Dividend, Baby, Dividend | U.S. Oil & Gas Companies

Hello friend!

Here we are, a couple months into the latest Trump presidency, where a bunch of the most self-destructive people in the country bring that imploding talent to the federal government. One bright spot might be Stephen Miller, who seems to have spent a good amount of time locked in a room with some “younger aides”, stuffing public documents in a binder and trying to convince everyone it’s the new age of transparency. But without getting into all of the brutal insanity at once, for most of this newsletter, we’re going to focus on this:

Do U.S. oil companies care more about drilling or profits?

But first:

We made Climate Town hats.

We’ve wanted to make hats for a while now. BUT it turns out most hats are made with a lot of plastic (the mayonnaise of fossil fuels) – especially the front bill, which is just a big hunk of plastic right up front. But then, after a good, long search with our partners Ethix Merch, we found Rustek. They make 100% plastic-free hats, featuring their completely trademarked Corkflex brim (a layer of bamboo, covered in cork). To make sure we liked them, we wore the sample hats non-stop for months. So we can confidently say: we think they’re very good hats.

Then we got Jeff Lopilato from Planet People Studio to make a design featuring the Official Climate Town Eagle and now we have Climate Town hats. We already sold out the first run, but you can pre-order from the next run of hats here (looking like delivery in mid-April). There’s black and there’s brown and there are no other colors. Thank you.

One more time: here’s the link to buy the hats.

And, as always, if your email’s full, you can find the unsubscribe button higher in the scroll than any local garden center would dream of.

For the rest of you:

You Might Be the Ponytail Guy

If you haven’t seen it yet, our latest episode focuses on a single scene in the new show Landman. And in this single scene, Billy Bob Thornton (The “Landman”) devastates a young lady-lawyer from some city by telling her how bad wind turbines actually are for the environment.

Now, normally, we wouldn’t take the time to debunk a misguided monologue from a flawed character in a TV show. Dexter made some good points, but he also loved murder. Tony Soprano was similar. Walter White too. In fact, a lot of TV guys make some good points, but also seem to love murder. We here at Climate Town don’t love murder, but we also accept that TV writers love to pretend about killing. And we generally let them be.

But in this case, a lot of people took this fictional rant as a listing of honest, tough facts. Or as one writer for a right-wing news site put it:

Every left-winger should have their eyes held open and be forced to watch this on repeat until it sinks in.

And, unfortunately, we did just that. And it did sink in. And most of the information is just old oil and gas propaganda that’s been circulating for decades. For example *Billy Bob voice*:

Do you have any idea how much diesel they had to burn to mix that much concrete? Or make that steel and haul this shit out here and put it together with a 450-foot crane? You want to guess how much oil it takes to lubricate that f*cking thing? Or winterize it? In its 20-year lifespan, it won't offset the carbon footprint of making it.

This is basically a baked-out stoner thought that probably seems really smart at the time, but is actually ridiculously normal, bordering on straight-up stupid. YES, PEOPLE HAVE ALREADY THOUGHT OF THIS. AND THEY’VE ALREADY STUDIED THIS. FOR YEARS.

They’re called Life Cycle Assessments (LCA) and there’s a ton of them. The research trick here is that the specific question of carbon emission payback/offset time isn’t necessarily important to these studies. They’re looking to account for the total emissions over the lifetime of the wind turbine. And they deliver that number (among a bunch of other data).

But then, if you want to figure out the time it takes to offset those emissions, you need to figure out the emissions that the wind turbine would prevent/displace. This study from 2019 does that extra step for a potential wind turbine in Northwestern Europe and finds that:

The carbon emissions offset period is around 6 months.

And this is just one of the many old school oil industry talking points jammed into the 3-minute Billy Bob anti-wind run. And he probably would’ve gone on for another hour or two, but he had to spring to action to save the otherwise brilliant lady lawyer from a rattlesnake.

And a quick side note: this woman had never heard of a rattlesnake before this run in? If you have heard of one snake: it’s a rattlesnake. And even if you hadn’t heard of one before but had to describe it, you’d probably land on rattlesnake. It’s a snake. That rattles. Help!

But where did this disinformation come from?

When we first started digging into this, we thought we found the answer pretty fast: Landman is co-created and executive produced by Christian Wallace. This particular Christian Wallace is a former Permian Basin roughneck, who wrote about Permian Basin oil and gas for Texas Monthly. And he created the podcast Boomtown, which inspired Landman.

But then we listened to Boomtown. And it’s really good.

But if it wasn’t Boomtown, where did it come from?

Well, friend, to answer that, you’ll have to watch our full YouTube episode.

[Dividend], Baby, [Dividend]

Despite all the talk of finally giving oil and gas companies a fighting chance in the U.S. – here are a couple things to things to think about:

• In 2024, the U.S. produced more oil than any country EVER. Wanna know the second most productive year in history? It was the U.S. in 2023.

• Oil companies don’t seem to want to drill any more than they already are.

But it’s supposed to be drill, baby, drill and unlock that energy potential and slurp up that hot chocolate for cars!

But apparently there’s something oil companies love even more than oil itself:

The money you make from expensive oil.

If you watch a video of an oil and gas executive talking for more than 30 seconds, there’s a good chance you’ll hear this:

Capital discipline.

For the first decade or so of the fracking boom, everyone went hog wild drilling the sh*t out of oil and gas they thought they could never (profitably) get their hands on. But this new stuff wasn’t the good ole blast-out-of-the-ground rock juice they were used to. Here’s a very good explanation of fracking vs. conventional from Boomtown (again, this is a good podcast, we know it’s confusing because of Landman):

Just imagine going to a kid’s birthday party, but instead of a piñata, that kid’s dad dumped a bunch of sugar in some concrete and repaved the driveway. Then he tells the kids that there’s plenty of candy for everyone, but they’re gonna need a fun-sized jackhammer. That’s fracking.

It’s difficult, it’s expensive, the wells deplete very, very fast, and it’s how we now get the majority of oil from the Permian Basin:

The Permian Basin, a vast expanse of oil pump jacks and mesquite shrubs that stretches from West Texas into eastern New Mexico, supplies roughly 6.4 million barrels a day of crude, or nearly half of all U.S. production.

But as the fracking boom has matured, oil companies have remembered that they (and their shareholders) really like massive profits. Which brings us back to:

Capital discipline.

The idea is pretty simple. If oil companies spend less on extracting oil, they can:

1. Lower their overall costs.

2. Focus on the highest profit margin oil extraction, instead of just maximizing production.

3. Get a higher price for that higher margin oil, since supply is more constrained.

And this brings us back to the graph we put as a data-driven teaser at the top of this section, from the IEA’s World Energy Investment 2024:

Over the last decade or so, there has been a radical shift in how large upstream oil and gas companies allocate their net income:

Note: if you don’t already know, upstream oil and gas refers to the part of the business that explores for and extracts oil and gas.

Based on a review of the 30 largest upstream oil and gas companies, buybacks rose to historic highs in 2023, accounting for 20% of cash flow from operations and payouts from dividends rose to around 30%. For a second consecutive year, less than 50% of cash flow was allocated to capital expenditures.

So while they were reinvesting more than 75% of this cash flow into capital expenditure in 2015 and 2016, that balance has shifted to the shareholders:

Large upstream companies spend more on dividends and share buybacks than they do on reinvestment in oil and gas.

Which is f*cking awesome!!

There is truly no better feeling than being a customer of a large, public corporation when they announce a major share buyback plan. Early May last year, cherry blossoms still blooming in NYC, and suddenly an unexpected roar of joy rolls across Central Park: Apple is doing more share buybacks. The largest in their history. It’s all been worth it. This is why we buy cell phones.

Wanna know why life before 1982 sucked ass? That’s because stock buybacks used to be mostly illegal, since they were considered market manipulation that doesn’t benefit society. But then in Reagan’s first term, the SEC opened up buybacks and life was good.

“Serving customers, creating innovative new products, employing workers, taking care of the environment … are NOT the objectives of firms,” Itzhak Ben-David, professor of finance at Ohio State University’s Fisher College of Business and a buyback proponent, wrote in an email response to questions from Reuters. “These are components in the process that have the goal of maximizing shareholders’ value.”

But even with the euphoria of dividends and stock repurchases, there is a downside:

The extreme profits have to come from somewhere.

Let’s look at Chevron as an example. In 2023, they earned $196.9 billion from sales and other revenues. And for their shareholders:

We returned a record $26.3 billion to stockholders in 2023 through dividends of $11.3 billion and share repurchases of $14.9 billion.

Which means that 13% of all the money they pull in, goes right back out the door to anyone who owns the stock. Not bad! In fact, that’s pretty staggering, considering that just $15.8 billion went into capital expenditures.

So if we take their word for it (for a corporation, spending money is considered talking), Chevron was 66% more interested in profit than they were in new oil and gas infrastructure.

But again, there might be a pretty simple answer for this:

Earnings of the company depend mostly on the profitability of its upstream business segment. The most significant factor affecting the results of operations for the upstream segment is the price of crude oil, which is determined in global markets outside of the company’s control.

When it comes to the Permian Basin specifically, Chevron CEO Mike Wirth gave this passionate speech about a year ago on Bloomberg:

What we've done now in the Permian is we've grown to a point where we'll hold our CapEx as guided at about $5 billion this year and see continued growth this year and next year. And as we get to next year, at a million barrels a day, we'll start to talk about holding a plateau, which allows us to actually invest even less capital in order to do that. So we're very committed to, you know, capital discipline through the cycle.

So it’s not shocking to learn that, less than a month after Trump declared a “national energy emergency,” we get this from the second largest U.S. oil and gas company:

Chevron announced that they plan to lay off 15% to 20% of their global workforce by the end of 2026.

Which means thousands of Chevron workers are set to be laid off before we’re even halfway through Trump’s latest term.

And that’s not to say oil companies hate Trump. They seem happy to have as many profit-friendly options at their disposal as possible. But just like Chevron, here’s the head of Exxon’s upstream division back in November:

We're not going to see anybody in 'drill, baby, drill' mode.

A radical change (in production) is unlikely because the vast majority, if not everybody, is focused on the economics of what they're doing.

So what the f*ck is Trump talking about?

This is truly a great question – and one we don’t have an answer for. The biggest oil news coming out of this new administration is that Trump turned to pressuring OPEC+ to increase oil production. And, at least for now, they agreed to start ramping production up.

In a surprise move that sent crude tumbling, the group led by Saudi Arabia and Russia will go ahead with the increase of 138,000 barrels a day in April, according to a statement posted on the group’s website. It will be the first in a series of monthly hikes to revive production halted for more than two years, which will gradually restore a total of 2.2 million barrels a day by 2026.

But then you remember that the U.S. has been producing around 13 million barrels of oil per day on its own. And OPEC+ produces around 35 million barrels a day combined.

But after running face first into a wall of profit obsession with U.S. producers, even a vague promise of the international oil cartel maybe adding potentially up to 6% more oil looks like a win.

And hopefully all this helps the next time someone’s uncle grabs you by the tricep and starts ranting about how Trump is unleashing AMERICAN ENERGY. Even though he seems to consider himself the god of the free market, there is always a higher power:

Profit.

Official Rollie (no prize)

Now, normally, we wouldn’t give a prize out for this section. And we won’t be changing that. There is no prize.

But for this edition of the Official Rollie (no prize) you must successfully find a digital copy of the 1996 thriller/drama Sling Blade written, directed by, and starring the very same Billy Bob Thorton that talked sh*t about wind turbines in Landman.

We can hear you thinking to yourself right now:

How hard could it possibly be to find a copy of Sling Blade? I mean it’s a movie from the 90s, this will take me 5 minutes, 10 tops.

To that we say, good luck. A series of contractual problems have made this movie a veritable Internet Houdini. But Rollie himself was able to navigate the dark waters of a few big corporations controlling all our access to movies. So this is the challenge.

If you are able to find a copy of Sling Blade, you must provide photographic proof to be declared an Official Rollie (no prize). This can be a screenshot or pic of your TV or pic of you watching the movie. And ideally you will have stopped the movie at 01:01:01 for the photo, but that’s up to you.

Now, technically you can win simply by finding the copy, but we strongly encourage you to watch it if you find it, because it’s weirdly great.

As for last edition, here are your Official Rollie (no prize) recipients:

• John Shulters

• Ben Vost

• Christian [Redacted]

• Hermanth [Redacted]

• Julius [Redacted]

How about that, friend?

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Well that's the end of the newsletter. If you want to send in a question, all you have to do is respond to this email. Or contact us directly at newsletter@climatetown.tv. We may never answer it, but you never know.

Also, if you think you found a mistake, let us know. We try our very best to research and review our way to full accuracy, but it's a big world out there.

Executive produced by: Rollie Williams & Matt Nelsen

Edited by: Rollie Williams & Caroline Schaper

Legal support from: The Civil Liberties Defense Center