The SEC and the Vaca Muerta
“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”
— Ronald Reagan
The Security and Exchange Commission (SEC) is getting into the act of bigger government by implementing new rules that will save the world and the people on it. These include environmental, social, and governance disclosures (ESG) from public companies.
Here is the mission statement from the SEC on its own website:
Created on October 26, 1936, by Commonwealth Act (CA) 83 also known as the Securities Act, the Commission was tasked to regulate the sale and registration of securities, exchanges, brokers, dealers and salesmen.
Nowhere in that statement does it say that the SEC is responsible for global climate, racism, or “governance” (whatever that means).
Yet spokespeople for the SEC were on Bloomberg radio yesterday talking up the need for more ESG rules and regulations. It doesn't matter that there is already a government agency called the Environmental Protection Agency that looks after the environment. There is also the Office for Civil Rights (OCR), which enforces social laws.
And “governance” didn’t stop Jon Corzine — or Nancy Pelosi, for that matter.
But I digress…
We all know what this is about. It’s about oil. The elites in this country hate oil, coal, and natural gas and are seeking out ways to impede its production. Five-dollar gas is nothing to them. They will fly private jets to Davos to talk about climate change and fly them back to their oceanfront mansions before writing a screed about the melting glaciers.
The SEC rules will just add layers to impede the production of oil and gas. The oil patch was already monkey-hammered by hostile banks, falling production, weary investors, and an oil price that went negative about 18 months ago.
Capital expenditure in oil and gas has been falling for years. In 2014, $135 billion was spent a quarter. By 2021 that number was just $40 billion. The last time oil was over $100 a barrel, capex was three times larger. Oil companies are running well below replacement rate.
There is also a huge lag time in oil production. The price of oil hit its record high of $142 a barrel in 2008. And yet production didn’t really start to ramp up until three years later.
Production topped out in the U.S. with a record high of 13.1 million b/d in February of 2020. It got crushed with COVID shortly after when the price of crude fell below $20.
All new drilling stopped, and some wells were permanently capped. Big Oil lost $76 billion over a two-year period and 260 oil companies filed for bankruptcy.
Furthermore, due to decline rates of shale wells, this means that production fell off a cliff, to 9.7 million barrels a day by the end of 2020. Production has since climbed back to 11.85 million b/d in 2022. It is expected to be 12.99 million b/d in 2023.
So in that sense, the U.S. oil patch is back. However, demand increased from 18.19 million b/d in 2020 to 20.84 million b/d the next year. Globally, demand is expected to climb by 3.6 million b/d in 2022.
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The upshot of all this is that the world needs new oil. It doesn't appear that the U.S. shale patch will save the day like it did 15 years ago. They just can’t produce another 5 million b/d in this climate.
The good news is that there is another America-sized shale patch in Argentina in the “Vaca Muerta” (or "dead cow") formation, which was discovered in 2010.
Few people know it, but Argentina now has the fourth-largest oil reserves in the world. Total proven reserves are around 927 million barrels. Estimated oil reserves are 22.5 billion barrels. The U.S. EIA estimates total recoverable hydrocarbons from the Vaca Muerta formation to be 16.2 billion barrels of oil and 208 trillion cubic feet of natural gas.
Up until a few years ago, the Argentine government imposed price caps on oil and natural gas, which, of course, kept investors out. More recently, the government has been pushing tax breaks and other subsidies to bring investors in.
Just this week, the Middle East Development Funds (a part of OPEC) announced that it will invest more than $1 billion to build pipelines and other infrastructure in Argentina.
Argentina reeks of oil opportunity we haven't seen since 2008 in the Permian Basin. Early investors could make a fortune. My good friend Luke Burgess has written up a free research report with all the details that he'll be unveiling this Thursday, so keep an eye out — you won't want to miss it.
All the best,
Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.
P.S. In other news, did you know that the U.S. government spends more than $80 billion on a set of clandestine military programs collectively called the “Black Budget”? All the important details about these programs are shared with just a small group of insiders — giving that small group the chance to become incredibly wealthy. My colleague Jason Simpkins is about to change all of that. He’s preparing to pull back the curtain on the “Black Budget” and show investors like yourself the type of information that’s crucial to turning small investments into astonishing wealth. All you have to do is secure your spot for the advanced screening of Jason’s new investigative series, Secret Stock Files, by joining here.
Energy Demand will Increase 58% Over the Next 25 Years
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