Newsletter No. 154
Good afternoon,
Energy has moved back to the forefront of portfolio strategy as global tensions, shifting capital flows, tax efficiency considerations and accelerating power demand continue to influence markets. What was once viewed as cyclical is increasingly being recognized as structural.
Energy Market Perspective delivers ongoing insight into oil and gas trends, power infrastructure expansion, macroeconomic drivers and the developments shaping today’s energy landscape. In addition to broader market analysis, we will continue providing King-specific updates, operational progress and highlights from our RIA-focused initiatives as energy’s strategic relevance grows.
Ask the “Tax Guy” also remains a key feature, offering practical guidance from our EVP of Tax, Rex Gifford, on structure, deductions and real-world tax considerations. You will continue receiving core oil and gas updates, now supported by expanded market context and a deeper institutional lens.
This Week's Headlines
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Google Expands Data Center Buildout with Major Clean Power Commitments
- How Oil and Gas Investing Can Stabilize Returns and Shield Against Market Volatility
- Ask the "Tax Guy"
- White House Urges Tech Firms to Cover AI Energy Costs
- U.S. Lets Private Cuban Businesses Buy Fuel, Keeps Ban on Government
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Is Oil Headed Higher? Josef Schachter Breaks Down OPEC, LNG & Global Supply Shifts
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Infinity Expands Ohio Utica Footprint with $1.2B Antero Asset Acquisition
Energy Market Perspective
Google Expands Data Center Buildout with Major Clean Power Commitments
Google is accelerating its AI-driven data center expansion in Minnesota and Texas, reinforcing the powerful link between AI growth and rising electricity demand. In Minnesota, Google plans a new $1+ billion data center in Pine Island through an agreement with Xcel Energy that would bring 1,900 MW of new clean energy to the grid, including wind, solar, and one of the world’s largest long-duration battery storage projects. In Texas, Google signed a 20-year power purchase agreement with AES Corporation to co-locate a new data center with dedicated clean power generation.
From an energy market standpoint, the continued surge in hyperscale data center development is driving significant demand for new generation capacity, grid upgrades and energy storage. Utilities and independent power producers are benefiting from long-term contracted loads, while natural gas, renewables, and emerging technologies like carbon capture and long-duration storage remain central to meeting reliability and decarbonization goals. The trend underscores sustained capital inflows into power infrastructure as AI-related electricity demand accelerates across key U.S. markets.
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Ask the "Tax Guy"
Tax treatment can significantly influence how energy investments fit within a client’s broader strategy. In this section, our EVP of Tax, Rex Gifford, addresses practical questions we’re hearing from advisors and investors, with straightforward, code-based insight.
Q: Why is an income tax loss often referred to as a paper loss?
A: An income tax loss is often called a “paper loss” because it reflects tax deductions, not necessarily an economic loss. In oil and gas, provisions like IDC (IRC §263(c)) and bonus depreciation (IRC §168(k)) allow investors to expense up to 100% of qualifying drilling and equipment costs in the year incurred. Those deductions can create a substantial current-year tax loss on Schedule K-1. On paper, it looks like the partnership lost money. In reality, that capital was deployed to drill and develop a commercial well, an asset that, if successful, is typically classified as proved reserves under SPE (Society of Petroleum Engineers) standards. The tax code allows you to expense the investment immediately, even though the asset may produce value for years. So, the “loss” is largely a timing benefit. The IRS sees a deduction. The investor sees reduced taxes and ownership in a producing asset. That’s why it’s called a paper loss.The ink is negative, but the economics may not be. The actual economics ideally are the “Net Cost of Investment” equals the capital contribution reduced by the tax savings.
Have a tax question you’d like covered in a future issue? Email it to theupside@kingoperating.com.
DISCLOSURE: For educational purposes only. Not tax, legal or accounting advice. Please consult your tax professional before making any investment or tax-related decisions.
Oil and Gas News
White House Urges Tech Firms to Cover AI Energy Costs
The White House is asking major tech companies like Microsoft and Alphabet to voluntarily agree to pay the full cost of the electricity and grid upgrades needed for their expanding AI data centers.
With data center power demand expected to triple by 2028, officials are concerned the surge could raise household electricity bills. The proposed (non-binding) pledge would require companies to fund new power generation, sign long-term energy contracts, and ensure local communities aren’t negatively impacted.
The goal: prevent AI growth from increasing energy costs for everyday consumers.
U.S. Lets Private Cuban Businesses Buy Fuel, Keeps Ban on Government
The Trump administration will now allow American energy companies to sell fuel directly to private businesses in Cuba, but the Cuban government will still be blocked from buying U.S. energy.
Private Cuban companies can get fuel to keep their businesses running, but the government cannot.
This move is meant to ease fuel shortages affecting everyday Cubans while continuing economic pressure on Cuba’s leaders. The broader sanctions against the Cuban government remain in place as part of Trump’s strategy to push for political change.
Happening at King
Is Oil Headed Higher? Josef Schachter Breaks Down OPEC, LNG & Global Supply Shifts
In this week's episode of The Jay Young Show, my co-host Jordan Soto and I welcome Josef Schachter, President of Schachter Energy Research Services and a 40-year veteran of the investment management industry. Josef specializes in connecting geopolitics, macroeconomics, and global energy markets to forecast where oil and natural gas prices are headed next. In this conversation, we break down the current energy cycle, global supply dynamics, and what it all means for investors and U.S. operators.
Watch it on LinkedIn, Rumble and YouTube (@JayRYoungOfficial).
Moves to Watch
Infinity Expands Ohio Utica Footprint with $1.2B Antero Asset Acquisition
Infinity Natural Resources has completed a $1.2 billion deal to buy oil and gas properties in Ohio’s Utica Shale from Antero Resources and Antero Midstream. In simple terms, Infinity is buying more land to drill for natural gas along with the pipelines that move the gas, which helps them control more of the process and operate more efficiently. Infinity now owns 60% of the deal, while Northern Oil & Gas owns the remaining 40%. The purchase adds thousands of acres and many new drilling locations, giving Infinity more room to grow production in the coming years. The company expects the deal to improve profits, reduce debt levels over time, and strengthen its long-term position in Ohio.
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All the best,
Jay
