Latest / Pioneer Mind Podcast / Oil Prices - Iran War and Politics
Transcript
- Mark Workman: Welcome back to another episode of the pioneer mind podcast. ⁓ we have a returning guest today, Steve Stengel from encore energy. And, last time we got together, we were talking off camera that we would get together and talk about prices and where things are going to go with these upcoming, ⁓ catalysts or conflicts. And, know, as many of you are aware, there's a war going on in Iran and it's disrupting, ⁓ the straighter straights of her news. Steve: In Venezuela, they have a lot of oil. And yes, they probably do have 303 billion barrels of oil in the rock. But the chances of that oil ever coming out of the ground, that would only come to fruition if oil prices were dramatically higher, maybe as high as $130 a barrel or even higher. Mark Workman: Right. Steve: You know, what you and I were talking about the other day is it's not that the world is running out of oil, but the world is running out of cheap oil. At some point in time, the slowdown in drilling in the United States and globally are gonna catch up. And I know for a fact that the wells that are pumping out, if you were to look at the reservoir characteristics and the actual Mark Workman: ⁓ supplies to China, Russia, through Venezuela, Iran, all kinds of disruptions going on in this industry. And we thought we'd come back and talk more about that. You know, I'm sharing from my point of perspective is a lot of times, even in the news today, I've heard people talking about this is an overreaction on the oil prices that somehow the industry is taking advantage of things. And Steve might disagree with that. ⁓ Right. Steve: Let's say the health report on our reservoirs across the world, they're pushing hard. They're making a lot of oil, their pressures are getting lower and lower in their reservoirs and they're depleting. And that is just a matter of time and not a very long time before we see major decreases in global and US production. It's that simple. Mark Workman: really kind of give his point of view too, but mine is that the industry is very sensitive to things. It's very smart. It knows what it's doing. And I believe that it's more fragile than we think in terms of supply and demand and movement, logistics, all these things are, there's a million variables going on to get this oil and gas into the market for consumers to use. And I think the market's very, very smart. So when you see this reaction, they're not just trying to take advantage. They stuff that like I'll never know. And Steve probably maybe completely understand it in some ways, but in my view, these are justified and ⁓ probably a smart move by the industry. Steve, you and I were talking just a few minutes ago, but like when the news says, talks about pricing. Steve: Okay. Mark Workman: Is it the lack of investors that want to, as the oil gets more costly to produce, obviously, if it goes from $40 to $60 a barrel to produce a barrel of oil at a specific well to get it to market, it's obviously less attractive. it that I know within my industry, the fluids companies and the mergers that are occurring, there's just not enough money a lot of times to justify having and has these perspectives on where price is going to go and that it's going to come back down. It's going to react. This is just a four day war. We'll be done. You know, all the stuff you're hearing about how fast this is going to go. I don't tend to believe that. I believe any disruption in the market, say you even disrupted things for just a few weeks, it would take months to recover, I think. You know, it's not going to happen overnight, these recoveries that they want. So when you hear in the news that prices are all these service companies and mud companies sitting around. there's just, obviously like you said earlier, there's just not as many rigs, but there's just not as much investment either. The money's really drying up. Steve: Yeah, it really is in the near term and short term. It is what you just said, you know, a slowdown and there are not as many service companies. There are less people working in the oil industry. There are probably 40 % less since COVID. COVID really hurt the oil industry and a lot of people, especially younger people left the oil industry. Thank Mark Workman: 100%. This is just transitory. Remember inflation was transitory? You know, you remember that? You know, and ⁓ we all remember that line. That'll go down in history. So when you hear that in the news, what's your response? Steve: Right. ⁓ yeah. because of all the hate and the Green New Deal and, you know, lack of support for our industry. And that's not just Democrats, that's Republicans as well. ⁓ People are not coming to the industry. you know, we need young people to come into our industry. Not only is our industry aging, but the people in our industry are aging. We talked about that some. Well, you know, I first want to say that I fully support President Trump and what he's doing in Iran. it is a window of opportunity that will not present itself again. And do believe that we will be successful and I there will be brighter days for the Iranian people. I also believe that what he's doing now, we're seeing this spike. Mark Workman: 100%. Yep. Steve: in oil prices, but I believe that it'll further stabilize the region for years to come and mitigate a lot of the risk we have right now as it relates to geopolitical risk coming out of the Middle East. So with that being said, ⁓ know, a of people, a lot of investors and even traders are saying, you know, this is a spike. But more so in the near term and the short term, you're looking ⁓ the all of these challenges. But in the long term, you got to remember, we've been drilling on this earth for ⁓ over hundred years. We've drilled everywhere. ⁓ Okay. let's just take the United States as an example. You know, one of the reasons that you don't have Mark Workman: Right? Steve: and it'll come down and it'll go back to the levels that, you know, the previous levels of 55 to $60 a barrel. And I don't believe that. I believe that we will see a spike, we will see it come down and I believe that it will stay at a higher level because of factors well beyond what's going on in the Middle East. Yes, and it is the price of oil. Big oil, big companies are not drilling as much because it's costing so much to drill. They don't want to outlay the cash to drill at that price level. Okay. They don't want to do it. They also are, you know, challenged with the lack of labor, the lack of services and a lot of other things that affect them and their daily operations. Mark Workman: Right. Steve: or in Venezuela or any other geopolitical risk. I believe that what the majority of people that are not actually in the oil and gas industry believe is we have an ⁓ oversupply crude oil. ⁓ And, know, 30 minutes ago I was watching Larry Kudlow on Fox News and he just said it over and over again, you know. In reality, we've drilled up the low-hanging fruit across the globe. And, you know, ultimately every well that everyone drills across the globe is deeper into new zones that cost more money, that involve more exploration, that is not going to get any better because it's just what it is. Okay. ⁓ Mark Workman: Yeah. Yeah. Steve: We've got this overflow, we've got this what people call glut. I don't know where that came from or what it really means, but the reality is that we are producing 106 million barrels of oil per day across the globe, and we are using 105 million barrels of oil across the globe. Okay. Mark Workman: Yeah. And again, that's going to reflect in the price. you know, they, like I was telling you earlier about the news today was like, ⁓ Trump's going to do this, that and the other and drive it right back down to 40 or 50 bucks and it'll be affordable again really quickly. And I just don't, I think there's so many market factors involved. You know, that's Hopium on steroids, in my opinion. I just think the, you know, like, you know, I I'm 60 and I'm probably a young guy in our industry. You're, you're behind me a little bit, but Yeah. Steve: And yes, that creates maybe temporary storage problems at the surface, which makes us feel like, we've got all these oil inventories ⁓ brings, you know, the price down. But the reality is oil is not sitting around in tanks waiting to be sold. It directly from the market, from the wellhead, ⁓ OK, the tanks, to the truck. Mark Workman: Like a lot of the guys had been here forever. When I first started, was probably just terms of mud companies ⁓ and in the Permian and in Texas, I bet 15, like generational companies shut their doors. Midwestern, I can ⁓ start naming them, I don't want to do that. just, ⁓ you know, these were that were buying from me and now there's just a handful of people. Steve: Right, right. or pipeline and to the market immediately. so our actual production from all of our wells across the world is what we're seeing every day at 106 million barrels of oil per day. Mark Workman: you know, buying, you know, in terms of, and I've got a good set of market shares simply because of attrition. I always believe not quitting is winning because everybody quits, but the industry has been under attack since probably 2015 in my opinion, you know, and, and, and you can just see the end results of that. But at the end of the day, price, we're talking about price. saw something earlier this morning. One of the analysts was predicting 100, you mentioned 130. I don't know if you saw that today too, but that's the number he put out this morning. You know, So if I ran, they're not shipping. They can't be shipping, can they? Steve: Right. mean, ⁓ could be, okay? ⁓ represent about one and a half to two million barrels of oil per day. I would assume right now that has slowed down a lot, if not completely, okay? But that in itself would not cause ⁓ spike that we're seeing. What's the spike that we're seeing is the that the straight of Hormuz Right. Mark Workman: You know, and again, that seems crazy, but, uh, you know, gold went to 5,000 too, you know, so it's hard to know, you know, exactly where things are going. So, go ahead. Steve: Right. And you know, put yourself in the shoes, I think they call it ethnocentrism, all right? Put yourself in the shoes of OPEC members, okay? All of a sudden you're getting $100 a barrel or just say $91 a barrel, $95, whatever it is, you're feeling good. Are you really wanting to give up that feeling? Are you really gonna wanna participate in bringing those prices back down to $55 a Mark Workman: Yeah. Steve: is 20 miles wide ⁓ barrels of oil via tankers, cargo ships go through that channel ⁓ every day. nearly 20 % of the world's oil supply. That's the risk factor. And like I I believe the risk there becomes less in future years. Mark Workman: Nope. Steve: Because at $55 a barrel, the world oil and gas business does not make any money. And in the United States, the shale business, just like Mr. Ham said, a legend in the oil and gas industry here in the United States, they need $80 oil, or they at least want $80 oil to meet and to satisfy and to deliver Mark Workman: Right. Steve: because of what Trump is doing right now. All right. With that being said, prior to COVID, there were 153 rigs operating ⁓ Iran, and these are big rigs drilling for bigger reserves ⁓ and production. And 15 those rigs are active right now offshore. Now again, to their shareholders what they projected, what they targeted, what they want to achieve. Now, they need that flat $80, not 80 today and 60 next week. And that's what hurts our economy. I'll just be flat honest with you, it's politics. It really is. And this division that we have in the United States is a primary factor I don't know what they're doing today because of the current state of war that the country is in, but prior to the war, there were 15 rigs operating in offshore waters on Iran, for Iran. Okay. If you recall in our last podcast, I'd mentioned that in 2014, there were 3,800 rigs Mark Workman: Right. It is. Steve: in hurting our energy policy. And what I mean by that is you have 50 % of Americans that drive SUVs, fly on airplanes, ride on motorcycles, mow their yard, hog the back five acres, all They're wearing clothes or driving cars made out of. operating across the globe. And today there are approximately 1500. Okay. Maybe closer to 1800, but somewhere in that range. And in 2014, there were 1800 rigs operating right here in the United States. All right. Now lot of those were vertical wells. petroleum, they're even driving electric cars that are made out of petroleum, but those are not really electric cars. The electricity that goes into those cars, 66 % of that was created by natural gas. So there's 66 % natural gas and there are 34 % electric. And so, you know, we've got to get out of this divisive state and we've got Mark Workman: Exactly. Steve: and a good portion of those were horizontal wells. there are around 500, and ⁓ primarily in the Permian Basin, and Permian Basin has become 50 % of the U.S. oil production, all right? Now, across the world, we've seen ⁓ major in drilling. Mark Workman: Right. Wow. Steve: embrace our oil and gas industry, understand its importance. And ⁓ side the Green New Deal, ⁓ one wants oil and coal. But really, in my opinion, the real progress be made when everyone sits down and we look at the reality. We've seen major declines in drilling over the last 10 to 12 years in the United States. And at the same time, we have seen wells going into production that were deeper with more reserves than your typical well. But those wells are fracked wells. They are Permian basin wells. They are deep horizontals that produce a lot of oil, but they make a huge of the supply of energies we have, which is number one, natural gas. Okay. We have lots of natural gas as far as how much you got to pay for some energy, it's the best commodity we have. Okay. flush production in the first year and they start to tell off in the second and third years, pretty significantly. So the EIA has already reported that since COVID in 2026, we're going to see our first decline in US oil production. And that's because, what's that? Yeah. And yeah. And the reason is because again, Mark Workman: Just to comment on that, like here in Montana, you could probably throw a shovel up into the air and it'd land and poke and gas would come out. We're floating on it. Like if you look at a map of wells drilled and natural gas availability, Alberta is completely red with dots with the ability for gas. And Wyoming's the same way. We're just floating on gas. And Montana has a perspective of, they haven't approved a mine since 1972. We're the treasurer state. I've mentioned that to you before. Gotcha. Right. Okay. ⁓ wow. I said ⁓ wow. didn't know. Steve: We are losing the flush producers that provide that big replacement of reserves that we consume every day. so to give you a few numbers here, I'm going to go back to ⁓ other that are being said on the news and I'm going to pivot for just a moment to Venezuela. Okay. Venezuela has around 1 million barrels of oil. Mark Workman: But like here, we don't have anything happening. We're floating on gas. We had tried to get a permit for a natural gas electric generation here in Great Falls 15, 20 years ago. They never approved it, never got it done on and on and on it goes. And again, our rates are going through the roof. Montana wants to protect it so much. I used to go to meetings with government officials and I used to always use the phrase, you're loving it so much, you're killing it. Steve: Okay. Okay. Mark Workman: And I, I, that's the way I see the state is we love our state. We love its beauty. We love all these things. And you've even mentioned the footprint on this stuff at the end of the day is like so minimal. It's not even funny, you know? And so, and the truth of it is, is where there's got two ideological philosophies. I I've had a friend that used to tell me, well, Mark, you just need to teach them and talking about the other side. You just need to teach them. And I said, have you ever talked to the one of them? You know what I mean? Steve: per day production. Trump's policies have now converted that flow of oil to the United States, where we are going to be able to process their heavy oil at various refineries for that oil in Texas. All right. And that's news. The other good news is that Right. Right. Mark Workman: And the truth of it is they are virulent. I've been in meetings with, was me and three other industry partners. And then they had 26 Sierra Nevada ponytail attorneys at same round table meeting. And they pounded the snot out of me and ⁓ the two guys for hours, you know, about everything we were being asked to do by the government in terms of this project in Alaska. And my point is, is. Steve: You know, you're basically taking 400,000 barrels away from China. Okay. with that, and you know, just like with Iran, there's a large portion of that one and a half to 2 million barrels of oil per day that goes to China. So that'll come off the market for China as well. And you know, Trump's foreign policies have continued to make Mark Workman: Right? Steve: . progress in areas that I don't think lot people think about. But in it ranks higher Saudi Arabia, higher than Iran, higher than the United States. As a matter of fact, it ranks higher than any other country in the world for proven reserves, 303 billion. Mark Workman: Have you ever talked to one? It's very hard to have it go back to a, someone like Biden who wants the green new deal AOC and talk to them and say, Hey, well, we need to have a balanced approach with this, you know, all use wise use, whatever, however you want to try to approach the sales technique. It's very difficult. that division and lack of unity on just this subject alone, just energy is absolutely driving the volatility. You know, Steve: When you met with those long-haired attorneys, Okay. Now you have to ask the question, why does a country that has 303 billion barrels of oil reserve only make a million barrels a day? Okay. And most people are going to say because of conflict, danger and political instability. Yes, all of those things play a role, but at the end of the day, the oil Did you go out in the parking lot and see what they were driving and what the cubic inch displacement and their combustion engines were so you could get some idea of to the gas mileage and the consumption? Mark Workman: You To be honest with you, they all flew in on private jets, every one of them from San Francisco. again, that's burned in my brain, those meetings. And learned a lot from those meetings realizing, and again, I kind of mocked my friend for telling me you just got to teach them. I'm like, no, ⁓ they're just 100 % opposed to anything. Steve: Well, there you go. Mark Workman: Right. Politics, Maduro. Steve: in Venezuela is two classifications, heavy and extra heavy. Okay. And the majority of that 303 billion barrels of oil is comes from what's called the Orenco belt region of Venezuela. And the Orenco belt region is classified as extra heavy oil. So even lower 28 degree gravity Mark Workman: The the earth can provide us as a resource should be touched. This is not it We don't we actually don't we're actually the problem and should be eliminated, you know, I mean it's Steve: Right. And you know, it's, hate to say it, but there's so much propaganda. Okay. And it's not just side of political, you know, it's both sides. Okay. And, ⁓ and listen, you know, I'm a Republican, but I'm going to just tell you, you know, the Republicans are, ⁓ know, lackadaisical at best at understanding the oil and gas industry. Mark Workman: Yes. No, 100%. I tell my wife that all the time. said, go ahead. Steve: is heavy oil, right? Very heavy oil. And that's the average gravity for oil in Venezuela. In the United States, oil, conventional good old US crude oil typically ranges around 35 to 40 degrees, which, which is a thinness or thickness that is preferable for US refineries that make diesel and really working across the aisle to come to a solution to our energy problems, which in my opinion, the way to make progress is to utilize what we have. ⁓ oftentimes we can utilize the energy sources we have that provide less environmental impact by utilizing them a certain way. Now, what I mean by that is, and gasoline. right. And the Shell boom brought about major increases in oil production in the United States. And all of that oil is light oil. It's closer to 50 degree gravity. so basically those wells produce very well in the first year because they're ⁓ How do we make renewables profitable? Well, right now they're trying to jam them down our throat and make them a primary source of energy. I'm sorry. Like we talked about in the last podcast, you got to spend $3 to get the same amount of energy from a windmill or a solar farm that you get for a dollar in fossil fuels. That is never going to change, ever. Okay, now. majorly, they're multi-stage fracking for miles underground. Okay? And they respond back very quickly because they are fracked and they are a light oil. So you get a real big flush out of those wells. All right? And again, the flush is going down and it's going down because oil and gas companies, regardless of what anybody tells you, There are places for solar and wind and other renewables, but it's not as a primary source of energy. They've not even established themselves as a supplemental source of energy and they're trying to push them into a primary source. Does that make sense? Mark Workman: Right. Steve: we drill our best prospect first. We drill our second best prospect second, and we drill our third best. We never put things over here for a rainy day, okay? It's not how it works. And that's the same across the world oil and gas industry. And so in the Permian Basin, they're drilling deeper deeper with longer laterals. Mark Workman: Well, Montana, Montana has some of the best coal and the most efficient coal and the greatest quantities in the entire nation. Okay. Again, we're the treasure state that doesn't look for treasure. I make fun of it all the time. I'm having some politicians on here pretty quick to just talk about energy policy and stuff. They're running for office. So obviously I'm getting geared up to talk to those guys, but you know, we have a situation here. We have a place called coal strip where we have a coal generation. Right. Steve: Yes. bigger multi-stage fracks and a whole lot more money is spent in deeper and tighter, and now that's the key word, tighter rock. Rock that's not as preferable as the rock they drilled last year. They're going deeper now into secondary layers. You could call them, instead of tier one prospects, you could call them tier two. There's a lot of oil there. Mark Workman: And we, we wrote a contract with the transmission lines going to Seattle that the, the, energy on those transmission lines would come from renewables only. So we sat down our coal plants ⁓ Montana, and we sell all our energy to Seattle. When we have a brownout or a really cold spell, or it's a hundred degrees, believe it or not, we run in our air conditioning in the summer. We got to go on the open grid and buy it at $900 a kilowatt compared to 50, if we can generate it. So. Right. Steve: but it's in tighter rock, which means you're not gonna get as much out of the ground per linear foot of drainage in a horizontal well bore lateral. Okay? It's just not gonna happen. So it's costing US companies and companies across the world to drill deeper and tighter rock. And for example, in the Mideast, Right. Right. Mark Workman: The whole system is beyond a mess in terms of politically that someone would sign a contract with the city of Seattle that we're only going to do renewable energy going out there we're going to shut down our coal generation. It's ridiculous. So, so I think we're devoid of leadership, but I know I'm talking a lot and I apologize as a podcaster, but I know I'm to listen, but the truth of it is kind of a hot topic for me in the sense of that we're almost devoid of leadership at every, every turn. Right. Steve: Right, right. They have beautiful reservoirs over there. You've heard me say that before, but they themselves are having to drill deeper into less favorable rock that they were drilling two years ago, five years ago, 10 years ago, 20 years ago, because they drill their best prospects first and their worst prospects later. And so going back to this glut or this Mark Workman: Yeah. And like, you you said Republicans, it's the same thing I say to my wife. said, we're there. Our side does the hyperbolic statements as well that aren't generating any thing towards a resolution or a solution. You know, we kind of do that similar type of hyperbolic talk, you know, but energy is a ping pong ball. And it's almost like every time administration changes, we're having to navigate and readjust to that next ⁓ of leadership. first. Yep. Steve: overflow of oil that we're swimming in, okay, have to remember that oil ⁓ only on at surface. You don't hear a lot about what's going on in the reservoir. ⁓ Oil produced in solid rock, and some rock is more permeable and has more porosity and more oil saturation and better pressure than other rock. And some rock Mark Workman: and it gets very challenging. Steve: Right. Yeah. And you know, the thing about it is I tell people, you know, and look, again, President Trump, I understand what he's doing with oil prices. He wants oil prices lower so that we can start booming this economy. And I believe that's going to happen. And when that happens, oil demand is going to go up and prices are going to come up. All right. But what politicians don't understand is when they come in office, Mark Workman: Right. Steve: moves oil fast and some rock moves oil slow. In Venezuela you've got 28 degree gravity oil or less and it just doesn't want to go ahead Mark Workman: Right. Steve: They typically want to get oil prices low. All right. And when you stand on oil prices and you bring them down, they act like on the news that $55 oil is good for the United States. It is not good for the United States. Let me say that again, Kudlow. $55 oil is not good for the United States of America. And the reason it's not is you're living in a false economy. Mark Workman: Yeah, if someone saw a video of that material, of that oil, they wouldn't believe it. Am I right? Steve: Right, it's like tar, okay? Mark Workman: It's, it's just doesn't even look like that's oil. They would just, they would make fun of you. Steve: Yeah, and when I start talking about this subject with people, most of the time they say, well, hey, you can use that thick oil just like you can thin oil. And they are right. It's harder to transport. It's a little harder to process, but you can still use it. That's not the problem. The problem is it doesn't want to move through the rock to the well bore very quickly. Then when it gets in the well bore, it has increased It does not match up with the real market value across the globe for crude oil based on the money that has to go in the ground today to replace the reserves were burning up now and in the previous 20 years, which is a typical well life average. Nobody thinks about that. They don't care. Well, you need to care because that's where the oil comes from. It comes from underground. It doesn't just Mark Workman: It's not... Yep. Steve: by what we call hydrostatic pressure. You've got the formation pressure and the reservoir pressure trying to push hydrocarbons from deep underground to the surface. When you add heavy oil to that mixture that already moves slowly through the rock, when it gets into the it creates another bottleneck. It's heavy. It doesn't want to, you know, there's a thing called gravity ⁓ it does not want to go up. birth itself out of a tank and go into a trailer truck and go to the refinery. ⁓ so, you know, the fact is that there is no ⁓ glut. There is no overflow of oil. There's just a lot of food in the refrigerator right now, but there's a lot of people eating from that refrigerator. ⁓ And know, the fact is that ⁓ Mark Workman: Right, right. Right. Steve: is easy. So if you ever look at an oil field that's currently being drilled Venezuela from years ago, because they haven't drilled in years because nobody wants to drill, because there's no economic benefit to drilling. All right? Mark Workman: Yeah. Steve: You can see the desperation in our news broadcast have analysts how they're supporting the lower oil prices and let's get them low. Oil prices do correlate with inflation, but it's not the only thing. Government the legal community and the cost of legal expenses and the threats of liability. Mark Workman: No. Yeah. And as a note, like when Trump did the Maduro Venezuela thing, and, and again, he's probably seized the big historical global map with Greenland and all the things he's doing. We're not necessarily privy to for what he's trying to protect in our hemisphere and all the things that are going on. But I'm assuming Venezuela is part of that. But my thing is, is that when he put it out there for the, you know, Chevrons or the Exxon's or whoever he was trying to get them to get interested in going down there. Steve: and the need for tort reform and all the problems we have with small businesses. These are the real factors that are causing prices to go higher combined with failed monetary policy from the previous administration. Right. started by COVID and bad reaction to COVID by our predecessor. All right. Mark Workman: They all hesitated like, they did that just what I just did right there. They just kind of him ⁓ they really haven't committed. don't think. 100%, yep. Steve: Now, Venezuela is like one big, what we call in the oil industry, stripper production field. Stripper meaning that these wells are not doing a lot. They are a lot of work. There is a lot of cost to move that oil not a lot of smiles on everybody's faces. All right? Mark Workman: Hahaha! Steve: And now we've got this inflation and as we all know, it doesn't go away for a while. Okay. It's like a disease. And, and, you know, and I think Trump is doing everything he can to change that. And I do think he's making progress and I do think he will be successful, but I do not think either administration or any politician has ever looked at the fact that oil prices need to be at a certain level. Mark Workman: You're right. No, it's not transitory. No, nope. Yep. I don't Steve: And in the Permian Basin, you have a well flowing a thousand barrels a day and everybody's in a good mood. mean, and so, you know, Venezuela, nobody's And if you look at the old photos where they've got the rigs drilling, they're so close together because when a well has heavier oil in its reservoir, it not only moves slower, Mark Workman: Exactly. Steve: to ensure future drilling and future reserves and future, because, you know, right now, no companies want to drill at $60 oil. They don't want to drill. And $70 oil, if they can maintain 70 average, they will drill. Okay? But that's not what our government wants. Our government wants 55. Hey, if you can get it in the 40s, that's even better. but it will drain a much smaller area, which means less reserves per drill and slower production rates, which both kill the economic ROI that is a, what I call a cashflow ROI. You put money in, how long to pay back? How long till you reach a certain rate of return? How much do you produce over time? How quickly? And that is not good for the U S economy because when you look at a, when you look at the oil industry, have three basic, well, before I go there, let's just let everybody know what oil is. All right. People get so confused. I am. like, you know, people are like oil and gas. Are you in the oil and gasoline business? No, I'm in the oil and natural gas business. Oh, so you drove for natural gas or you drove for oil. Mark Workman: No! Steve: And those wells do not do that. mean, they may produce for a very long time, but they're not going to provide the cash flow to make someone from Chevron say, hey, let's drill in Venezuela. Okay. Now with that being said, anything you, yes, the Venezuela oil field is probably in a mess and it probably could be reworked and brought to maybe 1.5 million barrels a day. Mark Workman: We're getting a little fired up today, aren't we? Exactly. Yep. Steve: they come out of the same hole, all right? And for everybody out there, natural gas, again, I'll say it's probably the premium product because it's cleaner burning, there's tons of it, okay? And it's cheap, which is a reason we're not drilling for natural gas. But the reason we have so much natural gas is it's a major byproduct of every horizontal oil well Mark Workman: Yes, exactly. Steve: But at that rate, you're never gonna come close to getting any of the reserves that they say are in the ground. And those reserves are in the ground. What I disagree with is that for a oil reservoir to be considered proven pursuant to the SEC and the guidelines set forth by every publicly traded oil and gas company in this country, and fracked well in this country. So it's just like, know, in our operations, we have to manage gas. And that means send it down a pipeline so that we can optimize our oil production from each well. ⁓ else does that. So every other oil operator is putting their gas into that line. And that's where our natural gas is coming from today. Hey, if natural gas Mark Workman: Yep. Steve: went to $10 in MCF and it was used the way we should use it across this country. We can use it in automobiles, we can use it in vehicles, we can use it in everything. We just don't do it because of politics, because of politics, all right? And we don't use it. there is, know, people don't understand that. You drill a natural gas well and you make a great well. Well, good luck, because you have to get that gas to the market. Mark Workman: Right. Yep. Yep. Steve: That's harder than drilling and finding the gas. All right? Mark Workman: Exactly. And hence the Encore energy pipeline. Steve: Exactly. know, and so, if we were to, if really want to do things for the oil and gas industry, we need assistance in clearing right-of-ways on private land for gathering systems, which are not quote unquote considered pipelines. They're gathering systems that bring the gas from all the wells to the pipeline. Now back to what I was saying earlier, wells produce crude oil, wells produce natural gas liquids, and wells produce natural gas. All right. And in recent months, I've seen the news report, you know, ⁓ we've got so much oil production and it's even more because we have all this natural gas liquid production. All right. Mark Workman: Right, yeah. Steve: Well, I'm sorry to say this, but a very, very small amount of natural gas liquid production goes into producing fuels. ⁓ of the fuel, gasoline, diesel, whatever we use for transportation comes from good old crude oil. So the liquids, it's used for propane, pentane, butane, and everything else that you can go buy for a campfire. You can cook on your stove. Mark Workman: Mm-hmm. Exit. Steve: You can grill outside. You can even heat a house on propane. You can do a lot of things with those natural gas liquids. But the majority are not being used of that are being used for transportation because we're stupid and we're stuck in a political mud hole. All right. Why we don't use it because we're dumb. All right. It's that simple. And because somebody on this side. Mark Workman: Ha Yeah. Steve: says no we're not going to do it and somebody and we're stuck in the middle there is no reason we don't have propane cars natural gas cars and all these different types of cars including diesel and gasoline competing over one another only way to success is to increase the diversification of our energy mix and that means renewables only apply to certain areas where it is profitable for the people investing in renewables. And natural gas, we use more and more of it, okay? And as we use more and more natural gas, our oil might still be at $90 a barrel, but the overall energy consumed, dollar, by each individual across the United States goes down because our energy mix has become more efficient. Okay? No one wants to do that, so I don't know why I'm talking about it, but that would be a start. Does that make sense? mean... Mark Workman: Yeah. Yeah. I don't know if you have as big a imprint or of the windmill in your area, like the West does. The West is overwhelmed. you drove from my place to yours in Kentucky, I would probably pass maybe a million windmills. I mean, maybe hundreds of thousands. I don't know what it ends up being, but we deal with it here in Great Falls because they're heading north on 15. going up into Alberta. So they shut down our highways and we got these stinking things going up there four times a day. You would not believe how many of them are, you the governments have really made a choice. See, I'm not for, I'm a, you know, everyone says they're a conservative until I ask about five questions, you know, and I can get, I can find out pretty quick if they're conservative, but you know, in my sense is that, that this energy is. Steve: Right. Mark Workman: got to be subsidized. And I don't like the fact that the government picks winners and losers. That's what we're talking about here a little bit. They, they decide that we're going to be a loser for a period of time or a generation until they really need us, you know, and they're going to subsidize this other direction just to have a, some votes or satisfy the gen Z's generation or because they're so conscious about, you know, the, the environment or whatever. A lot of those are political choices based on voting and Steve: Right. Mark Workman: power and control and all those things that we will never understand in our little brain. Right. And the truth of it is, is there's other people picking winners and losers when in a true capitalist system, which I totally believe in, there are going to be winners and losers, but in communism, everybody loses, you know, ⁓ and, and in this idea, capital capital is going to flow to those things that create the most bottom line margin profit that it most makes the most sense. Steve: Okay. Mark Workman: It makes great decisions every time, but what we have is a system where they're picking the winners and losers. And that's a really hard thing to overcome. You know, I've seen it and everything I've ever done is I've had everyone say, what's your biggest challenge? You know, insurance or logistics. and I said, no, the government and bureaucracy and everything I've ever had to do has always showed up with a judge in Missoula who signs off on a letter because a bear can't sleep at night. And I have to shut down my entire program. because a bear can't sleep at night. I got to somehow do noise mitigation because a judge ordered it from a guy down in the bitter root who wrote a letter to him saying, I heard the bears aren't sleeping well. You know, it sounds crazy, but those are real stories. You know what I mean? Steve: Right. And know, so it's amazing that, and part it, ⁓ I guess, like with the Green New Deal, okay? ⁓ I mean, doesn't even exist. You show me all the windmills, you show me all the solar farms, ⁓ none of make money. They get a bunch of money from the government to go build a lot of them and they never sustain themselves, okay? Mark Workman: Yeah. Steve: They just don't they won't because like I said, God made all these energy sources and wind and cannot generate energy at the same price that we can with fossil fuels. right? And it's it's now with that being said, you know, I think that EVs, the use renewables to really get a good position as a supplemental energy source is important, where they are used in certain areas for certain reasons. Like you and I talked about what I call remote energy, ⁓ like on land man when the ⁓ oil companies, need electricity to run their compressor stations and their pumping units. So ⁓ Mark Workman: You love that show. You want to be on Landman, I think. Steve: They bring in renewable energy to provide them with energy where they don't have electricity. that that's very important. And solar panels and windmills play a very important role there. But if you think that you're going to go into any state and knock out a thousand acres and disbrand that thousand acres, take it out of the U.S. economy, because that's what you do when you build solar farm. It's a cemetery. You're not going to do anything there. ⁓ right, nothing's going to grow. Nobody's going to do anything. You can't even hunt there. All right? ⁓ And then disbrand a thousand acres to produce a very small amount of energy that everybody can just feel good about. Well, you're not going to feel good when you had to pay Mark Workman: Right, 100%. No. Steve: three or four times as much for that energy, all right? Mark Workman: Yeah. And I, and I think that's showing up in the market where, you know, just utility costs, you know, everything here in Montana has gone from, you know, I want to say a typical power bill for my natural gas heat in, in the middle of the winter, even when it's 20, 30 below would be 80 to a hundred bucks. That used to be standard. Uh, you know, I'm routinely in the same exact house. Nothing's changed over 300 bucks. So you tell me how I don't understand some of that, you know, and like, but they are just in it's the state of Montana has a, a committee that sets the rates, you know, I don't know how Kentucky does it, but maybe it's similar. ⁓ but these, but there seems like we just seem to be getting rid of coal generation. getting rid of, just doing some things that just makes no sense. We need refineries. need. Steve: Yeah. Right. Mark Workman: We need power plants. need, you know, and again, all those things can be held up so easily with litigation. You know, we're looking at generations before we start correcting the problem. And again, what's that going to affect? The bottom line price to the consumer is not going to moderate in my opinion, anytime soon. You know, that's how I see it. Maybe I'm wrong, but. Steve: Right, right, right. And you know, the majority of our politicians, well, the majority of our politicians are attorneys, okay, that went to law school. And then they became politicians, which is about 65 % of all politicians, okay. And look, I understand the importance for the legal community and attorneys and so forth, but at the same time, look, you have a businessman in office right now. and you see what's happened. Okay? You have a businessman, everything he's doing comes right out of his real estate investment business model. Okay? Every time Trump does something, it not only has an objective, but it has several synergies attached to it. For example, war on drugs, Mark Workman: Exactly. Yep. Yep. Steve: in Venezuela taking out the dictator and bringing about or at least trying to bring about democracy. All right. And at same time, authoritarian governments, because that's what they are, China, all right, an authoritarian government. The people are owned by the state. ⁓ That's it is. ⁓ Okay. in Mark Workman: Yep. They are 100%. Steve: an authoritarian government. All right. That may go away and that will be beautiful. And if it does, it's all because of Donald Trump. All right. Mark Workman: Right. Well, when you think about it, he, he's one after the Panama Canal. No China, you're not going to take that over. You're not doing that. We built it. We own it. We're going to take it back if we have to. Right. So he's been on the move geopolitical geopolitically to protect us. And I don't think we see the big picture. We see a, an attack in Iran or, or Venezuela, or even when he talks about Greenland, I think that's hilarious. Steve: Right, exactly. Mark Workman: when he starts talking about it, but he knows that these countries around the world are after those, positions to us. You know, for China, if they'd have gotten in charge of Panama canal, we'd have instantly started having trouble, you know, ⁓ and were trying to get that contract. Were you aware of that? Okay. Yeah. So, so that, that was a big deal to cut them off at the past there. So, you know, ⁓ again, goes back to our initial thing about pricing is like, Steve: Right. Right. Right. Mark Workman: There's so many, I mean, we've just touched the scratch of surface, right? How many things are affecting this end result in terms of price? It's crazy. Steve: Right. Oh yeah, and inflation. Now granted, you know, in 2014 oil was $120 a barrel. Okay. And I'm not saying at that point in time it was overpriced. All right. And, but you didn't have the same inflationary problems then as you do now. I don't, and those inflationary problems. Mark Workman: ⁓ yeah. Right. Steve: were from our predecessor flowing over into the Trump administration. 120 % and they've gotten better. And again, I will say I understand Trump's mentality on keeping oil prices low, but I think there has to be a realistic evaluation by the consumer to understand that we are in a position Mark Workman: 100%. Yeah. Steve: where if we're going to have the production that we have now in the future, oil prices are going to have to increase. Mark Workman: As an example, say I asked you to come over to mow my lawn. I have a pretty big lawn, by the way, and I'd like you to mow it, but I'm not going to pay you. How are you going to show up? Steve: Probably not. mean, I might do it one time just to make you happy, but... Mark Workman: No, I doubt, think you were pretty transactional and I like, you know, in the sense of, first of all, I wouldn't think that I pay somebody, but the truth of it is, is that's what's happening here is you're saying, Hey, you know, a lot of my career, anything I was involved with, I always say to people on the phone who were trying to work me, I can't stand to be worked about pricing or what I've, you services I offer because I am a service oriented dude big time. I Steve: Mm-hmm. you Mark Workman: go for the highest quality of everything I do in terms of products and everything. So I always stayed to that high end of the market with a high level service. And anytime I get worked, I'm like, you're basically asking me to work for free. The operators work down to the mud companies, mud companies call me, hey, we need a break. They're gonna take their rigs from us. Go ahead. Steve: . Right, right. And you know, I could see oil prices in the future years going higher and higher and higher. And the only way to mitigate that is, yes, horizontal drilling and the shell play has been a major increase in US production and world production and has really brought the consumers a much lower price. Of course, the oil industry doesn't get credit for that, but that's what happened. All right. Mark Workman: So is the consumer a spoiled brat? Steve: Yes. think that people look at oil and natural gas and energy as a and not a privilege. Okay. ⁓ And believe that the U S economy looks at it ⁓ not a free market enterprise, but they look at it from a ⁓ price All right. Let's face it. ⁓ We're price controls on oil. I mean, when, when people stand up and say, we've got to these prices down, you know, Mark Workman: Right, exactly. Yes. Steve: Same thing that's happened with farmers, you know, it doesn't work. And we need to look at inflation as to what are all of the factors causing inflation instead of saying, you know, well, let's just, let's go after oil, let's go after beef, let's go after this and all of these that we use to create products when maybe the process is where most of the money is being spent. For example, the US oil industry is made up of upstream, which is everyone that drills and produces oil and gas wells. Then there's midstream, that is gas pipelines, interstate pipelines, processing, ⁓ stripping and processing, pentane, punetane, every product. Mark Workman: Right? Steve: moving it from one place to the next and processing it and then the retail distribution of gasoline, propane, kerosene, everything we use in our daily lives, that's the downstream. So big oil controls all three, is vertically integrated to control all three and big oil, your Chevron, ExxonMobil, they control and own the majority of the midstream. Mark Workman: Yep. Steve: and if not all, and all of the downstream. All right. But big oil only controls 35 % of the US oil production. 65%, 65 % are independent producers all the way from a smaller on-core energy to a large, like, you know, there's a lot of companies out there, but most of the companies drilling in the Permian Basin. All right. Mark Workman: Exactly. Steve: And these are large independent companies. They could be a hundred million dollar company, they could be 10 million. They represent the majority of production. cost, the if you look at midstream and downstream, their profit margins do not move as much downward when oil prices go down. Mark Workman: Right. Steve: Okay. When oil prices go down, they still maintain a certain profit level. When oil prices go up, right, when oil prices go up, they increase that profit margin. All right. So they're somewhat protected from swings in the prices because they control Mark Workman: Because the costs are already cooked in, right? Yeah, insulated is a word I would use. They're insulated from it. Steve: Insulated, yes, immunized. And that's where a lot of the costs come from, all right? one is taxes. A tremendous amount of money is paid on fuel taxes. ⁓ so after farmer, the oil and gas operator, that's the easy fix that the politicians want to run to. Mark Workman: Immunized. There you go. Good old COVID. Yeah. Steve: But it doesn't solve the problem of inflation until you look at the entire product cycle of a commodity. And so, you know, I mean, I can say all this, but who owns Midstream? Okay. Big business, big companies, big companies with, big companies with lots of lobbyists. Okay. Mark Workman: Big business, yep. They're huge. Yes. Yeah. I tell you a story or another, again, just from my experiences, this is where like a lot of times my philosophies about things are framed is, is these experiences I've had, I used to go down to the congressional session every Thursday and sit in on the judiciary meeting and then the business and labor and the other one was environmental. And so I sat in on three committee meetings every Thursday because that was their executive session. So they would be. putting bills out to go to the floor to be voted on. And I'd sit in there and I would go down as a normal person, similar, know, hoodie and jeans. I wasn't going to testify typically. I've testified a lot, but times, but typically just sit and listen to see what they're up to, you know, and I want to meet the senators, meet the representatives. ⁓ know, Montana, you can walk right up to them. It's no, there's no security. It's totally different deal probably than a lot of States, but you're really approachable. can have visits with them and ask questions. And what I found out is, like if I was in a room and there was 40 chairs, they set up 40 chairs for guests, it's me and 39 attorneys. 39 every other chair is a guy in a black suit who gets up by rise in support of this bill for the name of this company next one I rise in support I rise as an opponent to this bill for you know, whatever, you know a big tobacco whatever and it's amazing to me that the American people really don't have a voice I don't think and that's really and again, I we've kind of chipped at the consumer a little bit today, but that's okay because they're unaware but to some degree Steve: No. Mark Workman: They don't have the influence. Our vote matters. I'm not saying that, but I am saying if you're not going to those sessions, and I know you're involved that way too, maybe a little bit, I might be wrong, but I think involved politically a little bit. You have a voice, right? Steve: What's that? To some degree, yes. mean, I feel like, you know, I just don't like seeing politicians talk about things like the energy industry, oil and gas industry. And I just hear them say completely incorrect things, just like on Fox News a while ago, you know? And I'm thinking, wow, they can say that to 370 million people. Mark Workman: Right. Steve: You know, it was completely wrong. ⁓ you know, and then this just like Venezuela, you know, how many people in the world believe that there's 303 billion barrels of oil that's going to come out of the ground in Venezuela? They got two drilling rigs out there right now. Okay. Mark Workman: Right. Right. Exactly. And you and I might know that because we're aware of it. and, you know, we're aware of how much oil they supposedly have. Cause I've seen the grit, you know, the different graphs and all that. And I'm always been shocked by how much they have, but in I'm, didn't know there was only two rigs running. You know what I mean? I didn't know that part, but I also know it's almost impossible to get. didn't know that. But, ⁓ the idea of two rigs, that's a joke. That's a joke. Steve: Right. Right. But you know, what's that? a joke. Nobody wants to drill there. And just like what you said earlier, you know, when the big oil met at the White House, you don't have to be ⁓ body language expert to know they were not too excited about this new proposition. Okay? Huh? Yeah. You know, so you... Mark Workman: They did this. They did, they started bobbing and weaving. Steve: You want us to send our people down there who might be kidnapped, killed, thrown in a cage, whatever, while they're working to do all this work. And it's going to increase the volumes, maybe by a half a million barrels a day. And, you know, and by the way, we're not going to drill. Okay. And so, you know, I mean, big oil has other prospects. Okay. And, um, Mark Workman: Right. Steve: Most of that is, you know, I could see, and what we need is a resurgence in offshore drilling. And we, you know, and that's a big deal. across this country, like I said, all of the low hanging fruit has been picked for the most part, but there are, there's still a lot of oil deeper. It just takes a lot of exploration and exploration is a lot of risk. Okay. Mark Workman: Yes. Thanks Well, it's... As we, as we close out today, it's been a really good, good one. And I appreciate you bringing the spice today. I mean, we got to kind of got fired up a little bit, know, which is not, you know, that's good. I like that. I, cause I definitely, you know, want to be careful and not be hyperbolic. want, I want to be a person who's actually bringing a conversation. And I think you're the same way we talking about stuff like this, but I ⁓ want bring it in a very wise and, Steve: Absolutely. Mark Workman: you know, measured way so it can be heard. You know what I mean? You start making wild claims or whatever, things. I want to end with two things. ⁓ Energy, you can invest with them. I'm just a full disclosure again. I'll say it every time as I talk to Steve. I am an investor. I've loved the whole process. I'm in love with this company. This guy has become a close friend of mine and probably haven't seen each other twice in five years, but I would trust anything he told me. Steve: Right. Mark Workman: So, that's, you know, ⁓ that's an important thing to say is that I could trust him with anything he told me and that not many people in my life that I could say that about. ⁓ think Steve could probably say the same thing. ⁓ I trust him explicitly. Encore energy is an amazing, amazing, family owned, right? Company essentially. Yeah. ⁓ Steve: Yeah. Yes, yes. Mark Workman: And really a soft touch and tons of communication, tons of emails. you know, he, just, it's hilarious. His emails are written so well, but sometimes you'll send an email about this, the most basic thing, like, ⁓ we put in a new pump or, or, know, am I right? You you, ⁓ you really inform us quite well as investors, but Steve, tell them how to get ahold of you. Give them your phone number and maybe a website ⁓ just, Steve: Yeah, absolutely. Mark Workman: put that out there for them to get a hold of you they want to check out investing. Steve: Absolutely. And first, let me just tell you, I'm pleased with the opportunity to be on this podcast with Mark. Mark, I sincerely appreciate him as an investor and as a friend. going back to pioneer mind, Encore looking for investors that have the pioneer mind. Yes, you the best tax benefits in the United States of America. Mark Workman: Zip, pip. Steve: And that is an 87 % intangible drilling cost deduction against all forms of active income in the year you make the investment. Typically, the well is drilled later that year or early the next year, you would receive 87 % deduction. The remaining 13 % is deducted over, I believe, five years. 15 % of your production revenue Mark Workman: Yep. Steve: is tax deductible for the life of the well, okay? ultimately, you're a partner with us in this new oil discovery we have. We're making really good volumes of oil. We expect them to go even higher coming out of flow back. We've got multiple PUD locations we're drilling, but ⁓ investment is those investors that not only want to make a solid transparent investment in the oil and gas industry with real upside potential, years of income. We want to establish a business relationship with the company ⁓ involved to some degree. You know, we have investors like yourself come to the field operations. We love them coming there. ⁓ Encore the operator, the lease owner, and we have no middlemen. So... Combine that with horizontal drilling and fracking, we have the highest intangible drilling cost deduction, probably in the country, because of our structure. Okay? And then, you know, when you make oil, you see the refiner statements, you have K1s prepared by a professional CPA firm, weekly reports almost on the operations. Mark Workman: Wow. Wow. ⁓ Steve: and production revenue checks with detailed statements and those checks are getting to be a lot better and with these upcoming oil prices they're going to get a lot better so you know we're looking we're encouraged by that. You can reach me at 270-438-9956 and you can check us out on our website at www.oncor- Mark Workman: Hahaha Steve: energy.com Mark Workman: Okay. And that, that information will also be in the description when I post this on YouTube and it goes like 32 different platforms, rumble and anything you think of, it'll be in the description. So it'll be there as well. But you know, I encourage it, you know, even if you're wanting to learn more about it and maybe it's a few years off before you want to invest you just want to learn more about it. I would encourage it. Steve would definitely get you trained up. He's a great teacher. So anyway, as we close out again, Thanks for joining us. What a great episode. I had a ball with this Steve and thanks so much and, and we'll, we'll keep doing them because it's really good education for all. Steve: Always a pleasure, Mark. Mark Workman: Okay, thanks buddy. Bye bye. Steve: Thanks. Bye bye.