis is nowhere close to being over. Arjun also voiced his concern about optimism in Europe that a range of new technologies will ramp quickly and how that can feed a reluctance to fully embrace proven, reliable resources such as natural gas. He wrapped by flagging that coal consumption was likely to grow for the foreseeable future now that it is almost exclusively a developing market fuel source.   We greatly enjoyed our conversation with Saul and thank him for sharing his morning with us for the first SOBW - "Start Of Business Wednesday."   G’day mates! Our best to you all!

We had a fantastic session today with Arshad Mansoor, President and CEO of EPRI (Electric Power Research Institute). EPRI’s formation was initiated by Congress following the Great Northeastern Blackout of 1965 that left 30 million people in the US without electricity. Since then, the organization has served to support the electricity sector with research and development to drive technological innovations and ensure the public has access to clean, safe, and reliable electricity. While headquartered in the US, EPRI has a global presence, is in 40 countries, and has over 400 member companies. Arshad also has 1400 engineers and scientists on his team researching all aspects of electricity. Arshad first joined EPRI in 2006 and his passion for energy, electrification, electric vehicles and technology in general is undeniable. We were thrilled to visit with him for a power-focused and detailed discussion.   Arshad first provides background on EPRI’s history, their partnerships, and global presence. We then cover the importance of reliable electricity, how EPRI is adjusting their planning for reliability in the future and the scientific and technical approach that EPRI takes when evaluating power systems. We also discuss nuclear and the balance of increasing nuclear power while being mindful of budgets, EPRI’s support of both established and innovative nuclear technologies, and how the markets will ultimately pick the winners and losers of energy transition technologies. We then touch on carbon capture and storage’s role in the future, Arshad’s confidence that the US electric grid will support expanded electrification, and the goal to reduce energy-related costs for the average consumer in the US. Arshad also shares his perspective on how utilities view EVs, the "good versus good" involved in the energy transition, batteries and battery technology, the necessity of carbon capture in a net zero future, and more. We had a hard time ending the discussion and wrapped with the two areas Arshad feels need the most acceleration in the energy transition.    To start the show, Mike Bradley reviewed market activity and flagged that markets have been tame as they await this week’s important market-moving economic stats (CPI, PPI & Initial Jobless Claims). He noted market expectations for these stats, expectations for weekly total US inventories, and that EU storage levels are above seasonal averages which could take off pressure on EU natural gas prices. Mike ended with an update on the upcoming EPA gasoline emission rules and the potential implications of new stricter guidelines. Brett Rampal also joined today and peppered in his power perspective to the discussion.   Thanks to you all. We hope you enjoy!

Today we had the pleasure of hosting Lucas Arangüena, Global Head of Sustainable Tech and Group Head of Green Finance at Santander. Headquartered in Madrid, Santander is one of the leading European banks and the largest bank in Latin America. They are also the top financier of renewables globally and a leading advisor overall for M&A across renewables, hydrogen, battery tech, EV charging and energy storage, CCUS & ClimateTech, Biofuels, and AgriTech. Lucas joined Santander in 2010 and is responsible for advising clients globally in their energy transition as well as providing corporate finance advice across clean technologies. We were very interested to visit with Lucas and hear his perspective. As you will hear, the command Lucas has of so many of the technical features of today’s energy world is very impressive. To start the discussion, Lucas first shares the four themes that are his current top areas of focus including the technology paradigm change taking place with the energy transition, electrification of everything and how to add capacity and storage facilities, advising clients on circular economies, and decarbonizing food, particularly protein, which Lucas cites as being responsible for more than 20% of global GHG emissions. His themes segued into a robust conversation on the future of hydrogen demand in Europe, Latin America’s potential and opportunity to help developed economies decarbonize, and Chile’s (solar and wind) and Brazil’s (hydro power) particular promise. We also discuss Santander’s depth and breath in the energy transition markets, touch on some of the projects they’ve financed in the US, Lucas’s and his group’s passion for technology, and the future of infrastructure and industry in Europe. We continued the conversation with the importance of having an orderly and fair transition, Santander’s decarbonization targets for energy, steel and aviation, the Net Zero Industrial Act compared to the IRA, the odd dynamics of Chinese and Korean battery companies benefiting from IRA tax credits, and Lucas’s perspective on the two greatest opportunities for decarbonization by 2030. We ended with the future of public and private debt with as countries continue to provide subsidies for the transition, developments in carbon capture, and the importance of taking action now to achieve decarbonization goals. The Veriten team kicked off the show: Mike Bradley shared his observations on the surprise OPEC cut, noting it’s impact on pushing crude oil prices higher and how the last surprise cut in October 2022 also spiked prices over the ensuing weeks. He highlights several reasons why OPEC might have chosen to cut production and then discussed Ovintiv’s recent Permian shale acquisition. He wrapped up by noting that Glencore PLC launched an unsolicited bid for Teck Resources and concluded that both these recent deals, as well as a handful of deals announced last week, demonstrate that we’re still in the early innings of energy and mining consolidation and that the amount and size of future deals could be healthy. Jeff Tillery shared his thoughts around Q2 earnings with an emphasis on sustainable returns. It was our pleasure to host Lucas and we want to thank him for sharing his perspective. We are excited to spend more time with him in the future. Thanks to you all for your support and friendship!

Today we were delighted to host our good friend Ken Hersh, President and CEO of the George W. Bush Presidential Center. Prior to his position at the Presidential Center, Ken was the co-founder and long-time CEO of energy private equity firm NGP. Ken’s first COBT appearance was in November of 2020 and since our last visit, Ken has written a new book entitled "The Fastest Tortoise Wins the Race: Winning in Industries I Knew Nothing About." The book was officially published on Tuesday, March 28th and we couldn’t be more excited to visit with Ken and discuss the book. As you will hear, our whole team got (and read!) advanced copies and thoroughly enjoyed it.   In our conversation, we cover the broad array of topics Ken hits in the book and intersperse some of today’s energy hot button issues. We start with Ken’s inspiration for the book, cover some of the important moments in energy history that he has been a part of (the formation of Pioneer Natural Resources and of Energy Transfer, just to name a couple), re-live the journey of co-founding and leading NGP, and explore cultural and operational philosophies like "feeding your winners" and paying attention to signals ("yellow lights don’t turn green"). We also touch on the importance of betting on a team for the long-run, Ken’s early involvement championing energy technology and adaptation, the latest estimate of the IRA’s total cost and government spending in general, and what Ken describes as “leapfrog” opportunities in the energy transition. Ken walks us through his perspective on the clash between today’s fast-paced world and the deliberately slow institutions we have built in government and elsewhere, comments on the future of private equity, and some of the keys to building a collaborative and trusting culture. As we wrapped up, we of course probed him about what the future holds. In sum, we loved the book and the visit both.   Mike Bradley offered up five highlights/observations from the past week and for coming weeks. He observed that markets are becoming "Comfortably Numb," meaning investors are gaining "comfort" that systematic risks are lessening but "numb" in the sense that recession fears are still heightened. He also observed that bond yields are temporarily stabilizing because consensus believes (hopes) rate hikes are over and that the next move might be down in rates. He highlighted crude markets rebounding back to a previous trading range, near-term SPR refills by the Biden Administration looks to be fantasy, OPEC will likely not change their previous production policy at next week’s meeting, and that the energy sector has temporarily become more correlated with regional bank equities than crude oil price. Mike also flagged the handful of traditional and new energy deals announced over the last week. He wrapped by highlighting a Richard Rainwater quote "where there is chaos - there is opportunity," and applied this concept to the recent purchase of Silicon Valley Bank by First Citizens Bank. Jeff Tillery also joined for today’s engaging session.   We took a lot of lessons from visiting with Ken today and hope you enjoy it as much as we did. Our best to you all!

Today we were thrilled to welcome back our good friend Corby Robertson, Chairman of the Carbon Neutral Coalition (CNC). Corby’s extensive career includes over 40 years of global investment and operations in energy and natural resources and as a proud Texan, he is focused on what the state looks like in the decades to come. The CNC’s mission is for the state of Texas to be carbon neutral by 2050 and the organization is focused on the necessary education and regulatory changes to achieve their goal. As always, it was our pleasure to host Corby.   To help frame the discussion, Corby provides a detailed walkthrough of the organization, why the organization is focused on CCUS and their other objectives, and the importance of how the liability and regulatory aspects of CCUS are managed. We also hit on the organization’s management team and their community of advisory board members, the audience the organization is able to reach with social media, and studies that various universities are conducting on economic impact, as well as the incentive bills that could help us implement CNC’s proposals. Corby was last on COBT on March 26th, 2021, and so we also touch on the momentum CNC has created in the past two years, the bills they are currently supporting including the franchise tax credit, property tax credit and liability bills, the upcoming legislative session, and we wrap with Corby’s vision for a more vibrant Texas in ten years. It is fantastic to see the progress the CNC has made and we’re excited to watch and support their efforts in the years to come.   Mike Bradley kicked off the show flagging a few key items including the upcoming FOMC meeting (March 22nd), implications of rising rates and what markets are expecting (consensus = 25bp hike). He highlighted that high inflation, the FED aggressively hiking rates and recent banking instability all have roots in governments globally outspending. He rounded out the segment by noting that global crude oil price weakness has less to do with current supply/demand fundamentals and more to do with a global risk off trade, and that equity investors, though modestly more concerned with 2H’23 global demand, are even more concerned with global upstream underspend, which will support higher “normalized” commodity prices. Jeff Tillery touched on recession concerns and historical context of energy demand.   Thanks again to Corby for a fantastic discussion and thanks to you all for your support and friendship. 

Today we were delighted to host Jarand Rystad, CEO of Rystad Energy. Jarand founded Rystad Energy in 2004 following a long tenure with McKinsey & Company to build an independent research and consulting company rooted in granular data. Rystad Energy tracks all energy sources, from production to consumption, to provide detailed analysis. We had a wonderful visit!   Our discussion explored a range of topics starting with Jarand’s background and inspiration for creating Rystad Energy, the company’s growth in scale and depth of analysis, the data and analytics the company tracks, Jarand’s day-to-day involvement, and the importance of adding energy transition supply chain capacity in the US and Europe. We also touch on the concept of energy transition vs. diversification, Jarand’s view on how new technologies and the free market will outcompete oil and gas, the role of nuclear, future supply and demand for electrification, Rystad Energy’s data on new energy materials, and more. We ended with Jarand’s view for the energy world ten years from now and walked away with a great appreciation for the work Jarand and Rystad Energy are doing.   To kick off the show, Mike Bradley presented a market update from the past week, including a closer look at the historic three-day decline (100bps) in 2yr US Government bond yields and why that’s changing the Federal Reserve’s previous hiking campaign of higher, faster, and longer to one that most market participants believe will be shifting to lower, slower, and shorter. He noted that the recent Silicon Valley Bank seizure had enormous implications for venture capital funding and that it would likely lead to less, higher cost and more stringent funding for Tech and New Energy startups. He wrapped up by reviewing recent events, including ConocoPhillips’ Alaskan Willow project approval, Aramco’s large boost in future capex spending, and a handful of key themes coming out of last week’s CERA Conference. Arjun Murti chimed in and emphasized the importance of understanding risk and finance controls within a company and what are inherently less sexy aspects of running an organization. He also flagged that all companies should be considering how international climate policy and regulations might impact them, even if those policies seem distant in location or time.   This week marks three years of COBT and we are thankful for all of your support along the way. Thank you to Jarand for being a fantastic guest to mark the occasion!