Alexis Christoforous of Yahoo Finance and Neal Dingmann, Managing Director of Truist Securities, discuss energy prospects as Biden approaches the White House.
ALEXIS CHRISTOFOROUS: All right, with Joe Biden nearing an election victory, energy managers are weighing the potential impact of a president who supports the move away from fossil fuels.
I am now joined by Neal Dingmann, Managing Director at Truist Securities. Neil, I think if people start looking at energy as a sector, they might have this knee-jerk reaction thinking that the big oil companies like Chevron are actually going to lose like ConocoPhillips during a Biden presidency. Would you get involved in that?
NEAL DINGMANN: No, not necessarily. I think if you had that in the Senate, a new green plan was sure to be discussed. And there was talk of what – maybe something – I would call a tougher stance, but only with Biden, that political stance itself.
I think it will be more of a partnership. You will surely have, as we have seen, the green energy values, the clean energy values are doing very well. But I really think it’s going to be more of a partnership because I think anyone who studies the fundamentals of energy will realize that you can’t just go two years, five years, even ten years without oil and fossil fuels Cutting off oil can make gasoline prices skyrocket. So I really call it … I think it’s going to be a partnership.
ALEXIS CHRISTOFOROUS: OK, look, if you look at some of the things Biden said he would like to do, if he becomes president he may stop drilling at the Arctic National Wildlife Refuge. He could close this controversial Dakota Access Pipeline. Where do you see opportunities for investors if these things really happen?
NEAL DINGMANN: For sure. I think you know risk is all that you mentioned. There are many things on state that have probably grown the most. So again, where I see the odds would be companies like those that are in the Permian. You mentioned many of the majors.
Which is very interesting when you compare Chevron to Exxon, even when they called Chevron this week, Chevron really highlighted how much more they are going to invest in renewable energy, or how much they got in renewable energy, I should say. I think number one, you have a lot of big energy companies like Chevron that are already doing this.
I think if you want to go for fossil fuels yourself and purely fossil fuels, it would have to be more of a Permian company that has very little to no federal land and only one private acreage that really isn’t under that Area is both in control.
JARED BLIKRE: Jared Blikre here. I would like to hear your opinion on Iran and the sanctions currently in force. If we have a Biden presidency, will they go? How does this affect oil prices?
NEAL DINGMANN: Yeah, hey, Jared. I think … that’s a good question. I think they are coming, and the attitude towards Iran is obviously softer. There are, as you said, a little over a million barrels. You know, the hard part we have right now is that you still have about 7 1/2 million barrels that are still mostly voluntarily from Russia and Saudi Arabia.
So you have to think, you know, you call that OPEC Plus, that if this happens, and I think there is a chance, as you emphasize, that it is strictly possible, that the responsibility rests with these two countries in particular. Are they being reinforced and even voluntarily including more? If the answer is no, instead of the price range you were talking about, maybe your mid-30s to under 40s, you can even see a few dollars below because of this extra offer.
Unfortunately, the US and most of these US companies have now become swing producers. Even if Iran comes in, they are all currently producing what they call livelihood capital, so to speak, that they really need to survive.
Most of my companies, whether they’re the size of a Chevron or an Exxon, to a Diamondback and some of the all-Permian companies, really can’t afford to stop any of their production. For me, the responsibility will probably lie with Saudi Arabia and Russia.
ALEXIS CHRISTOFOROUS: What do you think of Jared talking about that range, that narrow range that we may see crude oil in – I don’t know how tight it is – that we may see crude oil trading between $ 34 and maybe $ 40 a barrel?
NEAL DINGMANN: I think he’s up to something, Alexis, because if you get back to the point where I’ve still voluntarily ceased production at all times, I guess my fear – I know there are some others out there at that Wall Street is asking for $ 65 in oil next year. And I thought the chances of that were still pretty slim.
Because for me, the minute you come to the middle – if for whatever reason you were going to return in the mid-50s, if the demand was going up again and taking us back to the mid-50s, still right away, think I Saudi Arabia and / or Russia are starting to relax some of this voluntary production.
So, for me, you know, it’s only when that whole 7 1/2 million barrels that OPEC Plus is voluntarily locking in until that’s finally gone – and that could be years – I think Jared is probably into something that You probably had a range somewhere in the 50s that we were comfortable with. This new series, I think he’s right. I think it’ll be in my mid-30s to probably mid-40s if we’re lucky.