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Huntington Private Bank's Oviatt: We're Still Positioned for Growth · Bloomberg Intelligence

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  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Well, we've got the
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  Speaker 1: delta variant, and that's calling into question the reopening trade,
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  Speaker 1: if you will, putting some headwinds out there for the
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  Speaker 1: global economic growth, causing some people to take down their
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  Speaker 1: growth forecast for this year, maybe putting a little bit
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  Speaker 1: more pressure on what is an investor to do with that? Backdrop?
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  Speaker 1: Here at chat At Oviatt, senior vice president, director of
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  Speaker 1: investment Management at Huntington's private bank joints to say, have
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  Speaker 1: about twenty seven billion dollars in assets under management. So
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  Speaker 1: Chad again, the folks thought they were gonna have, you know,
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  Speaker 1: maybe a clearer reopening trade the back half of twenty one.
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  Speaker 1: That looks like it will be delayed. How are you
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  Speaker 1: guys thinking about a you know, portfolio construction here in
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  Speaker 1: what is you know, still a delta world? Yeah? Great, question,
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  Speaker 1: and thanks for having us on this morning. As we
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  Speaker 1: think about things on the minds of markets and certainly
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  Speaker 1: things that our clients are starting to ask about. There
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  Speaker 1: is no shortage of headlines out there to indicate that
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  Speaker 1: we might be facing some headwinds related to that opening
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  Speaker 1: trade right you have ever granted so that news coming
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  Speaker 1: out of China. We have monetary policy this week, fiscal
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  Speaker 1: policy still some unknowns their higher energy prices. We do
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  Speaker 1: have some slower growth numbers coming at us here in
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  Speaker 1: the US as well as around the world. You have
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  Speaker 1: earnings questions, global supply chains. So really what we are
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  Speaker 1: encouraging our clients to do is just take a step
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  Speaker 1: back and even think about where we might be in
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  Speaker 1: the next six to twelve months. If it is slower growth,
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  Speaker 1: that's not necessarily a bad thing. We've been growing at
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  Speaker 1: such an accelerated pay case that some slowing should be expected,
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  Speaker 1: at least in terms of the rate of growth. So
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  Speaker 1: we're still positioned in a post recession environment. We think
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  Speaker 1: the U S economy as well as the global economy,
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  Speaker 1: we're going to have these moments where we have resurgence
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  Speaker 1: in the path of the pandemic. There's going to be
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  Speaker 1: increases in cases. Uh, there's still some fair amount of
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  Speaker 1: accommodation from most central banks around the world. Fiscal policy
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  Speaker 1: is still supportive. So all things being equal, we're still
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  Speaker 1: positioned for growth, even if it does start to slow
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  Speaker 1: here heading into the last quarter of this year. So
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  Speaker 1: what are you doing a position for growth? Where are
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  Speaker 1: you putting your money? Yeah, we still If we're thinking
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  Speaker 1: about how we're constructing portfolios, we're using what we call
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  Speaker 1: our three B methodology. Right now, we're broadly asset allocating,
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  Speaker 1: so we're using a broad representation of asset classes, stocks, bonds,
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  Speaker 1: real estate, investments, commodities, you name it. We're putting representation
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  Speaker 1: should again in a broad base of asset classes. We're
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  Speaker 1: really balancing between growth and value right now. We're not
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  Speaker 1: tilting one way or another too heavily. We may favor
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  Speaker 1: the growth side right now, it's still staying pretty balanced.
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  Speaker 1: And then we're also being relatively bond light in most
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  Speaker 1: of our allocations. We think pathive least resistance for yields
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  Speaker 1: is likely higher, and so we are favoring equities over
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  Speaker 1: fixed income. Now, you know, so broad asset allocation balance
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  Speaker 1: between growth and value and bond light is really what
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  Speaker 1: we're thinking about. So, you know, a lot of folks,
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  Speaker 1: you know, they're thinking about, do I need to stick
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  Speaker 1: with some of those tried and true growth stories they
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  Speaker 1: give me both top line and bottom line growth, whether
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  Speaker 1: it's a you know, a Microsoft or and Apple or
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  Speaker 1: something along those lines, maybe some healthcare names, or do
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  Speaker 1: I kind of, you know, really embrace this um reopening
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  Speaker 1: and think about rotation into some more cyclical names. Maybe
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  Speaker 1: I can get some small cap and get some return there.
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  Speaker 1: How do guys think about the equity allocation within equities?
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  Speaker 1: We we did broaden out earlier this year there as well,
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  Speaker 1: so we did start to increase our exposures to MIT
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  Speaker 1: and small cap earlier in the year. We haven't pulled
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  Speaker 1: back from those decisions. We still are predominantly large tap
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  Speaker 1: domestic equity focused, but we still have our broader representations.
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  Speaker 1: There could be some challenges with the idea of slower growth,
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  Speaker 1: maybe not as much support by way of stimulus or accommodation.
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  Speaker 1: That could have impact some of those smaller or mid
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  Speaker 1: sized companies, But generally speaking, we're still favorable on all
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  Speaker 1: of the different market capitalizations here. We haven't changed our allocation.
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  Speaker 1: We are a little bit in a wait and see
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  Speaker 1: moment with the FED meeting this week. We also have
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  Speaker 1: some fiscal policy decisions coming at US and the quarter
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  Speaker 1: here and taxes potentially, uh, which is something that we
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  Speaker 1: always talk about with our client in the fourth quarter
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  Speaker 1: of each year, but this year is going to be
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  Speaker 1: a particularly challenging set of circumstances if we don't have
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  Speaker 1: a whole lot of clarity on what the tax ramifications
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  Speaker 1: maybe for next year. Yeah, I mean, that's got to
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  Speaker 1: be the biggest there's so many question marks chat I know,
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  Speaker 1: but taxes for for your business has to be one
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  Speaker 1: of the biggest ones. It is, and we've had such
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  Speaker 1: a great rebound from where we were March of that
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  Speaker 1: there's a lot of embedded unrealized games and portfolios, and
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  Speaker 1: so for those folks with taxable investments that have gains,
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  Speaker 1: there's some decisions to be made ahead of what could
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  Speaker 1: be some potential tax increases. So we will be talking
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  Speaker 1: very closely to our clients about that. We're not tax advisors,
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  Speaker 1: so we'll be working with some of their other professionals
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  Speaker 1: within their financial lives, but that is part of the
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  Speaker 1: equation for particularly hind that with worth investors, What do
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  Speaker 1: you do with some of these games? How and when
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  Speaker 1: do you realize those? Do you have potential bosses and
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  Speaker 1: other parts of your portfolio? Again, we'll be working with
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  Speaker 1: the tax advisors, but it is a conversation that will
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  Speaker 1: start to pick up here as we enter the fourth quarter. Hey, Chat,
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  Speaker 1: thanks so much for joining us here today. We appreciate
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  Speaker 1: getting your thoughts here on these markets. Chat oh yet,
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  Speaker 1: senior vice president, director of investment management at Huntington's private
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  Speaker 1: bank located and I think the state of State of Ohio.
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  Speaker 1: There you go with the Ohio State University, So look
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  Speaker 1: forward to that anyway. Chat kind of talking about a
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  Speaker 1: broad diversification of a portfolio, and we've heard that from
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  Speaker 1: others like Barry Ridholts as well. Well more coming up
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  Speaker 1: this is Bloomberg. Well, Matt and I we've been following
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  Speaker 1: this global supply chain issue, you know, four months now.
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  Speaker 1: It just really doesn't seem to be getting any better
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  Speaker 1: in effects so many different industries across the board. And
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  Speaker 1: the story jumped out at me today that I wanted
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  Speaker 1: to talk about, and that is us real estate builders
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  Speaker 1: building homes. Tough to find material, It was tough to
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  Speaker 1: find people that are work and build these houses. Craig
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  Speaker 1: Giammona joins this US real estate team leader for Bloomberg News,
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  Speaker 1: and his claim to fame, in my opinion, was he
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  Speaker 1: was the sports editor for the Daily Sitka Sentin. Aware
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  Speaker 1: of Sitka. You might a Sitka Sitka. That's awesome. Who
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  Speaker 1: is that on the resume? Sitka Alaska? That's awesome. Uh, Craig,
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  Speaker 1: thanks so much for joining us here. So we're hearing
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  Speaker 1: from the home builders that the supply chain challenges are
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  Speaker 1: impacting their business as well. What's going on, Yeah, you
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  Speaker 1: know that this has kind of been out there for
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  Speaker 1: a while, as you said, right, so the supply chain
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  Speaker 1: has been snarled really across the globe. Started with lumber
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  Speaker 1: that was a pretty high profile. Some of that has
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  Speaker 1: eased off, but you're really seeing sort of the macro
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  Speaker 1: factors that we know about showing up in in the
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  Speaker 1: home builder world. And they're talking about it in their
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  Speaker 1: in their earnings. Hard time getting workers, hard time getting
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  Speaker 1: things like windows and would and you know it's slowing
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  Speaker 1: them down. I mean, I think the flip side a
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  Speaker 1: little bit is that they're making a ton of money
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  Speaker 1: on these homes. You know, there was a problem. There
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  Speaker 1: was sort of a guidance yesterday from Pulty Group, but
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  Speaker 1: they did say our margin is up, so we don't
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  Speaker 1: think it's going to affect earnings, but it's slowing down
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  Speaker 1: their ability to build these homes. What what do you
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  Speaker 1: think about? I mean, you're the US real estate team leader.
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  Speaker 1: What a hot subject, probably one of the most popular
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  Speaker 1: dinner guests wherever you live. Um, what do you think about?
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  Speaker 1: Prices that have gone crazy? Um, supply that has dried up?
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  Speaker 1: Where's this market headed? You know, there's really no We've
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  Speaker 1: been waiting, right, There's been things froze up in March.
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  Speaker 1: It was very quiet in April and May, but as
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  Speaker 1: soon as people started to move around again, they felt
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  Speaker 1: a little bit better about wearing a mask and having
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  Speaker 1: an open house. The market now has really been on
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  Speaker 1: fire for the better part of a year and a half.
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  Speaker 1: And you know, the laws of gravity still exists, right,
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  Speaker 1: I mean, I don't know how long we can see
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  Speaker 1: The prices can't come down, right, Craig, How housing prices
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  Speaker 1: don't ever fall? That's that's right? What could ever go wrong?
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  Speaker 1: But I mean I think all getting aside um, it's
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  Speaker 1: been months after months after months, and I think a
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  Speaker 1: lot of us are sitting here saying what something has
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  Speaker 1: to give here? But mortgage rates are still at historically
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  Speaker 1: low levels below three percent, and there's tremendous demand. There's
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  Speaker 1: a gigantic millennial generation that sort of delayed home purchases
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  Speaker 1: they had student debt, but now those people are thirty
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  Speaker 1: five having the second kid. The pandemic sort of made
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  Speaker 1: people a lot of people reevaluate cities like you know,
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  Speaker 1: Manhattan or San Francisco. So there's just tremendous demand for
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  Speaker 1: homes that we don't have enough. We've underbuilt for decades,
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  Speaker 1: and that's why prices continue to go up. So, Craig,
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  Speaker 1: you know, I read a Bloomberg story. You know, another
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  Speaker 1: logistic issue, just saying, how you know a cargo ship
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  Speaker 1: was loaded in Asia, sailed for Los Angeles Long Branch,
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  Speaker 1: took nineteen days to get there, and then when I
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  Speaker 1: got there, it's now sitting there for twenty days, still
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  Speaker 1: not able to unload. Uh, it's cargo. Are any of
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  Speaker 1: these homebuilders given any guidance as to when they think
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  Speaker 1: things will improve in their business? They haven't, and they
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  Speaker 1: haven't got incredibly specific about like where the pain points are,
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  Speaker 1: but I think we know that things like that are
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  Speaker 1: showing up. I mean, there's labor issues, so they haven't
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  Speaker 1: said too much of that. I mean, I think the
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  Speaker 1: good thing for the home builders right now is that
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  Speaker 1: they can sell every home they build, and they're selling
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  Speaker 1: them fast. Um. Some of this, you know, going back
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  Speaker 1: a couple of months, we had us we broke a
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  Speaker 1: story that these builders were deliberately slowing down sales, and
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  Speaker 1: now some of them have come out and said that
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  Speaker 1: because they don't want to disappoint buyers. I also think
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  Speaker 1: an element of that was with the commodities being so
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  Speaker 1: volatile that they didn't want to lock in contracts when
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  Speaker 1: these homes are still under under construction because you know,
• 10:35
  Speaker 1: wait three months and maybe the price is going to
• 10:36
  Speaker 1: be fifteen percent higher. So I think some of this
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  Speaker 1: was them trying to control the business. And I think
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  Speaker 1: I still think that they're there. You know. The good thing,
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  Speaker 1: like I said, the backdrop here is that there's no
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  Speaker 1: shortage of buyers for these homes. There's billions and billions
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  Speaker 1: of dollars that's been raised on Wall Street, uh to
• 10:50
  Speaker 1: go after these homes, you know, by institutional investors, not
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  Speaker 1: to mention sort of the first time buyers and the
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  Speaker 1: families that are trying to get into the wealth creation
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  Speaker 1: pipeline that we believe been for you know, fifty years
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  Speaker 1: in this country. Is there any indication that the government
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  Speaker 1: wants to step in and do something. I mean, it's
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  Speaker 1: terribly un American to intervene in markets like that. But
• 11:11
  Speaker 1: here in Germany, you know they're talking about, well, we've
• 11:15
  Speaker 1: got rent caps and everything like New York City, but
• 11:18
  Speaker 1: they're also talking about taking property back um in. In
• 11:21
  Speaker 1: in Canada, you've got both parties were saying they wanted
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  Speaker 1: to block foreign buyers from um the markets for at
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  Speaker 1: least a couple of years. Are you hearing anything like
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  Speaker 1: that out of the US. It's very interesting. I mean,
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  Speaker 1: somebody else another editor of Boomberg asked me this very
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  Speaker 1: question this morning. But whether when I think this is
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  Speaker 1: going to become a political issue in the United States.
• 11:40
  Speaker 1: I mean, it's sort of one of these things where
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  Speaker 1: I just think we have a very different attitude about
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  Speaker 1: it in the US than they do in Europe or Canada. Um.
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  Speaker 1: I think affordability is a huge problem. You'll see the
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  Speaker 1: Democrats talk about it at a high level, but as
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  Speaker 1: far as specific plans to address I mean, the Buiding
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  Speaker 1: administration has put some money into building more affordable housing.
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  Speaker 1: But these things are very, very tricky in a capitalist society,
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  Speaker 1: very tricky to control. And like you said, it's un
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  Speaker 1: American for the government to a lot of people believe
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  Speaker 1: it's Unamerican for the government to step in and try
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  Speaker 1: to control this. But you know, I don't think it's
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  Speaker 1: hyperbole to say that we're looking at a generational shift
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  Speaker 1: in the ability of people to buy homes. I mean,
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  Speaker 1: I think there's a generation of people that just might
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  Speaker 1: have to rent. You know that that three hundred thousand
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  Speaker 1: dollars home for a first time buyer, that's the thing
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  Speaker 1: that doesn't exist. You know, people that were in homes
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  Speaker 1: they were able to refy. You know, they've they've managed
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  Speaker 1: to buy homes for cash, they bought second homes. This
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  Speaker 1: really has been a housing valley fueled at the high end,
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  Speaker 1: and it is creating some some serious questions that I
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  Speaker 1: think could become a political issue, but very very tricky
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  Speaker 1: to deal with that, I think in a substant way. Craig.
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  Speaker 1: You know when when you've spoken to homebuilders in the past,
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  Speaker 1: you know they've said that they're not really buying entry level,
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  Speaker 1: they're not building entry homes because the margin on some
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  Speaker 1: of the bigger homes is much much better for them.
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  Speaker 1: And to think is that one of the contributors to
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  Speaker 1: this housing problem, that that he just historically have not
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  Speaker 1: been building entry level for first time buyer. Yes, absolutely,
• 13:03
  Speaker 1: and that that goes back to the last crash. I mean,
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  Speaker 1: I think they came out of you know, look, we've
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  Speaker 1: underbuilt in this country for three or four decades, if
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  Speaker 1: you look at the chart, just we haven't kept up
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  Speaker 1: and we're running out of land. Zoning is a big
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  Speaker 1: problem in a lot of the country. Single families zoning
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  Speaker 1: is a political issue, but because there's a lot of
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  Speaker 1: sort of well meaning, wellmaning people that would agree we
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  Speaker 1: have an affordability crisis, but when the proposal shows up
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  Speaker 1: in their town, they say, no way, I want to
• 13:27
  Speaker 1: keep single family zonning. You know, the Nimbi factor is
• 13:30
  Speaker 1: a big effect. So we've underbuilt for a long time,
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  Speaker 1: and coming out of the last crash, you're right, the
• 13:35
  Speaker 1: builders basically said, the margin is much better at the
• 13:38
  Speaker 1: high end. You know, it costs me maybe only slightly
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  Speaker 1: more to build this high end home and I can
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  Speaker 1: make a lot more selling it. So there has been
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  Speaker 1: an underbuilding problem at the low end. That is probably
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  Speaker 1: something that government could try to address. But you know,
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  Speaker 1: right now we're dealing with a severe shortage of of
• 13:55
  Speaker 1: places to live. And oh, by the way, rent is up.
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  Speaker 1: You know, rent is up all over the country, basically
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  Speaker 1: everywhere the side Manhattan and San Francisco. Rent has gone
• 14:02
  Speaker 1: through the loop. That's because people with good six figure
• 14:05
  Speaker 1: jobs can't find home subai and are now renters. Better
• 14:08
  Speaker 1: to be a settler than a buyer in this real
• 14:10
  Speaker 1: estate market, is what I've been told Matt Craig giammona
• 14:13
  Speaker 1: US real estate team leader for Bloomberg News his Twitter
• 14:16
  Speaker 1: handle at Sitka Writer, Sitka Alaska boom didn't see that comes,
• 14:21
  Speaker 1: so Craig Gimmona giving us the latest on housing supply
• 14:24
  Speaker 1: chain issues impacting that industry as well, lumber prices, labor,
• 14:29
  Speaker 1: you name it. Now. I remember when I was a kid,
• 14:34
  Speaker 1: maybe fourth or fifth grade, and my dad had started
• 14:39
  Speaker 1: a project to put a deck on the back of
• 14:41
  Speaker 1: the house, and he was like in seventh heaven, absolutely obsessed.
• 14:47
  Speaker 1: It was all he could think about, studying every possible
• 14:50
  Speaker 1: material he could use, you know, figuring out what the
• 14:53
  Speaker 1: maintenance would be, planning it was like it was like
• 14:57
  Speaker 1: the greatest thing that ever happened to him. And I
• 14:58
  Speaker 1: didn't get why until I got my own house, and
• 15:02
  Speaker 1: now I totally get it, especially after the pandemic. A
• 15:05
  Speaker 1: deck is like your own private little escape. Brian Fairbanks
• 15:10
  Speaker 1: joins us right now, President CEO of Treks. They make
• 15:13
  Speaker 1: the alternative wood uh decking material that all homeowners are
• 15:18
  Speaker 1: probably familiar with. Brian, I imagine your business was absolutely
• 15:25
  Speaker 1: booming during lockdown. How's it going now? Yeah, things continue
• 15:30
  Speaker 1: to move along well. So thanks for having me on
• 15:32
  Speaker 1: this morning, both Matt and Paul. As we moved into
• 15:36
  Speaker 1: the pandemic last year, of course, there were a lot
• 15:39
  Speaker 1: of questions about the economy early on, but pretty quickly
• 15:43
  Speaker 1: after that and people were staying at home realized they
• 15:45
  Speaker 1: had time to work on their homes, and we saw
• 15:49
  Speaker 1: our numbers increased quite rapidly through that time period, and
• 15:53
  Speaker 1: we've continued to see that tailwind into two one. As
• 16:00
  Speaker 1: we look forward, we still continue to see opportunities for
• 16:04
  Speaker 1: strength of outdoor living products and people wanting to be
• 16:08
  Speaker 1: able to build low cost outdoor space on their home
• 16:13
  Speaker 1: so give us a sense of um your supply chain.
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  Speaker 1: We've heard from so many different company executives and across
• 16:21
  Speaker 1: the globe that they can't get the materials they need,
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  Speaker 1: and if they do get the materials, they don't have
• 16:26
  Speaker 1: the labor to actually build it. Talk to us about
• 16:29
  Speaker 1: your business, how you're dealing with that. Sure, it's fair
• 16:33
  Speaker 1: to say that we've had our share of challenges. Last
• 16:36
  Speaker 1: year we grew over as a company, and year to
• 16:40
  Speaker 1: date through the second quarter, we've grown thirty two so
• 16:44
  Speaker 1: that puts a lot of pressures on our suppliers. Of course,
• 16:47
  Speaker 1: we had the freeze down in Texas earlier this year,
• 16:50
  Speaker 1: so some of the additives and various polymers that go
• 16:54
  Speaker 1: into our product were impacted by that. But overall, with
• 16:59
  Speaker 1: these six us of our supply chain group, we've been
• 17:02
  Speaker 1: able to manage our way through without having any main
• 17:06
  Speaker 1: outages of material. Where do you put together you're decking,
• 17:13
  Speaker 1: I know it's it's mostly recycled materials, right, So where
• 17:16
  Speaker 1: do you source that and where do you put it?
• 17:18
  Speaker 1: Put it all together? Yeah? Correct Tracks is unique in
• 17:22
  Speaker 1: that of the content that goes into our deck boards
• 17:27
  Speaker 1: is recycled material It's polyethylene stretch film and bags from
• 17:32
  Speaker 1: grocery stores as well as reclaimed would we purchase that
• 17:36
  Speaker 1: from all over the country and up into Canada. We
• 17:40
  Speaker 1: will leark work with some of the larger grocery change,
• 17:44
  Speaker 1: larger distributors, anybody who is using polyethylene as protective wrap
• 17:49
  Speaker 1: on manufactured parts. And we've built our program to be
• 17:54
  Speaker 1: a service to these organizations where instead of paying to
• 17:58
  Speaker 1: put this material into land, we can provide them payment
• 18:02
  Speaker 1: and get it off their shipping dot quickly and put
• 18:04
  Speaker 1: it into trucks decking products. So some companies says they
• 18:09
  Speaker 1: think about how their business was impacted by the pandemic
• 18:13
  Speaker 1: and the changes in everybody's day to day lifestyles. A
• 18:16
  Speaker 1: lot of businesses were able to pull demand forward, whether
• 18:19
  Speaker 1: you're a peloton provider or or something else. And when
• 18:23
  Speaker 1: you look at your business, did you see I mean,
• 18:26
  Speaker 1: the growth rate you're talking about not typical. I wouldn't
• 18:28
  Speaker 1: think in that business. So how much of your growth
• 18:31
  Speaker 1: that you've experienced over the last you know, four or
• 18:33
  Speaker 1: five quarters do you feel it's just literally pulled forward
• 18:36
  Speaker 1: from the following the upcoming quarters. Pre pandemic timeframe, Trucks
• 18:41
  Speaker 1: Company was growing between fourteen and six, we've seen higher
• 18:45
  Speaker 1: growth in the meantime as we come out of the pandemic,
• 18:49
  Speaker 1: we have significant opportunities to be able to continue growing
• 18:53
  Speaker 1: in that high teens type level as we focus on
• 18:58
  Speaker 1: converting more people who would have been installing wood decks today.
• 19:02
  Speaker 1: Would decks account for about seventy eight percent of the
• 19:06
  Speaker 1: overall industry, and our key strategy is to convert more
• 19:09
  Speaker 1: of that two treks at the rate of two hundred
• 19:12
  Speaker 1: or more basis points a year. We also have opportunities
• 19:16
  Speaker 1: to grow in international marketplaces as well as focusing more
• 19:21
  Speaker 1: on the new builder marketplace. All right, very interesting stuff
• 19:28
  Speaker 1: and of course something that I think everybody wants to
• 19:31
  Speaker 1: know either more about or has already dealt with throughout
• 19:34
  Speaker 1: the pandemic, because a deck is just got to get
• 19:39
  Speaker 1: out of the house a little bit. It's just a
• 19:40
  Speaker 1: man's castle or a woman's castle if you're a woman
• 19:43
  Speaker 1: who's into decks, which I'm sure a lot of them are. UM, Brian,
• 19:47
  Speaker 1: thanks so much for joining us, Brian Fairbanks. They're joining
• 19:50
  Speaker 1: us from Treks talking about their recycled deck materials and
• 19:54
  Speaker 1: the growth they've seen and the growth that they expect
• 19:57
  Speaker 1: to come um, I dream of a day when I
• 20:00
  Speaker 1: will be back in the United States of America putting
• 20:02
  Speaker 1: a deck on the back of my house. I'll consider
• 20:04
  Speaker 1: treks boards. Let's get over to Fernando Valet. Now I
• 20:10
  Speaker 1: told you are oil and gas analysts and Bloomberg Intelligence
• 20:13
  Speaker 1: was going to join us on a couple of uh,
• 20:16
  Speaker 1: we're really big stories. And Fernando, let's start with the
• 20:19
  Speaker 1: Conico Phillips purchase of UM assets in the Permian Basin
• 20:24
  Speaker 1: Shell assets in the Permian Basin. It's a nine and
• 20:26
  Speaker 1: a half billion dollar acquisition. What are the BFW bullet
• 20:29
  Speaker 1: points we should know about here? Well, the big thing
• 20:33
  Speaker 1: is Conicos acquiring uh, pretty continuous acreage to its most
• 20:37
  Speaker 1: recent deal, the Concho Resources acquisition, which had announced in
• 20:42
  Speaker 1: October of last year, and they are acquiring about a
• 20:45
  Speaker 1: hundred and seventy five thousand barrels a day of production,
• 20:48
  Speaker 1: which they expect to grow to two hundred thousand barrels
• 20:50
  Speaker 1: next year and two d twenty five thousand acres UM.
• 20:55
  Speaker 1: And they believe they can actually get more free cash
• 20:57
  Speaker 1: flow UM that way and eventually increase their sharels of
• 21:02
  Speaker 1: distributions towards their target and at the same time lower emissions,
• 21:06
  Speaker 1: they actually increase their targets to lower greenhouse gas emissions
• 21:10
  Speaker 1: tot So for now, as a long time energy analysts
• 21:16
  Speaker 1: on Wall Street, you followed these companies for a long
• 21:18
  Speaker 1: time and kind of what I even notices in the
• 21:21
  Speaker 1: permium base and you know, when things get tough, the
• 21:23
  Speaker 1: big guys come in and can kind of roll up
• 21:25
  Speaker 1: some of the smaller players here. Um. But the seller
• 21:28
  Speaker 1: here's Royal Dutchell, one of the majors. Why is Shell
• 21:31
  Speaker 1: selling here? I think there are really two reasons, Paul. First,
• 21:36
  Speaker 1: there is a difference of opinion on how the energy
• 21:39
  Speaker 1: transition will will transcribe between the European majors and the
• 21:43
  Speaker 1: US majors, and have addressed that from an emission standpoint.
• 21:46
  Speaker 1: So Shell has been kind of exiting more and more
• 21:50
  Speaker 1: of the large position oil and gas projects and this
• 21:54
  Speaker 1: is a marketable asset obviously there it was a competitive process,
• 21:58
  Speaker 1: um and also it was an area where they don't
• 22:02
  Speaker 1: necessarily have the greatest expertise. So I think Shells really
• 22:05
  Speaker 1: trying to go towards the l m G portion of
• 22:08
  Speaker 1: the world. And uh so Shill was was an avenue
• 22:12
  Speaker 1: to raise some funds and do some share all the
• 22:14
  Speaker 1: ibex um. For Conico, it's really they've reshaped their company
• 22:19
  Speaker 1: to focus on focus on show and they're now going
• 22:21
  Speaker 1: to be the second largest producer in the lower forty eight.
• 22:24
  Speaker 1: So it's really a repositioning. If you remember the exited
• 22:28
  Speaker 1: deep water in two thousand fifteen, after the oil price
• 22:31
  Speaker 1: crash of two thousand fourteen, what about the gas price,
• 22:35
  Speaker 1: what about l m G, what about what's going on
• 22:38
  Speaker 1: in the UK right now. It's been phenomenal to watch
• 22:42
  Speaker 1: and it seems like everything that's going wrong to push
• 22:44
  Speaker 1: prices higher could absolutely. I think you haven't gotten the
• 22:49
  Speaker 1: contribution from renewables that you would have expected in the UK,
• 22:53
  Speaker 1: and I think it's something that we talked about. It's
• 22:56
  Speaker 1: that resilience and ability to switch over very quickly. Unfortunately,
• 23:01
  Speaker 1: in Europe you had a confluence of issues from closing
• 23:05
  Speaker 1: the coal plants a bit faster than what was originally expected. Uh,
• 23:09
  Speaker 1: issues with growing in which was the largest gas shield
• 23:12
  Speaker 1: and in Europe and in the Netherlands that's now being
• 23:15
  Speaker 1: shut sooner than expected, and all of that because of
• 23:19
  Speaker 1: the low oil prices gave an unreal expectation that would
• 23:23
  Speaker 1: always be always be the case. And now we're seeing
• 23:25
  Speaker 1: that having a bit of more of a basket approach
• 23:27
  Speaker 1: to be beneficial as we transition and increase our electricity load.
• 23:31
  Speaker 1: All right, we got w T I crewed at seventy
• 23:33
  Speaker 1: dollars a barrel. Uh, should I be looking for some
• 23:36
  Speaker 1: of these uh you know dudes down in Texas and
• 23:40
  Speaker 1: you know, to start putting wells back in the ground. Well,
• 23:44
  Speaker 1: on the private side, they really have been. I think
• 23:47
  Speaker 1: with consolidation of Echo and Shell and others like uh,
• 23:52
  Speaker 1: Pioneer and and and Parsley. What happens is actually you
• 23:56
  Speaker 1: put fewer because you start to high grate your portfolio,
• 23:59
  Speaker 1: so you only drew of your better wells and you
• 24:01
  Speaker 1: pace it a little bit more differently. So I think
• 24:04
  Speaker 1: cover intuitively, all these mergers will actually reduce the amount
• 24:08
  Speaker 1: of of well as you would have seen even the
• 24:12
  Speaker 1: oil press arising quickly. All right, Fernando, thanks so much
• 24:15
  Speaker 1: for joining us. Fernando Valley there on the phone out
• 24:17
  Speaker 1: of New York. He's our oil and gas analyst at
• 24:19
  Speaker 1: Bloomberg Intelligence. Thanks for listening to the Bloomberg Markets podcast.
• 24:23
  Speaker 1: You can subscribe and listen to interviews with Apple podcasts
• 24:27
  Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm
• 24:31
  Speaker 1: on Twitter at Matt Miller V three. Pt on Fall Sweeney,
• 24:35
  Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
• 24:37
  Speaker 1: can always catch us worldwide at Bloomberg Radio