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Misnomers & Misunderstandings About the Importance of Hydrocarbons

September 5, 2023 Article by Julie

The Wall Street Journal recently ran an insightful interview with the vivacious CEO of Huntsman Corp., Mr. Peter Huntsman (son of the founder) – see story here. Far from being an apologist for hydrocarbons, he is an ambassador who is quick to point out the widespread importance of hydrocarbons that make our modern-day life possible. One of his great quotes is that “They think the chemical industry is just plastic bags.”. He points out that everything from skateboards to makeup have a basis coming from oil & gas! Pretty good! He also points out that the proportion of energy that comes from other sources is simply unrealistically small. He’s not the only voice making this point, but it is a head-scratcher that the rank-and-file green energy advocate seems to not be able to grasp this simple fact of life. The Huntsman interview is just another of many level-headed news articles that point out the painful truth that hydrocarbons have a necessary and lasting role in a modern society.

Likewise, the First Keystone Industrial Park is leasing warehouses in Pecos, Texas to accommodate service companies that are the backbone of America’s increasingly important O&G industry. We have as members of our growing community cutting-edge service companies that are supporting the hydrocarbon industry in its most important province, the Delaware Basin! In fact, First Keystone welcomes three new members of its community – all of which exemplify this point! – ChampionX (recently expanded its facilities), Spindletop, and, most recently, TNT Midstream.

The opinions expressed above reflect only those of the author and do not represent those of the First Keystone Pecos Industrial Park organization. First Keystone welcomes responsible fact-based discourses on these topics.

CapEx by Big Oil Turns Around?

August 29, 2023 Article by Julie

Over the last few years, as a majority of the gargantuan Big Oil profits have been channeled into shareholder payouts, we have been lamenting the insufficiency of capital investment being made by Big Oil. As citizens and as developers, we have been frustrated by the decisions to de-emphasize reinvesting in their core businesses. But the investment community has applauded these moves translating into buoyant stock prices and huge C-Suite rewards. However, the Wall Street Journal ran a very interesting article on August 14, 2023 (see here) citing statistics that point towards a turnaround back toward investing in the core businesses. Recent statistics are eye-opening. For example, the cash hoard built by large oil reached $85 billion in late 2022 and has since dropped back to about $70 billion as of early 2023. Other statistics show that the percentage of cash deployment in early ’23 that was channeled towards CapEx has migrated from a low of 25% up to around 42%. This encouraging trend reflects a mirror image of reduced debt repayments which was a dominant use of cash as recently as two years ago. Hefty payouts to shareholders continue, at around 40%, but they have topped out. So, the most recent trend toward investing in O&G development certainly bodes well for supply and service companies. We at First Keystone have been assiduously investing all along in O&G support services having built and leased (or sold) three industrial buildings, totaling 14,500 sf, over the last year. In fact, our core business is to lease industrial real estate in Pecos, Texas to O&G service companies. Three new companies have recently joined our community – ChampionX, Spindletop Energy Products, and, most recently, TNT Surface & Supply. All of them serve midstream industries and some upstream, as well.

Dirty Secret: Green Energy “Panacea” Revisited – Another Update!

June 12, 2023 Article by Julie

You may have reviewed a previous soapbox speech bemoaning the absurdity of the supply-chain flaws – hiding in plain sight – that afflict the mirage of a massive worldwide conversion to EV technologies. Well, the New York Times recently published an interesting series of charts – click here – that graphically illustrate the stranglehold that China has on this industry. In a nutshell, China has a dominant position somewhere in the supply chain for each of the critical materials comprising these vehicles: cobalt, lithium, nickel, etc.

We at First Keystone are all over this issue because energy is arguably the top geopolitical factor in the world today. Thanks to the unanticipated shale revolution, the U.S. has miraculously reversed its position of being dependent on nasty folks for oil, and has itself ascended into being a dominating force. It’s this power that has enabled the Biden Administration to put the screws on Putin’s Russia.

So back to EVs – it’s no surprise that the Biden Administration has eased off its rhetoric about the conversion to EVs. Without a complete re-jiggering of worldwide supply chains, the U.S. would be committing folly to place its transportation system into the controlling grip of the Chinese Community Party. And, we know the Biden Team is monitoring Chinese maneuvers very closely. That’s why strengthening the infrastructure of U.S.-based energy production is regarded as a critical geopolitical necessity. And, we at First Keystone are making our own small contribution to this effort by leasing industrial warehouse space in Pecos to well-established suppliers like ChampionX and to nimble new players like Spindletop Energy Products, the most recent member joining our community.

Indeed, it’s companies like these that are the backbone that makes the U.S.-based oil & gas industry so dynamic – and that helps to make the United States such a powerful geopolitical force.

Brent Embraces Midland

June 7, 2023 Article by Julie

Say what!? Yes, the formula for calculation of Brent prices – for the first time – incorporates a factor based on U.S.-produced oil. Not just any oil, but it’s Midland price points – see recent Wall Street Journal article here. That’s not WTI. If that’s not an endorsement of the importance of the Permian Basin, then what is!?

That’s why in 2017 First Keystone set up shop in the up-and-coming western section of the Permian to bolster the supply of high-grade industrial buildings for sale or lease in Pecos, Texas. Of course, Midland has for generations been a major center of oil & gas service activity, but Pecos – a relative “newcomer” — must grow into a major satellite of the Midland-dominated Permian since roughly half of all drilling in the Permian now actually occurs out in the Delaware Basin sector where Pecos is THE Hub.

The World of EVs – Norway is 10 Years Ahead of the U.S. – What Does That Tell Us?

May 11, 2023 Article by Julie

The New York Times ran a surprisingly interesting article on May 8^th on the unanticipated repercussions and benefits of a major shift to a national fleet of vehicles that is weighted toward EVs. There were all sorts of surprises. Among the takeaways were these: (1) improved air quality in downtown Oslo, (2) changes in parking patterns, (3) impacts on convenience stores, and (4) pleasant surprises for traditional auto mechanics. There’s more. Here’s the link: NYT Article.

Our own takeaway is that Permian-produced crude is going to be an essential energy source for decades to come. So, there needs to be a reliable infrastructure in this region to make that possible. That’s why our organization is dedicated to lease warehouse space in Pecos to make that possible. Meanwhile, the government and industries such as convenience stores will need to muster billions of dollars to build out the infrastructure that will support the charging of vehicles.

For the author here, I will continue to drive my 30 mpg mid-sized SUV to my summer cottage 345 miles away with zero anxiety about whether my car will crap out along the way.

Conflict with Financial Goals — Another Installment — Is Big Oil Doing Enough?

Article by Julie

Tuesday’s Wall Street Journal (May 9) lead story hit the nail on the head (https://www.wsj.com/articles/big-oil-has-150-billion-in-cash-and-investors-want-a-share-b5cdea35?st=kmn8twtikurvdoj&reflink=desktopwebshare_permalink). This story, rehashing the breathtaking profits generated by “Big Oil” in ’22 and now 1Q23, zeroes in on why aren’t oil companies spending more to boost daily production. Here is a critical excerpt:

“President Biden has called on producers to ramp up output in a bid to lower prices at the pump. “These balance sheets make clear that there is nothing stopping oil companies from boosting production except their own decision to pad wealthy shareholder pockets and then sit on whatever is left,” White House Assistant Press Secretary Abdullah Hasan said.

But investors have favored financial discipline, and executives are increasingly compensated based on shareholder returns. It marks an about-face in the U.S. oil patch, where companies for years chased production growth by tapping gushers of crude in regions such as the Permian Basin in Texas and Bakken shale in North Dakota.”

The basic point is that Boards of Directors have recalibrated their priorities to build value through shareholder distributions which means an abandonment of the historic mantra that has driven this industry for decades, “Build value through the drill bit”. That’s a depressing thought for companies positioned to service a vibrant and growing O&G industry. And that’s what we offer – Pecos industrial property to buy so that the critical service & supply sector can be domiciled in modern facilities. And, Reeves County and the greater Delaware Basin are the epicenter of America’s push to halt the invasion by the anti-democratic USSR (ooops! Made that mistake again!). As much as the oil industry wants to complain about the Democratic-led federal government, it is strange times to see the liberal-leaning government jawboning for more oil and the conservative-leaning oil industry resisting. What an upside-down world!

We urge you to check out this article through the link above (you do not need a WSJ subscription to view this).

Dirty Secret: Green Energy “Panacea” Revisited – Implications of Raw Materials Requirements for EVs

May 9, 2023 Article by Julie

The panacea that is ascribed to a world that has migrated away from gas-powered automotive transportation to EVs has a dirty ~~little~~ big secret. In a nutshell, the disruptions to the environment and societies associated with magnitudinal increases in consumption of key elements (e.g., lithium, cobalt, and copper) are going to be colossal. Here’s another in an intensifying trickle – actually a flow – of articles about adverse repercussions of the transition to electrified personal transport, this one from the Wall Street Journal https://www.wsj.com/articles/net-zero-will-mean-a-mining-boom-electric-cars-minerals-oil-fossil-fuels-climate-change-policy-cb8d5137?st=wsk1xit42bvh24y&reflink=desktopwebshare_permalink. Places like the Congo, Bolivia, Argentina, and New Guinea are going to experience huge impacts – good and bad.

Add to those concerns this fact: Much of these raw materials when they are refined flow through China. The global strategic implications are colossal. Are any of the “leaders” clamoring for EVs giving thought about that “detail” while stampeding us to drive an EV? In my mind – as I witness the nasty Ukrainian War – it’s a pretty dumb strategic idea to shift our purchases of oil from ourselves to lithium batteries from Beijing. Russia is ill-equipped to win the Ukrainian War in no small part because the world is not tethered to its oil & gas. China is very well-endowed to prevail in a Taiwan conflict. Hello!? Wake up!

That’s why the Permian is so geopolitically strategic! It’s the reason the Russian oil ain’t so critical. In wading through this minefield of conflicting energy policies, we at First Keystone Pecos Industrial Park remain committed to providing infrastructure to support the U.S. domestic oil & gas industry by offering industrial land for sale in Pecos, Texas. We are part of the solution…not part of the problem!

In closing, we would suggest some due diligence be conducted by the EV advocates who earnestly want to cut down on carbon emissions by devoting some of their attention to the unintended consequences of their efforts.

Fact Check: What is the Real Policy of the Biden Administration Towards Fossil Fuels?

May 5, 2023 Article by Julie

So many disparaging remarks are tossed around in casual conversations throughout the Permian Basin about the “terrible” policies of “what the Biden Administration does to” the oil & gas industry. Yet, with all the angst and complaining, it is difficult to really put one’s finger on a set of tangible policies and regulations that have hurt the industry. Indeed, an argument can be made that the Administration is methodically backing America’s fossil fuel industry as part of a grander geopolitical strategy in not only fighting a war in Eastern Europe, but in workibg to contain advances of autocratic regimes. For example, take a look at this article https://www.nytimes.com/2023/04/06/climate/oil-gas-drilling-investment-worldwide-willow.html?searchResultPosition=9 published by the New York Times on April 6, 2023 which lays out concrete steps taken by the Biden Administration that are part of hydrocarbon-friendly policies. This article is in contrast to those widespread disparagements freely aimed at “the feds”. Sure, the government is cracking down on methane emissions, but that’s the equivalent of regulating discharges of untreated sewage. One would hope they’re regulated! Isn’t it incongruous that Biden is jawboning the industry to pump more oil? And, it’s funny – but it’s not – that the left-wing of the Democratic Party criticizes him, too! Isn’t it funny – but it’s not – that many of the U.S.-flag leading producers are hanging back and curtailing year-over-year growth? What is it about this picture that’s backwards?

This is why the Permian – an outpost in the U.S. with less than one million residents – is arguably one of the Top 5 strategic sites in U.S. territory! On the opposite end of the size continuum, First Keystone is a tiny contributor that helps to lay the groundwork to strengthen American’s oil & gas industry – we do it by offering to industrial buildings for lease in Pecos, TX. We’re in a geopolitically crucial region!

The Biden Administration also has plenty of overt inducements designed to speed up America’s transition to “green energy”, but those moves do not cancel out these near-term policies that are meant to spur the U.S. forward to The World’s #1 position as an oil producer. They demonstrate a real politik approach to oil taken by the center-leaning Biden Administration.

Preventing Disastrous Energy Shortages — Another Installment – Is Big Oil Doing Enough?

April 6, 2023 Article by Jeffrey Price

A recent Economist piece covering the jaw-dropping profits earned by the Super-Major Oil Companies shines an unflattering light on this industry’s approach to both supporting independence and building shareholder value (https://econ.st/40LXXmx). In a nutshell, the 5 Super Majors earned $150 billion in profits last year with over half of that amount being used to buy back stock. Just what does a “buy-back” mean? It means that the highest and best use for cash in these companies is to reduce the float of stock. In other words, plowing profits back into the business pencils out as an inferior priority. And, this is what companies in declining industries do. It’s what Blockbuster Video did. Ditto Gannett (newspapers), Sears & Roebuck, and more. Those are classic financial management behaviors in a declining industry.

Yet, unlike all those industries, the oil industry is wildly profitable. But evidently, management doesn’t see its core business as an attractive avenue for deploying cash. In a nutshell, they are setting the course toward shrinking the industry. There are, however, smaller & more nimble E&Ps who are growing. They are at the heart of the surge in the rig counts in the Reeves/Delaware sectors.

We at First Keystone aim to support all those companies, big and small, who are investing capital into the greater Delaware Basin and we are accommodating that growth by offering for sale or lease industrial buildings located in Pecos, Texas.

Is Big Oil Doing Enough? — A Shining Example of a “Patriotic” Drilling Program

March 2, 2023 Article by Jeffrey Price

Investing in increased oil & gas production should be a national goal as part of the increasingly intense war raging across much of Ukraine. A thrust of that war effort is to replace plentiful crude oil and natural gas coming from Russia. Our “friends” in Saudi Arabia are conspicuously sitting on their hands. Our enemies (e.g., Iran) are gleeful.

The world’s swing producer – that would be the Permian Basin – can absolutely move the needle by ramping up. We have opined already on the CapEx policies of Big Oil, and reiterate our disappointment. However, there is one conspicuous exemplar that is “stepping up”, and that would be Continental Resources. An advertisement that this now-private company placed on the back cover of Oil & Gas Investor speaks for itself – we applaud Harold Hamm’s patriotic stance in this time of America’s biggest challenge since the Korean War. In fact, we support this type of expansion effort by leasing industrial/warehouse facilities in Pecos, Texas.

Like Continental, we at First Keystone are supporting the war effort: We offer high-quality industrial buildings for sale or lease in Reeves County, Texas.

In closing, it is most interesting to note the direction taken by Harold Hamm which diverges significantly from that charted by the Boards of Directors and Senior Management of big publicly-traded oil companies. Back in 1942, shortly after Pearl Harbor, big industry in the U.S. became laser-focused on the war effort – it was that commitment that made possible the decisive U.S.-led defeat of Axis powers. We commend Harold Hamm and Continental for not forgetting that 80-year-old historic lesson.