A Conversation with Economist John Mauldin

Newsletter No. 29

Good evening!

Hope you are all doing well. We’ve got another full slate of oil and gas tidbits this week, so let’s get to it.


Today’s Headlines

  • A Conversation with Economist John Mauldin

  • Oil and Gas News

  • King Operating News from the Field

  • Ask Jay …

  • On a Personal Note …

A Conversation with Economist John Mauldin 

I recently sat down with economist John Mauldin whose Thoughts From the Frontline letter goes to a million subscribers each week for my podcast, The Jay Young Show, to discuss the ins and outs of oil and gas investing, and what it takes to succeed in the business. 

John and I have known each other for around 20 years having met at the Arlington ball park. So, it was just like old times sitting down to talk about the past and our experiences. 

The episode includes several cool stories and details about both my and John’s family history in the oil business. We discuss starting a company and then explore how investing in oil can be risky, but people can still find success in it. 

The discussion also covers clever ways that regular people can invest in oil fields, not just big companies. You can watch it here.

Oil and Gas News 

Well, we are in the midst of hurricane season. It usually runs June 1 to November 30. Hurricanes are definitely something oil producers in the Gulf of Mexico need to monitor. 

A recent hurricane in the Gulf has caused some serious issues for the production of oil. A group called the Energy Information Research (EIR) took a closer look at what happened and found some significant insights. 

Primarily, the hurricane severely disrupted offshore oil extraction operations. Offshore drilling rigs, responsible for extracting oil from underwater reservoirs, were compelled to cease operations due to the adverse weather conditions induced by the storm. Additionally, the personnel operating these rigs had to evacuate for their safety. 

However, the challenges were not limited to the drilling machinery alone. The facilities responsible for refining and processing the extracted crude oil were also adversely affected. The combination of strong winds and tumultuous seas hampered the continuous operation of these facilities. 

The restoration of normal oil production could be significantly delayed even after the hurricane subsides. The repercussions of these disruptions translate into a temporary reduction in oil availability. Such supply shortages in the market usually result in higher commodity prices. 

Also, the global oil prices might experience an upsurge, impacting various regions across the world. The experts at EIR emphasize the necessity of closely monitoring the remediation efforts for the affected oil production infrastructure. This emphasis is grounded in the recognition that these operations bear substantial significance in shaping energy accessibility and its associated costs on a global scale. 

As far as oil prices go, it is around $80 per barrel and there were several A&D projects in the works last week.  

In my view, the most significant news is Warren Buffett’s purchase of LNG. What does this imply? Buffett, the Oracle of Omaha and arguably one of the wisest investors of all time, has knowledge that the natural gas market will export more natural gas and as the demand for natural gas increases, the price should move up.  

Companies have been focusing on oil drilling for the past couple of years due to the price hovering around $2.50 per mcf. The supplies are lower in the US and with the increased demand, we should see prices in the $4-$5 range by next summer. This is great for our assets that produce majority of natural gas and this is the reason we feel it is time to complete the Cotton Valley wells.  

King Operating News from the Field

We started on the wells this week in Borden County, TX. We perforated the Wichita Albany on the Borden (aka Miller Ranch) #4 well. We will come up hole to the Jo Mill and possibly the Spraberry in the next couple of weeks.  

We are getting the Borden #1 ready for the vertical multi-stage frac in the Wolfcamp as well as the perforating 10X number of perforations in the #3 well. The #3 well has produced over 1,400 barrels of oil but we feel the wellbore is restricted with the limited number of perforations therefore we will go back in with a perforation gun and 10X the number of perforations from 100 to 1,000. 

The #2 well is creeping on producing 3,000 barrels of oil and continues to flow without the aid of any artificial lift system. Finally, the #5 well in Borden will also be fracked in September.  

We are eager to get these wells online as soon as possible. We are also making progress in finalizing a deal to stimulate the Cotton Valley wells in Harrison County, Texas. These wells were drilled but never completed. We are collaborating with local experts to aim for these wells to go online, ideally in September. 

We will have more updated, detailed information in our weekly updates for our partners, but stay tuned here for updates as well. 

Ask Jay …

I receive oil and gas questions quite often, so I thought I would start adding them to the newsletter along with a video answer. 

So, if you have any questions, please reply to this newsletter. I will do my best to answer them in a timely manner and to the best of my ability. 

This week’s question is “What affects the price of oil and gas?” Watch the video with my explanation here.

On a Personal Note …

We returned from the Volleypalooza volleyball tournament in Austin, and my daughter’s team made it to the championship game, facing Mater Dei from the Los Angeles, CA area. Mater Dei has a great sports program and has over 70 DI commits at their school. 

We had an incredible match after lunch on Friday, and the momentum was on our side as we beat Grand Oaks from Conroe, Texas. We were 8-0 going into the Championship and fell short to Mater Dei in the final. 

So, with 68 teams playing in the tournament, we ended up second, and we are all very proud of the girls. They played their hearts out and left it all on the court. 

It was disappointing, but we understand more about our strengths and weaknesses and look forward to traveling to Tampa next weekend for another tournament against many of the powerhouse teams from across the nation. 

Also, while I was in Austin, I was able to spend some time with baseball legend Nolan Ryan and his sons, Reese and Reid. But, I’ll let you know more about that visit in next week’s newsletter.

Hope you all have a safe and wonderful week. Be sure and follow us on LinkedIn here for more on King Operating. 

Recommended Reads

Namibia’s Oil And Gas Sector Sparks Global Investment Rush

BOEM Plans to Conduct New Gulf of Mexico Lease Sale in September

Oil and gas industry bringing billions to New Mexico in the next year

Lastly, if you have a subject you would like me to discuss, please do not hesitate to reply to this email.  I will do my best to include it as soon as I can. 

 All the best,