I hope this letter finds everyone in good health.
What a wild ride we have been on over the last thirty days. This last month we have seen something we have never seen in history… negative oil prices!
What does this mean for our company?
Well for starters let’s look at a few facts. Will electric cars replace the demand for the combustion engine? A simple search of global market share for electric passenger cars show’s as of 2019 this average is only 2.5%. What about green energy? Global renewable electricity generation (less hydro) is at 9.3% as of the best estimates for 2018. What about the byproducts of petroleum? Currently over 6,000 items are made from petroleum byproducts!
So, what does this tell us?
Should we be fear the dip in oil production has the ride ended?
The answer is quite simply NO!
The headlines would have you believe the world has adapted newer technologies and our use of petroleum is about to end but it’s simply not true. It does make for a salacious story, but the reality is quite different.
Having been involved in the oil and gas industry for almost 20 years these ups and downs are part of a cyclical market that like other industries have points where there is a market correction.
Let me explain why we are leading our industry and why we are better positioned for these corrections in the energy market for the long term.
First, we only purchase minerals. Minerals are real property. This means we own this asset FOR EVER. We only pay taxes on the minerals extracted and pay nothing while it stays in the ground. Our taxes are paid from the production and we receive the balance.
Second, our company focuses on technology that evaluates multiple data sets with information that clues us in on the best areas of a basin to pursue and purchase. This will often put our purchases under very large oil and gas operators who are looking as some of the same data as we are. These operators are playing a long game with development plans that span years and even decades in these oil and gas rich basins.
I can tell you there will most likely be a shuffling of the deck with some of the larger names in the E & P space. Some will go under and some will merge in order to survive.
The industry as whole will survive for the foreseeable future and we are positioning ourselves for this future.
We are excited about what we are developing in house and have the first-hand experience and know how to best position our company for the future.