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Oil & Gaas Investing With Encore Energy · Pioneer Mind Podcast

• Mark Workman: Hey, welcome back to the show and joining the pioneer mind podcast. ⁓ just, ⁓ having a great time doing these, ⁓ falling in love with the people that I get the chance to talk to and, some great shows earlier in this week. And then today we got a good one, ⁓ with my, ⁓ you know, good buddy and regular guest, Steve Stangl from Encore energy. He's, ⁓ you know, as I always tell him, he's just a great teacher, but you know, again, if you're interested in investing in oil and gas, Steve: Okay, so, you know, first, ⁓ last month we were at about 105,000 in gross revenue from one well. Now that's up this month, about 121,000. And then, you know, we expect to go higher as we go along here. And ⁓ we expect this similar, maybe better, maybe about the same across all of the next. Mark Workman: ⁓ in any way, you should be paying attention to every word Steve says. It literally is a good guide for ⁓ if you want to get involved in this space, it's not the easiest space to be involved with, but there's certainly some results happening for Steve that, again, and it takes leadership to lead these things, as we all know, but Steve has provided great leadership and amazing communication, all those things that he does as a leader, but he, again, just... Steve: ⁓ seven horizontals we drill and you know like I told you we're working on permitting today and everything for four and five wells and we're getting ready to move a rig on number three well and we're ⁓ getting ready to start ⁓ fracking on number two well and so this time of year with the beautiful weather it's time to work. . Mark Workman: Wow. Steve: you know, and so things are going well. Mark Workman: Are you there, Steve? I think I lost you. There you go. Okay. ⁓ I can just cut that out. So, but anyway, ⁓ so to start again, but just, ⁓ you know, he, what he does with encore energy has been super encouraged to me just for full disclosure. ⁓ I am an investor and, and I'm glad to do so. So welcome Steve and thanks for coming today. That's awesome. Yeah. So You know, when I, again, I've not, as an investor, sat down and I've told you this is, and this is really the truth for me as I kind of invest and walk away, I don't ⁓ sit there and track. even though you're really good at informing me, so I don't need to call and ask, I guess. But for the most part, like I'm in a lot of different projects with you and in small amounts, I guess I consider them small. I do 50 to 80, 50 to 100, and whatever I'm doing in terms of total investment per project. You know, Encore Energy, ⁓ you know, as I've tracked it, you know, you've really been working hard and all these development phases of what you're doing with, with all your work, you know, you're developing, developing, developing. And now it seems as though you're moving into this spot where you can start getting to the point of not only drilling fracking and starting to produce a harvest and all your hard work. And I'm assuming that's got to feel great to start moving into that. ⁓ that next part of what you're doing because. At what I've felt like as an investor, maybe you can tell me I'm wrong. Like, I don't know if you have guys just coming in on one well with large sums, trying to get a bigger percentage of a specific well, or do you have more people like me that do smaller amounts over, you know, I, I've best with you every year on what you're doing. Steve: Well, that's a great question because I have both. And a lot of people come in, they see the tax benefit, but maybe they're not as enthusiastic about the industry itself. They want the tax benefit, they want the income. And then a lot of investors, I mean, kind of like you, I want to go get into oil and gas business and I want to invest Mark Workman: The waiting, I think I've told you this before, is none of us are good at waiting. We need to practice that skill of working through the hard things to get to the good things. And I think you're in that mode. ⁓ Maybe share today a little bit more about what Encore is up to in terms of successes, their current well, all those kind of factors that you've shared with me before. But as an investor out there that might be listening, they might need to hear some of this. So just go for it. Steve: as direct to the wellhead as I can. want to get the best, the best tax benefits, but more importantly, I want to get quality wells that produce for a very long time and will provide a sustainable flush and return of capital that makes you happy. Okay. And if it makes you happy, it makes me happy. All right. And at the same time, while we're doing that, Mark Workman: Yep. Right. Steve: We're developing an entire field that is, although there are multiple horizontal wells, all producing on their own with multiple tank facilities and roads and infrastructure, it's all one asset. Okay. And a lot of my investors love that and they invest, they diversify across multiple wells. And then along this trend, of course, we have multiple leases. So they will diversify across multiple wells and even across multiple leases. All right. And you know, because some areas just tend to be a little better than other areas. ⁓ but at the end of the day, it's one asset. Okay. And if an investor wants to put money in one well, ⁓ then Mark Workman: Right. Right. Steve: That's great. ⁓ But a lot of people will put money in multiple wells at one time, because if they come in earlier, they get typically a better investment price and ⁓ they like to diversify. And the diversification is everything, not only in the production. and your ROI, but also in the event of a potential future exit. Then you got your ownership in multiple assets spread across an entire field. And it's much more attractive to big oil buyers. All right. So, you know, that's, that's one of the things we work on as well. And we love having investors in the field. ⁓ Mark Workman: Right. Sure. Steve: You've been there multiple times. know, ⁓ I told you well ago, we've got an oil tanker that I think just left that well while ago. But when I brought an investor on a few weeks ago, we drove up on the ⁓ location and there was an oil tanker. ⁓ it was exciting for him. Okay. He loved it. mean, and then, know, so now we're moving multiple tanker trucks every week and Mark Workman: I love it. Yeah. Steve: That in itself is an art form, being able to move the oil in the tanks in such a way that optimizes and optimizes your production operations. Okay. Yeah. And what a lot of people don't understand is all those, these are oil projects. It's a gas driven reservoir. So the way we manage our gas and the way we hold back pressure and the way we Mark Workman: ⁓ wow, huh. Right. Steve: We ⁓ utilize gas pressure to drive the oil. We do so in a slow way so that we don't make changes to the reservoir that the reservoir doesn't like. Okay. Mark Workman: Right. Like, and I know you've shared this in the past on previous episodes, but again, people might not understand that oil and the oil and the gas are kind of in competition. They're, fighting each other. Is that correct? Steve: Well, they fight each other, but gas, you know, when I was telling, I was telling my wife about this, oil is like the man and gas is like the woman. Okay. ⁓ yeah. So I'm a little sensitive here. All right. The gas is the pressure and the drive that moves the oil. If you're moving the right amount of gas, you are Mark Workman: ⁓ boy. Right. Steve: You are saturating your oil with the gas to make your oil thinner and lighter. So the gas will carry the oil through the reservoir into surface. All right. Now, now if you move more gas, you're going to move more oil. But when you get to a position where you're you're moving more gas than you need to, to move the oil short term, you waste a lot of energy. that'll affect you years down the And the other is the fact that you have oil, if you move it too fast, then the gas will start, let me change this real quick. The gas will start to outrun the oil and it will leave the oil in the ground more so because the oil will thicken up some in the reservoir and we will not want to move as fast. And so what we do is we slowly let pressure off the well to bring it up to a sustainable flush for a much longer period. And then we have better long-term production where the difference in that is a lot of companies and in the shell play everywhere. A lot of the reason you see such a huge first year is because they're letting pressure off the wells to get that volume high fast. Okay. Mark Workman: And is that a investors are hounding us, they're calling us for returns, they're bugging us, so we're going to give them what they want and then at the end of the process, it's not so good. Steve: Yes, it is. Right. So what we want to do is slowly move up to the IP utilizing less energy to get the reservoir to where it wants to be to produce optimally, not maximize, but produce optimally. And ⁓ so, you know, by letting pressure off slowly, and then we will actually be producing the well at a higher holdback. pressure at the wellhead so that we're retaining that pressure long-term. And, you know, like I was saying earlier, I'm exceeding projections without letting very much pressure off the wells. And that's partially due to such good oil prices right now, you know. Better, longer. Mark Workman: Yeah. So it's going to be better longer, essentially the way you're the way you're doing it. Yeah. So Steve: better, longer, and more reserves that are producible in the ground in the event of an exit strategy. Okay? Mark Workman: Yeah. I was thinking about you'd commented on the visits earlier. ⁓ and I, and I'm not necessarily talking for my wife, but she has brought it up, ⁓ unprompted from me more than once. Like I've come to your spot and then I invited her. said, you need to come see this. These people are crazy what they're doing. You know what I mean? So, and I'm not being rude. I didn't mean you're crazy, but I mean, like some, my first few first trip there was really fascinating. I'm like, ⁓ my gosh, this is pretty big, you know, And, uh, all the work you're doing, anyway, she, you know, she was hesitant. I'll be honest with you. She wasn't sure she'd understand. She wasn't sure she even wanted to go to be truthful. uh, yeah, that's your thing. You go do it, you know, and I just really pushed on her to come. And I'm just telling you, unprompted for her, she'll bring it up sometimes when I'm telling you, Oh, I'm going to do another episode with Steve or whatever. She'll bring it up that, that, that trip helped her more than anything. She's, know, in terms of. understanding, investing and whatnot. Cause I'm in a lot of little pies, you know, I'm not just oil and gas. I, even the, even the returns I get from you each month, I'm reinvesting. So I'm not, I don't spend money. I'm a hoarder in some ways, but I'm always invested. You know, I'm always investing, but you know, I can just tell you from my test, her testimony is that I think that few hours that we were together that day and all the things you did and all the teaching you did, you know, I would encourage everybody to go take. Steve: Right, right. Yep. Right. Absolutely. Mark Workman: you know, if your spouse doesn't want to go, try to get her to go, you know, that kind of thing. Uh, cause it's very viable to be working as a team because now she could see it and she came home and, she actually put some money in the pot from her own works, you know, she's, I want to do one of those wells, you know? So, uh, you know, this last investment I did, part of that money was hers, you know, with whether you, whether you realize that or not, but I think the visits are probably understated in my opinion. Steve: ⁓ yeah. Right. Right. Yeah. Right. Yeah, no other. And you know, so we when we when people visit, we go to the Wells. We we they get to they get to see the entire production process. If we're lucky, there'll be a tanker truck picking up oil. I do have people occasionally there when we're drilling. That's a lot more intense time. I've had people there when we're fracking, you know, and even if we're not in major operations when they're there. We can go to actual producing sites and see how the returns are being generated. And it even comes to them getting on the tank and we'll lift the hatch and listen to the flow into the tanks, you know? And we get kind of good at giving them a barrel a day estimate when we listen to it, you know? Yeah. And so, you know, it's really fun. And I've got, you know, a... Mark Workman: Yeah You're right, yeah. Steve: a road plan where people want to come show up at this spot and then we come get them. And yeah, so it's great. But, ⁓ you know, we're just excited about the returns we're seeing and, you know, the oil we're producing is top notch quality. The company Ergon that picks up the oil, they... They love, they call themselves Ergon Midstream, but they are not just a transporter. They use that oil for everything that oil is made of. Okay? And they want that oil. They come and show up and I mean, they've been fantastic to work with. you know, our oil is approaching 40 degree gravity oil, which makes it Mark Workman: ⁓ wow. Steve: thinner and produces fast, but it's not as light as the US Shell oil, so it's actually more preferred by US refiners. Mark Workman: Yep. Very nice. Gotcha. Hmm. That's interesting. so, ⁓ you know, ⁓ in terms of investors, you know, in terms of the types you want to attract, you know, ⁓ again, I'm just talking from my side of it. If, if someone can learn to be patient as you communicate these developments and stuff. You know, I'm sure you have an ideal investor, you know, somebody that's going to come along and you probably, you know, don't want to speak about the negatives necessarily say, but you know, what type of person isn't really ready to do the oil investing? Does that make sense? Like I've talked to some people that are very wealthy, told them about you and they, you know, just sit there hesitant across from me at a dinner and, and, ⁓ and I just don't even understand it when, know, they trust me. So Steve: Well, yeah... Mark Workman: why not trust what I'm telling them is this guy's a great guy, you know, that kind of thing. Steve: So one of the things I tell everybody, look, everybody invest in the stock market. Okay, we all do. However, ⁓ so many people try to use that as a template of due diligence and review on an oil and gas project. And it doesn't work because they are absolutely, you know, ⁓ my academia experience is the MBA, corporate finance. And let me tell you, okay, there is, those methods do not work. All right. Mark Workman: Yeah, right, right. Mm-hmm. Steve: In the oil and gas business, the objective is to utilize everything you can, the tax advantages, et cetera, to get you to production. Once you're to production, what a lot of investors look at is what's my monthly check, and that's all they look at. They don't think about the reserves in the ground, okay? And oil and gas is much unlike the stock market, because in the stock market, investors have immediate recognition. Okay, they buy a stock today, tomorrow it's doing this, the next day it's doing this, and well and gas investing is long term. Okay, now it can provide short term benefits like the tax benefit, like the fact that you may have noticed in my email the other day, I bet you your current monthly revenue from this well is beating everything in your stock market portfolio right now. Mark Workman: Yep. ⁓ there's no doubt. Steve: You know, and, and when you wrote a $200,000 check to the stock market, you didn't get to deduct a hundred percent of that check off of your taxes either. And I'm talking return on investment, excluding tax benefits. Okay. And so, you know, and then, you know, ultimately the dream Mark Workman: No. Right, right. Steve: And I try not to talk about it so much because it's seven years out at least, maybe five, but probably eight or nine to do an exit, you know? And so, you know, but that's a big picture. That's very important. And hey, after your well has declined down because they do decline out some after five years, I'd still like, we want to achieve decent volumes. Mark Workman: Right. Steve: that give the investor, you know, maybe a 18 to 25 % return every year for many years. And that can be dramatically move upward with oil prices, you know, going higher. And, you know, yes, oil prices are high right now because of the Iran ⁓ conflict. But the reality is since 2014, we have We have gone from 1800 active rigs in the United States to 500. And across the globe, we've gone from 3800 rigs to 1800. We're not drilling enough to offset the inevitable decline that is coming and already showing up right now. As a matter of fact, if you look at the IEA, and you're not going to hear this from government, Mark Workman: Right? Steve: or the news mainstream or Fox News or anywhere. According to everyone, we have tons of oil. We're just flowing in it. But the reality is we're producing more oil than ever. We've reached what we call peak oil. We're producing more oil than we ever have from more wells, more sources. Hello. We have not been drilling anywhere near what we need to be drilling to offset the decline, all wells decline, all of them decline. Now the majority of our world production are, is from wells that have already gone through their early decline. So they decline less, but they decline. And to give you a point on that, every time we have a Mideast conflict, oil prices skyrocket, at least temporarily, or a Ukraine, you know, we did it with Ukraine as well. ⁓ but Mark Workman: Right. Exactly. Yeah. Steve: But in when that happens, we normally get in the oil business, what we call a bump. And a bump means that during these hot oil prices, everybody's out acidizing their wells, reworking their wells, clearing their tanks, calling in shipments and doing everything they can to move oil off their leases as fast as they can, which is what we're doing right now and every other oil and gas operator in the United States. Okay. Mark Workman: Exactly. Steve: But when you look at the IEA supply reports over the last six weeks of this war, our actual production is actually going down. Our rig rate. Yeah. Mark Workman: Yeah, I was reading that this morning. I could actually pull it up if I needed to, but on oil price.com, there's a huge article about that this morning is that exactly what you're talking about. They're just saying supply is under threat. So anyway. Steve: Right. Right. So, know, the supply now we have a lot of oil. Yes. But we have to meet even if we have sluggish demand in the future, if the supply can't meet that demand, then you're looking at prices well above $70 a barrel. All right. And I believe that with the with the falling and record low rig count in the United States and across the world. All right. Combined with the fact that there's just not as many people developing prospects. There's less to drill, less wells drilling. And I do not see that changing too much because COVID wiped out 30 to 40 % of the US oil and gas workforce. You know? And now in the Permian Basin, where you're seeing the majority of new wells in production, Mark Workman: Ugh. It did. It just destroyed it. Yep. Steve: You're seeing less permits, less drilling rigs, less crews, and the production is declining there as well. Mark Workman: Exactly. Yeah. And so what you're saying is, is we're looking at a future of, as an investor of actually improving possibilities for returns just simply because supply and demand, all those factors, not enough rigs, we're running into a situation where as an investor, might be a good time to jump in. Steve: Exactly, because every time they drill a new well in the Permian, ⁓ that well, its ability is subpar to the well they drilled before. So they're going deeper and in the tighter rock to get the same amount of oil and it's costing more to get it out of the ground. The more it costs to get out of the ground, the less the ROI to the big oil companies, the less the ORI, the less they drill. Okay? So the only thing that can make up that gap is oil price. And, you know, people talk, there's a very dangerous word that I hear people say, break even. That's a very dangerous word. It's kind of like rhetoric in my opinion, in the sense that a break even is however you want to define a break even to suit your purpose. Mark Workman: Right. Yeah. Steve: But the reality is that US oil, US non-conventional horizontal drilling with fracking oil needs $80 a barrel for the big oil companies to fully provide the commitment they've made to shareholders. Now, it's $70 oil, $70 oil, they are profitable, but they're not as inclined to drill. Mark Workman: Right, right. Right. Steve: below 70, forget it. Whenever we're in a $60 oil situation or a $50 oil in the States and everybody's celebrating, it's killing your future production, which means you're gonna spike back up over 100. All right? And so everybody thinks $50 oil is great. Let me tell you what, $50 oil is bad for the US economy. And politicians don't wanna hear that. Mark Workman: Yep. Exactly. Steve: Um, people on Fox news don't want to hear that. Nobody wants to hear that because what I'm talking about is occurring outside of a political cycle. All right. And the reality is, is that I've told congressmen this, I've told people, I've said, look, the reality is develop an oil industry where $70 oil to $80 oil. Mark Workman: Right? Steve: is where it's at. If you do that, it'll stay there flatter longer. If you bring it down in the fifties, it's going to go back to a hundred. And when it goes back to a hundred, that volatility hurts worse than a nice flat $75 barrel day. All right. $75 per barrel. All right. It does. Okay. And you know, I hear people talking about, well, we just got a pump more. Well, I heard somebody, I'm not going to say anything because Mark Workman: Yep. Steve: They're at the very top of the administration. I love the Trump administration, despite their, their inability to understand the oil markets. Okay. They, they're lost. They're lost. And, um, but they always come out and they use certain words like rig and pump incorrectly when they state things. And it just shows they don't know anything what they're talking about. I have no clue. Okay. Mark Workman: Yeah, yeah. Steve: And like this guy was saying, it was the U S treasure. Well, the, the, uh, Mideastern countries have agreed to pump more oil. First of all, people don't understand that the U S oil industry competes with the Mideast, of course. All right. And the Mideastern countries were blessed by the Lord with the very best oil reservoirs on the planet. I'm sorry. There are none better. Okay. Mark Workman: Right. Right. Steve: And you can go on YouTube and they'll explain to you why because of oceans and organic material. It all makes sense. But the reality is their wells are awesome. Their reservoirs are awesome. It's not wells don't produce oil, reservoirs do. Okay. And they have the best reservoirs in the world over there and they flow. A lot of them might have pumping units on them, but the majority of the wells in the mid-east Mark Workman: Right. Steve: are flowing oil wells. And so they're not pumping, they're flowing. Okay. And yeah, which is amazing. Okay. So they're dollar in dollar out is better there than anywhere in the world. All right. And so, you know, the fact there is that when Mark Workman: Right, which is amazing. Steve: If we do enter this crisis where countries are having to shut their wells in because of the backlog of tankers coming out of the Strait of Hormuz, you're in a pretty serious situation there. They call it extraction. I call it production. All right? And you have to shut your wells in. And when you have flowing wells, that's a lot more problematic. than wells that are on artificial lift or pump. Okay? I mean, I don't like to shut off a well that's on pump, but if I have to, I have to. But if you have a flowing well and you have to shut that well in, it puts a dramatic change on the reservoir and you have to recreate that when you put that well back into production. Okay? Sometimes they don't. Mark Workman: Sure. ⁓ so you have to, your costs are, you start having costs you wouldn't have never had then. Steve: Well, it's not just the cost, it's the fact that the reservoir doesn't like the shock. Okay? When you go from when you shut a flowing well in, now when you put it back, it'll go right back to production. That's not good for the wells. And it takes time. And the best way to do it is to slowly let it come back up. So there's a, whereas pumping a well, you shut it down, you turn the pump back on. All right? Mark Workman: Okay. Steve: And so, you know, that's the real problem over there, combined with the fact that there is significant damage to oil infrastructure that's going to take years to repair. Okay. And at the same time, the world supply separate from the Middle East is still in a situation where we've not been drilling any wells. Okay. Mark Workman: Right. Steve: And we're starting to see US production for the first time since COVID going down. you know, US oil production in the Appalachian Basin is down. US oil production in the Permian Basin is starting to go down. US production everywhere else is down. And there are less rigs drilling, less people working, which means there are less people Mark Workman: Right. Steve: developing prospects to drill. There are less leases being acquired to drill and there are less rigs drilling. There are less frat companies. There are less well service companies and that's because there are the oil price of 50 to $60 that we saw. Okay. Mark Workman: Right. Steve: And so, you know, ultimately when the United States of America realizes that, you know, that the oil industry needs a, needs a certain price to provide security in the future for volumes necessary to maintain a doable price, whether that's 70, 80, 90, whatever it is. 90 is better than 150. Okay. 80 is better than 100. Okay. And look, just cause I'm in the oil industry doesn't mean I want it at $150 a barrel. I know that if it's at 80 or 90, it's in a very good place. If it's at 70, we can live with that. When it goes into 60 and 50, everything shuts down. Investment shuts down. And not really for a good reason, because every time it's at 60, Mark Workman: Yep. Steve: If an investor comes in, their price points for getting in are typically lower. By the time the well's in production, you're back up cycle. But nobody realizes that. All right. Mark Workman: Right. Right. So what are your thoughts on some of the news this week with, I know ⁓ UAE dropped out of OPEC, is that right? United Arab Emirates. So, and that was kind of a shock even to the pricing that day. kind of, again, almost daily it's changing, but again, they stopped being a member of that group and went on their own. Why would they have done that, I guess, because it seemed like they had Steve: Mm-hmm. Yep. Yep. Mm-hmm. Well, well, you know, they're a small country with a lot of oil, very civilized, very, you know, very good country. And they just don't want to put up with Iran, you know, and they, they have the right to do that. I felt like it was a good, a good move, you know, just like what president Trump is doing by bringing crude oil from the United States and increasing exports. think that's a great move too. Mark Workman: quite a powerful position within OPEC, you know? Right. Yeah. So is the ⁓ OPEC group of nations that have been really kind ⁓ of deciding the future of oil, I guess in some ways have a lot of influence, is it like ⁓ NATO where NATO seems to be being kind of dismantled? Is OPEC kind of going to go the same way or? Steve: You know? I don't think it will dismantle because there's too much, you you may see some members come out, but I don't really feel that way. know, ⁓ Saudi Arabia is, I call it Saudi OPEC because they make all the decisions. All right. And that's because what? Their reservoirs are better than everybody else's. Okay. It's that simple. All right. Mark Workman: Yeah. I'm sure that's true. Yeah. Sure. Steve: And they produce about nine to 10 million barrels a day. We produce about 13 million, but they produce theirs from a whole fewer wells, okay, that are absolute rockstar wells, all right? Because they got absolute beautiful reservoirs that I would love to see on a well log, but I probably never will. So, you know. Mark Workman: Right. Right. that's funny. So, where do you think we go from here? I guess, you know, is this, ⁓ this going to be the thing through the summer, you know? ⁓ and cause it was going to have to be some time, even if the conflict would end today, it seems to me that it was going to take some time to recover from, like you just said, some of the infrastructure, ⁓ logistics, you know, getting boats moving and all that. don't, and again, they're announcing some sort of. agreement today and again they've done that about 10 times so I don't know what the truth is but you know is this is this this kind of going to be the norm for the summer at the minimum? Steve: Well, what I really hope is that this price increase wakes up the United States of America, because everyone else in the world would do whatever we do. Okay. And start realizing the legitimacy, the importance, the size, the money, and the environmental conscience that the oil and gas industry in the United States has. We're cleaner than we've ever been. Okay. Mark Workman: Okay. Sure. Right. Steve: I don't want to compare us to other industries like agriculture or anything like that, but we are cleaner than we've ever been. And we produce more oil than we ever have with less environmental impact per barrel oil. And the biggest part of that is the same thing that saved this country that nobody talks about. Okay. Like I keep going back to 2014 and the heat. and the height of US shell horizontal drilling and multi-stage fracking, the shell revolution. That created about seven million, maybe as high as 10 million barrels of oil on a hundred million barrel market across the globe. It saved the world. People today can walk out in their yard, look at their three cars and their 3,000 square foot home, Mark Workman: Right. Sure. Steve: And no, they got one extra car and a 1000 extra square foot house they live in because oil prices have been so much lower since 2014, where if they would not have had this Shell revolution, they'd be at 100 the entire time. Because that seven million barrels changed the face of the oil price. So the very thing that the oil industry created killed itself. Mark Workman: Sure, exactly. Right. Interesting. Yeah. ⁓ I do. I totally see it. Steve: You see what saying? Much like farmers. Much like farmers that get out here and they get so, they get so efficient and productive that they make so many, so much yield that the prices go down. So what do they do? They make more, you know, and work on high volume, low, low, low margin. All right. And that's what the oil industry has done. Mark Workman: Yeah, well, there was, I understand farming a little bit because I have farmer family, but I've also been to a number of Wells Fargo energy ag related, you know, conferences and stuff to learn enough from these folks, these geniuses really. And there was a trend probably, oh, 10, 12 years ago to open up every possible acre to more corn, more of everything. And the guy who was like saying it's like building Steve: Right. Mark Workman: 10 Applebee's in the same town, you know, is what they ended up doing. And none of them can survive. They all go out of business. And these farmers were tearing down, you know, tree stands and old homes and putting those acres into production. And it was across the Midwest. There was just a huge production increase in just corn, you know, that kind of thing. And now corn is being sold below actual production costs. A farmer, you know, I actually don't know the prices in my head right this minute, but I would say it's five bucks. that it, you know, for four bucks for corn, there's the cost of $5 a minute, you know, plant it and produce it, you know, it's because they put every acre possible into production. And again, that came back to haunt them and they're in, you know, the farming communities, they combines are a million five tractors, you know, you you just start looking at the inputs. There's no young people coming in. Everybody's over 60 and they're going broke, you know, at least in our community out here in Montana. Steve: All right. Hello? Yeah, right. Mark Workman: You know, the farmers are now, you know, fertilizer, they're taking loans, extra loans to buy fertilizer. Cause the price is, you know, there's so many factors going on with oil and gas, you know, that we don't even, we don't even see the ripples in some ways, unless you really take on a hard look, you know? And, ⁓ you know, and anyway, it's, it's interesting to try to figure out the directions on some of these patterns and Steve: Mm-hmm. Right, right. Mark Workman: You know, the macro look at things, but I always tell you, and I tell you privately off the phone is that, you know, I was down at a conference recently in Vegas and, and I got talking with some people and I, I feel like I'm well read. probably read five, six hours a day. I don't know if you knew that about me, but I'm studying all this stuff all the time, you know, and I feel like I just love learning. I read books, I read articles. I I'm constantly reading about business stuff, chemicals. Steve: Right. Mark Workman: You know, I read chemistry books, believe it or not, like an idiot, you know, you know what I mean? So I'm trying to understand these things. So when I'm on a conversation, I can understand the language or what they're telling me, you know, I want to be aware, you know, and I came away from this conference. told my wife, said, you know what, I read more than anyone I know. I probably read a 50 to a hundred books a year and you know, that kind of thing. I'm always reading. And I walked away, felt those guys are so smart. You know, there's so many. Steve: Hahaha Right, right, right. Mark Workman: people that are just geniuses, you know, in my opinion. And you do what I mean? Like it's just, you can't understand everything. And I think you make your best attempts, right? But, but even then you're going to be fall short because there's somebody else that has an insight you don't truly understand just yet. You know, it, and oil oil gas is that way for me, be honest with you, you know, Steve: absolutely. Right. Right. Yeah. And one of the things that's gotta happen to, okay, they say we have a drill baby drill. Rig rates are lower than they've ever been. We've lost 30 to 40 % of our workforce in the oil and gas industry. Oil prices have been well below historical averages. Okay. Regulatory is stronger than it's ever been, especially in the states that are blue governor states, okay? And like Southern Illinois, ⁓ Pennsylvania, a lot of different places like that where, you know, and then we have this unnecessary green new deal hate against the oil industry. And all of that works to, you know, if you go to Texas A ⁓ right now, I don't have to go look. Mark Workman: Yeah. Steve: You know, I went to school there in graduate school. I guarantee you the enrollment is down unbelievably in petroleum engineering. Nobody's coming into this industry because they're being told it's a thing of the past. They're being told that, you know, yep. Mark Workman: Montana tech is the same way they produce petroleum engineers. Some of the best in the world come out of that school, believe it or not. they're just, it's no one is signing up for that, you know? Steve: Right, right. And it's all this, you know, every, the US especially has become entitled to petroleum. They don't look at it as a boy, it's a great commodity. They look at it as it's a fundamental right. Mark Workman: Amen. That's interesting perspective. Steve: And it's not, it's a commodity, okay? Just like when you go out to a restaurant, that's a commodity. Okay, if you wanna go eat sushi, you know it's gonna cost a little more, all right? But the reality is that we've gotten so intertwined with, we believe that we have the right to $60 oil, which relates to closer to $2 net or $2 gas. Mark Workman: Right? Right. Steve: But nobody ever looks at the fact who's got their little hand in that gas price. You got state government, federal government, okay? When oil comes out of the ground, who's got their little hand in it? State, okay, takes severance, huge severance amounts out of all the production made. They don't do anything. It's better than an overriding royalty, okay? And ⁓ you know, taxes on everything we do. Mark Workman: Right. Steve: ⁓ property taxes on oil and gas assets are double what real estate on the surface is. Okay. Because they project, yeah, they project your assets to be worth way more than they are. I wish they were worth that much. Okay. And you pay on that tax. I mean, there's nothing that government does that is in line with promoting Mark Workman: Wow, I didn't know that. Steve: a healthier growing oil and gas industry. Nothing. Everything that has been created has been created by the oil industry. And you know, I tell people, they say, you working at oil industry, boy, I bet that's, I'll be honest with you. There are more honest people and better deals and better handshakes and better trusting, more predictable pay in the oil business than any other industry. Nobody wants to hear that. Mark Workman: No. I a hundred percent agree. know, people will know and it's a flat out the truth. I can totally back that up. I have, you know, when I came into this industry in 2009 and really knew nothing, I just thought, Oh, it's going to be, you know, guys running around with Cadillacs with big horns on the front, smoking a cigar and you know, and you know, it's just going to be this big. Everybody's a genius. Everyone's an engineer. They're I mean, all, and you know what they do? All they wanted to do is help me. Steve: Nobody wants to hear that. Yeah. Right. Right. Mark Workman: I didn't have anyone kind of say, trying to take me down or make, you know, or whatever they did. They, tried to help me and, ⁓ and lot of it is handshake deals and it's, there's a lot of money changing hands and you're trusting someone's word, right? You know, and I, I have found nothing but good people for the most part. There's that one bad apple, but I'm telling you right now it's been excellent. Excellent. Steve: Right. Yeah. Right. Yeah! There are bad apples just like there is in every industry, all right? But the reality is oil and gas companies work together better than they used to. And I think that's a lot to do with horizontal drilling and fracking. We're more like farming for oil and natural gas. We're more like farmers next to each other. And we'll exchange confidential data. We'll exchange crews. Mark Workman: Yep. Yep. Yep. Steve: We'll do different things because at the end of day, your neighbor wants you to look good because his property has more value if your property has more value, you know? And so. Mark Workman: Right. You know, and one of, and what, one of the things I've seen in the industry too, and this is just my perspective and you can sure challenge it if you wish. But my thinking is, is people that are come in and down in Texas, they call them coyotes. You probably have heard that term. Yeah. The cut, ⁓ those are coyote in town, you know, and it's just basically the, a nefarious person pushing either, you know, they got all the, whatever they're pushing, it's not real, you know, Steve: ⁓ yeah, ⁓ yeah. Right. Mark Workman: And so they call them coyotes that are in, you know, Texas, but I would say the industry says, Hey, Mark, there's guys running around doing this. Be careful. You know, we actually try to protect ourselves, you know, and, and I feel like the industry is really strong at keeping integrity and good people, ⁓ involved in, in, what we're doing. I just feel strongly what you said. I like what you said, because it's the truth is that there's this impression overall. Steve: Right. Mark Workman: And really these people just care deeply about what they're doing, in my opinion. Steve: Yeah, and what most people don't understand is of all US oil production, big oil only owns 35 % of it. Yeah. And, but big oil almost overwhelmingly, I'm not going to say a hundred percent, but an overwhelming majority of midstream and downstream. Now, most people don't know what I just said. Upstream is oil and gas drilling and production. Mark Workman: It's not right. Yep. Steve: Okay. Once that tractor trailer leaves your tank facility or that gas goes out of the line, then it's into midstream where they transport, process, distribute, know, create new products. All of that is midstream. And then downstream, that's your gas stations. That's where you go get your propane field. That's where you go, you know, that's downstream. The majority of that is controlled almost 100 % by big oil. Mark Workman: production, right? Steve: All right. So, you know, what happens is when oil prices go down to 60, upstream operators really hurt, the 65 % really hurt. And then big oil controls all three phases, the midstream and the downstream. Okay. Which means they're buying the 65 % of the producers production. Mark Workman: Yep. Steve: So when oil production goes down or prices, does hurt big oil, but not to the same extent. Okay. Because they control the transportation processing and retail of it. Okay. So they had better profit margins built in. And that's why people come in and say, you know, gas is still high in oil. Well, there's a difference. those are different markets. Okay. Mark Workman: Right. Right, right. Steve: And by the way, we don't create that much emissions. That's created by automobiles. We don't make automobiles. Okay. No one ever, no one ever holds GM or somebody responsible for emissions. They blame it on the oil industry. Okay. And you know, so the horizontal drilling and fracking is probably one of the, if not the greatest invention and Mark Workman: Right. Sure. Steve: thing that has saved the United States of America. And it's cleaned up the industry because it creates so much natural gas as a byproduct of producing oil that we are now powering more electricity off natural gas than we ever have. And we need to do that more. Yep. Mark Workman: Well, you know, again, I'm, I'm doing some episodes coming up on, um, elect, uh, these new electronic, uh, electric, uh, cable lines that don't let leakage. They, they, you know, there's all kinds of ways to preserve electricity and that kind of thing. one of the big moves for these AI centers, like there's one being built in Utah that. And essentially it's going to use as much power as the entire state of Utah, like one, one facility. And yes, my son's involved with. Steve: Right. Right. Mark Workman: He's got, he's involved with the AI driven data centers. He's, he's a project manager on 13 of them across the country. He works for an engineering firm and that's his day. He's a lead project manager for these tells me quite a bit about them, you know, and how they're trying to do the energy. And, know, I just don't understand why it isn't full board. Maybe you're seeing it on our gas pipeline, the Peters branch line. Is there any talk in your area with the. greater use of natural gas from your area. But like he said, I said, they should be producing all their electricity from the, can, there's natural gas so plentiful. What's the problem here? You know, so. Steve: Yeah. Well, the thing about natural gas is yes, it's plentiful. Okay. And like I say, when you look at our natural gas that's being produced right now, it's a combination of little gas wells that were drilled 50, 60 years ago. Okay. That it produced for that. All right. But they don't produce a super high volume and the gas prices in previous year, prior years has not been good at all. So there's no real, They've been terrible. Yeah. So most of the gas drilling you see right now in the United States, which is very minimal, is only for the purposes of lease commitment drilling. They have to drill a well ⁓ to keep their lease active. Okay? That happens in both oil and gas. But most of the gas now is coming as a byproduct from Mark Workman: No, terrible. No, it's terrible. Yeah, yeah. Gotcha. Steve: horizontal oil wells, because all horizontal oil wells or most of them, 90%, produce gas. And so we've got large areas like Appalachia that have lots of gas. And ⁓ what would really be in areas like Appalachia, not only do you have a lower gas price, but Mark Workman: Right. Steve: when you're in rural America, you got to take that gas so many miles across wretched terrain to get to a gas quality pipeline that you're netted so many times that your net price might be 50 % of the actual market price. So if you got $3 gas, you're getting $1.50 net. Okay. Now, if AI was to come in and say, Hey, Mark Workman: Right. Steve: We want to take these gathering systems, combine them, bring us this much gas. We'll pay you a higher price, not this high, but this high, and we'll use it to power whatever, a data center, whatever. That's a great thing. And it's a great thing because that data center is going to be located, guess where, in the middle of nowhere. All right? Mark Workman: Then. Yeah, this one in Utah, I could look it up and confirm, but I'm pretty sure it's going to be powered by natural gas. They're going to develop their own generation there using natural gas in Utah. And that was the big thing about the article. So these companies like that, that Steve: Right. Mark Workman: have resources, seemingly endless resources are, you know, my son says they're even believe it or not, looking at micro nuclear and, you know, they're, you know, all these things that he has calls about, but it's pretty fascinating. The amount of energy we're going to need. And it just seems like it's going right over our head. Like we're not paying attention. I mean, across the board, oil, gas, electricity here in Montana, we have power lines that ⁓ main power lines to go to Seattle that we put under contract to Seattle. Well, about 10 years ago, they said, we only want clean energy, your green new scam. We only want wind and solar to come across those lines. No more dirty energy. Right. So we have these coal plants at coal strip, Northwestern energy doesn't know what to do with them. Seattle doesn't want to buy the energy. You know, there's all these weird things going on with energy, but I think it's going over our head. The demand for energy is going through the roof. Steve: Well, in my opinion, what the country needs to do is look at a energy mix over the next 10 years. All right. And that means taking, they tried to take solar and wind and make it a primary source. That was dumb. It was stupid. It made no economic sense because when you compare any average oil well in the United States or gas well, Mark Workman: 100%. Steve: or oil and gas well, and you compare it to a wind farm or a windmill, you have to put $3 in the ground on wind to get $1 to get the same of putting $1 into fossil fuels. That's the problem. Nobody wants to invest. Everyone that's touting the Green New Deal are not writing checks. Mark Workman: Crazy. No. Steve: No. And nobody else wants to write those checks either because you look at, think it was one of the majors, was either Chevron or somebody said, okay, we're going to go out, we're going to do some windmills in solar, but it has to meet our target objective of six to 8 % annual return. It didn't make it. And that's because when God made wind and he made sun, it just doesn't convert to energy because you don't burn it. Mark Workman: No. Steve: Okay, when you burn something like natural gas, gasoline, et cetera, you create combustion. Combustion creates acceleration of energy. You get more. Okay. Three times more. And so, you know, where we need to do is we need to look at where it is smart to put not green energy, alternative energy. That would be wind, solar, ⁓ everything else. Mark Workman: Right. Right. Steve: Okay. And I think that like when it comes to EVs, we need to quit saying, Hey, this is great for the environment because it's not. Okay. It really isn't, but it may be a little better than a fossil fuel car. But there's no, it's not. But what, what it does is the, lot of people like electric cars because they like electric cars. All right. Mark Workman: Yeah. Steve: I think you're kind of cool. Alright, I mean I like the test list. Mark Workman: Right. They're, they're technology marvels. They just, it's just, you don't know, you don't know what to do with the battery at the end of the day. There's, think there's a company in Nevada, Nevada trying to recycle all that or New Jersey maybe, but something like that. And it's, it's super, there's a big problem with the batteries from them cars. Yeah. Steve: Yeah. Right. Right. Right. Now here's the funny thing. Somebody rebuked me the other day when I said on this And they said, well, China is just moving along. And ⁓ they're moving along great on their ⁓ EV model over there. And I'm like, they have to, they don't have very much oil. And it's hard not to buy an EV when someone's pointing an AK-47 at you. ⁓ You know what I'm saying? Mark Workman: Yeah, well, I did an interview. Steve: That changes the consumer experience a little bit. All right? Mark Workman: I did an interview with a guy a few weeks back and he was telling me that he was recently in San Francisco, got in a car, no driver. And he said 40 % of the cars in San Francisco have no driver, you know? And so the world's changing and you again, you can fight it all you want. That's how I tell my wife. said, you know, I understand the data centers and AI and there's a lot of changes coming in a very short period of time, which is kind of the problem. Instead of having 40 years to change these changes, we're doing it in these brief, brief couple of, you know, short periods. So it causes a lot of volatility, but I hear people kind of complain so hard and I'm like, Hey, you're already using it. You know, you're already a part of it. You might want to limit that or do your best to be, if you don't want to be involved, but really. Well, ⁓ I, tell you what, as we, know, we've, we've had quite the discussion. just, again, I never get tired of this, ⁓ again, this will be on every platform you can think of. It goes out to like 32 places, Rumble, YouTube, Spotify, you know, and again, ⁓ you know, these have had your show, just so you know, has had some of the highest views. across all the platforms, ⁓ whether you know that or not. I had one buddy that called me and says, ⁓ that guy, I just love listening to you. So you've had a lot of good feedback and I probably haven't told you that enough, It's astounding. I can testify to it. It's just literally astounding the amount of information that I get. And I read every bit of it, whether you realize it or not. I do. I read every word and I think you're the best writer I ever heard. mean, in terms of technical writing and explaining what's going on, like, I just don't know how you do it. And it's probably because you've just done it so much, ⁓ repetitively. Yeah, I forward those emails to my wife at her email and she actually has asked me to stop sending them because it's just, but truthful though, I sent them to her just to encourage her because I think like I've learned in my business, like, know, and this is not to talk about myself in any way other than the truth of it is that like there's customers that I worked on for five to seven years called a Momlots Monthly. would even show up at their office when I go to Texas and five to seven years, took a long time to get a result, you know, and I've learned that it's just, you got to have the ability to wait, be patient, trust the people you're involved with, or you wouldn't have made the investment in the first place. Yep. Well, thanks so much for coming today. I love having you as a guest. Again, I think over time, as we just keep teaching and keep teaching, it's going to only help. And again, the more exposure to your program and what you're doing is the best. So that's really my goal for you. And again, I'm so glad you come on here and take your time. And I know you're busier, and heck, I know you are. ⁓ But I'm really grateful for it.