All right, Josh, welcome to the Resource Insider podcast today. Where are we finding you? >> Uh, I'm here in Houston, Texas. >> Okay. Well, look, I uh reached out to you a couple weeks ago. I have been looking forward to this podcast. Uh I have probably 800 questions sitting in front of me uh that I want to ask you and we're not going to get to all of them today but you know as a way of background resource insider podcast has been around for almost eight years now. We've focused primarily on mining and metals, which is my background, my expertise. And we've had some great success there, but over the last several years, uh, in part because of the success that I've had and and our readers have had investing in the kind of the energy metals, uh, I've gotten more and more fascinated with oil and gas and other forms of energy. Uh, I've started following you on Twitter. You've got an excellent Twitter account. You've been on lots of podcasts and lots of interviews. um and you're someone whose views I've sort of started to listen to and admire in this space and I thought it'd be great to get you on here so you can help educate me a little bit about oil and gas uh particularly oil where I would say I'm the least knowledgeable uh and also our audience who many of whom I think are are on a similar journey to me and recognize the value proposition in in oil and gas but maybe haven't positioned in that yet or or don't understand it as well as they mining and metals. >> Sounds great. You know, uh the the one thing that popped to mind as you were saying all that, I really appreciate it. I want to meet this Josh guy and what I found is that um the more I learn, the less I realize I know. So, you know, I'm on this journey too trying to figure this all out. So, happy to help where I can. >> Well, well, let me start there because h how did you end up getting into oil and gas? Are you from an oil and gas family? Are you an engineer or what's your background into that space? >> No, not at all. Um, so I studied economics at University of Chicago. I'm from Santa Monica, California. Um, I uh I worked in management consulting coming out of school. Um, it was sort of a logical transition like sort of real world applicationish of studying economics in the sort of University of Chicago sort of very intense comprehensive sort of way. Um I ended up not liking that because it was sort of too theoretical and um went to work for a private equity fund and generalist lower middle market buyouts. Um I had this fantastic inspiring intern there who's now a worldrenowned influencer and writer Morgan Hel and we sat in a room together for three months and he convinced me that I should pursue my passion which was value investing and leave private equity generalist whatever. Um, and so I went to work for a multi-billion dollar family office doing public equity investing and ultimately helping run their energy exposure. Um, and this was in the 2007 to 2010 period. So that's sort of where I got real interested in the space. Um, and so you know a number of different misadventures and challenges and problems and so on and ended up uh in 2015 co-founding Bison focused on publicly traded oil and gas companies. Basically, the space had gotten destroyed. Everyone was pulling money out of Publix. I think there were something like a hundred public equity funds focused on oil and gas or similar strategies. And now there's maybe a handful, maybe not even that many, at least focused on North American. >> So, I this is going to derail our conversation a little bit, but I feel like I have to ask this question. How does how does someone's intern convince them to totally change their career path? That's that speaks very highly to the persuasiveness of Morgan. I mean obviously and that has gone on to to reflect in his career so far. But what what did he say to you? What was he doing day in day out to to to convince you of that? >> Well really so what was happening was it was it was early to mid 2007 and so the deal environment in private equity was slowing. You had the quant blow up right around then. You had banks and hedge funds that were doing lending. you know, it was lower middle market at a time where this was sort of like the almost the cowboy years for, you know, private equity. Private equity was much less understood as an asset class and so um the ability to do deals was falling apart. Um and so there wasn't really um there wasn't that we were working on deals, but there wasn't really a lot to do in terms of completing deals. And part of why I was there was to come in and on recently acquired things help fix them. sort of apply the consulting stuff I'd been doing and go fix companies and I was doing some of that but really there was just a lot of downtime and then um a lot of I think um you were working for a young team and they had a relatively you know I guess big fund in retrospect considering you know inflation adjusted whatever but it was a couple hundred million dollars they were deploying and so you know they weren't really sure where they wanted to go so they would come into this room I'm sitting in with Morgan staring out over we were in the Twin Towers in Sentry City in Los Angeles and you know staring out out to the beach whatever like talking about hey like which things should we buy and you know uh the running conversation was hey like which stocks are you buying which fund managers are you following we talked a lot about Monish Pabry um and you know various you know Buffett and various other uh sort of famous investors and um you know I don't know there was any one individual thing um and it's actually sort of funny right because Morgan was so set on becoming a value investor ended up writing books and sort of becoming this sort of like popular uh sort of value investing sort of or just passive investing figurehead sort of and I I ended up doing the thing that he wanted to do and there he is convincing other people to sort of think rationally about money and investing. So um you know again that's one of those things where you never know really who's going to influence you and how they're going to and um I I'd already been investing a lot on my own personally. I loved it. I I sort of funny he ended up going to write for the Mly Fool after that and I had read as a kid I used to read the whole newspaper. Um and um I I was really cool at eight. Um and so um I really liked the mly fool column and I got some money when I was 10 and then like you know bar mitzvah money sort of like cliche whatever you know opened I think it was a Scott trade account or something you know walked down the street with my dad and got to open it and whatever and you know put money in and started buying these things that they were talking about in the mly fool newspaper column. So I'd been doing it for a while. I liked it. I knew I was like I really enjoyed it. I loved talking to Morgan about it. love talking to whoever would talk to me about what they were investing in and how they thought about it. And so, you know, I think I mean I didn't take a lot of convincing, I guess I would say. >> And you went to this family office and did you go there thinking you'd be focusing on energy or is that just sort of how it turned out? >> Yeah, it's more how it turned out. Um, you know, it was a very interesting sort of odd experience. every family office is sort of its own thing and these guys you know they just were really interested in energy and they had a lot of exposure to it and at the time you know many different public equity managers were really focused on energy because I think oil and gas stocks were something like 15 or 20% or something of the market at that point you were sort of in a bubble for oil in that 2007208 period um and so there was really there was a lot going on um in oil and gas and um it was something I I liked the people And I liked evaluating the businesses and I think um you know honestly I don't think I I think I didn't know what I didn't know and so that made it even more appealing than it should have been to me at the time. I had no background in engineering or anything like that. And u you I will say the one benefit of that is over my career I've seen people with specific backgrounds use those backgrounds and ending up sort of blowing themselves up. And again, I made plenty of mistakes and lost plenty of money in different sorts of things. But, um, you know, there's a, you know, tendency for engineers to preference optimizations and geologists to poke holes in the ground and, you know, xyz other expertises to whatever and finance folks to go overly financially engineer companies. And I think not having really any of those backgrounds coming at it from economics and you know some of more sort of intellectual theoretical perspective along with sort of these roots in value investing and just you know reading and following all these different value managers over time. I think it's sort of kept me out of trouble in a number of different places and ways that um you know most of my competitors since we launched Bison in 2015 um you know are gone. And so whether they were smart and went into stuff that would that boomed or whether they were, >> you know, had one of these problems, you know, either way, I think I think it's actually been really helpful to not have had that background. But I didn't know that at the time. And there's a lot of mistakes that I've made in between um starting to invest professionally in oil and gas stocks in 2007 and where I'm at here in November of 2025. I mean, I think it's it's that that kind of phenomenon you see sometimes people from another industry or a peripheral industry move into something and end up being incredibly successful or in some cases dominating that industry, right? Because they they take an an adjacent but similar playbook and put it to work there and and they're kind of they're playing a slightly different game that attracts more capital or more opportunities or whatever it might be. And you kind of see that again and again and again across different sectors. And it sounds like you're you're you've experienced a little bit of that phenomenon yourself. >> Yeah. Here I am, a guy from uh Santa Monica with a um you know, not oil and gas country background. Yeah. Yeah. >> What um so Okay. In 2015, you launched Bison Interest. You're the founder and CEO today. This is a oil and gas focused investment fund. What was the thesis behind starting this? what what was the plan and and how has that evolved over the last decade? >> Yeah, so so I co-founded it. Um the my co-founder um was a private banker at UBS and he and I both saw um folks set up various opportunity funds and SPVS and whatever around the financial crisis and become phenomenally successful. We saw the oil price crash in 2014 and um small caps really get destroyed in oil and gas and it felt like just sort of a bigger version of some of the many cycles that you had seen in oil and gas over the bull market from 2000 to or really 98 to 2014. And so the thought was hey using that sort of framework and again if you if you look back it's like hey that's ridiculous because shale was booming and whatever but no one knew that there was going to be this big discovery of the Delaware basin you know Midland you sort of knew but the Delaware basin was a surprise and the the Montany sort of get revitalizing and duven some of this other stuff there were there were some big surprises there uh from a supply perspective from where we were sitting in early 2015 looking at this and so the thought was hey this is like sort of a three-year opportunity. We'll come in and buy a bunch of these small caps. I think the the sort of model profile was um four times IBIDA, two times market cap IBITa, two times debt to IBIT at let's say $50 oil. And that as you went from 50 back to 100, you'd delever a little, you'd grow a little, and you could end up with sort of a three or 4x or something from there over a three-year period. We looked at prior periods where that had worked. We looked at the opportunity set and I've been doing a bunch of sort of one-off special situation type investing and the thought was to take a bunch of those put them into a portfolio and maybe get some additional return which ended up that part we caught in spades like we did really well I think relative to small cap oil and gas but there was not that uplift in fact we were very wrong I was very wrong and um small cap oil and gas stocks proceeded to date from four times to essentially two times and now they're starting wanted to rerate very slightly. Um but the valuations really sort of the multiples collapsed and many companies failed um or got bought out for low premiums or so on in between 2015 and now. >> Okay. So, you know, I I think back to when I started the resource insider newsletter. Um and I would like to claim brilliance on this, but it actually turned out to be sheer luck in that gold was about $1,200 an ounce at that time. So we started the newsletter uh at what turned out to be the very absolute bottom of the gold market which is where we were really focused early on in making investments in that space and and we made many in those first sort of two years. Uh and that brought us to, you know, 2020 or so. COVID hit, gold had a spike, everything went up. We ended up looking very, very smart. Uh we made several investments at the top of that speak, at the top of that peak rather. Then it came crashing back down and we ended up looking fairly stupid and it kind of balanced out in the fullness of time. And it was a very very uh big and somewhat painful learning experience for me of like the importance of being early, the importance of not chasing deals, the importance of not chasing a commodity. And ever since that time, we've really focused on trying to buy how how would I explain this? tried to buy the companies that we believe will provide us the best leverage in a commodity that we're bullish on at at or near the bottom of that of a of a of that cycle. And we've had a lot of success in that in uranium and in copper and in lithium. Um, and now I I look around and gold is at all-time highs and you know ticking higher it seems every day. And we are in a position now where we're kind of selling off some of our positions in there and and thinking about re redeploying capital. And when I look at at oil today at, you know, in the high50s, low $60 range um a barrel, I just see a I my gut feeling is I'm seeing a lot of the same dynamics that I saw in the gold market in 2018 where everybody hates oil right now and no one is interested in it. And I look around that ecosystem of commentators and then you are a a kind of a lone voice out there in many ways, you know, trumpeting the upside there and that gets me really interested. So I'm going to ask you a question after that saliloquay. Um, you probably don't get very often, but like what is the bare case for oil today? What, you know, why why would someone you say you shouldn't be investing in oil today? and then let's talk about why you see things differently after that. >> Sure. So, first of all, um uh I'll I'll quote Rick Rule who actually I think has come around to sort of a similar thing to what you just described in terms of early in resources did real well and then now shifting over to oil. Um and uh you know what does he say? His uh short-term track record is not marred with success. Um so I like to say my short-term crystal ball is broken. And so, um, I won't proclaim that I know when exactly oil prices have bottomed or will have bottomed. You know, I'll post on Twitter, hey, bullish oil, whatever. But I think over a multi-year period, we're going to see oil prices go much higher, uh, for reasons I'll get into. The short-term thesis on bearish oil is extremely easy, which is that the IEA is forecasting a four to five million barrel a day glut over supply relative to demand over the next year. >> And if you look at the past, that's the largest on a volume basis ever. and it's close on a proportionate basis to the overupp you saw the very temporary overupp you saw in 2020 which sent oil prices negative. So that's the that's the bare thesis and then that's supported by a increase in measured oil on water in the last few months which has sent the quantity of oil on water up by hundreds of millions of barrels uh indicating some tangible evidence of a significant glut. That's the beer thesis. >> And is this oil on water? Does that mean it's oil currently being transported in tankers and whatnot to a market or or or are those tankers being your used as storage because there's so much of a glut how should people think about oil on water? >> Yeah. So so that's the bare thesis and every clarifying question and every thought about that pretty much leads you bullish rather than bearish which is what has me so interested in this. Right. the cheapo high level is hey there's that right so one the IEA has been very very wrong their long-term track record is not marred with success uh they they um have done these very longterm sort of wrong predictions and then they'll do um sort of uh kitchen sink writedowns where there'll be a billion or two billion or whatever like some giant number of barrels that are missing in reserves and they'll just in storage and they'll just they'll just you know get rid of them on their their spreadsheet or whatever. So, they've done that once already and it looks like they're on track to doing it again. So, um so that's a starting point is like understanding where this is coming from like like the um same folks that are trumpeting this. So, there's the IEA um there's the EIA and again we'll get to sort of the specifics but I think it just helps to to lay out sort of the cast of characters and where this this is where the information is coming from and >> IEA is the International Energy Association. What's the EIA? the EIA. So the IEA is technically an NGO which was formed by Henry Kissinger when he was the uh secretary of state. So sort of quasi like western government government affiliated. Um the EIA is the energy information association. I think it is the it's a US government agency or uh and it's it's controlled by the energy department or department of energy which uh Chris Wright now is the head of. And so, um, the EIA and the IEA both were formed to try to give sort of like accurate measurements to try to reduce the odds of there being some sort of shortage of oil. Um, but they've both been sort of repurposed. The IEA has been repurposed to push a sort of clean energy, anti- fossil fuel sort of stance. Um, which they they do to a greater or lesser extent over the last decade. And yeah, um there was a big uproar when they they stopped forecasting or they added a forecast that oil demand might not collapse right away uh recently and and just seeing the the f >> people were offended that they put that in there. Is that the idea? >> Yeah. Yeah. And again like when you see that it's like oh man like is anyone taking this seriously at all? And again like between that and the kitchen sinks like but that's the people use their forecast. It goes into all the investment bank models and it goes into almost all the, you know, expert consultants, whatever. >> And so they're not predicting as much as advocating almost in many ways. >> Yeah. They're wish casting. >> Yeah. Okay. >> And the EIA, sorry you is also wish casting, which is that you've had Trump and then Biden and then Trump sort of trying to force the oil price lower in order to like manhandle inflation. And it turns out that you can successfully manipulate the price of a commodity lower for a period of time. Um the problem is that when you do that, you end up with the inevitable consequences of that which is an under supply and way higher prices. It's the ironic thing about the IEA and EIA which is that they're supposed to be there to prevent this thing and instead they're pushing this thing. So, um, so the I the IEA sort of has these weird sort of green stuff. The EIA was doing that under Biden. Now it's just trying to force the oil price down. They have these weird forecasts that also sort of make no sense in different ways. Um, and you sort of get to a similar thing as the IEA with like a less green push, but still this sort of like extreme bearish wish casting. There's things that don't make sense like projecting higher US oil production and an even lower oil price while also incorporating u you the Dallas Fed does these measurements of producers and polls and stuff and the the EIA is using a forecast price that's way below the stated break evens from the Dallas Fed for example it should be an input given it's also government agency you know sort of tied in um and they're forecasting higher volumes but at even lower than break even sort of price for producers And so it's a very odd thing. So, so the the data is coming from these guys and then it's coming from a set of expert consultant type firms that are barrel counters that I think were very valuable a decade ago when it was really expensive to get AI analysis or it didn't even exist, really expensive to get satellite imaging, really expensive and hard to get all this other stuff. The reality is that that's all a lot easier. And so the best I can tell without naming any specific names, it appears that the new business is to sort of scare people into subscribing. And so, um, which is brilliant, right? Frankly, like I've thought about competing in this space. I might, um, you know, we launched this newsletter thing. Hey, why not go and do sort of the same sort of nonsense? Um, I I try to not put out anything I don't think is real, but um, there is this sort of weird high price competition on, you know, who can be most bearish or who can whatever. Um, and so, um, you you have these guys and the banks sort of somewhat echoing the EIA and IA and somewhat also coming up with their own analyses and forecasts, but they're always tying back to the EIA numbers. They're always tying back to the IIA numbers. And so, you just have this like, from what I can tell, garbage in, garbage out dynamic. And so, I think I just wanted to explain that because it sounds sort of crazy to say, oh, well, they're all wrong. But um I mean they're starting from a bad premise with like a weird political bias. Um you know in one case suppressing inflation in the other case trying to push the green energy thing. And I think that's where it comes from is hey wait a second I don't care. I just want to make money for myself and my clients. I just want to find things that I think can do better than other things that I can understand. And so that's my approach and my starting point. And so to me, looking at a mess like this where everyone's sort of like staring at each other while like, you know, referencing this stuff that's dumb and wrong and very very politically biased. Um, I mean, it's a great place to come in and say, "Hey, well, this is wrong and this is wrong and this is wrong. So, hey, you know, yeah, I could be off on this by a little, but I'm probably going to be right on this." um not necessarily in any given moment or any short term, but over the medium to long term, this this should go horribly wrong for all these guys. And here's why. And maybe here's three or five reasons or something why it's going to do that. >> And so so clear case for for the short short-term bears. Now, what's the case for for being long or maybe medium-term bullish on oil today? >> Yeah. So, um, the the long-term bull thesis, which we saw in 2015, and it's only gotten better. This was the tailwind that said, "Hey, if this time's different, we're still fine." And the long-term bull case is that exploration for oil collapsed in 2014 and it peaked in 2012 with China. So when China went into decline in 2012, like in real decline, you know, they started printing money, whatever, but like China's real expansion ended in 2012. Everyone forgets this, they all whatever um you know, they build all these ghost cities and they never really sort of they they stimulated out of it sort of, but like they it it ended. And so when it ended, all these commodities went into horrible bare markets and exploration by and large collapsed, not just for oil, but sort of across commodities. And so um for oil versus some other commodities, you can't recycle it. You just burn it. And so um you have a much bigger problem than you know for precious metals like for a gold or whatever like your problem is that you have more and more of it over time. And so you need to absorb it. You need money printing in order to to drive absorption of existing and then additional min uh ounces. Um with oil you don't need that because you have depletion of of existing discovered reserves and then destruction uh you know um incineration, combustion, whatever or you know use in chemicals that then end up sort of you know recycling basically doesn't work for most of that stuff. And so so you have destruction of almost all oil ever produced up to like 45 days ago or if you believe the IEA 60 days ago. And so um you know that's really positive long-term because if you have depleting reserves, you have diminishing supply from existing fields, you need to not only reinvest what your industry has been doing in sustaining existing supply, but you need to go do more exploration to discover more stuff and then more delineation. And there's been a little of that, but historically low amounts relative to m what had been done historically. And then the discoveries have been incrementally smaller not bigger. So smaller discoveries and fewer of them and that's leading to this problem where you know there's different manifestations of it whether it's OPEC plus having issues with their spare capacity Saudi break evens skyrocketing other oil company break evens skyrocketing um and there's various other I mean you can just measure the the discovered reserves and announced discoveries and so on and then look at delineation activities where more often than not delineation ends up with less oil in place and higher break evens than initially thought um AC across the world. >> This mirrors the the copper market in so many ways to me. It it's it's sounds so very familiar. And so where are you in the the M&A cycle? Are you seeing the sort of majors and super majors buying up all the mid tiers right now to to replace reserves that they're they're not organically replacing with discovery? >> Yeah, we're in the middle of a merger boom um and acquisition boom. And so, um, it's always good, I think, to take these with a little caution because M&A typically happens either at the top of the cycle or the bottom of the cycle. And I feel pretty good that we're not at the top of the cycle, but you know, there's always the chance that, hey, you know, totally wrong. IA was right for the first time in a while and, you know, their green agenda sort of ended up mirroring reality for the first time in what, a decade plus or whatever. And so, um, you know, it's possible. There's always risk. There's always, you know, there, you know, we launched bison in 2015 and there were these huge wells that started coming on the Delaware Basin in 2016 and I think there's now something like 2 million or more barrels a day of oil produced from a thing that did not exist pretty much. I mean, there were some very old legacy vertical wells or whatever there. Um, and you know, there's an extra million barrels a day from the Midland Basin. There's, you know, been ramp ups in various other places. The oil sands are working a lot better. there's always a risk of incremental supply uh big improvement in technology or efficiency or whatever but you know by and large I think that's really the I think that's the setup and then you referenced copper copper is at basically it's all-time high price oil's near its all-time low price on an inflation adjusted basis just radically different there's lots of exploration efforts for copper whether people like to admit it or not or whatever a lot of the gold exploration efforts are also copper exploration efforts it's sort of a different dynamic uh oil I think is a few years behind behind the gold market and um I would argue is similarly behind the copper market. I don't know that I believe some of the demand estimates for copper just sort of incidentally um which I guess other folks would look at oil and say they don't believe them but the oil ones are hey I think it's going to grow by 1% a year because it's grown by 1% a year for 40 years whereas copper hey it's going to double okay cool like when where why uh tell me about Chinese building and like how much less copper demand there'll be there to offset some of these other demand factors or whatever so >> yeah I mean so much of that those predictions are tied to green energy and electric vehicles and pretty aggressive adoption rates of that I would say which which we're probably not we're definitely not seeing and might not ever see. So I I see where you're coming from on that but you know you're in the middle of an M&A cycle right now. I mean let's assume let's assume that it's at the bottom of a market, right? So when does that capital shift from M&A to to exploration and are you seeing any of that yet uh in oil or gas? you're actually seeing it shift away from that. Interestingly, so Chevron just cut their capital program by a billion dollars after going and buying Hess. And um you they they bought Hess to get into one of the great last discoveries which Hess Hess really drew uh or drove which was uh Gana offshore Gana the Starbucks block. um phenomenal wells, you know, really truly impressive. Uh tremendous value creation in the middle of a time when people were really not doing that too much. Um and uh you know, it's very interesting to see that in the context of of this problem. You're also seeing Exxon sort of move away from exploration. They shifted to they bought Pioneer, so they bought shale after inventory had likely peaked and started depleting. Um, Scott Sheffield has come out subsequently and talked about how he thinks there's only three years of inventory left, which is sort of funny. Uh, I wonder how Exxon feels about that. And this would not be the first time that Exxon lost a lot of money on an acquisition. It would be, you know, uh, there's been many of those. Uh, it used to be fun. I would write these articles on Seeking Alpha just for fun, whatever, to get feedback. And it's like for a while you could just write about oil major multi-billion dollar writedowns from their like poorly thought through, poorly timed acquisitions. And there were just so many like there were more of those to do than than I had time or patience to actually write about. Um so uh the reason to highlight that is that these are the companies that should be leading the way. If you look at what like Exxon and Chevron are really good at, it's not drilling 500 onshore wells and optimizing them, it's just not what they're good at. They don't have the cost structure for it. They don't know the people for it. It's not what they built in their organization. It's not in their DNA. There's no part of Exxon or Chevron that's good at that. And you can actually tell there's actually this sort of weird thing that I think is relevant to to all of this and understanding like the um the brokenness of the current oil market from a producer perspective and why there's going to be so much higher prices. So Exxon and Chevron the whole business the the business model was was innovated by Rockefeller, right? And Rockefeller didn't come at it from a producer perspective. He came at it from a pipeline/rail perspective and originally refining. And so if you look at their businesses now, they're basically scattershot. They're like the highcost, lowquality producer in the Perian and they go and buy stuff in various other places. Just in a bidding war for a Gana asset. Um they have their refining assets and chemicals assets spread all over and they've both spent huge amounts of money developing out these West Texas fields that and southeast New Mexico that again they're not particularly good at. Like on a rock adjusted basis they have very poor results. on a unadjusted basis they have like middle of the road results but they have the best rock uh because of legacy positions and because of their acquisitions. >> So um what they haven't done is the Rockefeller game plan which is to come in and optimize the midstream and optimize their upstream operations and fully integrate it with their refining on the Gulf Coast. Change their refining and upgrade it to be able to actually use the volumes that they produce. um integrate that in with their chemicals businesses and then just focus relentlessly on being the lowest cost in that sort of integrated supply chain in order to deliver gasoline that's superior and lower cost um at the end point that their competitors would be unable to compete with by not being integrated. >> They have not done this >> right at all. Ex's done it a tiny bit like one hundth of what they they could do. >> Why like what do you make of that? That seems like a pretty obvious uh value creation case. Why what are they missing? >> Uh well, partly I think they bought in at least partially to the sort of peak oil thing. So, hey, if you why do that when you can go invest in sort of lithium Brian extraction in Arkansas or you know go bid against your competitor on this sort of big sexy offshore field that you'll go lie to everyone about and say it's break even. You there's a race to the bottom on that stuff. They used to do it with Shale where one producer says, "Oh, I'm $50 break even." The next one, I'm 45 and they they you get to there were some estimates where Shale was supposedly break even at 28 and you look at the financials and there's no basis for that at all. The financials are break even at 70 and uh or they were at the time and they were claiming 28. Similar on this offshore stuff. So, I think misaligned incentives, broken organizations, complete sort of strategic disarray from I I'll talk to I'll still see these guys at conferences and stuff. I was at a conference recently where there were some folks from some of these super majors and they actually thought this was a great point and they said, "Look, we can't do that because I'm in the refining business or I'm in the upstream business and we don't talk to the refining people. We don't talk to the upstream people. We're we're we're in our silo and our manages those >> overseeing the kind of end to end product line, right? The kind of soup to nuts approach. >> Yeah, the CEOs, but okay. Like, and that's where like all of a little push back on some of the generalists that are getting into oil and gas and say, "Oh, Exxon should triple or whatever." Come on. Like, Exxon should like figure their stuff out. They should stop having refineries blow up or catch on fire every year or two or three. Um, same with Chevron, same with Shell, same like these guys really like they have very sort of broken organizations and again you can see it there's these external manifestations like bidding wars on offshore assets that are not attached to their sort of integrated complexes. Um, and then you know, I mean, the air quality in Houston is is too frequently bad because you'll have these refinery fires and chemical plant fires and explosions. And again, I think that's that's not intrinsic to the business. You don't need to have refinery explosions. You have them because they underinvest in the maintenance because they don't prioritize it because it's a a cost center. It's not a profit center. But it's ironic because Standard Oil was the exact opposite. It was, hey, let's relentlessly optimize this stuff and you're really, really far. So again, why does that matter? Well, you have the companies that were set up, right? So why' they deviate? They deviated from this in order to be international exploration machines. When we were running out of oil in the last cycle, everyone was worried about peak oil in 2000, 2005, whatever. And so um they're not even doing that anymore. They've pivoted away from that and now they're sort of these like lost entities. Um and so there's not exploration like you'd need. there's not delineation like you'd need. There's not even the optimization that they could do that would make a lot of sense. And so without that, um I think you end up with much higher prices. And I actually think these oil majors end up they're they're strategically misaligned. And so I think you end up with them not being the beneficiaries uh because they have so many challenges and issues within their organizations and within their asset bases. >> So I'm really glad you brought this up. This is one of my favorite sort of talking points and one of my kind of core thesis. So my whole career, probably yours as well, across markets in general, across the stock market, we've seen almost every business kind of broken down into its smallest conceivable parts, right? They're all split into small, hyperfocused businesses, right? And and you know, there's a lot of good reasons for that in public markets. People want exposure to a given thing and they want them to optimize for that given thing. And we've gone from seeing maybe in the 70s or 80s like the conglomerate premium that maybe the Enrons used to get or the GES used to get to the conglomerate discount now, right? That so many of these things are discounted because they're too big and too complicated and too bureaucratic. And you know, we've seen we've seen most things break apart. But now I feel like in the tech world, we're starting to see this real push towards vertical integration. When you think about like a SpaceX or an Amazon or a Tesla, some of these companies that are kind of trying to control their whole supply chain and and create every aspect of their product from from sort of ideiation to to end of the assembly line and hearing you describe the the inefficiencies uh and ineffectiveness of the super majors, it makes me wonder like is that model dead or is it perhaps just not being done correctly. And there's some incumbents, there's some smaller companies that are trying to do that now, what you've described, right? Like they have their product, they have their assets, their goal now is to get it out of the ground as cheaply as possible, get it to customers at the best price with the best margins possible. Do you think that's something we're going to see uh these sort of new vertically integrated uh companies arise in the energy sector or or am I just kind of fantasizing about this? >> No, no, I think you're seeing it. I think like one example would be Suncor where they were doing a quite poor job of this and then Elliot came in and replaced the management and I think at least some of the board and they brought in um incidentally a former CEO of Imperial Oil which is a subsidiary of Exxon in Canada who had done a great job. Imperial is probably one of the best examples of what to do right where you tightly integrate everything you manage it extremely well constant cost efficiencies focus on returning capital focus and they've done that business unit is fantastic and it's an integrated production uh and it's oil sands to um I think they even have gas stations all the way through and very efficient one of the lowest cost models really great and so Suncor is doing that too I think it's actually one of the things that's really helped the Canadian oil and gas companies and where you're starting to see more of a multiple up there is the success with Imperial and then that success being replicated um with Suncor and I think it's starting to be replicated by a couple more of their competitors and so I don't know I think that the problem is with tech you can sort of create it there's network effects but you can sort of create it out of scratch >> to some extent especially if the other guys you know um what was it uh whatever came before Facebook it was the MySpace it was really you know good, but like they had lots of problems. And so you don't need like MySpace to refine itself. You just fa create Facebook and it kills it. Um there's not really room for that in oil and gas per se because um these are fixed assets and so someone needs to buy them. But uh I mean Exxon and Chevron and Shell, etc. are terrible sellers. They'll sell these things for pennies on the dollar when they sell, but like I was alluding to their big write downs and transactions and so on. Um but it's real hard to get. I don't know that they're going to go sell their, you know, West Texas to GF Coast plus ref uh plus, you know, the refining plus chemicals plus gas station whole thing like that. They should, right? They should spin that out and it should be its own thing and they should bring in someone to just manage that and have it be sort of a a super fantastic integrated company similar to Imperial Oil or Suncor. So, I don't know. I'm not sure there's room for the whole thing to fix itself. The reason I went on that tangent though is that there's something broken in the industry and so you don't have the guys that are built now to go do the exploration because it's so expensive. It's really hard for small independents to go do the big exploration. Frankly, even Hess couldn't really do it. That's how you ended up with Exxon in there is, you know, needing the Exxon money through the downturn to be able to fund that exploration. So, um, you're just not seeing it. And since you're not seeing it, you're seeing reserve depletion and you're seeing um global uh decline rates for oil production rise actually pretty rapidly. And so you're needing to discover more, but you're discovering less. And so that's sort of that long-term bull thesis. So yeah, is there an over supply now? Sure. Right. Is it 4 million barrels a day? Probably not. It's probably a lot less. But am I phased by it? Not really, because demand keeps growing way above the consensus of it shrinking. uh but growing in that long-term trend and then they're burning the furniture and so as you burn the furniture but the demand grows >> I don't know at some point you end up with much higher prices and again I just don't think the the companies that should have been doing that exploration that aren't end up as beneficiaries because they just don't have that next field they they've discovered to generate the high historic return on invested capital and return on equity that they discovered in the last cycles from having invested in prior cycles. Okay, thank you for that and you know you kind of highlight a point here which is the supply side of oil and gas is so much more complicated than mining for example right again we I think of copper like the majority of the co world's copper comes from maybe a dozen mines uh most of it comes from Chile and Peru a few places in Africa and it's it's very simple in the grand scheme of things from a supply side and it's so inelastic takes so long to bring a new mine online and and ramp it up to any sort of volume of production. You can predict with a relatively high degree of certainty, right? But when I when I think about the oil space, right, I think about American onshore, I think about American offshore. I think about all the international interests. Some of them are, you know, independent capitalist systems. Some of them are controlled by different governments. Some of them are, you know, cartels like OPEC and all with competing interests. And how do you how do you start to weigh these things to build a view of of um I guess the supply dynamics and like I you know I I hear a lot of people say you know the basins uh the onore basins in the United States many of them are sort of peaking production and we're going to see decline uh uh in the notsodistant future. But then I hear other people say, you know, it doesn't really matter because the Saudis are just going to start pumping up uh supply and they're going to fill the the gap on that. No problem. And then there's Venezuela and you know, who knows? Maybe, you know, Donald Trump invades and nationalizes the oil or or brings brings oil back to market. There's so many factors here. How do you start layering those things when you're thinking about just oil? And then there's a whole other set of complexities with gas which which maybe we'll have some time to talk about after. >> Yeah. Um I mean I think it's a great question. I think it's the the complexity you just described is part of why I'm not particularly phased when a bunch of folks go and try to measure every individual component of that to a tremendous degree of precision and then make large claims based on uh you Morgan actually turned me on to this uh the the problems with financial modeling you know on an individual company basis where you know the more complex your model the more likely it is that you're going to be precisely wrong in your understanding of the >> and so >> my thought on analyzing the oil market, my approach to it is a little different where I'll track all of these different factors because each one of them could be the swing factor, but generally there's only two or three factors in the oil market in a given year that end up driving the price. And then there's maybe half a dozen or so over a decade that really uh determine whether you're in a terrible oil bare market or a you know roaring oil bull market for a multi-year period. So um it's not it's really complicated and I think the complexity and the variety of supply sources I think sinks a lot of the folks that try to go and barrel count worldwide. Um because again it is complicated and there's a lot of it that's unknowable. Um, so >> what are these factors that you're really contemplating that that that swing there? >> Yeah. So I think probably the biggest single factor is how much OPEC plus spare capacity there is because if OPEC is out there I heard it described recently they have this gut like big stick that ready to like smack the producers if they overproduce. Um so if that's the case then you know oil is going to be for the most part if there's a big um potential surplus from OPEC plus you know it's a it's an oligopoly it's not really and they I mean it's technically cartel but it's not enforced in the way that you know there's no Pablo Escobar equivalent for uh the uh for the OPEC cartel. So again, that's where I think oligopy is probably a better better term or monopoly, whatever like different different economics terms for this, but alopy is probably the simplest uh mental framework in the sense that um there's not perfect cohesion. And so um the the question is, hey, is there 7 million barrels a day of spare capacity or is there one or two? And if it's one or two and not seven, then obviously that puts you in a completely different place from an oil market perspective. And that's a big question and you can measure it and you can analyze it and you can consider it. And I did go out to Vienna in February. I got invited out to meet with those guys along with some other oil analysts and you know investment bank to meet. >> Yeah. Yeah. To meet with I got a actually I had this really cool experience. They got to they had this whole day where they showed us different stuff and complained about how people get the oil market analysis wrong and whatever. And then at the end of the day, everyone's exhausted. Um they had us all stay at the Hilton like across the street or whatever in Vienna. And they hosted some like happy hour thing, non-alcoholic happy hour, which was also sort of an interesting uh you know, coming from Houston, Texas, going to Vienna to to have a coffee at night. Uh yeah. So, um, I got to sit right next to, uh, secretary general Python and across from their like head of macro, um, I I mispronounced his name. I shouldn't even try. And, um, and then a few there was like one guy from Argus, one other sort of independent analyst, and one other person there. And God, I sit with them for two hours and chat with them about how they're thinking about things and, you know, sort of what's what what really going on with their understanding of their group dynamic and sort of how they navigate it. And so I'm not saying that gives me a perfect insight into what they're going to do day-to-day, but the best I can tell, you know, at Bison, we published um a few white papers on OPEC plus spare capacity and how we think that people have grossly overstated it. And at the very end of that, I took the the head of macro researchers. I was like, "Hey, like, you know, I really appreciate you guys keep having me come to this because, you know, we put out this stuff on spare capacity." He's like, "Josh, you don't understand. we don't publish spare capacity. Those are our member nations that publish it and we don't do that because we can't verify it. And then he was a little concerned, a little interested and asked me how I measured it. And I told him and he said, "Hey, yeah, that sounds actually um I I think they had a couple of different ways they the names for our sort of measurement and analytical approach." And basically, we looked at the peak production from each of these countries at moments when they were in price wars and figured, hey, when they're trying to punish each other by over supplying the market, that's probably the right way to tell how much like their peak amount, >> how much they can actually turn on when they when they want to do it. Yeah. >> Exactly. Which is logical, right? Like in April 2020, and then and then the one thing I did that people didn't like, but I I think it's fair. Um, if you have to deplete your own storage in order to get to a certain supply level, that's not your supply. That's your supply plus storage. So, if you net that off, we're real close right now. And why does that matter? Because one of the big sources of over supply is this expectation that OPEC's going to keep bringing on more and more. OPEC countries are going to keep bringing on more and more production, and they just don't have it for the most part. And so, we'll see, right? I could a year from now we could have two million barrels a day more from OPEC than we have right now. I just it seems very especially at the current price very very unlikely. Um and they agree. So I thought that was really interesting and you know you might as well if you have a the bison right you face into the storm you have a big fear big concern go figure it out. And uh I don't think the Saudis would appreciate me sort of tooling around their their fields or checking out their data. Uh but you can read their financial reports and you can read look at the um Aramco balance sheet and look at what's happening with their bonds and look at what's happening with their dividend and you can sort of see I think that that there's really not a lot of spare capacity um within this uh national oil company that would have all of it among other things. So anyway, that's I think one the biggest factor and there's one other that we should probably talk about and there's many others that could be talked about that are of lesser uh significance but do you want do you want to talk about the one other uh >> yes yeah >> okay so the one other is um shale well productivity and the ability to sort of force down the cost curve through new discoveries and then through productivity efficiencies like drilling longer laterals, dropping drilling costs and so on And so I think we're near the end of the productivity gains where you're getting to sort of the longest laterals you can get. So the the ways that they've improved productivity is one discovering new fields which there aren't really new shale fields being discovered right now in the US or Canada. Like we sort of know what's working. The stuff that people are trying to you know go into and explore is mostly not working. Um there hasn't been the next Delaware basin. Um >> like we saw in 2016. Basically, it's just all been downhill from there on a per foot basis. I think you saw a productivity peak for oil in 2020 and then for gas in 2021 on a per foot basis. So, okay, what they did after the last discovery is they started drilling longer laterals and they started putting more propent per foot in to try to stimulate the rock better and to try to get more feet of reservoir for per wellbor to try to maximize the productivity per well. And that would reduce your cost because you need fewer wellbors per amount of rock exposed and you need fewer feet exposed uh because you have more sort of propent um fracturing the rock. So you maximize the fracturing, you maximize the amount of reservoir that's accessed, you minimize the number of wellbors and in theory that gets you to and you also optimize the placement. Uh you put it in exactly the right vertical spot in the rock and you avoid falting and other stuff. So you're sort of there now and maybe you'll get a little longer laterals, maybe not. But >> so these are like perfectly positioned, maximally length, pounded full of sand basically, and getting every drop of oil out of there or gas as cheaply as possible. Am I basically summarizing that in layman's terms? >> Exactly. Exactly. That's it. And then there's this really fascinating problem which is you have inventory depletion. So, it's not like there was an infinite number of these wells to drill from the outset. There was a finite number of those wells. And figuring this out, ironically, I think by the time you've optimized your well design and placement and lateral length and so on, typically you're way over halfway through with your core inventory. And you might be sort of 80% through of your original core inventory, the stuff with the lowest break evens and highest productivity. and you've turned the economics from your tier one, so the one step down from core, um you've turned those those economics towards core, but even that you're typically about 50% depleted. And so we've raced through I think it's hundreds of thousands of horizontal wells in the US um over the last decade. I have to go back and check the exact numbers, but um we've raced through all of the best. Basically, the core is pretty much done other than a few sort of complicated sections where you weren't able to drill it because of like land issues or you know there's a what is that a pot ash mine or something in the middle of the perian and the New Mexico side. So there's some complic complications on drilling some of that. But outside of like specific like land title issues or whatever, you've basically drilled almost all of your core and you've drilled almost all of your tier one. And so we're in this weird spot where yeah, the laterals are getting a little longer and you're putting a little more prop into replacing a little better. You're designing a little better, but those improvements are not are not forcing the break even cost down anymore. And if you think about it for any commodity, if your costs are not falling, they're rising. And once they start to rise, there's a lot of pressures that could force those costs up a lot real fast. If you run more rigs because you're trying to c make up for, you know, worse wells on volume, you end up running them less efficiently, especially as they ramp up and then you more rapidly deplete your remaining inventory. And then, and again, I'm not saying that we're at the peak production for shale. We could produce more at a higher price from from here. Um, but we're probably at the peak economic productivity for shale, at least onshore uh onshore US. >> Okay. Wow. So when do you have a prediction on when actual sort of net or gross production is going to start decreasing because like I know it's sort of peaked maybe or or is slowing down I guess the growth but it hasn't started to shrink as I understand it in any of the basins yet or do I have that wrong? It looks like it's started to, and again, this is one of those things where it obviously will matter a lot once it's happened, but there's various things that can keep it from showing up until it's already well underway. And so, one example of that is you're seeing there's natural gas liquids, which are essentially oil products, right? That you can get them from the ground, but also they're one of the outputs from the refining process. This is like propane and butane and the pentane. Yeah. Okay. >> Exactly. And you're seeing reports of increased amounts of oil coming from West Texas that's being either rejected or getting punished by refiners because there's too much of these natural gas liquids that are getting blended in right now. And so that's the sort of thing you would expect to see in a decline, not in a uh boom. Right? If you're if you're growing your production, if it's easy, if it's cheap, you're going to just sell your oil and not risk, you know, having the legal and operational issues associated with trying to cheat and stick other stuff in. So, so you're starting to see that, which is, I think, a reason outside of measurements to think, hey, we're getting into that decline. um you're seeing producers who were growing a lot and were not interested at all in anything other than just growing a lot um selling or doing so like Pioneer or doing large acquisitions outside of their core areas. So EOG just bought a you know in Cino and Udica what was a 5.6 or something billion dollar deal. Um, you're seeing them also in addition to that going to Abu Dhabi to go drill shale wells in the Middle East, which is fascinating and not really what you'd think if they still had a lot of inventory left in the core of the Delaware basin. Why would they, you know, you can drill your oil supposedly for $28 a barrel break even? What are you doing? Uh, you know, you have these supposed they call it double premium wells where they're, you know, 100% irra at $40 oil or something. If you can do that, what on earth are you doing messing around in the Middle East? like what why are you there? Um and so it's not about any individual producer. It's that the the pattern >> I think is indicative of you're either in decline now or you're going to be in decline pretty soon. But you know, I think there's and there's a certain amount of uncertainty. Again, there's stuff you can do like sticking NGL's into your oil to try to sort of hide or forestall some of those declines. But I think I think we're we're sort of there. And again, I'm not the guy to tell you exactly the day that we've gone into decline. And I've thought we were in decline before and I was wrong. Um, so maybe I'm wrong on this by a few months, but I don't think I'm wrong on this in a few years. And you're even seeing behavior again from the companies that claim they have sort of the most inventory here and so on. That would indicate that there are real problems. Um, and you're also seeing those problems not just from those big companies. You're also seeing them from smaller companies. um where you know they might have had a lot of tier one inventory that's now a lot depleted and you know burned through a lot of tier 2 and maybe they're now um maybe they're now uh selling or merging or you know doing some other sort of big strategic shift ahead of just full depletion and needing $100 oil to come back in and drill the rest of their fields. So you're seeing you're seeing that sort of M&A which is potentially capitulation which again would be a good signal that you're getting into potentially material declines. And then why is all this matter? We're like okay why are you even talking about this right? Like why not just wait until you can see a big decline? And the answer for that is that the decline rates on these fields are really high. And so once you get into decline um you could potentially see production fall really fast depending on reinvestment rates. And so if you blink you could miss it sort of thing. Um and if you blink you could go from 58 or 60 or whatever WTI to 100 in that month or three months or whatever as people go from thinking or over supply to panicking about where you're getting your oil from next. >> Okay. So you can get those those rapid movements. You've built a view on on how do I want to say this? So you have a view for onshore depletion. You have a view uh for call it OPEC and foreign supply. How do you and you you've got a view on growth which you know 1% a year consistently for the last 40 years or whatever it's been. How do you as a money manager start thinking about how to position for this environment for oil exposure? It sounds like based on our conversation, you're almost certainly, you know, not buying the super majors. Where where are you focused? Where do you think the value lies today? >> Yeah. So, when we launched Bison, we had this idea that we were going to go buy companies that had um you know, solid management teams, uh survivable balance sheets. I think at the time we called them good balance sheets. What we meant was they could survive a downturn. Um and um cash flowing assets. and then obviously at a large discount to our view of their intrinsic value. And so what we found is that generally these things you have to give on one of those factors because you're generally not even in a very mispriced market even with capital leaving and whatever it's generally hard to uh get all of those. Um and I think we've done well with that. We've way outperformed versus the small caps and whatever. Um, and sometimes it's on management and occasionally I've gone and fired management teams and boards and stuff. In other cases, I've just very significantly pressured them into sort of doing what I think they should do and that's created a lot of value, I think. Um, in other cases it's been balance sheets and occasionally that's burned us. So, you know, we actually had I think pretty much no bankruptcies during COVID, but we had one a couple years later. company sort of ended up running up its costs a lot and we had sold a bunch but still you know that was uh that was painful. Um and then occasionally we'll own stuff where there's a little either less cash flow and more resource or some other sort of um of attributes and those actually have done okay. Weirdly those um generally if we own like a big discovery and then some pipelines and real estate and other stuff like those actually the the asset intensive things have done pretty well. And so the the reason to share what's worked is those are the things that I'm looking for, right? So it's less, hey, this company has the most upside from higher oil prices because a lot of them have a lot of upside from higher oil prices. It's, hey, what can survive if this lasts for a lot longer and then have a lot of upside? Where's their compounding value at a really big discount? Where's their, you know, value with some, excuse me, some real significant catalyst where, you know, they're going to go sell this thing or drill some additional wells and grow a lot or, you know, um, do some other sort of unlock or, you know, buy back 10% of their stock a year and grow 10% a year and pay a 10% dividend or whatever. you just get this crazy above market return where over a multi-year period you sort of get because the the highest cost guys are not they're not always the right way to to get exposure I think um in fact they're usually not and then if you get into a period a prolonged period of lower prices the value degradation is so extreme that you were better off going to instead of the highest cost guys the next level down or you know even to sort of midcost type companies where they can compound value um such that when you emerge into a much higher price there's been that value compounding. So I think I think it really just sort of depends on uh risk preferences and my preferences to buy things that are really cheap that maybe have for the most part not the most upside to higher oil prices if they were to happen today. Do you focus primarily on the producers and EMP companies or are you also investing in pipelines and like the other sort of picks and shovel businesses, right? The the fracken producers, that sort of thing. >> Yeah. So, we'll do both. the the focus for our investment strategy is on the producers, but um with a producer focused, producer centric strategy, we've often invested in companies that are one or maybe two degrees removed from that production. Um, and with that focus, it's actually I think we've actually done better and I'd have to go back and double check this, but I think we've done better in oil field services and pipelines than we've done in upstream because we've been so careful and so picky about which ones to buy and when to buy them and when to sell them and so on. Um, there was this one midstream company who used to love to buy. uh they would basically threaten to or would cut their dividend every sort of downturn distribution, every downturn. And so the same one uh it was trading at like 20 and then we bought it at four and then went back to 20, sold it and then it went down to four and bought it and then sold it at 10 and then went back. I mean, ridiculous nonsense where you could get crazy returns in very very short periods of time. So we'll do that. Um and then um and again, you can't count on that. There was always risk and uncertainty, but that's worked well for us. And then on the services side, right now we actually have a lot of exposure because I think some of the services have also underinvested which is part of what has me so bullish longer term. Like in order to get the exploration and then delineation then development you actually need equipment and people and technology and if you don't have that then you can't get it. and the services companies have been bleeding down the rigs that are available and the pressure pumping that's available and the sand that's available and the chemicals and so um you know the capacity is limited the profitability for some of these companies is still actually pretty good as they choose to underinvest and pay off debt and buy back stock and the quality of the businesses is so excellent there are still many unfortunately mediocre oil and gas producers um especially on the smaller side I guess I've just sort of made the argument that Exxon and Chevron maybe aren't so great either. But on the services side, it's hard to find bad publicly traded oil services companies because so many >> had to be excellent to survive. Is that kind of the the thesis there? Well, when you talk about how much harder it's going to be for every incremental barrel of oil and how much more expensive it's going to be to get out of the ground, my mind really does go to these again these picks and shovel businesses. A couple years ago, you know, we bought a Frackand terminal in the Bacan and it's a it's an asset that was once the sole asset in a publicly traded company. And the the value of that publicly traded company was was well we we bought it for about just over 10% of the value of what it once traded for. And it's sort of an irreplaceable asset. Uh you know, the cost of replace it would be two or three times to build it that we bought it for. And I we saw it as such a unique opport like as such an undervalued opportunity that was getting paid on volume and it's just getting paid on volume of sand delivered to market. And so if you we were we we really spent a lot of time thinking about how we could get paid on sort of volume and an asset that was making money at the bottom of the market uh and still had upside exposure. And it's gone sort of phenomenally well from there on. And I'm constantly on the lookout for other businesses like that, either in private or public markets that are going to benefit from this sort of drill baby drill mentality if if that does happen. And and exactly what you're saying, just how much harder it is going to be and how much more expensive it is to to get every incremental barrel of oil or MCF gas out of the ground. >> Yeah, I I agree. And I what what has me in a lot of these services stocks is this sort of very rare combination. So, you know, I've I've read a lot of books and listened to a lot of interviews and read a lot of letters from famous and less famous value investors and um it's common to either find companies at low cash flow multiples or at very large discounts to replacement cost, replacement value. And it's so rare to find companies that are making lots of money, at least relative to their current market caps. Typically, it's because the stocks are down a lot, right? And then they had a lot of debt. And my favorite are those, and then they pay off a lot of that debt. And it's like, okay, well, you have less debt and lower market cap, and you're still making a lot of money, at least relative to this new sort of reset, lower enterprise value. Um, and because if your enterprise value reset, maybe you're at a fifth or a seventh or a third of replacement cost. And so to me, that's actually probably one of the most interesting kinds of businesses out there. And so we have pretty much our maximum exposure. I actually thought about maybe I should just go set up a separate strategy just to own those. But um you know, for an upstream strategy, we basically have as much exposure to those as I think is prudent. Um and they're just so compelling. They're so wellrun. There's no compromise on balance sheet. There's no compromise on management. There's no compromise on strategy. These guys are returns focused and operations focused and you know these are people who um you know would have garnered enormous valuations in uh you know the tops of cycles and right now people just aren't even looking. In one case um there's these two super investors that are like that own a bunch of this one uh services company and their other businesses pretty much all trade at giant valuations because people piggyback on them. And this one particular oil flood services company like no one wants to talk about. Everyone hates it. No one and >> it's fine, right? Like it has a little too much debt but not a lot too much and was able to refy recently. And you have these people who literally everything else they own and touch that people are aware of trade at, you know, eight times Ebita, 12 times Ebita, huge premiums for replacement cost. And this thing is at a fifth of replacement cost. It's like, okay, well, are they brilliant or are they terrible? Do you how much do you hate oil field services versus how much do you love XYZ brilliant you know 20% plus compounder over 30 years billionaire and so to me it's just so amazing that >> that must get you excited to sort of see those opportunities though doesn't it like doesn't that kind of get you amped up and and knowing you can buy these things so cheap and that they're they're like there literally has to be a repricing at some point right there has to be a repricing you know one of the best trades we ever made was in uranium and we bought a bunch of uranium equity when uranium was something like $25 a pound. And when we looked at it, it was the simplest thesis in the world. It was that that was below sort of the break even price for any mine in the world to mine Roman to mine uranium. And so if you had any view that nuclear energy would continue to exist, then uranium miners were were like a no-brainer. And the returns bore that out over the next several years. And again, when you talk about this, I see a lot of that same setup. I mean, we bought that Fraxan terminal for uh under six times IDA, I think. And you know, we're seeing other other acquisitions similarly to that. We're working on one right now. And there's just nobody that wants them. No one's interested in them. No one cares about them. And it's it seems like such a unique setup to me. And and I'm interested to hear where you're seeing those opportunities in the sector. >> Yeah. Um, so, um, yeah, I mean, you could sort of tell I got excited about talking about the last one. It's sort of that's my favorite thing is like you the macro analysis is fun. It's like great to be a contrarian. It's great to I think have like a variant view on this thing that all >> but it's better just to find great deals and to make money. Like that's what it's really all about, right? >> Yeah. Yeah. Really, that's uh it's it's pretty amazing. So, um, yeah, I I, you know, I think a lot of it for me is is trying to avoid some of those specialty, uh, services niches. So, like a frack terminal, for example, like I'd worry about that. Like there's other there's alternatives to um to getting sand to wells. And there's other, you know, there's different technologies that people have used and different kinds of um delivery mechanisms. And so, you know, is the right mechanism having a terminal like that or is it having, you know, uh, you know, it's a good question? >> And it's different for different basins and different locations within those basins. And it's, yeah, it's it's complex for sure. >> Yeah. And then what happens in North Dakota from here, right? Are you going to see, you know, 500 wells a year completed there or are you going to see 50 or are you going to see 5,000? And I think there's some real open questions there. And I think one of the things I've done on that and again it's probably because I'm focusing on it from an upstream perspective and coming in I'm looking at hey where are the best returns for upstream and then where are they going to come next and where does that trickle down whenever exactly and then who benefits the most as you go from you know $58 oil to $75 oil and who benefits the most to get to $85 oil and so on and like can they compound value as that happens and So um you know that's kept me out of some of the esoteric stuff some of which has worked and some of which hasn't worked and so on and in some of the mainline sort of services providers um where where it's less about my ability to identify differentiated technology or differentiated um need for infrastructure uh or services or whatever and more tracking hey is this still the thing that's like you know necessary to get more wells producing or not. And if it is, okay, are there any big innovations these guys are behind on, yes or no? And then if they're not behind on stuff and there's not really some replacement for it coming up, um, I can go buy these things. And the the downside is that the the nichy stories like what you're describing can trade up a lot. You can get someone that really needs it or believes in it or whatever. And so in the public market, that can get rewarded first. And I think I'm okay with missing that in exchange for the near certainty. Nothing's certain, right? You could just whatever somehow, you know, uh it's like the um what was it? Guys and dolls where you know the guy really wants to bet on one thing and the professional gamer is like no, but um he covers the guy's tie and says, "Hey, I'll I'll bet you I or bow tie. I'll bet you uh you know, you don't know the color of your bow tie." And so similar sort of thing. I'd rather not do that sort of bet. I'd rather bet on this the thing that um you know I have a a good good odds on being right and very low odds I think of getting wrong and um you know maybe that means I'll have to wait a little longer for a return on some of these things or maybe it means I'll get a little lower of a return but in exchange I think the the certainty on it for me is a lot higher. So Josh, we've kept you for about an hour now. Uh, and I I would love to have you back another time to talk about gas because we didn't touch that at all in this conversation. But before I let you go, can I ask you, you mentioned Rick Rule uh earlier on in the conversation. He's been publicly pretty bullish on Canadian oil at the moment. And uh, as a Canadian, I feel like I have to ask you, what is your view on Canadian oil? and and what are some of the differences between Canadian oil and gas producers versus American oil and gas producers? How should investors be thinking about that dynamic? >> Yeah, so it's real simple. Um Canada is extremely poorly run relative to where how it's been um run as a country for a hundred years or whatever. It's very the the fiscal and governance aspects of Canada are extremely poor and that's reflected in a very very weak Canadian dollar and oil is denominated in US dollars. And so again, it's not about any individual politician. It's just sort of this like sort of societal dysfunction. And I have to study these things a lot to try to not end up with expropriation or or Canada has had issues where their local oil prices have been very low because of insufficient pipeline capacity or whatever. But right now pipeline capacity is not an issue and the local currency is very very heavily discounted. And so that means that they're selling oil for close to $100 a barrel in Canada while US producers are selling their oil for $58, you know, before uh local differentials and so on. So um that's the biggest driver from what I can tell. The people make arguments about, oh hey, there's this field or that technology or whatever. And the reality is that from best I can tell, for the most part, that's just a function of there being higher oil. Like if you had $90 US oil and if the the had if the diff currency difference had switched and it was $60 Canadian oil and um you know $100 or $90 US oil, you'd see a development boom in the US and you'd see a slowdown and a lot of the things that people are touting in Canada uh slowing down. So I don't think there's any sort of magic. It's not, you know, there's different attributes to different oil fields in the US and Canada. There's more oil sands in Canada. there's more unconventional here in the US. Um different stages of development and so on. But I think the biggest single difference is the currency difference. And the good news for Canadian producers um is that Canada doesn't seem unfortunately to be resolving this. The bad news is they're not resolving it. But the good news is they're not resolving it. Canadian dollar has just weakened over and over and over again. And so that's been extremely good for the profitability of these businesses. So I think that's how I differentiate it. Yeah, I share your view on Canada and unfortunately I share your view on the the direction it's going and that there's not going to or at the very least that there aren't going to be any changes anytime soon. So I uh yeah, I couldn't agree more. Uh you're seeing the same dynamic amongst gold miners in Canada right now, right? They're mining in Canadian dollars and selling their product in US dollars and it's a it's a very lucrative time for them. Uh but you know, sad for Canada, sad for Canadians, unfortunately. So there's one one thing that we didn't talk about that we probably should before before we go and I should probably run a couple minutes but um the one thing to talk about is similar to that sort of currency effect there's there's similar currency effects in other countries the US dollar has been relatively strong versus many currencies um in the context of other commodities having done well in the context of you know um the producers of those commodities doing well from a share price perspective as well as those prices of commodities um weirdly No one's really talking about the likely incremental oil demand from this global commodities boom X oil. And we did some math on it and we think there's going to be, you know, not tomorrow, but there's going to be an incremental roughly million barrels a day of oil products demand globally from >> from gold and copper and and the mines coming online or expected to come online. >> Yeah. and and the mines that are going to expand and that are already expanding and the drill holes and the whatever. And yeah, there's a lot of um if you look at the last cycle, you saw almost a million barrels a day of incremental demand. And similar to oil, the easy copper has been mined and the easy gold has been mined and the easy silver has been mined and so on. And so as you have these prices high, as you see literally every day, you know, you see spat and some of these other guys with crazy high stock prices as they just go do equity issuance and whatever. So yeah, that's wonderful for oil demand. And I think your intuition that hey, these other commodities have done well. When is it oil's turn? I think there's actually this direct connection between that commodity boom and oil demand. And I I've not seen pretty much anyone else talk about this. We started talking about this like six months ago. I think a couple people on social media have started like sort of copying it or whatever, but no one's very hard to find any sort of research on this. It's not in anyone's supply demand balances. And I think resource extraction, let's say 3 years from now, was going to show a million barrels a day more demand than it's showing right now, plus or minus a couple hundred thousand. >> I think it's underappreciated in general. Um the the what a big cost center diesel consumption is for for mines globally, right? Because you see this obviously particularly in the open pit mines, you know, those monster trucks that they use, you know, that burn a ton a ton of diesel. People also underappreciate the fact that so many of these mines are in a Brazilian rainforest or the Canadian Arctic and the entire power needs are met by diesel generators. So it's often the, you know, the most expensive the biggest cost for any mining operation globally is is the consumption of of diesel. So yeah, I uh it's not something I've thought a lot about uh how that might actually have an impact on on oil price, but it does make a lot of sense what you're saying. >> Yeah. And and the the last tiein there is just there's the the technical price analysts got real interested in this a few months ago. You know, they weren't connecting the demand. They were just connecting that there's this tendency historically for gold prices to precede oil prices by about 18 months. Not always, but >> yeah, >> often enough that it was worth them talking about and they started forecasting much higher oil prices. >> And is that the connection that the actual mining uh drives oil price? >> Yeah, I mean like there's many connections, right? Like some of it's inflation and money printing whatever um and some of the dynamics that would drive gold prices for example higher. But then there's also this physical connection and that was I saw it and I was like hey this is the explanation. I started talking to these guys like what are you talking about? like I don't know I just see you know line go up and then next line go up and so um you know but that's not how I I I'll see that I can understand it I can experience it but um you know this is the the fundamental explanation and connection and so um if if if this cycle's like the last cycle where you know grades have diminished and mines need to be bigger and it's a even bigger process to access them and whatever then probably the oil intensity doubles on this new stuff. So maybe it's 2 million barrels a day or some some number that's just astronomical. And again, like I don't think people appreciate like you're saying how much oil is necessary and you know it's diesel, it's gasoline, it's whatever like but also I don't think people appreciate how much oil goes into the mine construction process and people just don't think about you build whole like tent cities or whole temporary things and there's all kinds of jet fuel consumption getting people back and forth depending on where it's at and um all kinds of gasoline consumption and diesel consumption and then the diesel for the those that big equipment. Um, and then potentially power gen or whatever. So, yeah, it's a I just don't it's it's been very strange to me that people haven't really been thinking about this or talking about it. And it's not the end of the world for the oil market, right? It's just 1% roughly of global demand. You know, it might be a little under 1% or a little over, but that's just a free, it's almost like a free year of incremental demand for oil that's coming. It's probably the whole glut that we're experiencing right now in the oil market is like two years out demand just for mining. >> So, you know, and that's been historically what's happened, right? You have a little bit over supply, oil's down, you know, you go back to gold in '98, 999, oil bottoms, you go back to it just it just goes nuts and then oil follows. And um so again, is the technicals are are those right? Are the fundamentals right? I don't know that I have to have a view. So, I can just observe the connection between the two and uh and it'll be really interesting to see. >> But you are right that like grades are down. Uh mines are getting deeper and deeper and deeper. Um you know, you're going to you're having to move more tons of rock for every ounce of gold or pound of copper you're getting out of the ground and they're in more and more remote hard to get to locations, right? So, it's like anything, you know, the the lowhanging fruit gets picked first and every year it gets harder to mine a go mine an ounce of gold than it was the year before. and and that's just that's the history of mining in general. So, yeah, it makes a lot of sense. Well, Josh, thank you very much. Um, where can people find more about you? You obviously mentioned you run Bison Interests and you have a new newsletter, uh, Bison Insights. What's the best place for people to learn more, get in touch, find out about what you're doing? >> Yeah, so I have sort of two separate businesses. So, I have, uh, Bison Interests. I invest in publicly traded oil and gas companies. Um, and so if they go to people can go to bisoninterest.com to find out more about that. It's only available to accredited investors and none of this is an offer, solicitation or recommendation. So, you know, do do your own diligence consultant adviser. If it's relevant for you, go check it out. If not, um, I have a big social media following, which is wonderful. I've gotten to meet lots of interesting people like you through that. And so, um, I launched this newsletter to be able to share more of my ideas in a structured compliant manner. And so, um, we launched Bison Insights about four months ago. And, um, you know, it's grown real fast and and it's gotten a lot of, uh, a lot of uptake, which is is fantastic. And I've shared different ideas of stocks that I'm buying without any sort of recommendation or whatever. And, uh, you know, it's been, uh, it's been real fun. shared some upstream producers, shared some services companies like we talked about and um and then also done some expert interviews sort of like what you're doing where bring on various uh you know oil and gas company executives and industry executives and other investors and various other folks and so that's been uh it's rare for me but it's fun to be on the other side of the camera. I talk too much so it's nice to get to sit and listen. >> All right well thank you very much and very much appreciate your time today. Thank you.