|On Alaska radio 4:30 – 5 today -dh|
"If the world around us seems increasingly chaotic, you may not be overreacting. You may simply be sensing signals to become more serious about soul searching, personal planning and decision making."
|CBC. … debate over the Energy East pipeline becomes more about national unity. More.|
Yesterday, in a case that means as much to Oil & Gas as it does to other natural resource industries, John Sturgeon (NGP Photo) addressed the RDC breakfast meeting about his case before the U.S. Supreme Court.
See Sturgeon's video presentation here: http://www.akrdc.org/
Friday Observations by Our Anonymous, Mid Atlantic Energy Consultant Friend: Exxon took a meat cleaver to its capex budget two days after it borrowed $12 billion.
Yesterday we alerted readers to Aubrey McClendon's death earlier in the week. Today, we are grateful to have Richard Ranger's (NGP Photo) personal perspective on the life of an important figure in the history of natural gas technology, exploration, production and transportation (Click below). We devote space to Richard's perspective partly because of Aubrey's legacy of accomplishments and failures, a treasure of valuable life lessons. -dh
From Congressman Don Young's office yesterday (SEE YOUNG VIDEO RE: ANILCA AND FEDERAL OVERREACH, 43:27): The Fish and Wildlife Service has proposed new rules in the state Alaska that takes away our authority – granted by ANILCA – to manage fish and game. The Department of Interior asserts their actions are allowed by the National Wildlife Refuge System Improvement Act. As the original sponsor of that Act, I know that bill clearly states that ANILCA takes priority over any conflicts regarding refuge lands in Alaska. Yesterday, I asked Secretary Jewell why her agency is moving ahead with this clear example of government overreach.
A Personal Aubrey McClendon Perspective
Richard Lee Ranger
Those from Oklahoma, those who follow the oil and gas industry, some in the Duke community, and those who take note of celebrity business figures will have seen this tragic story, and the story of the business figure's criminal indictment the day before this incident.
I have an Aubrey McClendon (NGP Photo) story.
In October 2005, the weekend after I'd started work at my new job with the American Petroleum Institute (API) in Washington DC, I drove to Durham to meet some friends of ours in the Duke community, including Susan-Anne Smith MacKenna and Tom Beshere for a tailgate and pre-game for the men's basketball inter-squad scrimmage. A great tailgate, but the fellow who was supposed to show up with my ticket did not show, and there was no ticket for me at will call. Understand, this is Duke, where even the pre-season intersquad scrimmage is a sell-out.
I stood in front of Cameron Indoor Stadium, making peace with the fact that I now had to drive all the way back to DC without seeing the game I had traveled to see when, as if in a vision, there is this handsome fellow with wavy hair standing in front of me, and he's asking me "do you need a ticket? How many do you need?" He had a handful. "Just one", I told him. And he handed me one. I thanked him, and it was as if he disappeared in the shaft of light through which he appeared in front of me.
I took my ticket, and headed in to Cameron, heading to the stairway to lead me to the upper level, where I assumed I had a ticket in Row Z or somewhere by the rafters. "No, please come this way, sir", the usher told me, and I was guided to a seat two rows back of the Duke bench. Which turned out to be the McClendon row – as I learned when the charming lady who was his wife sat next to me. When the band struck up "Devil in a Blue Dress", and the team ran out onto the court, followed ny the coaches (and, yes, Carolina fans, the endless string of guys in blue sport coats who follow), then Coach K. Coach K acknowledges many in the near rows as he approaches the bench, shaking hands with a few, one of whom was the wavy haired gentleman seated on the other side of Mrs. McClendon.
My Aubrey McClendon story is not just that I got a ticket to an intersquad scrimmage from him by utterly random chance. It's that the family seated in the row in front of us (as Mrs. McClendon said when she introduced us) was the family of the slightly younger man who was the father, who years before as a kid from the wrong side of the tracks when Durham was a dying and not-yet reminted tobacco town, was Aubrey McClendon's "little brother" through Big Brothers/Big Sisters. Unlike a lot of Big Brothers, Aubrey never forgot his "little brother", stayed in touch with him as he grew, continued to mentor him, helped him get a couple of jobs, and would invite him and his family out to Oklahoma to the MccClendon Ranch. The little brother's 12 year old daughter was leaning back against Aubrey's knees as if Aubrey was her uncle.
Aubrey McClendon built a company – twice – that for a time was the largest producer of natural gas in this country. He invested hugely in his city at a number of levels. He was a major donor to his alma mater. He played the energy game creatively – and hard. There's a Forbes cover story on McClendon from several years ago that would still make a fascinating read.The stories that are unfolding indicate that McClendon was either not above – or not far from – what could be called sharp dealing. I will simply say that there are stories about him that suggest he was not necessarily the easiet person to invite into your sandbox. There are stories that indicate that he was not above taking advantages when he could – and at scale. Read your history – especially your business history. There are all types of people who cause the immovable objects to move against the irresistable forces. Some of them – flaws and all – built the country that you're standing on.
Aubrey McClendon was a dynamic and flawed man. It is easy to judge. Those who have the power and the authority to judge will have their opportunity to judge Aubrey McClendon, and the facts will lead where they will lead. I do know this as well. The stories of his generosity and his loyalties are also legendary. I benefited in a small way from his generosity, and I saw how another family benefited from his generosity in a way that gained him no advantage, but reflected one of the threads in this complex man's character.
It is easy to judge – and in a world and in a time where rendering a judgment is as easy to do as to hit "POST" we all do it, and most often about those whom we did not know. I did not 'know' Aubrey McClendon. But I do know that he was loved, and my sympathies and my prayers are for those who loved him and whom he loved. Because we're all flawed. And if we're lucky, we're also loved. Rest in peace, Aubrey, and thanks for the ticket. It was the gift of a memorable afternoon.
The focus for the end of this week is the race to cut capex budgets for 2016. This is the natural result of finding the debt markets functionally closed.
From a weekly piece by Jim WIcklund, “Things We’ve Learned This Week”. He starts off by noting moods and discussed trends at a Credit Suisse Energy Summit last week. He then notes the speed at which capex budgets keep getting adjusted downward. There will be more to come.
The second piece notes that Exxon took a meat cleaver to its capex budget two days after it borrowed $12 billion. Exxon has had a history of maintaining budgets “through the cycle” more than any other company in prior depressed periods; it did so in 1998-99, and even followed up by acquiring Mobil about a year later. They are viewing this cycle much more cautiously. Their peak capital spending was $38.8 billion in 2013. They generated sufficient free cash flow to cover dividends through 2014, but not last year. Even at $23 billion, it will probably not cover dividends this year, either.
But it is important to remember that a lot of that spending for Exxon (and for other major oil companies) in 2016 is to work toward completing major projects that are already in progress. As Rex Tillerson noted on CNBC this morning, Exxon has projects scheduled for completion in 2016 and 2017 that will start generating cash. It is unthinkable not to complete them, for a variety of good reasons. But new projects that would have started to be worked on in the next couple of years are being pushed out, tabled, or canceled.
BOTTOM LINE: Current annual global crude oil depletion is a little above 5%/year. That amounts to north of 4.8 million barrels/day/year, or the equivalent of almost five new Bakken fields per year that need to be added to global production. At a minimum, the effects of depletion will start to get felt in a big way by the markets; since the trading markets generally anticipate such things by 6-12 months, we may start to see it in prices perhaps as soon as the end of this year (given the Big Kahuna assumption that the global economy does suffer a massive collapse).