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Maurice Storm - The New Realities of Energy Finance, or, Hey, Where Did All the Money Go?

Moneymakers Business Forum | 2019 Oklahoma City

Moneymakers Business Forum | 2019 Oklahoma City

Summary

The New Realities of Energy Finance, or, Hey, Where Did All the Money Go? A Moneymaker Forum lunch keynote given by Maurice Storm, Tecolote Energy in Oklahoma City, Oklahoma on 4 April, 2019.

Private equity investment in the energy space has followed a well understood business model for the last twenty years or more. Lately, this model has been disrupted and investments that have been profitable for both management teams and private equity investors have few available exits. Why is this and what does the future hold for the sector?

Full Transcript

RICK FRITZ: You know speaker today for lunch is Maurice Storm. He currently serves as the president and CEO of Tecolote in Tulsa. And they were founded in May of 2015 with equity partners of private equity backing from NGP.

They operate over 1,200 wells in the Western Anadarko Basin. And currently they employ 90 people, almost 100 people in Tulsa.

He started his career with Samson and actually opened an office for Barrett Resources at Tulsa. That's something I didn't know. He later held a position as a Vice President and General Manager of the Mid-continent Division and Vice President of Business Development.

In October of 2002, Storm and his partners formed Crow Creek And they had some good runs with Crow Creek Energy there in Tulsa and some real success. And he served as presidency of both Crow Creek companies.

Now he is a Razorback through and through. I don't hear a lot of Sues there. And he's a chair of petroleum geology there in Arkansas. So that's great. So let's give a warm Oklahoma hand to Maurice. We'll get this started.

MAURICE STORM: So thanks, Rick. Thanks for having me. It's great to be here in front of a group of geologists obviously. Being a geologist, I know, unfortunately, we have a couple engineers that I like. I know a couple of them. Marty Falcon's here. He's an engineer.

Reid Beecher is here. He's an engineer. Reid, like the first day I was a geologist at Sampson, maybe the second day, we had some logs to look at. And I didn't really know what logs were.

But they said, this guy's coming in from some company I'd never heard of. And he came in. We rolled the logs out. That's the first time I met him, maybe the first day of work, I might have met Reid Beecher. What a great guy. You guys know Reid.

But anyway, I was going to say bad things about engineers. And I started saying good things. I'll stop now. A lot of people today, you heard them talk about their companies, the great successes they've had, how great their wells are. I heard Marty talk.

Of course, Chris talked. Berry Mullennix talked. Great companies, great guys. I'm not going to do that today I'm not here to talk about Tecolote and how great we are and all the great wells we've drilled. And how great our people are even though they are. They're back here. We've got a bunch of Tecolote folks back here.

Not really here and do that today. But I will give you a little bit of a spoiler alert. This story that I'm going to talk about, which is the new realities energy financer, hey, where did all the money go, doesn't really have a happy ending.

So because of that, I decided-- my wife is a schoolteacher. And she was talking about things that she does to help kind of de-stress her kids in class. She said, I just let them color. I get my coloring book, get a coloring book out. They do some puzzles. And then we go back to work.

And so I came up with a coloring book to hand out. And they're passing it around right now. So this is an adult coloring book. It doesn't have any profanity or anything like some of the adult coloring books I've seen.

But we also got some crayons. We got some little things of crayons. So if the talk gets too stressful, just bust out a crayon. You guys are going to have to share crayons. Don't just take the reds and the greens. Somebody use one of the yellow crayons.

But there's some puzzles. It's Western Anadarko Basin themed, crossword puzzles, some other things in there. But, again, not here to talk up Tecolote or myself at all, but just to talk about the topic.

So on the front page, we've got a little maze. And who's good can work that maze for me? Who's a great maze puzzle worker? One of you guys work through that maze real quick. Get a crayon.

And you start at the bottom like you've raised in capital. And you're going to go through the maze. And you're going to buy assets.

And then when you get to the middle of the maze, you've got to buy assets. And then you've got a branch off to the corners where you've got your options and private equity or make an exit or IPO.

So somebody run through that real quick.

Yeah, that's right. There is no path to either an exit or an IPO on that maze. You can't get there from here.

So there's an exit there to the right. I think it's like raise money from new investors. That's the only way out of the maze. So that's really what my talk's about.

So let me see if I make this work. So it used to be back in the old days that management teams put together a business model, business plan. Got the team together-- and Chris talked about it-- went on the road looking for capital.

But today what happens, private equity is going to-- so it used to be going for management looking for capital now. Oh, did they get that reversed? No. That private equity is going to management teams looking for capital.

So used to be we go look for capital from them. Now they're coming to us looking for capital. So that's a pretty big switch in how the world works.

And I can tell you it's funny. But it's actually true. You talk to a lot of guys and ladies in the room that have companies, their private equity providers are coming back to them and saying, hey. We need some money guys.

We are in a position where we've got to return capital to our investors. What do you guys have laying around here? Go shake the couch cushions. Pass a hat. We need some money coming back in.

And that is an actual fact. That's happening today. So it's a break from tradition.

So the question is, is the private equity model broken? Private equity companies are stuck-- not Chris Carson's company, not Berry Mullennix's company, not Marty's company. Those companies aren't stuck obviously. Great companies. But a lot of other companies are stuck.

Asset sales are difficult. There's a lot of broken, busted processes out there. People hire brokers. They take their assets out. And the bid-ask spread is so large, the people are not willing to sell for where the market is right now.

There's no path to IPOs currently. Exits are hard to find. And for the management teams themselves, incentive option payouts are in the distant future.

So private equity providers are having difficulty raising funds. Some have given up. I've talked to several people this year that are in private equity. They just have stopped trying to raise capital. There is just no more capital to be raised.

They've stopped going on the road. They're just giving up. And others, most others I would say, have had to reduce the size of the funds that they're raising. So what's going on out there?

I don't think we in private side of the business think about it very much. But the values of our private companies are really tied in a very real way to public company valuations. And it's always been true. But the recent public E&P woes are being felt on the private side.

And private equity was designed to consolidate properties and sell the public companies. And it started small in 1988 when energy specific private equity funds were first launched.

So this is an interesting chart. If you look at 1984, so the first private equity funds were raised-- now I know Chris said that Greg Casillas started his company in 1986-- so way, way out there in the distant past, Greg started his company.

But if you look at this chart on the left there is in billions. And in 1999, there was only $600 million in private equity raised in energy in 1999-- $600 million. So there's a couple, three of us in this room right now that have more than that in equity in our companies.

So in 2000, they raised $1.1 billion. So the numbers are very small. NGP's first fund, I think they raised around there in 2000, they raised $400 million their entire fund.

And looking a little farther back, many of us, the older people in the room, remember the time of $2 gas and $20 oil. Price volatility was low. The amount of capital available was low.

And it's hard to make money on price swings. When you look at that, it's hard to think back. I started in the business in 1984. And you look at that chart, it was very stable from 1984 really to 2000-- a 16-year period where there was very low volatility.

And with low volatility, you can't make money on price run-ups, which to be fair a lot of companies since 2000 have made money on.

So the old private equity business model was buy oil-producing properties major oil companies were selling. Fix them up. You had a small staff. You had low overhead. You were a low-cost operator. And then you'd sell the properties to independent companies who were trying to grow.

So it was a fairly small business. I think Crow Creek won, we had $15 million in equity. And that was a lot of money back then. And I would say today-- or at least maybe not today, but last year, year before, if you want to try to raise $15 million in private equity nobody would do it because it's too it's too small number.

So if you go flip forward to 2000, you can see there's a lot of volatility in the price curve there. In 2001, gas spiked from $3 to $9. In 2006, you had $13 gas a couple of times. So in high volatility times, a lot of people realized you could buy something and fix it up a little bit.

But then when gas prices doubled or tripled, you could double or triple your money pretty quickly. And the private equity funds seeing that dynamic, I think, we're able to jump in and say, hey, this is something we can make money on.

And using that price volatility-- there's lot of other things going on too-- but price volatility was one thing-- and also, again, a rising tide. You can see gas going from $3 in just a long, slow climb up into the right. And really the same with oil prices over that period from 2000 to 2008 or '09.

If you were in the business, I like to say, if you're in the business and you had a company and you didn't sell it and make a lot of money, and just bags of money didn't fall of the sky and hit you on the head, you were doing something wrong.

Because, really, just based on price increase, people could make money. And the private equity guys made a fortune. But the private equity model shifted in that time.

So it was no longer just buy it and fix it. It was buy a bunch of properties, drill wells. Buyers, the public energy equity values were going up too. A lot of people own public stocks for growth at that point.

It used to be the model was you would own a public energy stock for growth. It was also a proxy for the underlying commodity price. You would say, well, oil's $50. If it goes to $100 and doubles in six months or a year, I'll double my money on the stock. And then I'll get out of it.

So as prices went up, the interest in public equities went up. The buyers were paying for PUDs. Companies were growing production. They were growing reserves. Public companies would buy acreage from you to drill wells on. You'd prove up locations.

The number locations times the EUR of each well you had was how much your company was worth. And those were great times. And the public companies were buying these properties from private companies. And that was really what drove the private equity business model.

And the private equity guys are in there. The prices climbed. Investors seeking growth poured money into it. There was a huge demand for properties and drilling opportunities. And private equity companies provided the growth the public entity companies were seeking. And the fund sizes grew.

So another interesting graph here, in 2000, there was $1.1 billion worth of energy specific private equity raised. And by 2008, that number had grown to $26.5 billion was raised in energy private equity.

So that is a lot of money chasing a lot of deals. So the shale revolution comes along. Massive spending in public and private companies drove production up. And increases in efficiencies of horizontal drilling drove the rig counts down.

And so here's a commodity price curve 2008 to 2014. There's a big crash in 2008. And, of coarse, oil keeps climbing back. Gas is still hanging around $4. And 2014, another price collapse.

But if you look at this oil and natural gas production curve, this is, obviously, a great story about energy production in this country and the great job everybody in this room's done. The top curve is crude oil production.

You can see it was just cruising along from 2000 to 2012-- '11, just very flat. Rate counts climbing. The darker line, their rig count's climbing. And then as oil production is peaking at around 10 million barrels a day, you see the advent of the horizontal drilling revolution kick in there.

And rig count falls. And production continues to climb. And on the gas side, it's a similar story. And rig counts falling and production continues to climb. That to me is one of the great slides showing how productive these wells that people are drilling now are.

I used to work at Barrick for Paul Rady who now is the Chairman of Antero. I talked to Paul. And the wells those guys are drilling in the Appalachians are just insane-- 30 million a day, two mile laterals. They drill them in four days, five days.

I'm always like, hey, Paul, thanks for destroying the oil business for us. They found so much gas out there, it's just ridiculous.

So you look at those curves. And that's what it tells you. The business has become much more efficient. And the other thing is is investors look at those production curves, there isn't any fear of scarcity anymore.

People aren't afraid we're running out of gas. People aren't afraid that we're running out of oil. And when you think about the price curves going forward now, look at it again, $100 oil isn't on the horizon.

And $4 gas isn't on the horizon. And, of course, we had OPEC attack the US shale companies and US business and try to destroy it. But that failed. They destroyed themselves. But what's come out of all that is the market has taken a step back.

And the public markets have taken a step back. And they look at the production. And they think, wow there's a lot of oil out there. There's a lot of gas out there. With a lack of scarcity and a lack of price volatility why do we need to own oil? What's the point of it?

I think as the analysts dig in deeper, I think what you see is it's just massive, massive capital destruction basically in the public companies.

So there's been a real falling out in the public sector. So, yeah, public investors realize energy companies don't make any money. And in point of fact, they really never have. People owned energy stocks, generally, as a growth vehicle and as a hedge against the underlying commodity price.

If you wanted some upside in the stock and you thought gas prices are going to double or oil prices are going to double, you might own it. They were destroying capital the whole time. But if prices spiked, you could make some money on it.

Well, with that not being on the horizon anymore, public companies are struggling. Public investors no longer look to energy for growth. They're focused on cash flow and dividend returns to investors.

And the public companies are trying to pivot. And, again, I think as we heard Steve Agee say a minute ago, there are headwinds from the green anti-carbon investors. If you talk to private equity guys they're getting a lot of pushback from their investors.

They don't want to invest in dirty oil and dirty natural gas. Somebody told me that an investor from California teacher's pension fund said they put oil and gas in the same bucket with pornography and tobacco.

And they were completely serious. It was something that they were just not even consider investing in. So that gives you a sense that on the institutional investor side, there are some real problems for the energy business.

So those guys, their stocks are getting killed. And because of that, what you see is that public companies have stopped buying assets except for the Permian and a few select plays around there.

Mostly, public companies have stopped buying assets, because they're getting punished by their investors for doing that. Because the investors don't want them. They say, look, you got 10,000 shale locations. Why are you buying another 10,000? You've got 30,000 shale locations. Why are you borrowing money and raising equity to buy another 20,000 locations you're never going to get to?

Why don't you guys mind your business and why don't you try to drill profitably? Why don't you try to generate cash flow and live within your expenses? Don't spend more than you bring in. And in the same time, why don't you start returning capital to your investors in the form of dividends.

So the world at large out there in the public market, that's what's happening. And so if you look at public company valuations, this is an interesting slide. In 2007, I was at a Jeffries conference recently. I stole this from my good friends at Jeffries.

But on the left hand side, you can see large Permian pure play companies These are EOG, bunch of those guys.

In 2017, they traded at 12 and 1/2 times cash flow. That's pretty good multiples-- so 13 times cash flow. And in 2018, they traded at nine times. And in 2019, they're training at less than seven times cash flow.

So the value that public investors are putting in those companies have almost halved. And the same thing at other Permian players. They, in 2017, traded at nine times cash flow. In '18, at six. And now in 2019 traded at less than six times cash flow.

And then if you go to all remaining independents, there's 70 companies in that right-hand group. They are trading at less than six times cash flow.

Well, it used to be you'd look at doing an IPO. And someone would say, hey, you doing an IPO, you're going to go out, you're going to trade-- if you're making $100 million a year, you're worth a $1 billion on 10 times cash flow.

So you go public, because you're worth a! $1 billion. Well, now you're going to be worth half of that. So there's no demand amongst investors to invest in IPOs. Nobody wants to pay for it.

So public companies valuations have gotten hammered. And as a result, the public companies being the dominant buyer of private assets, they can't pay. If their assets are trading at less than six times cash flow, they can't pay you six times cash flow. They're going to pay you some number probably less than four.

So now you think, well, I thought I was worth-- I've got $150 million a year cash flow. I should be worth $900 million. Well, you're not. You're probably worth 3 and 1/2 times that number.

So maybe you're worth $450 or $500 million. Well, it might be as much as you have in it. So the degradation of public company valuations has really landed hard. And it's trickled down to the private side.

So this is the state of the public markets. I was working on this talk Tuesday night. And I got one of my 100 emails a day from Heart Energy Publications, oil and gas investor people. And I looked at this. And I was looking for a distraction from working on writing this.

And so this article was in there. And I just copied this out of this thing. This is a Reuters news agency. And I took just parts of it out of there. Because it was just right in line with what I was trying to say.

US shale producers last year spent more money than they collected extending a year's long streak of putting oil output above cash flow and investor returns according to Reuters. All but seven of 29 of these producers last year spent more in drilling and shareholder payouts then they generated through operations according to securities filings. Total overspending by the group was $6.7 billion.

They spent $6.7 billion more than they brought in. So they're still not living within cash flow. They're borrowing money. And they're selling equity to fund their drilling operations, which means their drilling operations aren't making money.

Shell firms are pushing US oil output to record shattering levels. But companies have prioritized spending on acreage and drilling. The data showed few producers generated solid returns even as US crude prices rose 28% in 2018 to an average of $65 a barrel.

Stock prices of all 29 shale producers fell in 2018 pressured by volatile crude prices and stronger returns in other sectors. Only one of the 29, Cabot, traded higher at the end of 2018 than it did two years earlier.

Now, this is the part that is really troubling. An investor who put $100 in the S&P 500 Oil and Gas E&P index, in 2013 would have $58 at the end of 2018. So a five-year investment basically destroyed 40% of the capital. Similar $100 investments were worth just $9 in Whiting Petroleum, $33 in Apache.

And Devon, which is a great company here across the street, if you put $100 in Devon in 2013 it would be worth $38 today. So that's what people are looking at in the public investor universe.

That, look, we gave you guys five years. We went to all your talks. We looked at all these drilling locations you had. Heard all the stories. But at the end of the day, you've destroyed 60%-70% of the capital. It's just a huge loser.

And that oil shares lose luster obviously-- these exploration production companies are becoming essentially production companies.

The focus is on capital efficiency by cutting spending to a level allows more cash from stable production. So that's the message. This was an article from Tuesday.

And then this follows along. So you think about how badly those public company stocks are getting hammered. M&A activity is slowing. If you look at first quarter 2000-- except for big deals.

If you've got a $10 billion Permian company, congratulations. You can merge it with another $10 billion dollar Permian company. I like this little story explaining how all these Permian guys paid $30,000-$50,000 an acre for their acreage.

And they've merged it together. And neither really has to mark their acreage to market what it would really be worth today.

Guy's walking down the street going to work. He walks by this pet store. And there's a dog in the window. And it says, $1 million. And so he goes by a couple days. He finally can't stop himself. Walks in and goes, that dog in the window, that's not really a $1 million? The guy goes, yeah. It's a $1 million dog.

And he's like, come on. Who's going to pay $1 million for that dog? And he goes, listen you, might not be the buyer of that dog. But there's a buyer for that dog.

And he leaves. And a week later, he walks by and the dog's gone. The sign's gone. He walks in, he goes, did you sell that dog for a $1 million?

The guy goes, no. But I traded it for two $500,000 cats. So that's I think in a nutshell the M&A business out there right now.

And you can see in the first quarter of 2017, there's $25 billion in transactions. And the first quarter of 2019, $1 billion. So that's one over 25, that's a 25-- it's a pretty steep fall-off.

And what's the read-through for private companies? There's no market. So is it the beginning of the end for the private equity model? Public companies were generally the only buyer of assets. Public assets valuations fall. Private equity valuations fall farther.

Even large Permian pure plays are trading at 6.7 times. And it implies private equity valuations at 3 and 1/2 to four times cash flow. IPO windows closed. There are no public exits. This is a little side note talking to Wil VanLoh, the other day who's the Chairman of Quantum, one of the really fine, big energy private equity outfits.

He says that in 2016 and 2017, private upstream exits averaged $6 to $7 billion per quarter. In 2018-2019, private upstream exit's averaging $1 billion a quarter. so that's a pretty big drop-off.

So what's the read-through for that? Private equity fund-raising collapsing. This is what I told one of my private equity guys I was going to talk about. I said I've got to go to a Oklahoma City and talk. And he goes, what are you talking about? I said, the collapse of the private equity bottle.

He said, not really. I go, really. He goes, oh, my god.

But listen, Jessica, one of our engineers, worked with me on this. We were working on this slide. And I said, overlay the price of oil. I said this shape looks familiar. Overlay the price of oil on private equity fundraising by year. It's highly correlated. Private equity fundraising is highly correlated to the price of oil I would say.

I've never seen this done before. But it's unnerving. In 2008, there was $26 billion of private equity raised. The next year after prices crashed, less than $2 billion.

Then the market kind of recovers. And people started feeling confident again. And in 2014, they raised almost $32 billion in private equity-- energy specific private equity. And then, of course, a big crash in 2014 when the Saudis declared war on the US. And it falls from $26 to $18 million.

And then it recovers in 2017. And it keeps recovering. But in 2017, they raise $21 billion. In 2018, it was down to $7.5 billion. And projecting 2019, the people I talk to think that 2019 number is going to be maybe half that number.

So collapse of public equities, collapse of private equity. The two things are fairly highly correlated.

And if you think about it, it's almost like-- if you look at '14 and '15 and think about housing or tech, you wonder a little bit if that was really-- we look back on it and we're going to think that was a bubble-- that 2013-2014 was a bubble in energy.

It certainly is looking like it now. And the bubble has burst. And so where do you go from here?

Private equity reality today, rolling up assets, consolidating portfolio companies in the same play. You guys aren't using your coloring books. This is the stressful part. I told you this didn't have a happy ending. I wasn't kidding.

Private equity companies are rolling up assets, consolidating portfolio companies in the same play. NGP doing this. NCAP's doing this. A lot of people are doing this. They're wanting to see their companies cut overhead. They're dropping rigs.

Mark Stoner is going to talk in a minute here about DrillCos. He's in the DrillCo business. Your private equity guys are asking you to go out. And even though they're in the business of providing you with drilling capital, they're telling you to go find drilling capital from somebody else. Because they don't want to do it anymore, which is a strange position to take when that's your business.

But that's what's happening right now. They're sending people to DrillCos to help fund the drilling. And the private equity sponsors are looking to return capital to their investors and their funds.

So what's next? The private equity model of a 30% rate of return in 3x to 5x ROI is I'm going to call it-- I don't think I know anybody who's got-- except maybe in the Permian. God knows anything can happen in the Permian.

If prices go to $150,000 an acre when Exxon starts ramping up, maybe you can do it 3 or 5x in the Permian. But I think for most people that model is over. There's billions of dollars in stranded private equity investments in all basins.

And when there is a buyer, it's mostly other private equity. So it's a little bit of the trading the $1 million dog for the two half million dollar cats. And the private equity guys look at each other and go, well, yeah, OK. Will you take it, and I'll take this?

The only cash that funded the system came from public companies. The only cash that came into the system to take out the private equity guys was public dollars and the public equity dollars. And the public guys are out. There is no market-- as you can see from those slides-- there is no market to replace those guys.

What happens? There's all these people like, we own a company. We've got a lot of assets in the Western Anadarko-- not exactly everybody's favorite place to be. We like it. But not everybody thinks it's great.

Patient investors are going to have to emerge that are interested in longer term hold and dividends. It's not going to be, hey, get in. Buy a acreage, drill a couple of wells, flip it, get a 3x. Pay everybody off and go. That model is going to be much more difficult to execute on.

You're going to have to build a real company. And it's interesting to hear-- Marty's talking about they're building a real company with real cash flow. Chris Carson talk about it-- they're building a real company the real cash flow, doing it for the long term. Because I think that's all you can do.

And as you think about that, management incentives within the private equity companies are going to have to be restructured to allow for a longer term hold-- the three year-- Cain Anderson those guys, would love to get everybody out in three years. But that just doesn't look likely anymore.

So that's how management is structured. They're going to have to be changed. And the management incentives are going to have to start rewarding efficiency and cash flow generation, not high rate of return quick buy it and flip it.

And then as you do move into dividends, the management's going to have to share in those dividends.

So once again, private equity will have to follow public markets. And maybe the question is, maybe the idea is to make money? So back to the 1990s, early 2000s model, you're not going to have any equity infusion from your investors. You have to live within cash flow. Run a minimal drilling program, keep production flat-- high grade to the best of the best.

You can tell your private equity guys you've got 30% rate of return drilling. And they're going say, don't do it. We don't want it. Don't do 30 rate of return drilling. It's not good enough. They want you to reduce risk, cut overhead, be dividend focused.

And as you think about getting out of your company, it's you're going to be getting out of it over time. It's not going to be a complete exit all at once.

Any questions? Let's give a hand.

[APPLAUSE]

I may be speculating here. But I understand for a company such as yourself as a wide variety of assets across a huge geographic area, you might be able to see the effects, the transition over time as you exit the company, do it in pieces. How would you see it looking for a pure play?

I think what people think about pure plays is if you're one of five or six or seven players in the stack or the scoop, you need to either buy up the other guys. Or they need to buy you-- that ultimately the analysts and the public analysts look at these plays and think, who's the national consolidator in the play?

If you're in a play as big as the Eagle Ford, your idea is to be bought up by somebody else who's consolidating it. But if you're one of the bigger people, I think you try to raise capital to be the consolidator of the other companies.

Because what you're trying to do right now is-- assets are so cheap none of us want to sell our assets at the price today. So we look at it and most people look at it and say, well, I should be buying people right now, not selling. So I don't know.

It's obviously not a great time to sell. And certainly, our strategy as we go forward is try to raise money to buy more people at this price. Because I tell our investors, historically, we've got some-- God bless them-- the millennials. I've raised will millennials, so I can say bad things about them.

But one of my guys is 32. And he's like, I don't know. It looks like it's over. I'm like, listen, this is the oil business, dude. Go back 100 years. Here's what happens.

When oil prices are down, you buy it up. And then they go back up again, you sell it. It's not complicated.

And now oil prices are down. And they look at it and they're like, well, what if it never gets any better? What if this is the end? You're like, well, I guess it's the end. But, god, you're already going to be broke you might as well take a shot at making some money, right?

Yes.

QUESTION: I wonder if you might draw a comparison of this scenario, not so great, versus cryptocurrency and Lyft or Uber or RideShare.

MAURICE STORM: Listen, those stocks are going crazy. Lyft and Uber, they have destroyed capital-- I think Uber is a $1 billion loss-- I don't know if it's by the quarter or by the year. Lyft and Uber, yeah, they have billion dollar losses. But I think people look at it. it's a growth opportunity.

They're going to say, well, it may be losing $1 billion dollars, but someday when nobody owns a car anymore, that nobody's getting cars, the green things are going to come along. There's going to be all these electric cars. And they're going to be you know self-driving, electric cars-- when that happens, this thing's going to be gold.

So the people tell themselves that story, it's harder to tell yourself that story with oil. Because it's like, there's a lot of it in the world. The headwinds are against it. I think all those tech guys have great stories. And you spin this tale. And everybody's like, oh, yeah. That could be huge. That could really grow.

But I don't think oil has the ability to tell a growth story anymore. And that's what's hurt it. So you either own it, because you have faith in the underlying commodity value. Or there's no point owning it.

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