10/3/2025

Energy Firms Cut Back

I attended a presentation by Roe Patterson this week.  He created the private equity firm, Marauder Capital. The firm owns three energy service firms. Why Marauder owns them given what he said is a puzzle to me. Here is his take on USA energy.

Drill baby drill is not going to happen at these prices. US firms need $70 oil to increase the search for new wells. In fact, the rig count continues to decline.  Firms are already laying off employees. If Trump gets $50 oil, there will be massive layoffs. It will take years to re-build the employee base.  (We have seen this time and again in the Permian Basin).

Solar and wind are unreliable. The sun does not shine at night and the wind does not always blow. Nuclear will take years to build. This means plentiful natural gas is the viable solution. He also noted the very large contracts for export of LNG.

Persuading countries to avoid buying Russian oil will not work. The Russian lifting cost is so low they can still make money at lower prices.

OPEC does not have the extra capacity to increase production by what they claim Patterson was particularly critical of OPEC for falsifying just about everything they say.

Exxon Mobil is slashing 2,000 jobs world-wide. This accounts for 3% of its workforce. Since 2014, Exxon Mobil has shed 19% or 61,000 jobs.  Exxon says their work force was created decades ago under very different conditions. Chevron, Conoco Phillips and BP will cut thousands of jobs creating billions in savings.

This Thursday West Texas crude dropped to $60.79. This is the lowest price since August. I have mentioned the overall trend is down.  The low for the year was $55 in May. Crude oil is at a crossroads.  The Commitment of Traders report has commercials at their lowest net short position since 2010. That proved to be the low in oil prices. There is no guarantee this will repeat. Should the oil price begin to rise, the FED will have to re-think interest rate cuts.

September 23 the DOW closed at 46,714.20. Today’s action Friday morning has the index at 46,841.  This is near my upper range of 46,881. An  adage has it that the market can remain irrational longer than one can remain solvent betting against it. Social mood market wise remains strong. Until we get a significant pullback, the trend remains up.

The ten-year yield hovers above 4%. Breaking below 3.88% will suggest lower yields. Yields are up a smidge this morning but not enough to reverse the down trend. As with stocks the trend in yield is down.

Gold and silver likewise are in hyperbolic rallies. Both are over bought but let’s not stand in the way. Social mood is positive towards the metals.

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