![\"Email](\"https://i0.wp.com/hs-2935563.f.hubspotemail.net/hub/2935563/hubfs/Email%2520Graphics%2520-%2520Bitcoin%2520Basic.jpg?w=750&ssl=1\")
| What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal: invest in a wellsite mining project that will produce Bitcoins for approximately $30,000 per coin. After months of planning, the project is now coming together. Just last week, we officially placed the first order for mining equipment, and started designing the onsite layout. Over the next several months, we hope to have all the pieces in place to begin churning out Bitcoins for $30,000 per coin. (Note: this $30,000 projected Bitcoin cost reflects the estimated all-in costs for the life of the project. This estimate is subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) So what does this mean for Yield Fund I investors? Our current estimates suggest that this Bitcoin mining project could achieve IRRs in the triple-digit range. After speaking with many current and potential investors in recent weeks, we know many Bitcoin enthusiasts are excited about this project. But today, I’d like to provide some basic background information for those new to Bitcoin. Let’s start from square one: why Bitcoin, and more importantly, why now? An Unprecedented Economic Environment As you know, the COVID-19 outbreak delivered a crushing blow to the economy. But only 18 months later, we’re now living through a full blown economic boom. Record retail sales, record corporate earnings and record high asset prices across stocks, real estate and commodities. What happened? The largest monetary and fiscal expansion of all time. Specifically, the Federal Reserve expanded the U.S. M2 money supply by over 30%, from $15.5 trillion in March of 2020 to $20.6 trillion today. That means roughly one-third of U.S. base money supply was created in the last 18 months alone. Meanwhile, the largest fiscal stimulus package of all time pushed the federal deficit to over $3 trillion last year. That’s more than twice the deficit spending deployed to fight the previous recession in 2009, which itself was unprecedented at the time. Clearly, these efforts helped jumpstart economic growth. But here’s where things get tricky… The Bill Comes Due We’ve all been taught that there’s no such thing as a free lunch in life, and economics is no different. After all, why should anyone work or pay taxes if the government can simply borrow and print our way to prosperity? One of the potential costs of record deficit spending and money creation is rising prices, and that bill is now coming due. U.S. consumer prices are currently increasing at over 5% per year – the fastest rate in over a decade. And current evidence suggests more pain for the consumer is in store. That’s because producer prices, the key cost input feeding into consumer prices, are increasing at over 10% per year – the fastest pace in over 40 years: |
![\"FED](\"https://i0.wp.com/hs-2935563.f.hubspotemail.net/hub/2935563/hubfs/FED%2520PPI.png?w=750&ssl=1\")
| Meanwhile, policymakers claim that today’s inflation is “transitory”. But the chart below shows that economist expectations for consumer prices have only moved higher with each passing month: |
![\"bloomberg](\"https://i0.wp.com/hs-2935563.f.hubspotemail.net/hub/2935563/hubfs/bloomberg%2520inflation.png?w=750&ssl=1\")
| Even if today’s inflation does turn out to be “transitory”, that’s little consolation for consumers. There’s a reason inflation is known as the “silent thief” – by making your money less valuable, it’s no different than a wealth confiscation in practice. If your bank confiscated 10% of the money in your account, would you not worry simply because it was a one-time event? Bitcoin Solves This Bitcoin is a decentralized, digital monetary network that offers a superior currency alternative. Unlike traditional currencies, Bitcoin is controlled by software – not central bankers and governments. The Bitcoin protocol ensures that only 21 million coins will ever be created, which means no more silent theft through endless inflation. Each transaction is digitally encrypted onto a decentralized network, run by computers all around the world. Some have called it the “internet of money”, because you can seamlessly transact with anyone around the world at the click of a button. No intermediaries or central authorities getting in the way – it’s the people’s money. Beyond offering inflation protection, the Bitcoin network was designed to be super secure and self-regulating. That’s where Bitcoin mining comes in. Here’s how it works… The self-regulating Bitcoin network is maintained through a network of thousands of “nodes”. At each node, high-powered computers – known as miners – keep track of every Bitcoin transaction. These miners compile real-time Bitcoin transactions into data blocks. When a given data block fills up, the miner adds it to the pre-existing block series. These linked blocks form a chain, known as the “blockchain”. So, the blockchain is simply a continuously-updated public ledger, which contains every single Bitcoin transaction of all time. The Bitcoin protocol uses several mechanisms to ensure security and integrity of the blockchain. This includes the fact that 50% of the network nodes must approve each data block before adding it onto the blockchain. This prevents a bad actor from creating false transactions in real-time. Meanwhile, rewriting blockchain history is even more difficult, as explained in the following graphic: |
![\"bitcoin](\"https://i0.wp.com/hs-2935563.f.hubspotemail.net/hub/2935563/hubfs/bitcoin%2520cheat.png?w=750&ssl=1\")
| In exchange for lending their computing power to the Bitcoin network, miners get rewarded with a certain amount of Bitcoin per each data block they create. The number falls over time, by design, as the total number of Bitcoins approaches 21 million. Currently, miners receive just over 6 Bitcoins for each data block. Now, here’s where we get back to why it all matters for Yield Fund I investors… How To Buy Bitcoin at $30,000 Today Sure, you could bet on the future of digital currencies by simply buying Bitcoin. But why pay $42,000 per coin, when you could instead pay $30,000? That’s the opportunity we see today, thanks to the rise of mobile Bitcoin mining units. Let me explain… You see, Bitcoin mining can be thought of as simply converting electricity into digital currency. So electricity becomes one of the biggest variables driving the mining economics. Over the last few months, we’ve put together a plan for converting wellhead natural gas into electrical power, via gas-fired commercial generators located at the wellsite. The generators then power the mobile Bitcoin mining units, also located onsite near the wellhead. We believe the economics speak for themselves. For roughly $2 million in upfront capital cost, we believe we can produce roughly 6 Bitcoins per month initially for an operating cost of just over $60,000. The end result – a payback period in less than one year, and a project IRR exceeding 100%. (Note: these project economics are estimates, and subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) We’re excited to be offering this opportunity to Yield Fund I investors today, and look forward to updating you on the progress as we start receiving equipment at the mining site. This is a truly unique opportunity, and I am pleased to be offering the chance to democratize Bitcoin mining. |
What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal:Continue reading “How to Buy Bitcoin for $30,000”
\nTop Three Tax Deductions for Oil and Gas Investments
\n\n\n\nThe oil and gas industry enjoys some of the most lucrative benefits available in the U.S. tax code. Starting in 1986, the Federal Government introduced unique tax deductions for investors who directly fund oil and gas wells. Thanks to a new law in place from 2018 – 2023, you can now deduct up to 100% of the well cost in year one of the investment.
\n\n\n\nFor more than three decades, wealthy Americans have used these deductions to reduce their taxable income. Instead of sending a check to Uncle Sam, they’ve put that money towards drilling oil and gas wells. The tax code also offers the opportunity to protect the future income from those wells. The end result: a lower tax bill today, and the potential for years of tax-advantaged income streams in the future.
\n\n\n\nHere are the top three ways you can take advantage of these opportunities.
\n\n\n\nThe non-recoverable expenses of an oil and gas well are known as “intangible drilling costs” (IDCs). These include things that you can’t resell later including fuel, drilling fluids, and wages. IDCs typically make up roughly 65 – 80% of the well cost, and you can deduct 100% of IDCs in year one of the project.
\n\n\n\nFor example, if you make a $100,000 investment into a well with 75% IDCs, you could earn up to a $75,000 deduction against your income tax bill. You also get a little leeway with the timing. IDC deductions become available in the year the money gets invested, even if the well does not start drilling until March 31 of the following year. (See Section 263 of the tax code.)
\n\n\n\nTangible drilling costs (TDCs) refer to the well costs that you can potentially recover, including wellheads, tanks, leaseholds, etc. TDCs typically make up between 20 – 35% of drilling expenses, and they are also 100% tax deductible.
\n\n\n\nIn the past, tax rules forced investors to take TDC deductions over a seven-year depreciation schedule. But thanks to a new 2018 law in effect until 2023, you can now deduct 100% of the TDCs in the first year. So instead of having to apply these tax savings over seven years, you can now bring forward 100% of your TDC deductions into the current tax year.
\n\n\n\nThe end result for investors is that, through at least 2023, you can now deduct up to 100% of the upfront cost of drilling a well from your current year taxes. But that’s not all – as an individual investor, you can enjoy even greater tax benefits after drilling the well when the production comes online.
\n\n\n\nThe 1990 Tax Act allows energy producers under a certain volume limit to exempt 15% of their gross income from federal taxes. The incentive is designed to support independent energy producers and individual investors.
\n\n\n\nHere’s how it works…
\n\n\n\nThe Depletion Allowance applies to small companies that produce no more than 50,000 barrels per day of oil. As an individual investor, you qualify for the Depletion Allowance if your share of production falls under a threshold of 1,000 barrels of oil per day or 6,000 cubic feet of gas per day.
\n\n\n\nEnergyFunders offers the unique opportunity of investing as an active or passive participant in our Funds. As an active investor, you can deduct your investment from active income, including regular wages. If you invest as a limited partner, you can only deduct your investment against passive income (i.e. stock dividends or bond interest payments).
\n\n\n\nImportantly, active investors take on unlimited liability versus limited partners that have limited liability. We encourage every individual to consider their own risk tolerance and tax situation in choosing which option makes the most sense for their personal situation.
\n\n\n\n\n\n\n\n\nTop Three Tax Deductions for Oil and Gas Investments The oil and gas industry enjoys some of the most lucrative benefits available in the U.S. tax code. Starting in 1986, the Federal Government introduced unique tax deductions for investors who directly fund oil and gas wells. Thanks to a new law in place from 2018Continue reading “Understanding the Tax Breaks”
\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2FBull-Run.4b0f611ff868bd5201417264316ec673.png&w=1920&q=75\")
A new paradigm has gripped the global energy markets… and it’s creating the most attractive investment opportunity of a generation.
\n\n\n\nIn the past, capital chased economic opportunity in the energy markets. We see this reflected in the historical relationship between prices and rig counts. As you would expect, periods of high oil prices would draw capital into the market, sending rig counts higher. Inevitably, the excess capital would create excess supply, pushing prices and rig counts back down. Thus oil normally follows the same boom/bust cycle seen across most other commodities.
\n\n\n\nBut 2021 ain’t your normal oil market.
\n\n\n\nThe previous relationship between oil prices and rig deployments has officially broken down:
\n\n\n\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2FRig-Count.dbae94180e7f9906acb53d16de08da31.png&w=1920&q=75\")
Looking at today’s rig count, you’d think oil was trading at 2016 or 2020 levels. Instead, despite the oil and gas trading a multi-year highs, capital remains stubbornly sidelined in the current market. In other words…
\n\n\n\nCapital allocators now avoid oil and gas at all costs, regardless of the returns available.
\n\n\n\nIn today’s article, I’ll explain what’s driving this seemingly irrational behavior, and why it’s creating the best investment opportunity we’ve seen in over a decade.
\n\n\n\nShale Shocked: Investors Recovering from a Decade of Capital Destruction
\n\n\n\nThe capital exodus from energy markets makes sense in the context of recent history. The shale revolution invited record volumes of capital into oil and gas development over the last decade. This excess capital forced up land, lease and drilling costs, and then ultimately oversupplied the market. The one-two punch of rising input costs and depressed energy prices generated hundreds of billions in capital impairment.
\n\n\n\nAccording to Bloomberg, the median internal rate of return (IRR) for private equity energy funds that started investing in 2010 is -5.6% through March 2021. Public markets haven’t fared much better. The following chart of public E&P companies versus the S&P 500 paints the picture of a painful lost decade for energy investors:
\n\n\n\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2FBull-Run-1.4b0f611ff868bd5201417264316ec673.png&w=1920&q=75\")
So despite a historic bull market where virtually every asset class enjoyed record returns, energy investors have generally lost money since 2010. And we’re not just talking garden variety underperformance – this lost decade included two crushing price collapses along the way, in 2016 and 2020.
\n\n\n\nThe 2016 energy crash delivered a particularly painful lesson. Many tried playing the contrarian game, with tens of billions of dollars flooding into the shale patch hoping to catch a cyclical rebound. But ultimately, too many contrarians acting together turned this into a consensus play. Within 18 months of the 2016 price bottom, a flood of new drilling activity sent U.S. production surging to new record highs. This unprecedented new production growth kept prices capped at around $60, while input costs soared, killing margins and cash flow across the board.
\n\n\n\nThen of course, we all know what happened in 2020…
\n\n\n\nThe Coronavirus delivered a crushing final blow to energy investors, only four years after the previous price crash. Thus, in the wake of two back-to-back oil busts and a decade of negative returns, “shale-shocked” investors are unwilling to throw good money after bad. Meanwhile, countless E&P companies themselves are pulling back from investing in new production growth. That’s because many took on excess leverage during the boom years, and must now divert cash flow towards repairing bloated balance sheets.
\n\n\n\nBut these financial scars only tell part of the story driving today’s capital retreat from oil and gas development. The rest of the story relates to the rise of environmental-social-governance (ESG) investment mandates.
\n\n\n\nESG Forces Fossil Fuel Exodus
\n\n\n\nESG investment mandates have forced a wide scale retreat away from fossil fuel development, regardless of the returns available from the industry. Kelly Deponte, a director for a private equity fund, recently explained in a Bloomberg article that private equity and pension funds are “moving away from investing in oil and gas no matter the returns in pursuit of their carbon neutral goals.”
\n\n\n\nThis includes major pension funds, like the New York State Common Retirement Fund – America’s third largest public pension – which now invests capital with a “net zero” emissions target mandate. Other major capital allocators shifting away from fossil fuel development include behemoths like the California Public Employees’ Retirement System (CalPERS) and Blackstone – one of the world’s largest private equity firms.
\n\n\n\nThese moves go beyond just generating headlines and talking points – it’s translating into a major shift in fund flows. The chart below shows how renewables now attract roughly 80 cents of every dollar going into energy investments, drawing vast sums of capital away from conventional fossil fuel funding:
\n\n\n\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2Fgreen-pic.58c55db729f8ce5c9fb1776c00f1c797.png&w=1200&q=75\")
Meanwhile, it’s just not capital allocators throwing in the towel on fossil fuels. Even the leading oil and gas companies themselves are being forced away from investments into hydrocarbon development. This includes the oil supermajors, like Chevron and Exxon – which have each come under fire from activist board members to reduce their emissions footprint. Over in Europe, the supermajors are under even greater pressure from both environmental groups and the legal system. Royal Dutch Shell recently became the first company in history ordered by a court to cut its emissions.
\n\n\n\nBut here’s where the plot gets really interesting…
\n\n\n\nWhile the ESG movement has successfully waged a campaign to cut back on hydrocarbon supply – by attacking the investment side of the equation – they’ve yet to make any meaningful impact on the demand side of the equation.
\n\n\n\n“Peak Oil Demand” Nowhere in Sight
\n\n\n\nIf we rewind the clock back to this time last year, the growing consensus narrative was calling for the “end of oil” as we know it. The headline below is one among countless examples:
\n\n\n\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2Fwords.756ce2c351e2f0c1e66f84e3ee1e58be.png&w=1920&q=75\")
The “peak oil demand” theory gained a lot of momentum last year based on the idea that COVID-19 would permanently change our way of life. One of the popular theories said that work from home would create a structural loss in gasoline demand from commuters. Fast forward to July 2021, and the American driver recently racked up a new all-time record high in gasoline consumption – using over 10 million barrels per day of gasoline over the July 4th weekend.
\n\n\n\nMeanwhile, countries like India and China show no signs of slowing their fossil fuel demand anytime soon. After all, hydrocarbons still reflect the cheapest energy source on the planet, and emerging economies need all the cheap fuel they can get.
\n\n\n\nThe bottom line: the end of oil demand remains nowhere in sight. Instead, we’re looking at new record highs looming on the horizon. That’s not my forecast – that comes from U.S. Energy Information Agency (EIA), which recently projected a full post-COVID recovery to new record highs in global oil demand next year:
\n\n\n\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2Frecord-oil-consumption.0bdcea6577c64a3636a6f31ecde003ef.png&w=1920&q=75\")
The Opportunity Beyond the Hype
\n\n\n\nThanks to a combination of poor historical returns and ESG-related mandates, the supply side of the oil and gas equation will likely remain impaired for years to come. Meanwhile, most analysts agree that demand will rebound towards new all-time highs in 2022 and beyond.
\n\n\n\nThus, the stage is set for a structural imbalance between impaired supply and record demand. Not only will today’s capital retreat keep oil and gas prices elevated, but this will also help keep input costs in check, enabling the best industry margins since the dawn of the shale revolution.
\n\n\n\nWe’re already seeing this new paradigm of profitability emerge in the data. The chart below shows that U.S. shale companies are now generating more free cash flow than at any time in their history:
\n\n\n\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2Ffree-cash-flow-1.ea690f83b2be2a43c4057af437f14c7f.png&w=1920&q=75\")
The bottom line: for those willing to choose facts and numbers over headline hype, we’re looking at a once-in-a-generation investment opportunity in today’s energy market.
\n\n\n\nWe believe the EnergyFunders Yield Fund I provides an excellent vehicle for capitalizing on this unique opportunity. The Fund is available for investment today, and will remain open as long as capacity exists.
\nA new paradigm has gripped the global energy markets… and it’s creating the most attractive investment opportunity of a generation. In the past, capital chased economic opportunity in the energy markets. We see this reflected in the historical relationship between prices and rig counts. As you would expect, periods of high oil prices would drawContinue reading “The Generational Opportunity from Today’s New Energy Paradigm”
\n![\"\"/](\"https://www.energyfunders.com/_next/image?url=%2F_next%2Fstatic%2Fimage%2Fpublic%2Fimages%2Fblogs%2Foil-and-gas-investing-benefits.cb591b3b7faebfeb333f4b8c86e04f47.jpeg&w=1200&q=75\")
This is the entire reason for investing in the first place, right?
\n\n\n\nOil and gas investing offers a high return potential. It can also be riskier, which is why EnergyFunders offers you ways to diversify your investment into multiple well projects or investing in several projects at different stages — exploration, development and operation.
\n\n\n\nThe most obvious advantage of investing in oil and gas stems from the large tax breaks for investors Uncle Sam gives. You can deduct up to 80% of your investment within the first year. This gives you a sizable instant return on investment, even if you have a dry hole.
\n\n\n\nYou can also write off the entire amount within five years. Plus, you will receive a 15% depletion allowance against oil and gas revenue every year.
\n\n\n\nMake sure you have a qualified and competent CPA or tax preparer who understands oil and gas investing laws to make sure you get every deduction possible. Read more about the tax breaks for investors.
\n\n\n\nOil and gas investing also offers long-term return potential. Some wells are in production for a decade or more, giving you passive income for years.
\n\n\n\nA profitable oil or gas well can be similar to owning your own annuity that provides reliable, consistent cash flow. With most financial annuities, you have to pay premiums for several years before you can receive a payment. Compare this to a profitable oil and gas project, where you’re eligible to receive a payment in the month or quarter it hits the pay zone. You may only have to wait a few months to a year for that first payment, instead of five, 10 or 20 years.
\n\n\n\nGet the rewards of oil and gas investing. SIGN UP
\nThe Unique Benefits of Oil and Gas Investing HIGH RETURN POTENTIAL This is the entire reason for investing in the first place, right? Oil and gas investing offers a high return potential. It can also be riskier, which is why EnergyFunders offers you ways to diversify your investment into multiple well projects or investing inContinue reading “Why Invest in Oil and Gas?”
\n![\"white](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2023/04/pexels-photo-8828320.jpeg?resize=512%2C341&ssl=1\")
On Sunday, Saudi Arabia coordinated with several OPEC and non-OPEC member countries to announce a 1.6 million barrel per day (b/d) production cut. The Financial Times reports that
\n\n\n\n\n\n“The surprise cuts risk reigniting disputes between Riyadh and the US, which last year pushed for the kingdom to pump more oil in a bid to tame rampant inflation amid a surge in energy costs.
\n\n\n\nPeople familiar with Saudi Arabia’s thinking say Riyadh was irritated last week that the Biden administration publicly ruled out new crude purchases to replenish a strategic stockpile that had been drained last year as the White House battled to tame inflation.”
\n
The big takeaway here is that Saudi Arabia and the broader OPEC+ coalition is increasingly moving away from the US sphere of influence and supporting the American political agenda of keeping oil supplies flowing and prices low. Instead, Saudi and other key OPEC members are increasingly forging deeper ties with Russia/China. This includes increasingly moving away from trading oil in the U.S. dollar, hastening the demise of the petrodollar, and ultimately, threatening U.S. supremacy in the global economic and financial system.
\n\n\n\nConsider the following headline developments that have occurred in the last few weeks alone:
\n\n\n\nThis is the largest coordinated push against the petrodollar and the realignment of global oil producers against the U.S. since the 1970s oil crisis.
\n\n\n\nIt’s no surprise that both oil and gold are sky-rocketing, each reflecting the diminished status of the U.S. dollar and the realignment of the global energy trade away from the petrodollar.
\n\n\n\nMeanwhile, this is all coming at a time that the U.S. remains vulnerable to an oil shock, as the Biden Administration spent the last year attempting to manipulate prices lower ahead of the 2022 midterm elections, draining the strategic petroleum reserve to the lowest levels since 1983:
\n\n\n\n![\"\"/](\"https://lh6.googleusercontent.com/X7QtGtzP6qJIyFO2k9Zp2_o1zO6fbveCKxnZn8IEa1TUbMJfqdVAG3QubC1WdEbWnWcUGMFD0jhxdlw2neWWB8PYT-iU7bI52n7PwO5dLYAm5ex4ghFjn5dY2YMocUZAaIgQkMgU4tkVdZioQ74PlEI\")
Finally, when you consider the context of the U.S. shale industry’s crippled production profile, the stage is set for a period of structurally undersupplied global oil market for years to come, with the growing prospect of oil shocks from an OPEC cartel shifting its strategic alliance away from the U.S. towards Russian/China.
\n\n\n\nHistory doesn’t repeat, but today’s environment is rhyming with the 1970s… rampant inflation, diminished status of the U.S. dollar, and growing geopolitical risks of oil shortages as the OPEC+ cartel aligns itself with America’s adversaries.
\n\n\n\nOil has already been one of the best performing asset classes since inflation first broke out to multi-year highs in 2021, while traditional asset classes like stocks, bonds and real estate have suffered heavy losses.
\n\n\n\nThe bottom line: stage is set for a repeat of the 1970s investing playbook, and oil will increasingly provide a safe haven against this new economic and geopolitical environment:
\n\n\n\n![\"\"/](\"https://lh3.googleusercontent.com/B_jxNfAP8qHmB4QNKbVP0gMrr7N56WQefQ3Z-ftMUcpOTYXO7FnRt1YIYsUCL-Xk7_Wa-HYYmG3i1qioAh6ajaiPR63BzmlK3fyyzI4a2TeRX9HYnKKMWUEjPUoX6kDjAt3rhyJc3wOWv7MeNmCwCxo\")
If you’re interested in investing in oil in the current climate, EnergyFunders America First Energy Fund I is open to investments. Book time with our team or login to learn more.
\nSaudi Arabia and the broader OPEC+ coalition is increasingly moving away from the US sphere of influence and supporting the American political agenda of keeping oil supplies flowing and prices low. Instead, Saudi and other key OPEC members are increasingly forging deeper ties with Russia/China. This includes increasingly moving away from trading oil in the U.S. dollar, hastening the demise of the petrodollar, and ultimately, threatening U.S. supremacy in the global economic and financial system.
\nPhoto by Lara Jameson on Pexels.com
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Vladimir Putin just threw a spark into the powder keg of the global oil market.
\n\n\n\nThe Russian invasion of Ukraine has sent oil prices soaring above $100 per barrel, and without a quick resolution, we could see even more explosive gains ahead.
\n\n\n\nWhile the geopolitical situation is complex, the market impact distills down to basic supply and demand. Even before the Ukraine conflict, the world was running short of oil – evidenced by prices rallying above $90 per barrel at the start of this year.
\n\n\n\nNow, the market risks losing millions of barrels of Russian exports at the worst possible time. In today’s article, I’ll explain why this supply disruption could make today’s $110 oil prices seem cheap. Absent a quick resolution, we could face the prospect of $200 per barrel, or even higher.
\n\n\n\nFinally, one quick note before getting started…
\n\n\n\nRecent events have shocked the world into a newfound appreciation of low-cost oil and gas, sourced from good actors. Even President Biden is now urging U.S. producers to invest in more oil and gas production.
\n\n\n\nWe believe American energy will become more important than ever in the months and years ahead. EnergyFunders is proud to offer investors the chance of supplying responsibly-sourced, low-cost fuel to the world. We recently opened up a brand new oil and gas fund designed for targeting high-return prospects, which you can learn more about here.
\n\n\n\nWith that said, let’s begin by analyzing the scope of potential disruption in Russian oil supplies.
\n\n\n\nRussia is the world’s third largest oil producer, with output of 11.3 million barrels per day (bbl/d). The country consumes about 3.5 million of those barrels domestically, while exporting more than 7 million bbl/d of crude oil and refined products daily (the term “oil” will refer to both crude and refined products in this article). That makes Russia the world’s single largest oil exporter.
\n\n\n\nBefore the Russian invasion of Ukraine, 4.8 million bbl/d of Russian oil exports went to countries that are now backing sanctions against Russia. This primarily includes western European countries that are part of the EU, plus the U.S. and a few others. Meanwhile, another 2.3 million bbl/d goes to countries not backing sanctions – primarily China, along with several eastern European countries (see here for a graphical breakdown of who buys Russian oil exports).
\n\n\n\nWhile we can likely count on China and Eastern Europe to continue buying Russian oil, that still leaves a massive 4.8 million bbl/d of exports at risk from the escalating tensions between Russia and the West.
\n\n\n\nOutside of coordinated OPEC actions – which typically occur in bear markets – the world has never suffered a supply disruption of this magnitude before. Of course, Western leaders appreciated the critical nature of Russian exports in balancing the global oil market. That’s why the politicians initially avoided direct sanctions on Russian energy in the wake of the Ukrainian invasion.
\n\n\n\nThe problem is, scope of the financial sanctions leveled against Russia were the most sweeping of any kind ever implemented. So despite these intentions, the Russian oil trade got caught in the crossfire as collateral damage.
\n\n\n\nPhysical oil trading is a complex business that involves multiple layers of transactions and counterparties. So even where Russian crude is still technically legal to trade, the sanctions package has gummed up the inner-workings of transactions on the ground.
\n\n\n\nAs one example, physical oil traders often use letters of bank credit to finance the purchase of crude oil cargoes. But as the Wall Street Journal reports, the “banks that grease the wheels of international commerce are refusing to finance Russian commodity deals.”
\n\n\n\nWithout this critical source of financing, traders can’t buy Russian crude and deliver it into the global market. Meanwhile, we’re hearing similar reports of refiners, insurance providers and other key cogs in the physical market stepping away from dealing in Russian oil. Even if the transactions aren’t technically illegal, these players simply don’t want the risk or headache involved. As one trader at a major commodities broker simply explained: “the market is starting to fail.”
\n\n\n\nMeanwhile, even if Western companies are willing to take the legal/financial risk of buying Russian crude, they now face huge reputational risk. Case in point – oil supermajor Shell purchased 100,000 barrels of Russian crude at a record discount last Friday. The backlash was enough to spark a public apology from Shell by Tuesday of this week, along with a commitment to “stop all spot purchases of Russian crude oil.”
\n\n\n\nThe situation escalated further on Tuesday, when the Biden administration took direct aim at Russian energy – announcing a ban on Russian oil imports into the U.S. The U.K. followed up with a similar ban on imports of Russian crude oil. Russia quickly responded with the prospect of banning Russian commodity exports in response to Western sanctions.
\n\n\n\nSo already, a substantial portion of the 4.8 million bbl/d of Russian oil exports to Western economies is disrupted from sanctions and popular pressure. But now, escalating tensions threaten to directly impair the entire 4.8 million bbl/d of export volumes. That puts roughly 5% of global oil supply at risk of impairment.
\n\n\n\nThis would be a massive disruption during normal times. But it’s an even bigger problem for today’s already-undersupplied oil market.
\n\n\n\nLet’s consider the inventory situation…
\n\n\n\nDuring the initial COVID-19 outbreak, economic shutdowns around the globe briefly took up to 20 million bbl/d of demand offline. This created a historic build in crude inventories. However, the market quickly flipped from surplus to deficit as supply came offline and demand rebounded. By Q3 2020, the market entered into a structural deficit, with global crude inventories drawing down by an average of 1.8 million barrels per day (bbl/d) through Q4 2021:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/global-inventories.webp?resize=750%2C450&ssl=1\")
On the surface, a 1.8 million bbl/d deficit might seem modest in the context of a 90 – 100 million bbl/d global market. But this shows why the price of oil (and all other commodities) is set by the marginal barrel. It only took a roughly 2% daily supply deficit, compounded over 18 months, to erase a record oil surplus in record time.
\n\n\n\nSo, you can imagine the catastrophic impact of a 5% supply deficit from a major disruption in Russian oil exports. Especially given today’s starting point of depleted inventories.
\n\n\n\nBut the truth is, today’s inventory situation could be even worse than pictured above. Let me explain…
\n\n\n\nYou see, the public forecasting agencies that report on global oil stockpiles aren’t measuring tank levels. Instead, they estimate supply and demand, and take the net result as an implied inventory change. That means a faulty read on either supply or demand could produce a faulty inventory estimate. And it turns out, that’s exactly what’s happened in recent years.
\n\n\n\nThe international energy agency (IEA) is a key source for information on global oil supply and demand used the world over. So it raised more than a few alarm bells when the IEA recently admitted to massively underestimating global oil demand in recent years. After revising up their demand figures, the agency reported that global oil stockpiles are about 200 million barrels lighter than previously expected.
\n\n\n\nThat means today’s global oil market could actually be much tighter than the numbers reported by agencies like the IEA.
\n\n\n\nFor a more accurate measure of inventories, we can look at the weekly storage levels in Cushing, Oklahoma – the key hub that sets the West Texas Intermediate (WTI) oil price. Unlike the global inventory data that comes from supply/demand guesses, the storage tanks at Cushing are directly measured each week.
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/Image-1.webp?resize=750%2C450&ssl=1\")
The bottom line: today’s oil market has very little margin of error.
\n\n\n\nNext, let’s analyze the supply and demand trends that got us here, which will provide a roadmap for what we might expect going forward.
\n\n\n\nAs recently as late 2021, the fashionable opinion on Wall Street said that oil demand had peaked with the pandemic, and it was all downhill from here. One well-known asset manager overseeing tens of billions of dollars famously called for crude oil to go the way of “whale oil”:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/Image-2.webp?resize=750%2C188&ssl=1\")
Fast forward a mere 18 months later, and the oil skeptics couldn’t have been more wrong – with U.S. demand running consistently above pre-COVID levels and clearing new record highs just last month:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/Image-3.webp?resize=750%2C450&ssl=1\")
Even more impressive, these new highs showed up before peak seasonal demand kicks in during the summer driving season, which could unleash more upside from here.
\n\n\n\nLooking ahead, another source of potential demand upside could come from a further rebound in air travel. The chart below shows that U.S. air travel remains about 15% below the pre-COVID levels of 2019:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/rebounding-us-air-travel.webp?resize=750%2C450&ssl=1\")
With COVID restrictions fading into the rearview, many analysts expect U.S. air travel will stage a full recovery at some point in 2022. If true, this could help secure further new highs in U.S. crude demand from here.
\n\n\n\nThe rest of the world is following America’s lead. The IEA’s latest estimates indicate global demand will grow by 3.2 million bbl/d this year to 100.6 million bbl/d. Meanwhile, the U.S. energy information agency (EIA) projects a new record high in global demand by Q3 of this year, with further new highs in 2023 and beyond:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/global-demand.webp?resize=750%2C450&ssl=1\")
In other words, peak oil consumption is nowhere in sight. And with economies re-opening around the world, the world will need over three million bbl/d of new supply this year alone.
\n\n\n\nNext, let’s consider the supply side of the equation…
\n\n\n\nEven with the best pricing environment of the last decade, U.S. oil production remains stalled out at 11.6 million bbl/d. That’s about a million bbl/d shy of pre-pandemic highs:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/Image-4.webp?resize=750%2C450&ssl=1\")
This reflects a 180 degree change from the dynamics of the last decade, when shale drillers unleashed millions of barrels of new production growth at $50 – $60 oil prices.
\n\n\n\nThe reason for this change is two-fold: lack of capital investment, and perhaps more importantly- a lack of inventory. Shale drillers have simply exhausted core inventories in many of key basins that boosted U.S. production during the shale boom, like the Eagle Ford and Bakken shales.
\n\n\n\nToday, the Permian basin in Texas is the last bastion for U.S. production growth. Despite adding over half a million bbl/d in new production since mid-2021, the Permian is struggling to offset declines in conventional production and the stalled output from all other U.S. shale fields:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/Image-5.webp?resize=750%2C450&ssl=1\")
Given the exhausted inventory in shale basins outside of the Permian, it’s not clear that higher prices can solve this problem. Meanwhile, even if operators want to put rigs to work, the oil patch is dealing with an acute shortage of inputs across the board, ranging from labor to steel piping to frac sand.
\n\n\n\nThe same supply chain constraints slowing down auto manufacturing and home construction is showing up in the oil patch, and there’s no easy fix here. This confluence of factors explains why, despite the biggest weekly gain in crude prices ever, the U.S. oil rig count actually fell by three and remains 24% below pre-COVID levels:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/rig-count.webp?resize=750%2C450&ssl=1\")
Finally, there’s the OPEC+ coalition, which is also struggling to boost output.
\n\n\n\nIn the wake of the COVID-19 outbreak, OPEC+ balanced the oil market by cutting a record 9.7 million bbl/d of output. As demand rebounded, the group agreed to release 400,000 bbl/d of new supply each month, starting in July of 2021.
\n\n\n\nBut for the last several months running, many of the participating countries have struggled to hit their production targets. In January, the IEA estimated that OPEC+ undershot its production quota by 900,000 barrels per day.
\n\n\n\nA big part of this shortfall can be attributed to the Western backlash against fossil fuel development. Historically, a substantial portion of OPEC+ oil production has been developed by western capital – primarily from the global supermajors. But now, slashed capital budgets among Western oil companies is creating ripple effects around the globe, as energy expert Julian Lee explained to Bloomberg:
\n\n\n\n“Persistent production shortfalls in countries like Nigeria and Angola are not the result of maintenance… rather, they reflect dwindling capacity resulting from lack of investment in exploration and development. So the shortfall will persist. In fact, it’s going to get worse, as more and more countries run up against capacity constraints and struggle to lift production.”
\n\n\n\nThanks in part to downgraded estimates for OPEC+ production capacity, Morgan Stanley forecasts the world’s spare capacity will shrink from 6.5 million barrels a day a year ago to below 2 million barrels a day by mid-2022:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/opec-spare-capacity.webp?resize=750%2C446&ssl=1\")
Critically, these space capacity estimates were made before the Russian invasion of Ukraine. So even assuming zero disruption to Russian supplies, the oil market was set up for a dangerous drop in spare capacity to under 2 million bbl/d by year-end.
\n\n\n\nFinally, let’s consider the potential impact on the market in the case where Russian exports remain impaired going forward.
\n\n\n\nEvery commodities bull market is born from a supply/demand imbalance. The price mechanism attempts to solve the imbalance in one of two ways: incentivize more supply, or reduce demand.
\n\n\n\nOver the past year, the oil market has signaled the need for more supply (or less demand) through a steady grind higher in prices. And yet, despite oil reaching multi-year highs of $90, producers have struggled to add enough supply. As discussed in today’s article, many of these production struggles can’t be solved by higher prices in the short-term.
\n\n\n\nMeanwhile, demand continues rebounding across the globe. Now, the threat of losing up to 4.8 million bbl/d of Russian exports could take the supply side of this balancing act off the table. In the event of a total loss of these Russian exports, even with every OPEC member maxing out their production capacity, the market could still face a crippling supply deficit exceeding a million bbl/d.
\n\n\n\nIn that scenario, wide scale demand destruction would become the only mechanism available to balance the market. It’s anyone’s guess how high prices would go in this scenario, but $200 could be just the beginning.
\n\n\n\nGiven these risks, domestic oil and gas production has never been more important.
\nVladimir Putin just threw a spark into the powder keg of the global oil market. The Russian invasion of Ukraine has sent oil prices soaring above $100 per barrel, and without a quick resolution, we could see even more explosive gains ahead. While the geopolitical situation is complex, the market impact distills down to basicContinue reading “Here’s How Oil Could Hit $200+”
\nToday’s stock market presents a great dilemma for investors.
\n\n\n\nWith valuations inflated to near all-time highs, the broader U.S. stock market (i.e. S&P 500) offers low or negative future returns:
\n\n\n\n![\"Chart,](\"https://lh5.googleusercontent.com/SoacIzvY-Z41etqA3X9gGWpb06OVQNdMuOH8rcfaxzIrC2He-fSTGIY01uAsOH8cPNVeXqmaCfgG_z0OCPm_6GSTIJ-45xwcAE8i0reiaUBN-0AOYXtw4sVwoGVPFQT74wgwALqL\")
Meanwhile, with inflation running at 40-year highs, holding cash guarantees a loss in purchasing power. The energy sector offers a lone bright spot of value, plus inflation-protection, in an otherwise overvalued and dangerous stock market.
\n\n\n\nToday, I’ll make the case for how oil could hit $100.
\n\n\n\nLet’s start by reviewing the inventory side of the equation.
\n\n\n\nOil Inventories: From Glut to Potential Shortage
\n\n\n\nThe global oil glut created in the wake of the COVID-19 outbreak has officially been erased. Today, global crude stocks sit near the bottom of their historical range. Looking ahead, the U.S. Energy Information Agency (EIA) projects global inventories will remain depressed throughout 2022:
\n\n\n\n![\"Chart,](\"https://lh5.googleusercontent.com/BvUaKfvKtbu2ms_ZD6WaA7cTKlPHNo6WbTBKDoV2ZadmGS7sA6edYvOwtBgtDPFpeIcUclp-eZFO2ptz5eBCbynt9sVDBwdG4samVBxsYNn61ZzG_r1lVJzr5nlTmgRNVEExD2bO\")
This depleted storage situation increases the likelihood of a potential oil shortage, and price spike, in the event of a meaningful supply disruption anywhere around the globe.
\n\n\n\nIt’s also important to note that the EIA’s forecast in the chart above was made in early December, when the EIA assumed a potential demand hit from the Omicron variant of the COVID-19 virus, noting:
\n\n\n\nThe potential effects of the spread of this (Omicron) variant are uncertain, which introduces downside risks to the global oil consumption forecast.
\n\n\n\nWith the benefit of an extra month of new data, we now know that the Omicron has failed to make a major dent in global oil demand. Meanwhile, there’s a potential upside case from Omicron.
\n\n\n\nHistorically, it’s not uncommon for viral pandemics to end from the dominance of a milder form of the virus. Specifically, you need a variant with greater transmissibility, but lower-symptom severity. Preliminary evidence indicates that Omicron could fit this bill.
\n\n\n\nFirst, we know that the Omicron variant is highly transmissible and has become the dominant strain in many regions, including over 95% of all U.S. COVID-19 cases. Meanwhile, without downplaying the severity to the virus, it appears that Omicron is a milder form of the COVID-19 virus. We can see this in the fact that COVID case counts have exploded to new record highs in places like the U.S., while hospitalization and fatality rates remain well below the highs.
\n\n\n\nFrom my understanding, the growing dominance of a milder viral strain is exactly how the Spanish Flu burned itself out. If Omicron produces such an outcome, that’s obviously a massive upside surprise for crude oil demand in 2022.
\n\n\n\nEven without this outcome, the data shows that world is increasingly learning to live with COVID-19. Economic and travel patterns are gradually returning to normal around the globe, including a robust recovery in jet travel – the key lagging sector throughout the pandemic. That’s why current estimates from major forecasting agencies, including the EIA, project new record highs in global crude demand in 2022.
\n\n\n\nMeanwhile, things look even more bullish on the supply side of the equation.
\n\n\n\nThe plain reality is that oil production requires capital. And capital investment into fossil fuel development has been running at dangerously low for two years running:
\n\n\n\n![\"Chart,](\"https://lh6.googleusercontent.com/4xIV1YqyA8ZzDSBRbb2AXyZlJwrrhf2H-El8yNha2TcLgNFvGCDZhKMzfEoHEdjW8gjcSy652ACQra9RIfoE1Wy1vv1ft6ZKyVa99F1_9CpDvgYBOmsuNb30kGRSiGAwdUx-ODF4\")
After more than a decade of excess oil supply, the world has grown accustomed to the risk of oversupply in the oil market. However, with oil investment falling to the lowest levels of the last decade, capital starvation is setting the stage for potential supply shocks as the key tail-risk going forward.
\n\n\n\nWe can see clear evidence of capital impairment across the board, including in the U.S. shale patch. Despite oil reaching as high as $85 per barrel in 2021, U.S. production remains 1.5 million barrels per day below pre-COVID highs. This is a 180-degree inversion from the shale boom era, when $60 oil was enough to incentivize new record highs in U.S. production.
\n\n\n\nAll signs indicate further shale capital restraint into 2022, based on current rig count trends and capex plans from the major American E&Ps.
\n\n\n\nOf course, the story of shale capital impairment has been well covered. The lesser talked about phenomenon is a similar investment pullback among key OPEC+ producers, like Saudi Arabia. The chart below shows the Saudi rig count sitting at the lowest levels in more than 13 years:
\n\n\n\n![\"Chart,](\"https://lh5.googleusercontent.com/uu2tQeKVQvBn9JuKqnxelPj6NJtg8xHkOKKm7JBMlC3952FlxzmCxCmk55njI1sHO-iMmPKD7yWNcRFDZSPLn-76reBJO9mu_56gWyDe22QYw6IrK7A-p7AaVhvr5Md73yv9UKDf\")
Meanwhile, there’s growing chatter that Russia – the world’s 3rd largest oil producer – might also be running up against its production limit, as Bloomberg recently reported:
\n\n\n\nRussia failed to boost oil output last month despite a generous ramp-up quota in its OPEC+ agreement, indicating the country has deployed all of its current available production capacity.
\n\n\n\nSo even as OPEC+ remains on the output hiking path, including the recent announcement of a 400,000 barrel/day increase beginning in February, the big question remains: how much global spare capacity exists to meet record highs in demand this year and beyond?
\n\n\n\nThrow in the potential for a geopolitical disruption in a major producing region, like the current turmoil in Kazakhstan, and $100 oil could be just the beginning of the next leg higher in prices.
\nToday’s stock market presents a great dilemma for investors. With valuations inflated to near all-time highs, the broader U.S. stock market (i.e. S&P 500) offers low or negative future returns: Meanwhile, with inflation running at 40-year highs, holding cash guarantees a loss in purchasing power. The energy sector offers a lone bright spot of value,Continue reading “Here’s How Oil Could Hit $100”
\nA big part of investment success requires being in the right place at the right time.
\n\n\n\nToday, the prospects for direct oil, gas and Bitcoin investing have never looked better.
\n\n\n\nLong-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed, it’s just grown more compelling.
\n\n\n\nIn a normal commodity market, high prices provide a powerful signal for investors: allocate more capital. But in today’s market, that signaling mechanism is broken. For the first time ever, high energy prices have been met with capital scarcity, creating the best buyer’s market of our lifetime.
\n\n\n\nDespite oil trading at multi-year highs, capital remains stubbornly sidelined in today’s market. Consider the difference in rig counts between today versus the prior peak in prices, back in October of 2018 at $75 oil:
\n\n\n\nThe unwillingness of operators to deploy rigs becomes even more bullish when you consider the depleting inventory of “drilled but uncompleted” wells (DUCs). As the name implies, DUCs are wells where the majority of capital has been spent drilling, but the well has not been hydraulically stimulated (“completed”) to maximize production yet. DUCs reflect oil supply that can quickly be brought online through completion, but without deploying new drilling rigs.
\n\n\n\nDuring the shale boom years, excess cheap capital flowing into the shale patch funded a record accumulation of DUC inventories. But in today’s capital starved market, drillers are now harvesting this inventory. The shale DUC count is now at the lowest level in years:
\n\n\n\nToday’s depleted DUC count means less future oil supply, without a major increase in drilling rigs.
\n\n\n\nSo, even as the consensus calls for new record highs in crude oil consumption in 2022, all signs indicate U.S. production likely remains below the pre-COVID peak for the foreseeable future. Meanwhile, the major European oil companies are facing similar capital constraints, all while OPEC is maintaining discipline in keeping supply off the market.
\n\n\n\nThis is a recipe for one thing: higher prices.
\n\n\n\nAt least that’s the bet Wall Street is making. The Wall Street Journal recently reported on the flood of options trades betting on $100 oil, captured in the graphic below:
\n\n\n\nBut $100 could be just the beginning, if traders in the options pit are right. The same Journal article noted a recent spike in bets calling for $200 oil by the end of 2022.
\n\n\n\nDoes Wall Street know something we don’t?
\n\n\n\nBut it’s not just oil prices going through the roof…
\n\n\n\nPropane Apocalypse
\n\n\n\nSimilar supply/demand dynamics have driven a global shortage of natural gas and natural gas liquids (NGLs). NGLs include products like ethane, propane and butane – key feedstocks for chemical processing, and fuel sources for heat during the winter.
\n\n\n\nYou may have seen the headlines about $6 natural gas and a potential winter supply crunch. Less fanfare has been made about an already-dire supply situation in the propane market. The chart below shows U.S. propane inventories falling to their lowest seasonal level of the last six years, ahead of the key winter heating season:
\n\n\n\nThe combination of depleted inventories, stalled production growth, and the potential for a cold winter led one UBS analyst to warn of a potential “Armageddon” scenario in the propane market. While that may prove hyperbolic, Mr. Market is telegraphing a potential supply crunch by sending propane prices towards their highest levels in eight years.
\n\n\n\nThe Opportunity of a Lifetime
\n\n\n\nPut it all together, and we believe today’s energy market offers the opportunity of a lifetime for investors. With large scale capital allocators refusing to put money to work, even at today’s prices, we’re seeing the best buyer’s market ever for deal-making.
\n\n\n\nThis includes proven reserves projects with IRRs exceeding 20% for wells already on-production, and proven development projects with IRRs exceeding 30%.
\n\n\n\nGiven today’s stretched stock market valuations, and near record low bond yields, this type of return/risk proposition is almost unheard of. The only asset offering greater returns than energy in today’s market is Bitcoin:
\n\n\n\nThanks to the new Bitcoin mining opportunities we’ve identified, Yield Fund I investors can now tap into each of these top performing asset classes.
\n\n\n\nJust like oil and gas, the prospects for Bitcoin investors have never looked brighter.
\n\n\n\nBitcoin Goes Mainstream
\n\n\n\nHardly a week goes by without a major new catalyst moving Bitcoin towards mainstream adoption. This week, history was made with the launch of the first-ever Bitcoin exchange traded fund (ETF). Now, both institutional and retail investors can buy Bitcoin through a regular brokerage account.
\n\n\n\nWith millions of new investors able to invest in Bitcoin with the click of a button, it’s no surprise why Bitcoin reached new record highs above $67,000 per coin this week. At current prices, the economics of our proposed Bitcoin mines look even better than the lucrative oil and gas deals available in today’s market.
\n\n\n\nCut Your Tax Bill with Oil and Gas…AND Bitcoin Mines!
\n\n\n\nLooking beyond the returns available, we know a big reason why many investors chose direct oil and gas investing is to reduce their taxable income. Specifically, the intangible drilling cost deductions, that allows for the opportunity to deduct up to 100% of your investment in year one – providing immediate, upfront tax benefits.
\n\n\n\nAfter consulting with tax professionals in recent weeks, we’ve learned that our Bitcoin mine will provide investors with a similar bonus depreciation tax benefit. Timing is everything here. That’s why we’re making an aggressive push to raise capital and put it to work before year-end. This will allow investors the maximum tax benefit for the 2021 tax year.
\n\n\n\nIf you’d like to learn more, click here to schedule a time with someone on our team to learn how you can invest in our Yield Fund I.
\nA big part of investment success requires being in the right place at the right time. Today, the prospects for direct oil, gas and Bitcoin investing have never looked better. Long-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed,Continue reading “The Golden Age of Oil, Gas and Bitcoin Investing “
\n| What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal: invest in a wellsite mining project that will produce Bitcoins for approximately $30,000 per coin. After months of planning, the project is now coming together. Just last week, we officially placed the first order for mining equipment, and started designing the onsite layout. Over the next several months, we hope to have all the pieces in place to begin churning out Bitcoins for $30,000 per coin. (Note: this $30,000 projected Bitcoin cost reflects the estimated all-in costs for the life of the project. This estimate is subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) So what does this mean for Yield Fund I investors? Our current estimates suggest that this Bitcoin mining project could achieve IRRs in the triple-digit range. After speaking with many current and potential investors in recent weeks, we know many Bitcoin enthusiasts are excited about this project. But today, I’d like to provide some basic background information for those new to Bitcoin. Let’s start from square one: why Bitcoin, and more importantly, why now? An Unprecedented Economic Environment As you know, the COVID-19 outbreak delivered a crushing blow to the economy. But only 18 months later, we’re now living through a full blown economic boom. Record retail sales, record corporate earnings and record high asset prices across stocks, real estate and commodities. What happened? The largest monetary and fiscal expansion of all time. Specifically, the Federal Reserve expanded the U.S. M2 money supply by over 30%, from $15.5 trillion in March of 2020 to $20.6 trillion today. That means roughly one-third of U.S. base money supply was created in the last 18 months alone. Meanwhile, the largest fiscal stimulus package of all time pushed the federal deficit to over $3 trillion last year. That’s more than twice the deficit spending deployed to fight the previous recession in 2009, which itself was unprecedented at the time. Clearly, these efforts helped jumpstart economic growth. But here’s where things get tricky… The Bill Comes Due We’ve all been taught that there’s no such thing as a free lunch in life, and economics is no different. After all, why should anyone work or pay taxes if the government can simply borrow and print our way to prosperity? One of the potential costs of record deficit spending and money creation is rising prices, and that bill is now coming due. U.S. consumer prices are currently increasing at over 5% per year – the fastest rate in over a decade. And current evidence suggests more pain for the consumer is in store. That’s because producer prices, the key cost input feeding into consumer prices, are increasing at over 10% per year – the fastest pace in over 40 years: |
| Meanwhile, policymakers claim that today’s inflation is “transitory”. But the chart below shows that economist expectations for consumer prices have only moved higher with each passing month: |
| Even if today’s inflation does turn out to be “transitory”, that’s little consolation for consumers. There’s a reason inflation is known as the “silent thief” – by making your money less valuable, it’s no different than a wealth confiscation in practice. If your bank confiscated 10% of the money in your account, would you not worry simply because it was a one-time event? Bitcoin Solves This Bitcoin is a decentralized, digital monetary network that offers a superior currency alternative. Unlike traditional currencies, Bitcoin is controlled by software – not central bankers and governments. The Bitcoin protocol ensures that only 21 million coins will ever be created, which means no more silent theft through endless inflation. Each transaction is digitally encrypted onto a decentralized network, run by computers all around the world. Some have called it the “internet of money”, because you can seamlessly transact with anyone around the world at the click of a button. No intermediaries or central authorities getting in the way – it’s the people’s money. Beyond offering inflation protection, the Bitcoin network was designed to be super secure and self-regulating. That’s where Bitcoin mining comes in. Here’s how it works… The self-regulating Bitcoin network is maintained through a network of thousands of “nodes”. At each node, high-powered computers – known as miners – keep track of every Bitcoin transaction. These miners compile real-time Bitcoin transactions into data blocks. When a given data block fills up, the miner adds it to the pre-existing block series. These linked blocks form a chain, known as the “blockchain”. So, the blockchain is simply a continuously-updated public ledger, which contains every single Bitcoin transaction of all time. The Bitcoin protocol uses several mechanisms to ensure security and integrity of the blockchain. This includes the fact that 50% of the network nodes must approve each data block before adding it onto the blockchain. This prevents a bad actor from creating false transactions in real-time. Meanwhile, rewriting blockchain history is even more difficult, as explained in the following graphic: |
| In exchange for lending their computing power to the Bitcoin network, miners get rewarded with a certain amount of Bitcoin per each data block they create. The number falls over time, by design, as the total number of Bitcoins approaches 21 million. Currently, miners receive just over 6 Bitcoins for each data block. Now, here’s where we get back to why it all matters for Yield Fund I investors… How To Buy Bitcoin at $30,000 Today Sure, you could bet on the future of digital currencies by simply buying Bitcoin. But why pay $42,000 per coin, when you could instead pay $30,000? That’s the opportunity we see today, thanks to the rise of mobile Bitcoin mining units. Let me explain… You see, Bitcoin mining can be thought of as simply converting electricity into digital currency. So electricity becomes one of the biggest variables driving the mining economics. Over the last few months, we’ve put together a plan for converting wellhead natural gas into electrical power, via gas-fired commercial generators located at the wellsite. The generators then power the mobile Bitcoin mining units, also located onsite near the wellhead. We believe the economics speak for themselves. For roughly $2 million in upfront capital cost, we believe we can produce roughly 6 Bitcoins per month initially for an operating cost of just over $60,000. The end result – a payback period in less than one year, and a project IRR exceeding 100%. (Note: these project economics are estimates, and subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) We’re excited to be offering this opportunity to Yield Fund I investors today, and look forward to updating you on the progress as we start receiving equipment at the mining site. This is a truly unique opportunity, and I am pleased to be offering the chance to democratize Bitcoin mining. |
What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal:Continue reading “How to Buy Bitcoin for $30,000”
\nA new paradigm has gripped the global energy markets… and it’s creating the most attractive investment opportunity of a generation.
\n\n\n\nIn the past, capital chased economic opportunity in the energy markets. We see this reflected in the historical relationship between prices and rig counts. As you would expect, periods of high oil prices would draw capital into the market, sending rig counts higher. Inevitably, the excess capital would create excess supply, pushing prices and rig counts back down. Thus oil normally follows the same boom/bust cycle seen across most other commodities.
\n\n\n\nBut 2021 ain’t your normal oil market.
\n\n\n\nThe previous relationship between oil prices and rig deployments has officially broken down:
\n\n\n\nLooking at today’s rig count, you’d think oil was trading at 2016 or 2020 levels. Instead, despite the oil and gas trading a multi-year highs, capital remains stubbornly sidelined in the current market. In other words…
\n\n\n\nCapital allocators now avoid oil and gas at all costs, regardless of the returns available.
\n\n\n\nIn today’s article, I’ll explain what’s driving this seemingly irrational behavior, and why it’s creating the best investment opportunity we’ve seen in over a decade.
\n\n\n\nShale Shocked: Investors Recovering from a Decade of Capital Destruction
\n\n\n\nThe capital exodus from energy markets makes sense in the context of recent history. The shale revolution invited record volumes of capital into oil and gas development over the last decade. This excess capital forced up land, lease and drilling costs, and then ultimately oversupplied the market. The one-two punch of rising input costs and depressed energy prices generated hundreds of billions in capital impairment.
\n\n\n\nAccording to Bloomberg, the median internal rate of return (IRR) for private equity energy funds that started investing in 2010 is -5.6% through March 2021. Public markets haven’t fared much better. The following chart of public E&P companies versus the S&P 500 paints the picture of a painful lost decade for energy investors:
\n\n\n\nSo despite a historic bull market where virtually every asset class enjoyed record returns, energy investors have generally lost money since 2010. And we’re not just talking garden variety underperformance – this lost decade included two crushing price collapses along the way, in 2016 and 2020.
\n\n\n\nThe 2016 energy crash delivered a particularly painful lesson. Many tried playing the contrarian game, with tens of billions of dollars flooding into the shale patch hoping to catch a cyclical rebound. But ultimately, too many contrarians acting together turned this into a consensus play. Within 18 months of the 2016 price bottom, a flood of new drilling activity sent U.S. production surging to new record highs. This unprecedented new production growth kept prices capped at around $60, while input costs soared, killing margins and cash flow across the board.
\n\n\n\nThen of course, we all know what happened in 2020…
\n\n\n\nThe Coronavirus delivered a crushing final blow to energy investors, only four years after the previous price crash. Thus, in the wake of two back-to-back oil busts and a decade of negative returns, “shale-shocked” investors are unwilling to throw good money after bad. Meanwhile, countless E&P companies themselves are pulling back from investing in new production growth. That’s because many took on excess leverage during the boom years, and must now divert cash flow towards repairing bloated balance sheets.
\n\n\n\nBut these financial scars only tell part of the story driving today’s capital retreat from oil and gas development. The rest of the story relates to the rise of environmental-social-governance (ESG) investment mandates.
\n\n\n\nESG Forces Fossil Fuel Exodus
\n\n\n\nESG investment mandates have forced a wide scale retreat away from fossil fuel development, regardless of the returns available from the industry. Kelly Deponte, a director for a private equity fund, recently explained in a Bloomberg article that private equity and pension funds are “moving away from investing in oil and gas no matter the returns in pursuit of their carbon neutral goals.”
\n\n\n\nThis includes major pension funds, like the New York State Common Retirement Fund – America’s third largest public pension – which now invests capital with a “net zero” emissions target mandate. Other major capital allocators shifting away from fossil fuel development include behemoths like the California Public Employees’ Retirement System (CalPERS) and Blackstone – one of the world’s largest private equity firms.
\n\n\n\nThese moves go beyond just generating headlines and talking points – it’s translating into a major shift in fund flows. The chart below shows how renewables now attract roughly 80 cents of every dollar going into energy investments, drawing vast sums of capital away from conventional fossil fuel funding:
\n\n\n\nMeanwhile, it’s just not capital allocators throwing in the towel on fossil fuels. Even the leading oil and gas companies themselves are being forced away from investments into hydrocarbon development. This includes the oil supermajors, like Chevron and Exxon – which have each come under fire from activist board members to reduce their emissions footprint. Over in Europe, the supermajors are under even greater pressure from both environmental groups and the legal system. Royal Dutch Shell recently became the first company in history ordered by a court to cut its emissions.
\n\n\n\nBut here’s where the plot gets really interesting…
\n\n\n\nWhile the ESG movement has successfully waged a campaign to cut back on hydrocarbon supply – by attacking the investment side of the equation – they’ve yet to make any meaningful impact on the demand side of the equation.
\n\n\n\n“Peak Oil Demand” Nowhere in Sight
\n\n\n\nIf we rewind the clock back to this time last year, the growing consensus narrative was calling for the “end of oil” as we know it. The headline below is one among countless examples:
\n\n\n\nThe “peak oil demand” theory gained a lot of momentum last year based on the idea that COVID-19 would permanently change our way of life. One of the popular theories said that work from home would create a structural loss in gasoline demand from commuters. Fast forward to July 2021, and the American driver recently racked up a new all-time record high in gasoline consumption – using over 10 million barrels per day of gasoline over the July 4th weekend.
\n\n\n\nMeanwhile, countries like India and China show no signs of slowing their fossil fuel demand anytime soon. After all, hydrocarbons still reflect the cheapest energy source on the planet, and emerging economies need all the cheap fuel they can get.
\n\n\n\nThe bottom line: the end of oil demand remains nowhere in sight. Instead, we’re looking at new record highs looming on the horizon. That’s not my forecast – that comes from U.S. Energy Information Agency (EIA), which recently projected a full post-COVID recovery to new record highs in global oil demand next year:
\n\n\n\nThe Opportunity Beyond the Hype
\n\n\n\nThanks to a combination of poor historical returns and ESG-related mandates, the supply side of the oil and gas equation will likely remain impaired for years to come. Meanwhile, most analysts agree that demand will rebound towards new all-time highs in 2022 and beyond.
\n\n\n\nThus, the stage is set for a structural imbalance between impaired supply and record demand. Not only will today’s capital retreat keep oil and gas prices elevated, but this will also help keep input costs in check, enabling the best industry margins since the dawn of the shale revolution.
\n\n\n\nWe’re already seeing this new paradigm of profitability emerge in the data. The chart below shows that U.S. shale companies are now generating more free cash flow than at any time in their history:
\n\n\n\nThe bottom line: for those willing to choose facts and numbers over headline hype, we’re looking at a once-in-a-generation investment opportunity in today’s energy market.
\n\n\n\nWe believe the EnergyFunders Yield Fund I provides an excellent vehicle for capitalizing on this unique opportunity. The Fund is available for investment today, and will remain open as long as capacity exists.
\nA new paradigm has gripped the global energy markets… and it’s creating the most attractive investment opportunity of a generation. In the past, capital chased economic opportunity in the energy markets. We see this reflected in the historical relationship between prices and rig counts. As you would expect, periods of high oil prices would drawContinue reading “The Generational Opportunity from Today’s New Energy Paradigm”
\nTop Three Tax Deductions for Oil and Gas Investments
\n\n\n\nThe oil and gas industry enjoys some of the most lucrative benefits available in the U.S. tax code. Starting in 1986, the Federal Government introduced unique tax deductions for investors who directly fund oil and gas wells. Thanks to a new law in place from 2018 – 2023, you can now deduct up to 100% of the well cost in year one of the investment.
\n\n\n\nFor more than three decades, wealthy Americans have used these deductions to reduce their taxable income. Instead of sending a check to Uncle Sam, they’ve put that money towards drilling oil and gas wells. The tax code also offers the opportunity to protect the future income from those wells. The end result: a lower tax bill today, and the potential for years of tax-advantaged income streams in the future.
\n\n\n\nHere are the top three ways you can take advantage of these opportunities.
\n\n\n\nThe non-recoverable expenses of an oil and gas well are known as “intangible drilling costs” (IDCs). These include things that you can’t resell later including fuel, drilling fluids, and wages. IDCs typically make up roughly 65 – 80% of the well cost, and you can deduct 100% of IDCs in year one of the project.
\n\n\n\nFor example, if you make a $100,000 investment into a well with 75% IDCs, you could earn up to a $75,000 deduction against your income tax bill. You also get a little leeway with the timing. IDC deductions become available in the year the money gets invested, even if the well does not start drilling until March 31 of the following year. (See Section 263 of the tax code.)
\n\n\n\nTangible drilling costs (TDCs) refer to the well costs that you can potentially recover, including wellheads, tanks, leaseholds, etc. TDCs typically make up between 20 – 35% of drilling expenses, and they are also 100% tax deductible.
\n\n\n\nIn the past, tax rules forced investors to take TDC deductions over a seven-year depreciation schedule. But thanks to a new 2018 law in effect until 2023, you can now deduct 100% of the TDCs in the first year. So instead of having to apply these tax savings over seven years, you can now bring forward 100% of your TDC deductions into the current tax year.
\n\n\n\nThe end result for investors is that, through at least 2023, you can now deduct up to 100% of the upfront cost of drilling a well from your current year taxes. But that’s not all – as an individual investor, you can enjoy even greater tax benefits after drilling the well when the production comes online.
\n\n\n\nThe 1990 Tax Act allows energy producers under a certain volume limit to exempt 15% of their gross income from federal taxes. The incentive is designed to support independent energy producers and individual investors.
\n\n\n\nHere’s how it works…
\n\n\n\nThe Depletion Allowance applies to small companies that produce no more than 50,000 barrels per day of oil. As an individual investor, you qualify for the Depletion Allowance if your share of production falls under a threshold of 1,000 barrels of oil per day or 6,000 cubic feet of gas per day.
\n\n\n\nEnergyFunders offers the unique opportunity of investing as an active or passive participant in our Funds. As an active investor, you can deduct your investment from active income, including regular wages. If you invest as a limited partner, you can only deduct your investment against passive income (i.e. stock dividends or bond interest payments).
\n\n\n\nImportantly, active investors take on unlimited liability versus limited partners that have limited liability. We encourage every individual to consider their own risk tolerance and tax situation in choosing which option makes the most sense for their personal situation.
\n\n\n\n\n\n\n\n\nTop Three Tax Deductions for Oil and Gas Investments The oil and gas industry enjoys some of the most lucrative benefits available in the U.S. tax code. Starting in 1986, the Federal Government introduced unique tax deductions for investors who directly fund oil and gas wells. Thanks to a new law in place from 2018Continue reading “Understanding the Tax Breaks”
\nThis is the entire reason for investing in the first place, right?
\n\n\n\nOil and gas investing offers a high return potential. It can also be riskier, which is why EnergyFunders offers you ways to diversify your investment into multiple well projects or investing in several projects at different stages — exploration, development and operation.
\n\n\n\nThe most obvious advantage of investing in oil and gas stems from the large tax breaks for investors Uncle Sam gives. You can deduct up to 80% of your investment within the first year. This gives you a sizable instant return on investment, even if you have a dry hole.
\n\n\n\nYou can also write off the entire amount within five years. Plus, you will receive a 15% depletion allowance against oil and gas revenue every year.
\n\n\n\nMake sure you have a qualified and competent CPA or tax preparer who understands oil and gas investing laws to make sure you get every deduction possible. Read more about the tax breaks for investors.
\n\n\n\nOil and gas investing also offers long-term return potential. Some wells are in production for a decade or more, giving you passive income for years.
\n\n\n\nA profitable oil or gas well can be similar to owning your own annuity that provides reliable, consistent cash flow. With most financial annuities, you have to pay premiums for several years before you can receive a payment. Compare this to a profitable oil and gas project, where you’re eligible to receive a payment in the month or quarter it hits the pay zone. You may only have to wait a few months to a year for that first payment, instead of five, 10 or 20 years.
\n\n\n\nGet the rewards of oil and gas investing. SIGN UP
\nThe Unique Benefits of Oil and Gas Investing HIGH RETURN POTENTIAL This is the entire reason for investing in the first place, right? Oil and gas investing offers a high return potential. It can also be riskier, which is why EnergyFunders offers you ways to diversify your investment into multiple well projects or investing inContinue reading “Why Invest in Oil and Gas?”
\nOn Sunday, Saudi Arabia coordinated with several OPEC and non-OPEC member countries to announce a 1.6 million barrel per day (b/d) production cut. The Financial Times reports that
\n\n\n\n\n\n“The surprise cuts risk reigniting disputes between Riyadh and the US, which last year pushed for the kingdom to pump more oil in a bid to tame rampant inflation amid a surge in energy costs.
\n\n\n\nPeople familiar with Saudi Arabia’s thinking say Riyadh was irritated last week that the Biden administration publicly ruled out new crude purchases to replenish a strategic stockpile that had been drained last year as the White House battled to tame inflation.”
\n
The big takeaway here is that Saudi Arabia and the broader OPEC+ coalition is increasingly moving away from the US sphere of influence and supporting the American political agenda of keeping oil supplies flowing and prices low. Instead, Saudi and other key OPEC members are increasingly forging deeper ties with Russia/China. This includes increasingly moving away from trading oil in the U.S. dollar, hastening the demise of the petrodollar, and ultimately, threatening U.S. supremacy in the global economic and financial system.
\n\n\n\nConsider the following headline developments that have occurred in the last few weeks alone:
\n\n\n\nThis is the largest coordinated push against the petrodollar and the realignment of global oil producers against the U.S. since the 1970s oil crisis.
\n\n\n\nIt’s no surprise that both oil and gold are sky-rocketing, each reflecting the diminished status of the U.S. dollar and the realignment of the global energy trade away from the petrodollar.
\n\n\n\nMeanwhile, this is all coming at a time that the U.S. remains vulnerable to an oil shock, as the Biden Administration spent the last year attempting to manipulate prices lower ahead of the 2022 midterm elections, draining the strategic petroleum reserve to the lowest levels since 1983:
\n\n\n\nFinally, when you consider the context of the U.S. shale industry’s crippled production profile, the stage is set for a period of structurally undersupplied global oil market for years to come, with the growing prospect of oil shocks from an OPEC cartel shifting its strategic alliance away from the U.S. towards Russian/China.
\n\n\n\nHistory doesn’t repeat, but today’s environment is rhyming with the 1970s… rampant inflation, diminished status of the U.S. dollar, and growing geopolitical risks of oil shortages as the OPEC+ cartel aligns itself with America’s adversaries.
\n\n\n\nOil has already been one of the best performing asset classes since inflation first broke out to multi-year highs in 2021, while traditional asset classes like stocks, bonds and real estate have suffered heavy losses.
\n\n\n\nThe bottom line: stage is set for a repeat of the 1970s investing playbook, and oil will increasingly provide a safe haven against this new economic and geopolitical environment:
\n\n\n\nIf you’re interested in investing in oil in the current climate, EnergyFunders America First Energy Fund I is open to investments. Book time with our team or login to learn more.
\nSaudi Arabia and the broader OPEC+ coalition is increasingly moving away from the US sphere of influence and supporting the American political agenda of keeping oil supplies flowing and prices low. Instead, Saudi and other key OPEC members are increasingly forging deeper ties with Russia/China. This includes increasingly moving away from trading oil in the U.S. dollar, hastening the demise of the petrodollar, and ultimately, threatening U.S. supremacy in the global economic and financial system.
\nPhoto by Lara Jameson on Pexels.com
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EnergyFunders CEO, Laura Pommer, was featured in the March-April 2023 edition of Oilwoman Magazine. Read the article (page 24) to learn how Laura was introduced to bitcoin mining and how her oil and gas experience has led her to this point.
\n\n\n\nCheck out Yield Fund I’s mining location below! If you’re interested in investing in wellhead bitcoin mining, Bitcoin Discovery Fund I is still open to new investments. Join here!
\n\n\n\nEnergyFunders CEO, Laura Pommer, was featured in the March-April 2023 edition of Oilwoman Magazine. Read the article (page 24) to learn how Laura was introduced to bitcoin mining and how her oil and gas experience has led her to this point.
\nCheck out Yield Fund I’s mining location below! If you’re interested in investing in wellhead bitcoin mining, Bitcoin Discovery Fund I is still open to new investments. Join here!
![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2023/01/WSJ-Logo.jpg?resize=276%2C276&ssl=1\"){kind=logo}
San Antonio, Texas – TheNewswire – December 20, 2022 – EF EnergyFunders Ventures, Inc. (the “Corporation”) (TSXV:EFV) is pleased to provide an interim operational update for its fintech business unit subsidiary, EnergyFunders LLC (“EnergyFunders”).
\n\n\n\nIn 2022, a year defined by inflation and market volatility, EnergyFunders demonstrated its continuing commitment to making oil and gas investment opportunities more accessible and practical for today’s investor.
\n\n\n\nEnergyFunders’ Yield Fund I, which completed its fundraising activities in Q1 2022 and managed the deployment of those investor funds in various oil and gas projects, produced some stand-out results throughout the year.
\n\n\n\nIn response to the positive feedback from Yield Fund I investors, along with rising demand for energy investment opportunities that provide a hedge against inflation, EnergyFunders launched Yield Fund II, along with Drilling Fund I and America First Energy Fund I in 2022. To date, managed investor capital in these four funds is just under $15 million. Total investor capital managed by EnergyFunders since its inception is now almost $30 million since its founding in 2013. EnergyFunders is preparing for a year-end influx of capital contributions to its funds as investors seek to capture the unique combination of tax benefits obtainable through oil and gas investments. Investors can begin to take advantage of this opportunity by creating an investor profile on the company’s website at www.EnergyFunders.com.
\n\n\n\nLaura Pommer, CEO of EnergyFunders, speaks for the entire team when she emphasizes the company’s dedication to breaking down the costly and inefficient barriers to oil and gas investing that are characteristic of the old way of doing business: “Our goal at EnergyFunders is to make wellhead economics available to a larger segment of the community of investors than ever before.” New energy and energy technology investment opportunities are in development for 2023, and more information on those funds will be released early next year.
\n\n\n\nAbout EnergyFunders:
\n\n\n\nEnergyFunders is an industry-leading financial technology investment management firm offering private-market energy deals, sourced and vetted by industry experts. The company’s managed funds include investments in oil and gas wells, as well as mobile Bitcoin mining units powered by wellsite natural gas. By removing the middlemen between investors and the wellhead, the company offers consumers ownership in special purpose entities that directly invest in oil and gas wells and Bitcoin mines. In addition to potential returns from these investments, EnergyFunders’ investors may also enjoy favorable tax deductions unique to oil and gas investments, along with the potential for passive income creation and inflation protection. To invest or to learn more, please visit www.EnergyFunders.com.
\n\n\n\nFor further information please contact:
\n\n\n\nLaura Pommer
Chief Executive Officer
Email: laura@energyfunders.com
EF EnergyFunders Ventures, Inc.
\n\n\n\n716 S. Frio St., Suite 201
\n\n\n\nSan Antonio, Texas 78207
\n\n\n\nTelephone: 254-699-0975
\n\n\n\nMedia Contact:
\n\n\n\nAquila Mendez-Valdez
\n\n\n\nEmail: aquila@hitpr.com
\n\n\n\nTelephone: 210-606-5251
\n\n\n\nForward Looking Statements
\n\n\n\nThis news release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein are forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”,”proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. In particular, this news release contains forward-looking information regarding the Pommer Employment Agreement, the Light Employment Agreement, and the business of EnergyFunders. There can be no assurance that such forward-looking information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking information. This forward-looking information reflects EnergyFunders’s current beliefs and is based on information currently available to EnergyFunders and on assumptions EnergyFunders believes are reasonable. These assumptions include, but are not limited to: the underlying value of EnergyFunders’s common shares, EnergyFunders’s current and initial understanding and analysis of its projects and the exploration required for such projects; the costs of EnergyFunders’s projects; EnergyFunders’s general and administrative costs remaining constant; and the market acceptance of EnergyFunders’s business strategy.
\n\n\n\nForward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of EnergyFunders to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: volatility in market prices for oil and natural gas; constraints on sour gas production; the availability of commodity markets and third party equipment, infrastructure and services; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; geological, technical, drilling and processing availability, upsets or problems; general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; delay or failure to receive board or regulatory approvals; the actual results of future operations; competition; changes in legislation, including environmental legislation, affecting EnergyFunders; the timing and availability of external financing on acceptable terms; and lack of qualified, skilled labour or loss of key individuals. A description of additional assumptions used to develop such forward-looking information and a description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in EnergyFunders’s disclosure documents on the SEDAR website at http://www.sedar.com. Although EnergyFunders has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Forward-looking information contained in this news release is expressly qualified by this cautionary statement. The forward-looking information contained in this news release represents the expectations of EnergyFunders as of the date of this news release and, accordingly, is subject to change after such date. However, EnergyFunders expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.
\n\n\n\nCautionary Statement: This news release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities of the Corporation or any Fund managed by the Corporation in any jurisdiction in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The securities have not been approved or disapproved by the U.S. Securities and Exchange Commission (the “SEC”) or by any state securities commission or regulatory authority, nor have any of the foregoing authorities or any Canadian provincial securities regulator or stock exchange passed on the accuracy or adequacy of the disclosures contained herein and any representation to the contrary is a criminal offense. None of the securities of the Corporation or any of the Funds managed by the Corporation have been registered under the 1933 Act, or the securities laws of any state and any offer of such securities will be in reliance upon certain exemptions from registration under such laws. Such securities may only be purchased pursuant to a binding agreement for the purchase and sale of such securities.
\nIn 2022, a year defined by inflation and market volatility, EnergyFunders demonstrated its continuing commitment to making oil and gas investment opportunities more accessible and practical for today’s investor.
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/pexels-photo-6770513-1.jpeg?resize=750%2C1125&ssl=1\")
What do bitcoin mining and oil and gas exploration have in common? Aside from common geology language, the two seem completely different, but the truth is, they can both be pretty stressful on the environment.
\n\n\n\nFor years, oil and gas operators have been plagued with difficulties when trying to find suitable pipelines for natural gas. Sometimes, the nearest pipelines are 10s of miles away and would cost exorbitant amounts of money to tie into, and other times, they are antiquated and won’t hold up to regular use. As a result of these issues and more, operators have been forced to flare the natural gas in hopes that they’ll eventually deplete the gas layer and be able to produce the oil that may be sitting below it in the formation. We know that burning natural gas pumps more CO2 into the atmosphere, so the practice seems impractical and wasteful.
\n\n\n\nIn the meantime, Texas’ laws have made it easier for bitcoin mining companies to set up their operations there, but they take a heavy toll on the energy grid. With ERCOT’s instability during inclement weather, it seems unwise to add this extra pressure.
\n\n\n\nPerhaps the solution is obvious at this point. Simply utilize the stranded natural gas as a fuel source for the bitcoin mines, and that’s exactly what EnergyFunders’ CEO, Laura Pommer, has done with her team.
\n\n\n\nNot only does this have the benefits outlined above, it also provides EnergyFunders investors the opportunity to accumulate bitcoin at potentially below-market rates since EnergyFunders’ funds own the facilities and mining equipment. Take some time to read more about Laura and EnergyFunders here.
\n\n\n\nInterested in taking advantage of this amazing opportunity? Click here to invest in the Bitcoin Discovery Fund I. EnergyFunders has already begun to deploy capital and aims to close the fund soon. Don’t miss out!
\nWhat do bitcoin mining and oil and gas exploration have in common? Aside from common geology language, the two seem completely different, but the truth is, they can both be pretty stressful on the environment. For years, oil and gas operators have been plagued with difficulties when trying to find suitable pipelines for natural gas.Continue reading “Bitcoin Mining and Natural Gas Exploration – An Unlikely Union”
\nPhoto by Alesia Kozik on Pexels.com
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Listen to our CEO, Laura Pommer, talk about a range of topics from oil and gas to bitcoin to learning more about Laura herself and how she sees the future of oil and gas. In this podcast, Laura goes into detail about EnergyFunders, the way she and her team are revolutionizing oil and gas investing, and how they work together to select premium oil and gas assets for their funds. She also explains the life cycle of a well and how to find areas to drill from start to finish, starting with basic geology and finishing with a producing well. Also, find out how EnergyFunders became involved in bitcoin and how Laura sees the future of bitcoin.
\n\n\n\nRead a previous article from Texas Innovators with Laura Pommer here. If you’re interested in learning more about the intersection between oil and gas and bitcoin click here to read about the Bitcoin Discovery Fund.
\nListen to our CEO, Laura Pommer, talk about a range of topics from oil and gas to bitcoin to learning more about Laura herself and how she sees the future of oil and gas. In this podcast, Laura goes into detail about EnergyFunders, the way she and her team are revolutionizing oil and gas investing,Continue reading “The Texas Innovators Interviews the CEO of EnergyFunders Laura Pommer”
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/09/ezgif.com-gif-maker-7-1.webp?resize=512%2C342&ssl=1\")
Laura Pommer, CEO, was interviewed about how she is working with innovative, new technology while aiming for an environmentally-friendly end result. Read about Laura’s thoughts on the importance of working with the right people and how that can influence the efficiency of drilling hydrocarbon wells. She also discusses the ways she is using forgotten, producing wells to help with our growing energy problem and how she is harnessing that energy to power bitcoin mining.
\n\n\n\nLearn more about our team here!
\nLaura Pommer, CEO, was interviewed about how she is working with innovative, new technology while aiming for an environmentally-friendly end result. Read about Laura’s thoughts on the importance of working with the right people and how that can influence the efficiency of drilling hydrocarbon wells. She also discusses the ways she is using forgotten, producingContinue reading “The Fintech Times Interviews Laura Pommer”
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/09/ezgif.com-gif-maker-5-1.webp?resize=600%2C401&ssl=1\")
In this interview with Laura Pommer, CEO of EnergyFunders, you can read about how she started with EnergyFunders and how her oil and gas career has shaped her into who she is today. Laura talks about the difficulties of the oil and gas industry and the ways in which she has been steering her past and current companies toward success. For EnergyFunders, this translates to poring over potential opportunities to select the best assets for its funds.
\n\n\n\nTo learn more about EnergyFunders current offerings, click here!
\nIn this interview with Laura Pommer, CEO of EnergyFunders, you can read about how she started with EnergyFunders and how her oil and gas career has shaped her into who she is today. Laura talks about the difficulties of the oil and gas industry and the ways in which she has been steering her pastContinue reading “Laura Pommer featured in Voyage San Antonio”
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/09/ezgif.com-gif-maker-4-1.webp?resize=303%2C454&ssl=1\")
In this podcast, Laura Pommer, CEO, discusses her life experiences that have helped her prepare for her career in the oil and gas industry and how those experiences have solidified the importance of oil and gas to society and everyday life.
\n\n\n\nWith Laura at its helm, EnergyFunders aims to ensure America’s energy independence by providing multiple ways for accredited investors to fund hydrocarbon exploration and extraction.
\n\n\n\nJoin us today by investing in the Drilling Fund I or the recently launched Yield Fund II.
\n\n\n\nIn this podcast, Laura Pommer, CEO, discusses her life experiences that have helped her prepare for her career in the oil and gas industry and how those experiences have solidified the importance of oil and gas to society and everyday life. With Laura at its helm, EnergyFunders aims to ensure America’s energy independence by providingContinue reading “Laura Pommer featured in The FoundHERS Club Podcast”
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/09/EnergyFunders-Branding_full-background.jpg?resize=750%2C174&ssl=1\")
SAN ANTONIO, September 6, 2022 (Newswire.com) – EnergyFunders announces today the opening of a new fund, Yield Fund II, available to accredited investors. The company is building upon the recent success of Yield Fund I – its largest fundraising effort to date.
\n\n\n\nYield Fund II will follow a similar structure to Yield Fund I, focusing primarily on accessing private market drilling and production opportunities, which can provide investors with potential hedges against inflation and stock market volatility. In addition, investing in oil and gas may potentially reduce investors’ tax liabilities, an ever-important factor as investors turn their focus to year-end financials.
\n\n\n\n“The current market has a significant number of high-quality investment opportunities, especially given record high oil and gas prices, and our new Yield Fund II is designed to help investors capitalize on these two factors,” says EnergyFunders CEO Laura Pommer. “We anticipate that oil and gas prices will stay around these levels for quite some time, and small, efficient companies like those EnergyFunders partners with are able to move quickly to add and optimize production.”
\n\n\n\nWith more than a year now at the helm of EnergyFunders, Pommer has nothing but confidence for the future. “Our investors are thrilled to have access to this unique asset class, and though the last year has been filled with plenty of sociopolitical and economic uncertainty, we are pleased with the performance of our portfolio of current investments,” she says.
\n\n\n\nYield Fund I has notched impressive results, notably the Parker 10 well, which returned initial capital within two months of production. Yield Fund II will once again have the benefit of EnergyFunders’ unmatched team of experts evaluating and selecting all projects. Potential investors can contribute to any of these funds by creating an investor profile on the company’s website at www.EnergyFunders.com.
\n\n\n\n\n\n\n\nAbout EnergyFunders:
\n\n\n\nEnergyFunders is an industry-leading investment firm offering private-market energy deals, sourced and vetted by industry experts. The company’s funds include investments in oil and gas wells, as well as mobile Bitcoin mining units powered by wellsite natural gas. By removing the middlemen between investors and the wellhead, the company offers consumers direct ownership in LLCs that invest in oil and gas wells and Bitcoin mines. In addition to potential high returns, EnergyFunders’ investors may also enjoy favorable tax deductions from direct oil and gas ownership, plus potential for passive income and inflation protection. To invest or to learn more, please visit www. EnergyFunders.com.
\n\n\n\nMedia Contact: Aquila Mendez-Valdez
aquila@hitpr.com
210.606.5251
EnergyFunders is the first-ever digital platform offering direct access to off-market, exclusive energy investments. SAN ANTONIO, September 6, 2022 (Newswire.com) – EnergyFunders announces today the opening of a new fund, Yield Fund II, available to accredited investors. The company is building upon the recent success of Yield Fund I – its largest fundraising effort to date. YieldContinue reading “EnergyFunders Launches Yield Fund II, Building on the Success of Yield Fund I”
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/05/Webp.net-resizeimage.jpg?resize=451%2C299&ssl=1\")
In this informative OpEd featured in Texas Innovators, Cole Carpenter delves into the relationship between energy and bitcoin mining. He discusses the hallmarks of bitcoin and why it arguably has more staying power than alternative forms of cryptocurrency. This is a great article for skeptics of bitcoin who wish to learn more about why a seemingly arbitrary concept has garnered so much value and attention.
\n\n\n\nEnergyFunders is mentioned in the following quote:
\n\n\n\n“Companies continue to tap into the synergy between O&G and bitcoin mining in Texas. To start, EnergyFunders is the first-ever digital platform for investing in O&G and off-grid bitcoin mining. EnergyFunders is on a mission to democratize investing in O&G and new bitcoin mines through the company’s exploration projects and vertically integrated and crowdsourced ownership of bitcoin mines. Be on the lookout for a podcast episode with EnergyFunder’s CEO and Chief Geologist, Laura Pommer, in the coming weeks to get more insight into this innovative company.”
\n\n\n\n-COLE CARPENTER, COLE’S CRYPTO CORNER, “THE VALUE OF ENERGY, PROOF-OF-WORK (POW), AND BITCOIN MINING”, TEXAS INNOVATORS
\n\n\n\nReach out today if you have questions about investing. Ready to invest? Click here to get started!
\nIn this informative OpEd featured in Texas Innovators, Cole Carpenter delves into the relationship between energy and bitcoin mining. He discusses the hallmarks of bitcoin and why it arguably has more staying power than alternative forms of cryptocurrency. This is a great article for skeptics of bitcoin who wish to learn more about why aContinue reading “Cole’s Crypto Corner Mentions EnergyFunders”
\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/05/laurapommer1.webp?resize=384%2C576&ssl=1\")
Laura Pommer, CEO, is interviewed to discuss the value of investing with EnergyFunders and the exciting offerings currently on the table for accredited investors. Specifically highlighted are the benefits of investing in cost-advantaged bitcoin mining directly at the wellhead and the tax advantages afforded to oil and gas investors. Read here to learn how EnergyFunders is solving the issues of unnecessarily flaring natural gas while also pulling energy-intensive bitcoin mining off of the power grid.
\n\n\n\n“…EnergyFunders, the first-ever online investment marketplace to offer direct access to oil and gas well sites and off-grid mobile Bitcoin mining units powered by natural gas. The company…offers accredited investors a high-return, low-risk way to invest via direct fractional ownership in oil wells and Bitcoin mines.”
-Iris Gonzalez, “EnergyFunders offers direct investing in oil wells, Bitcoin mines”, Startups San Antonio
Ready to learn more or invest? Take a look at our current funds here!
\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/05/image.png?resize=611%2C585&ssl=1\")
Laura Pommer, CEO, is interviewed to discuss the value of investing with EnergyFunders and the exciting offerings currently on the table for accredited investors. Specifically highlighted are the benefits of investing in cost-advantaged bitcoin mining directly at the wellhead and the tax advantages afforded to oil and gas investors. Read here to learn how EnergyFundersContinue reading “EnergyFunders Featured in Startups San Antonio”
\nVladimir Putin just threw a spark into the powder keg of the global oil market.
\n\n\n\nThe Russian invasion of Ukraine has sent oil prices soaring above $100 per barrel, and without a quick resolution, we could see even more explosive gains ahead.
\n\n\n\nWhile the geopolitical situation is complex, the market impact distills down to basic supply and demand. Even before the Ukraine conflict, the world was running short of oil – evidenced by prices rallying above $90 per barrel at the start of this year.
\n\n\n\nNow, the market risks losing millions of barrels of Russian exports at the worst possible time. In today’s article, I’ll explain why this supply disruption could make today’s $110 oil prices seem cheap. Absent a quick resolution, we could face the prospect of $200 per barrel, or even higher.
\n\n\n\nFinally, one quick note before getting started…
\n\n\n\nRecent events have shocked the world into a newfound appreciation of low-cost oil and gas, sourced from good actors. Even President Biden is now urging U.S. producers to invest in more oil and gas production.
\n\n\n\nWe believe American energy will become more important than ever in the months and years ahead. EnergyFunders is proud to offer investors the chance of supplying responsibly-sourced, low-cost fuel to the world. We recently opened up a brand new oil and gas fund designed for targeting high-return prospects, which you can learn more about here.
\n\n\n\nWith that said, let’s begin by analyzing the scope of potential disruption in Russian oil supplies.
\n\n\n\nRussia is the world’s third largest oil producer, with output of 11.3 million barrels per day (bbl/d). The country consumes about 3.5 million of those barrels domestically, while exporting more than 7 million bbl/d of crude oil and refined products daily (the term “oil” will refer to both crude and refined products in this article). That makes Russia the world’s single largest oil exporter.
\n\n\n\nBefore the Russian invasion of Ukraine, 4.8 million bbl/d of Russian oil exports went to countries that are now backing sanctions against Russia. This primarily includes western European countries that are part of the EU, plus the U.S. and a few others. Meanwhile, another 2.3 million bbl/d goes to countries not backing sanctions – primarily China, along with several eastern European countries (see here for a graphical breakdown of who buys Russian oil exports).
\n\n\n\nWhile we can likely count on China and Eastern Europe to continue buying Russian oil, that still leaves a massive 4.8 million bbl/d of exports at risk from the escalating tensions between Russia and the West.
\n\n\n\nOutside of coordinated OPEC actions – which typically occur in bear markets – the world has never suffered a supply disruption of this magnitude before. Of course, Western leaders appreciated the critical nature of Russian exports in balancing the global oil market. That’s why the politicians initially avoided direct sanctions on Russian energy in the wake of the Ukrainian invasion.
\n\n\n\nThe problem is, scope of the financial sanctions leveled against Russia were the most sweeping of any kind ever implemented. So despite these intentions, the Russian oil trade got caught in the crossfire as collateral damage.
\n\n\n\nPhysical oil trading is a complex business that involves multiple layers of transactions and counterparties. So even where Russian crude is still technically legal to trade, the sanctions package has gummed up the inner-workings of transactions on the ground.
\n\n\n\nAs one example, physical oil traders often use letters of bank credit to finance the purchase of crude oil cargoes. But as the Wall Street Journal reports, the “banks that grease the wheels of international commerce are refusing to finance Russian commodity deals.”
\n\n\n\nWithout this critical source of financing, traders can’t buy Russian crude and deliver it into the global market. Meanwhile, we’re hearing similar reports of refiners, insurance providers and other key cogs in the physical market stepping away from dealing in Russian oil. Even if the transactions aren’t technically illegal, these players simply don’t want the risk or headache involved. As one trader at a major commodities broker simply explained: “the market is starting to fail.”
\n\n\n\nMeanwhile, even if Western companies are willing to take the legal/financial risk of buying Russian crude, they now face huge reputational risk. Case in point – oil supermajor Shell purchased 100,000 barrels of Russian crude at a record discount last Friday. The backlash was enough to spark a public apology from Shell by Tuesday of this week, along with a commitment to “stop all spot purchases of Russian crude oil.”
\n\n\n\nThe situation escalated further on Tuesday, when the Biden administration took direct aim at Russian energy – announcing a ban on Russian oil imports into the U.S. The U.K. followed up with a similar ban on imports of Russian crude oil. Russia quickly responded with the prospect of banning Russian commodity exports in response to Western sanctions.
\n\n\n\nSo already, a substantial portion of the 4.8 million bbl/d of Russian oil exports to Western economies is disrupted from sanctions and popular pressure. But now, escalating tensions threaten to directly impair the entire 4.8 million bbl/d of export volumes. That puts roughly 5% of global oil supply at risk of impairment.
\n\n\n\nThis would be a massive disruption during normal times. But it’s an even bigger problem for today’s already-undersupplied oil market.
\n\n\n\nLet’s consider the inventory situation…
\n\n\n\nDuring the initial COVID-19 outbreak, economic shutdowns around the globe briefly took up to 20 million bbl/d of demand offline. This created a historic build in crude inventories. However, the market quickly flipped from surplus to deficit as supply came offline and demand rebounded. By Q3 2020, the market entered into a structural deficit, with global crude inventories drawing down by an average of 1.8 million barrels per day (bbl/d) through Q4 2021:
\n\n\n\nOn the surface, a 1.8 million bbl/d deficit might seem modest in the context of a 90 – 100 million bbl/d global market. But this shows why the price of oil (and all other commodities) is set by the marginal barrel. It only took a roughly 2% daily supply deficit, compounded over 18 months, to erase a record oil surplus in record time.
\n\n\n\nSo, you can imagine the catastrophic impact of a 5% supply deficit from a major disruption in Russian oil exports. Especially given today’s starting point of depleted inventories.
\n\n\n\nBut the truth is, today’s inventory situation could be even worse than pictured above. Let me explain…
\n\n\n\nYou see, the public forecasting agencies that report on global oil stockpiles aren’t measuring tank levels. Instead, they estimate supply and demand, and take the net result as an implied inventory change. That means a faulty read on either supply or demand could produce a faulty inventory estimate. And it turns out, that’s exactly what’s happened in recent years.
\n\n\n\nThe international energy agency (IEA) is a key source for information on global oil supply and demand used the world over. So it raised more than a few alarm bells when the IEA recently admitted to massively underestimating global oil demand in recent years. After revising up their demand figures, the agency reported that global oil stockpiles are about 200 million barrels lighter than previously expected.
\n\n\n\nThat means today’s global oil market could actually be much tighter than the numbers reported by agencies like the IEA.
\n\n\n\nFor a more accurate measure of inventories, we can look at the weekly storage levels in Cushing, Oklahoma – the key hub that sets the West Texas Intermediate (WTI) oil price. Unlike the global inventory data that comes from supply/demand guesses, the storage tanks at Cushing are directly measured each week.
\n\n\n\nThe bottom line: today’s oil market has very little margin of error.
\n\n\n\nNext, let’s analyze the supply and demand trends that got us here, which will provide a roadmap for what we might expect going forward.
\n\n\n\nAs recently as late 2021, the fashionable opinion on Wall Street said that oil demand had peaked with the pandemic, and it was all downhill from here. One well-known asset manager overseeing tens of billions of dollars famously called for crude oil to go the way of “whale oil”:
\n\n\n\nFast forward a mere 18 months later, and the oil skeptics couldn’t have been more wrong – with U.S. demand running consistently above pre-COVID levels and clearing new record highs just last month:
\n\n\n\nEven more impressive, these new highs showed up before peak seasonal demand kicks in during the summer driving season, which could unleash more upside from here.
\n\n\n\nLooking ahead, another source of potential demand upside could come from a further rebound in air travel. The chart below shows that U.S. air travel remains about 15% below the pre-COVID levels of 2019:
\n\n\n\nWith COVID restrictions fading into the rearview, many analysts expect U.S. air travel will stage a full recovery at some point in 2022. If true, this could help secure further new highs in U.S. crude demand from here.
\n\n\n\nThe rest of the world is following America’s lead. The IEA’s latest estimates indicate global demand will grow by 3.2 million bbl/d this year to 100.6 million bbl/d. Meanwhile, the U.S. energy information agency (EIA) projects a new record high in global demand by Q3 of this year, with further new highs in 2023 and beyond:
\n\n\n\nIn other words, peak oil consumption is nowhere in sight. And with economies re-opening around the world, the world will need over three million bbl/d of new supply this year alone.
\n\n\n\nNext, let’s consider the supply side of the equation…
\n\n\n\nEven with the best pricing environment of the last decade, U.S. oil production remains stalled out at 11.6 million bbl/d. That’s about a million bbl/d shy of pre-pandemic highs:
\n\n\n\nThis reflects a 180 degree change from the dynamics of the last decade, when shale drillers unleashed millions of barrels of new production growth at $50 – $60 oil prices.
\n\n\n\nThe reason for this change is two-fold: lack of capital investment, and perhaps more importantly- a lack of inventory. Shale drillers have simply exhausted core inventories in many of key basins that boosted U.S. production during the shale boom, like the Eagle Ford and Bakken shales.
\n\n\n\nToday, the Permian basin in Texas is the last bastion for U.S. production growth. Despite adding over half a million bbl/d in new production since mid-2021, the Permian is struggling to offset declines in conventional production and the stalled output from all other U.S. shale fields:
\n\n\n\nGiven the exhausted inventory in shale basins outside of the Permian, it’s not clear that higher prices can solve this problem. Meanwhile, even if operators want to put rigs to work, the oil patch is dealing with an acute shortage of inputs across the board, ranging from labor to steel piping to frac sand.
\n\n\n\nThe same supply chain constraints slowing down auto manufacturing and home construction is showing up in the oil patch, and there’s no easy fix here. This confluence of factors explains why, despite the biggest weekly gain in crude prices ever, the U.S. oil rig count actually fell by three and remains 24% below pre-COVID levels:
\n\n\n\nFinally, there’s the OPEC+ coalition, which is also struggling to boost output.
\n\n\n\nIn the wake of the COVID-19 outbreak, OPEC+ balanced the oil market by cutting a record 9.7 million bbl/d of output. As demand rebounded, the group agreed to release 400,000 bbl/d of new supply each month, starting in July of 2021.
\n\n\n\nBut for the last several months running, many of the participating countries have struggled to hit their production targets. In January, the IEA estimated that OPEC+ undershot its production quota by 900,000 barrels per day.
\n\n\n\nA big part of this shortfall can be attributed to the Western backlash against fossil fuel development. Historically, a substantial portion of OPEC+ oil production has been developed by western capital – primarily from the global supermajors. But now, slashed capital budgets among Western oil companies is creating ripple effects around the globe, as energy expert Julian Lee explained to Bloomberg:
\n\n\n\n“Persistent production shortfalls in countries like Nigeria and Angola are not the result of maintenance… rather, they reflect dwindling capacity resulting from lack of investment in exploration and development. So the shortfall will persist. In fact, it’s going to get worse, as more and more countries run up against capacity constraints and struggle to lift production.”
\n\n\n\nThanks in part to downgraded estimates for OPEC+ production capacity, Morgan Stanley forecasts the world’s spare capacity will shrink from 6.5 million barrels a day a year ago to below 2 million barrels a day by mid-2022:
\n\n\n\nCritically, these space capacity estimates were made before the Russian invasion of Ukraine. So even assuming zero disruption to Russian supplies, the oil market was set up for a dangerous drop in spare capacity to under 2 million bbl/d by year-end.
\n\n\n\nFinally, let’s consider the potential impact on the market in the case where Russian exports remain impaired going forward.
\n\n\n\nEvery commodities bull market is born from a supply/demand imbalance. The price mechanism attempts to solve the imbalance in one of two ways: incentivize more supply, or reduce demand.
\n\n\n\nOver the past year, the oil market has signaled the need for more supply (or less demand) through a steady grind higher in prices. And yet, despite oil reaching multi-year highs of $90, producers have struggled to add enough supply. As discussed in today’s article, many of these production struggles can’t be solved by higher prices in the short-term.
\n\n\n\nMeanwhile, demand continues rebounding across the globe. Now, the threat of losing up to 4.8 million bbl/d of Russian exports could take the supply side of this balancing act off the table. In the event of a total loss of these Russian exports, even with every OPEC member maxing out their production capacity, the market could still face a crippling supply deficit exceeding a million bbl/d.
\n\n\n\nIn that scenario, wide scale demand destruction would become the only mechanism available to balance the market. It’s anyone’s guess how high prices would go in this scenario, but $200 could be just the beginning.
\n\n\n\nGiven these risks, domestic oil and gas production has never been more important.
\nVladimir Putin just threw a spark into the powder keg of the global oil market. The Russian invasion of Ukraine has sent oil prices soaring above $100 per barrel, and without a quick resolution, we could see even more explosive gains ahead. While the geopolitical situation is complex, the market impact distills down to basicContinue reading “Here’s How Oil Could Hit $200+”
\nBitcoin miners are flocking to Texas! In this TechCrunch article, several companies explain why Texas is becoming a hub for bitcoin mining. At a time when Texas bitcoin critics are concerned about stress on the power grid, EnergyFunders offers a solution with wellhead bitcoin mining. Read the article now to find out why EnergyFunders CEO, Laura Pommer, says,
\n\n\n\n“Texas is Bitcoin country”.
\n\n\n\nInterested in our Bitcoin Discovery Fund? Read about it here! Or invest now!
\nBitcoin miners are flocking to Texas! In this TechCrunch article, several companies explain why Texas is becoming a hub for bitcoin mining. At a time when Texas bitcoin critics are concerned about stress on the power grid, EnergyFunders offers a solution with wellhead bitcoin mining. Read the article now to find out why EnergyFunders CEO,Continue reading “EnergyFunders Featured in TechCrunch”
\nI can still smell the crude oil and chemical solvents…
\n\n\n\nIt was 2012, and I was fresh out of college working my first “real job” in the oilfield service sector. One of our key clients was facing a big problem: persistent wax build up within their oil wells and wellsite infrastructure. Normally, clients would send oil samples to our lab in Houston. That way, we could find a solution from the relative convenience of an air-conditioned laboratory.
\n\n\n\nBut time was of the essence.
\n\n\n\nSo our team traveled out to the field location in Gonzales, Texas – a small South Texas town that sits atop the Eagle Ford shale formation. Working in an 8 x 10 foot trailer, we tested hundreds of different oil and solvent combinations to find the best wax-busting recipe. And it was all done in the dead of summer… with no air conditioning.
\n\n\n\nA great character builder for a fresh college graduate, or so I was told.
\n\n\n\nBut beyond the blistering heat, the thing I remember most was how much the oilfield had swallowed up the entire town. As recently as 2009, Gonzales had been a sleepy town of just 10,000 people. The Eagle Ford was an obscure formation, churning out around 50,000 barrels of oil per day (bbl/d).
\n\n\n\nBut everything changed when the shale boom showed up on the scene, starting around 2010. Companies like EOG had unlocked the Eagle Ford’s potential, blowing up production 10-fold to 500,000 bbl/d by mid-2012, on its way to a peak of 1.7 million bbl/d by 2015.
\n\n\n\nThe oilfield descended upon the town, overrunning the roads with water haulers, equipment trucks, and an endless array of Ford F-250s sporting Halliburton and Schlumberger logos. You couldn’t walk into a restaurant, convenience store, or the local Wal-Mart without spotting half a dozen oilfield workers. The steel toe boot and protective coverall ensemble made them impossible to miss.
\n\n\n\nPerhaps the best boomtime indicator: rooms at the local La Quinta Inn went for over $200/night. And that’s if you were lucky enough to find availability.
\n\n\n\nIn my youthful enthusiasm, I remember thinking how great this all was. We were living through the birth of a brand new industry that was going to make us all rich, right? Buying shares in shale companies seemed like the ultimate no brainer.
\n\n\n\nOf course, we now know the truth. The 2012 scene in Gonzales, Texas should not have left me feeling optimistic. Instead, I should have left that trip feeling a lot more like this…
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/02/image.png?resize=750%2C297&ssl=1\")
The Shale Bubble: Great Technology Meets Dismal Economics
\n\n\n\nLike most bubbles, the shale mania was built upon the promise of revolutionary new technology that would make investors rich.
\n\n\n\nThe technology – horizontal drilling and hydraulic fracturing – weren’t exactly new concepts in the 2000s. However, these techniques suddenly became commercially viable with the introduction of things like optimized fracking fluid design starting around 2009 – 2010.
\n\n\n\nAnd there was a grain of truth in the story – this new shale technology did in fact unlock massive new supplies of hydrocarbons. Over the last decade, the shale boom unleashed an incredible 7.5 million barrels per day (bbl/d) of new U.S. oil production at its peak by March of 2020:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/02/Shale-Boom-Graph-1.png?resize=750%2C457&ssl=1\")
There was just one problem…
\n\n\n\nShale drillers poured a lot more money into the ground versus what they could pull back out. Turns out, drilling 10,000+ feet sideways through the earth and pumping thousands of pounds of fracking chemicals downhole gets expensive. We’re talking $8 – $10 million to drill and complete a shale well versus roughly $2 – $4 million for your average conventional well.
\n\n\n\nMeanwhile, the record flood of capital pouring into the shale patch bid up costs across the board. Prices surged for land, labor, equipment and yes, even the hotel rooms in Gonzales, Texas.
\n\n\n\nThen, starting in 2014, energy prices collapsed when excess shale supply overwhelmed demand. And yet, investors continued throwing good money after bad in the shale patch from 2016 – 2019, allowing U.S. production to clear new all time highs. As a result, oil prices remained capped at around $60 per barrel.
\n\n\n\nThe one-two punch of spiking input costs followed by “lower for longer” energy prices dealt a devastating blow to shale finances. The following summary from research consultancy Deloitte reveals the dismal state of shale economics over the last decade:
\n\n\n\n“The US shale industry registered net negative free cash flows of $300 billion, impaired more than $450 billion of invested capital, and saw more than 190 bankruptcies since 2010.”
\n\n\n\nThe lesson? When a wall of money rushes in to capitalize on a hot new technology – run, don’t walk, in the opposite direction. Of course, the corollary also applies: when money flees an industry en masse, that capital exodus can leave behind tremendous opportunity in its wake.
\n\n\n\nThat’s precisely what’s happening in today’s oil and gas industry.
\n\n\n\nShale Boom Goes Bust
\n\n\n\nNo matter how you slice it, the shale boom has officially gone bust.
\n\n\n\nImportantly, this doesn’t mean we won’t see new highs in U.S. oil production – we almost certainly will. The key difference now versus then: the flood cheap capital willing to finance non-economic production growth at $50 oil no longer exists.
\n\n\n\nMeanwhile, some of the key shale formations at the epicenter of the boom appear permanently impaired, including the Eagle Ford shale. Let’s revisit our “La Quinta” indicator from earlier…
\n\n\n\nDespite oil trading back at boom-time levels of $90 per barrel, the same La Quinta room in Gonzales, Texas goes for just $71 today. This should come as no surprise, given that drilling activity is down 70% from the former highs. Not even $90 oil can resuscitate the Eagle Ford’s dwindling production profile:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/eagle-ford.png?resize=750%2C442&ssl=1\")
So, what happened?
\n\n\n\nFirst, the strategic priorities among both investors and shale executives have shifted. The days of “growth at all costs” are long gone. Today, it’s all about living within cash flows, as Bloomberg explains…
\n\n\n\n“For much of the past decade, shale producers spent every dollar they earned and borrowed extra to drill new wells. Producers would typically reinvest 120% to 130% of their operating cash flow in new production, according to Noah Barrett, a Denver-based energy analyst at Janus Henderson. Now, that figure is closer to 70% or lower, leaving plenty of cash for shareholder payouts.”
\n\n\n\nNext, the rise of ESG investment mandates have increasingly labeled fossil fuels an “un-investable” asset class. The end result: collapsing capital expenditures across the energy sector – even despite today’s high prices and attractive returns:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/capex-graph.png?resize=750%2C388&ssl=1\")
Therein lies the big bullish catalyst on the supply side of the oil equation: a lack of investment. Pulling oil out of the ground requires capital, plain and simple. And until more capital starts flowing back into the U.S. energy industry, don’t expect more oil to start flowing out.
\n\n\n\nWe can see the evidence of today’s capital impairment in the numbers. Consider the following…
\n\n\n\nIn 2019, oil prices averaged $57 per barrel. At the time, U.S. drillers deployed 774 oil rigs to produce an average of 12.3 million barrels of oil per day (b/d). But last year, prices averaged a much more attractive $68 per barrel. Despite these higher prices, U.S. drillers deployed just 380 rigs. That’s down 50% compared with 2019, resulting in U.S. production averaging just 11.2 million b/d in 2021:
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/02/Oil-Production-Graph-2.png?resize=750%2C464&ssl=1\")
Despite a 20% increase in oil prices, U.S. production dropped 1.1 million bbl/d last year versus 2019. That’s a sea change from the shale behavior of the last decade – when $60 oil invited new record highs in production.
\n\n\n\nOf course, at some point, high enough prices will revive shale growth. And based on current trends in rig counts, it appears that $90 oil might do the trick – particularly from the low cost Permian basin. But the key nuance here is simple: modest growth at $90+ oil is a whole different ball game vs aggressive growth at $50 – $60 oil.
\n\n\n\nAt today’s prices, we should expect more supply to come online. But gone are the days of flooding the market with non-economic production. The hurdle rate for investment has gone up in the shale patch, and that’s great news for energy investors across the board.
\n\n\n\nThis year, the U.S. shale industry will generate its best cash flow since the dawn of the shale revolution – $30 billion, based on current analyst estimates. I expect this is just the beginning of a decade of more rational behavior, and higher returns on invested capital across the sector.
\n\n\n\nDespite the best cash flows since the dawn of the industry, energy stocks across the board still trade at reasonably attractive valuations. Why? I suspect one of the big fears is that today’s high price environment will prove short-lived, and investors fear an inevitable return to the days of endless cash incineration.
\n\n\n\nBut here’s where the story really gets even more interesting. Even if investors and shale executives wanted to bring back the growth rates of the shale boom, that option might not even exist anymore.
\n\n\n\nLet me explain why…
\n\n\n\nThe Shale Milkshake Runs Dry
\n\n\n\nOne key hallmark of any bubble is wildly optimistic forecasts of the security promoters of the day. During the shale bubble, C-suite executives kept shale share prices inflated based on overly-optimistic promises of future drilling inventory.
\n\n\n\nThe problem, it turns out, is a little something called “drainage”. Oil tycoon Daniel Plainview brilliantly describes this concept in the epic film There Will be Blood (played by Daniel Day-Lewis), as follows:
\n\n\n\n“If you have a milkshake, and I have a milkshake. And I have a straw… And my straw reaches across the room. I drink your milkshake!”
\n\n\n\n![\"\"](\"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/10/milkshake.jpg?resize=625%2C281&ssl=1\")
Expanding a bit, Mr. Plainview describes a situation of two nearby oil deposits, where the first well sucks up oil from the adjacent deposit. When this occurs, drilling the second well becomes uneconomic. Since the milkshake has already been consumed by the first straw, adding the second straw does you no good.
\n\n\n\nAs you can imagine, the closer you cram nearby wells together, the greater the potential for drainage. Or, if corporate executives assume they can pack future wells closer together, then they can systematically overestimate their future drilling inventory.
\n\n\n\nThis mirage can exist on paper… until you actually start drilling those future wells. That’s where we find ourselves today, with future shale inventories now getting marked down across the board, as the Wall Street Journal explains…
\n\n\n\n“Companies learned that newer wells drilled too closely to older ones often caused interference with the original wells’ oil production or caused new wells to perform worse than expected. They eventually spaced wells farther apart, cutting into estimates of how many they had left to drill.”
\n\n\n\nLooking ahead, that means dramatically less inventory, and thus less potential shale production growth. The days of 20% – 30% annual production increases are long gone. Take Pioneer Natural Resources as a prime example.
\n\n\n\nLike many of its peers, Pioneer grew oil production by as much as 27% per year during the shale boom years. But now, the company is capping future growth at 5%. The reason why all traces back to preserving inventory, as CEO Scott Sheffield recently explained…
\n\n\n\n“You just can’t keep growing 15% to 20% a year… You’ll drill up your inventories. Even the good companies.”
\n\n\n\nPioneer is not an isolated example. The Wall Street Journal cites research from FLOW Partners, indicating that the top five shale companies would burn through their entire inventory within six years if they grew production by 15% per year. Data from Bernstein Research and Rystad Energy point towards similar conclusions.
\n\n\n\nThe Bakken and Eagle Ford shales have already burned through their core inventory, with rigs down over 70% from the peak. Even at reduced drilling rates, analysts expect the top tier drilling locations in each basin will likely be exhausted within 5 – 6 years.
\n\n\n\nRystad reports that the number of highly economic drilling locations across five major shale basins has been slashed from 68,000 in 2016 to less than 35,000 today. In other words..
\n\n\n\nThe future potential of the shale patch has been cut by nearly half in the last five years alone.
\n\n\n\nThe bottom line: things will look a lot different in the shale patch going forward. Hurdle rates on investment have gone up, and available inventories have gone down.
\n\n\n\nSetting the Stage for the Next Oil Supercycle
\n\n\n\nThe last decade was a horrific one for energy investors. The shale revolution invited a record wave of cheap capital into the U.S. energy sector. As night follows day, the boom set the stage for the inevitable bust.
\n\n\n\nNow, the bust is setting the stage for the next oil supercycle.
\n\n\n\nNotice, I didn’t use the word boom. What we’re seeing today is the exact opposite of a boom – capital starvation in the energy sector. Neither investors nor shale executives have any appetite for aggressive investments into production growth. Cash flow and shareholder returns are the only game in town.
\n\n\n\nMeanwhile, depleted inventories mean most shale companies simply can’t return to yesterday’s 20-30% annual growth rates, even if they wanted to. Finally, the rise of ESG mandates only adds more pressure on the capital inflows into the sector.
\n\n\n\nAdd it all up, and you can see why it’s night and day at $90 oil now versus 10 years ago.
\n\n\n\nWe’re still in the early innings of the next oil supercycle. This article was originally published at the Ross Report.
\nI can still smell the crude oil and chemical solvents… It was 2012, and I was fresh out of college working my first “real job” in the oilfield service sector. One of our key clients was facing a big problem: persistent wax build up within their oil wells and wellsite infrastructure. Normally, clients would sendContinue reading “Shale Bust Sets the Stage for Oil Supercycle”
\nIn this podcast from March 2021, Laura gives an overview of her professional life leading up to her joining the EnergyFunders team last year. This podcast interview takes place before her time at EnergyFunders and is full of delightful anecdotes that show a broad picture of Laura’s background and why she has proven to be an excellent fit to take over EnergyFunders as CEO.
\n\n\n\nRead more about our team here!
\n\n\n\nIn this podcast from March 2021, Laura gives an overview of her professional life leading up to her joining the EnergyFunders team last year. This podcast interview takes place before her time at EnergyFunders and is full of delightful anecdotes that show a broad picture of Laura’s background and why she has proven to beContinue reading “Laura Pommer on “Round the Rotary” Podcast with J.P. Warren”
\nEnergyFunders CEO, Laura Pommer, and Director of Business Development, Jeff Allen, are featured on the podcast, Oil and Gas Startups. Laura discusses how her unique background starting her own company and as a geologist have allowed her to pave the way for innovative change at EnergyFunders, and Jeff shares his education in geology and experiences with oil and gas exploration. Laura and Jeff explain the ins and outs of investing with EnergyFunders and how the company is tackling Bitcoin mining. With a team of industry experts at its helm, EnergyFunders is uniquely positioned to shake up the old investing institutions with democratized oil and gas and bitcoin mining investment opportunities.
\n\n\n\nIf you’re an accredited investor ready to own a piece of an oil well or delve into the world of Bitcoin mining, click here to sign up now!
\n\n\n\nStill have questions? Check out these pages: Bitcoin Discovery Fund | Drilling Fund or reach out to us here!
\n\n\n\n\n\n\n\nEnergyFunders CEO, Laura Pommer, and Director of Business Development, Jeff Allen, are featured on the podcast, Oil and Gas Startups. Laura discusses how her unique background starting her own company and as a geologist have allowed her to pave the way for innovative change at EnergyFunders, and Jeff shares his education in geology and experiencesContinue reading “Laura Pommer and Jeff Allen on “Oil and Gas Startups” Podcast”
\nLaura Pommer, CEO of EnergyFunders, is featured on the podcast, “Oil Money”, where she has the opportunity to share the substance that sets EnergyFunders apart from other investment platforms. In contrast to traditional energy investment firms, EnergyFunders allows individual, accredited investors to participate in a diverse spread of oil and gas wells, which is a compelling opportunity for investors who are tired of the instability of typical Wall Street investments.
\n\n\n\nListen here or watch below!
\n\n\n\nLaura Pommer, CEO of EnergyFunders, is featured on the podcast, “Oil Money”, where she has the opportunity to share the substance that sets EnergyFunders apart from other investment platforms. In contrast to traditional energy investment firms, EnergyFunders allows individual, accredited investors to participate in a diverse spread of oil and gas wells, which is aContinue reading ““Oil Money” Podcast hosts EnergyFunders”
\nMost energy analysts expect new record highs in global oil consumption this year. This includes the international energy agency (IEA), which just upgraded its 2022 oil demand forecast by 200,000 barrels per day, but the million barrel question: Where will the supply come from?
Don’t count on the U.S. shale patch. Drillers are holding back on adding new production, even despite the attractive returns available. Consider the numbers:
In 2019, oil prices averaged $57 per barrel. At the time, U.S. drillers deployed 774 oil rigs to produce an average of 12.3 million barrels of oil per day (b/d). Now, consider that in 2021, prices averaged a much more attractive $68 per barrel. However, last year U.S. drillers deployed just 380 rigs. That’s down 50% compared with 2019, resulting in U.S. production averaging just 11.2 million b/d in 2021.
In other words, despite a 20% increase in oil prices, the U.S. produced 1.1 million fewer barrels of oil per day last year versus 2019. We can trace this all back to one thing: a lack of investment. Producing oil requires capital, plain and simple. And until more capital starts flowing back into the U.S. energy industry, don’t expect more oil to start flowing out.
Similarly, OPEC+ cut oil output by 9.7 million b/d following the COVID-19 outbreak. Now, with the global economy recovering, the group plans to restore 400,000 b/d of production each new month of 2022 until reaching pre-pandemic levels. There’s just one problem: the group is already struggling to hit their output targets due to a lack of investment in many key OPEC+ countries. Have a look at the following examples:
Nigeria – one of Africa’s top oil exporters – missed its December production target by 460,000 b/d. And in Angola – another former top producer in Africa – oil production has fallen to a 17-year low due to underinvestment.
Meanwhile, the IEA recently downgraded Iraq’s production capacity by 140,000 b/d, due to underinvestment. Even Russia – the world’s third largest producer – planned to boost production by 20,000 b/d in December, but instead suffered a 10,000 b/d drop in output. In total, OPEC+ undershot their December production target by roughly 60%, and the total shortfall is now 790,000 b/d below target.
The Western backlash against fossil fuel investing is having ripple effects around the globe. That’s because a substantial portion of OPEC production has historically been funded by western supermajors. As Suhail Al-Mazrouei, the UAE energy minister, recently explained in a Bloomberg interview:
“The industry needs investment, through the involvement of international oil companies, in order to provide adequate supplies.. Failure to provide sufficient capital may lead to future price hikes.”
Energy expert Julian Lee – who accurately predicted today’s OPEC+ production struggles months ago – recently explained:
“Persistent production shortfalls in countries like Nigeria and Angola are not the result of maintenance… rather, they reflect dwindling capacity resulting from lack of investment in exploration and development. So the shortfall will persist. In fact, it’s going to get worse, as more and more countries run up against capacity constraints and struggle to lift production.”
Many analysts have grown concerned that OPEC+ spare capacity could be much less than previously thought. Energy analyst Bill Farren-Price of Enervus recently commented in the Wall Street Journal:
“These monthly [OPEC] additions are increasingly nominal… They are not fully backed by real barrels.”
Morgan Stanley forecasts the world’s spare capacity will shrink from 6.5 million barrels a day a year ago to below 2 million barrels a day by mid-2022. That’s a tiny margin of error in a market where demand is expected to grow by roughly 4 million b/d in 2022, and another 2 million b/d 2023.
With prices approaching $100 per barrel, the market is signaling the dire need for more oil supply. But until investors respond, prices will keep moving higher. This is a tremendous environment for the few remaining investors willing to allocate capital into today’s energy market.For more information on EnergyFunders’ current funds, have a look here. Ready to invest? Get started today!
Most energy analysts expect new record highs in global oil consumption this year. This includes the international energy agency (IEA), which just upgraded its 2022 oil demand forecast by 200,000 barrels per day, but the million barrel question: Where will the supply come from? Don’t count on the U.S. shale patch. Drillers are holding backContinue reading “Oil Shortage Drives Prices Higher as Sources of Capital Remain Elusive Globally”
\nEnergyFunders is the first-ever digital platform offering access to direct oil and gas investments and off-grid Bitcoin mines.
\n\n\n\nSan Antonio, Texas (February 1, 2022) – EnergyFunders announces today the opening of two new energy and Bitcoin funds, available to accredited investors. The company is building upon the recent success of their Yield Fund I – their largest fundraising effort to date.
\n\n\n\nThe Drilling Fund will invest in unproven, undrilled oil and gas wells. The Fund’s strategy draws upon the geological and engineering acumen of the EnergyFunders team, including veteran geologist and CEO Laura Pommer. The company will also consult with trusted third party analysts in assessing geological, engineering and financial risk. With proper due diligence, the company believes it can offset the greater risks of “wildcatting” by identifying prospects with excellent upside potential.
\n\n\n\nThe Bitcoin Discovery Fund will be the first-of-its-kind offering, allowing investors to own a portion of an off-grid Bitcoin mine. The company believes its Bitcoin mines will enjoy substantial cost advantages from using natural gas directly from the wellhead to power mobile Bitcoin units. Based on current estimates, the projected potential IRRs of this Fund could exceed 100%.
\n\n\n\n“We are thrilled to be the only player in the market offering crowdsourced ownership of Bitcoin mines directly to consumers,” says EnergyFunders CEO Laura Pommer. “Now investors can accumulate Bitcoin at potentially below-market prices through their ownership in our Bitcoin mines.”
\n\n\n\nPommer says theDrilling Fund is an excellent option for those looking to tap into the typically inaccessible oil and gas investing space. “Even though wildcatting can be riskier, it can also have extremely high returns if you are able to use technology and experience to identify unproven to less proven oil reserves, which is what we hope to do.”
\n\n\n\nIt’s also important to note that direct energy investing can offer some of the most lucrative tax deductions in the entire U.S. tax code. EnergyFunders’ oil and gas investments allow eligible investors to potentially capitalize on these unique tax savings. Potential investors can contribute to either of these funds by creating an investment profile on the company’s website at www.EnergyFunders.com.
\n\n\n\n###
\n\n\n\nAbout EnergyFunders:
\n\n\n\nEnergyFunders is an industry-leading investment firm offering private-market energy deals, sourced and vetted by industry experts. The company’s funds include investments into oil and gas wells, as well as mobile Bitcoin mining units powered by wellsite natural gas. By removing the middlemen between investors and the wellhead, the company offers consumers direct ownership in oil wells and Bitcoin mines, plus their associated high returns. Investors in EnergyFunders may also enjoy lucrative tax deductions from direct oil and gas ownership, plus passive monthly income, high IRRs, and inflation protection. To invest or to learn more, please visit www. EnergyFunders.com.
\n\n\n\nPhotography, B roll, and additional assets are available on the company’s Media Kit here.
\nEnergyFunders announces the opening of two new energy and Bitcoin funds, available to accredited investors.
\nTalk Energy Podcast’s Max Gagliardi and guest host, J.P. Warren, interview Laura Pommer, EnergyFunder CEO, live at the Bitcoin 2021 Convention. In addition to a brief overview of what the company is doing in oil and gas, Laura provides insight into how and why EnergyFunders is starting up its own Bitcoin mines. Max, J.P., and Laura give some great commentary about the energy transition and the intersection between the energy sector and Bitcoin mining. Watch the video here:
\n\n\n\nClick here to listen via the Amazon Music app. Learn more about EnergyFunders, oil and gas, and Bitcoin!
\nTalk Energy Podcast’s Max Gagliardi and guest host, J.P. Warren, interview Laura Pommer, EnergyFunder CEO, live at the Bitcoin 2021 Convention. In addition to a brief overview of what the company is doing in oil and gas, Laura provides insight into how and why EnergyFunders is starting up its own Bitcoin mines. Max, J.P., andContinue reading “EnergyFunders live at the Bitcoin 2021 Convention”
\nIn this interview with Hart Energy, Laura Pommer discusses EnergyFunders’ two newly-opened funds. EnergyFunders is revolutionizing off-Wall Street investing by offering a platform to accredited investors who want to avoid traditional funding or private equity options for oil and gas investments. Additionally, the company is democratizing the process of Bitcoin mining and making it more accessible to everyday investors.
\n\n\n\nSo, why is an energy investment company starting Bitcoin mines? Click here and read the interview to find out.
\n\n\n\nTo learn more about the funds currently offered by EnergyFunders, check out the pages here: Bitcoin Discovery Fund | Drilling Fund
\nIn this interview with Hart Energy, Laura Pommer discusses EnergyFunders’ two newly-opened funds. EnergyFunders is revolutionizing off-Wall Street investing by offering a platform to accredited investors who want to avoid traditional funding or private equity options for oil and gas investments. Additionally, the company is democratizing the process of Bitcoin mining and making it moreContinue reading “Laura Pommer, EnergyFunders CEO, Interviewed By Hart Energy”
\nEnergyFunders CEO, Laura, is on the podcast “Tripping Over the Barrel”, discussing her background and how geology runs in her family. She delves into the nuances of Bitcoin and how she has utilized her oil and gas background to better understand Bitcoin and cryptocurrency herself so that she can now lead the way to a new frontier of Bitcoin mining.
\n\n\n\nEnergyFunders is making Bitcoin investing simpler and more accessible to investors. Learn about how you can invest with EnergyFunders and take part in the Bitcoin revolution.
\n\n\n\n
Watch the video above, or follow this Apple podcast link to listen to the innovative thinking that is fueling EnergyFunders as we intersect the worlds of energy investing and cryptocurrency mining.
EnergyFunders CEO, Laura, is on the podcast “Tripping Over the Barrel”, discussing her background and how geology runs in her family. She delves into the nuances of Bitcoin and how she has utilized her oil and gas background to better understand Bitcoin and cryptocurrency herself so that she can now lead the way to aContinue reading “EnergyFunders CEO on “Tripping Over the Barrel” Podcast”
\nPhoto by David McBee on Pexels.com
\n","id":"cG9zdDoyNDQ=","sizes":"(max-width: 300px) 100vw, 300px","sourceUrl":"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?fit=1733%2C1300&ssl=1","srcSet":"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?w=1733&ssl=1 1733w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=300%2C225&ssl=1 300w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=1024%2C768&ssl=1 1024w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=768%2C576&ssl=1 768w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=1536%2C1152&ssl=1 1536w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=1200%2C900&ssl=1 1200w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=800%2C600&ssl=1 800w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=400%2C300&ssl=1 400w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=200%2C150&ssl=1 200w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2022/01/pexels-photo-730564.jpeg?resize=1568%2C1176&ssl=1 1568w"},"id":"cG9zdDoyMzc=","isSticky":false,"modified":"2022-01-12T15:55:23","slug":"energyfunders-ceo-on-tripping-over-the-barrel-podcast","title":"EnergyFunders CEO on “Tripping Over the Barrel” Podcast"},{"__typename":"Post","author":{"__typename":"User","avatar":{"__typename":"Avatar","height":96,"url":"https://secure.gravatar.com/avatar/995d79c485706601a45efb3b791cef96?s=96&d=identicon&r=g","width":96},"id":"dXNlcjoyMTE5Nzk0MTg=","name":"infoenergyfunders","slug":"infoenergyfunders"},"categories":[{"__typename":"Category","databaseId":1372,"id":"dGVybToxMzcy","name":"Press","slug":"press"}],"content":"\nOur CEO, Laura Pommer, is featured on “Round the Rotary” podcast hosted by JP Warren. In this episode, Laura discusses joining and leading the EnergyFunders team in early 2021 and the headway she is making to democratize and disrupt the old ways of oil and gas investing. She also shares how the revitalized EnergyFunders team is making strides to create lower risk opportunities that are accessible to everyday investors.
\n\n\n\nListen to the podcast here to learn more about the changes the new team has been making to EnergyFunders!
\n\n\n\nFollow all episodes of the Round the Rotary podcasts here.
\nOur CEO, Laura Pommer, is featured on “Round the Rotary” podcast hosted by JP Warren. In this episode, Laura discusses joining and leading the EnergyFunders team in early 2021 and the headway she is making to democratize and disrupt the old ways of oil and gas investing. She also shares how the revitalized EnergyFunders teamContinue reading “EnergyFunders CEO on Round the Rotary Podcast”
\nToday’s stock market presents a great dilemma for investors.
\n\n\n\nWith valuations inflated to near all-time highs, the broader U.S. stock market (i.e. S&P 500) offers low or negative future returns:
\n\n\n\nMeanwhile, with inflation running at 40-year highs, holding cash guarantees a loss in purchasing power. The energy sector offers a lone bright spot of value, plus inflation-protection, in an otherwise overvalued and dangerous stock market.
\n\n\n\nToday, I’ll make the case for how oil could hit $100.
\n\n\n\nLet’s start by reviewing the inventory side of the equation.
\n\n\n\nOil Inventories: From Glut to Potential Shortage
\n\n\n\nThe global oil glut created in the wake of the COVID-19 outbreak has officially been erased. Today, global crude stocks sit near the bottom of their historical range. Looking ahead, the U.S. Energy Information Agency (EIA) projects global inventories will remain depressed throughout 2022:
\n\n\n\nThis depleted storage situation increases the likelihood of a potential oil shortage, and price spike, in the event of a meaningful supply disruption anywhere around the globe.
\n\n\n\nIt’s also important to note that the EIA’s forecast in the chart above was made in early December, when the EIA assumed a potential demand hit from the Omicron variant of the COVID-19 virus, noting:
\n\n\n\nThe potential effects of the spread of this (Omicron) variant are uncertain, which introduces downside risks to the global oil consumption forecast.
\n\n\n\nWith the benefit of an extra month of new data, we now know that the Omicron has failed to make a major dent in global oil demand. Meanwhile, there’s a potential upside case from Omicron.
\n\n\n\nHistorically, it’s not uncommon for viral pandemics to end from the dominance of a milder form of the virus. Specifically, you need a variant with greater transmissibility, but lower-symptom severity. Preliminary evidence indicates that Omicron could fit this bill.
\n\n\n\nFirst, we know that the Omicron variant is highly transmissible and has become the dominant strain in many regions, including over 95% of all U.S. COVID-19 cases. Meanwhile, without downplaying the severity to the virus, it appears that Omicron is a milder form of the COVID-19 virus. We can see this in the fact that COVID case counts have exploded to new record highs in places like the U.S., while hospitalization and fatality rates remain well below the highs.
\n\n\n\nFrom my understanding, the growing dominance of a milder viral strain is exactly how the Spanish Flu burned itself out. If Omicron produces such an outcome, that’s obviously a massive upside surprise for crude oil demand in 2022.
\n\n\n\nEven without this outcome, the data shows that world is increasingly learning to live with COVID-19. Economic and travel patterns are gradually returning to normal around the globe, including a robust recovery in jet travel – the key lagging sector throughout the pandemic. That’s why current estimates from major forecasting agencies, including the EIA, project new record highs in global crude demand in 2022.
\n\n\n\nMeanwhile, things look even more bullish on the supply side of the equation.
\n\n\n\nThe plain reality is that oil production requires capital. And capital investment into fossil fuel development has been running at dangerously low for two years running:
\n\n\n\nAfter more than a decade of excess oil supply, the world has grown accustomed to the risk of oversupply in the oil market. However, with oil investment falling to the lowest levels of the last decade, capital starvation is setting the stage for potential supply shocks as the key tail-risk going forward.
\n\n\n\nWe can see clear evidence of capital impairment across the board, including in the U.S. shale patch. Despite oil reaching as high as $85 per barrel in 2021, U.S. production remains 1.5 million barrels per day below pre-COVID highs. This is a 180-degree inversion from the shale boom era, when $60 oil was enough to incentivize new record highs in U.S. production.
\n\n\n\nAll signs indicate further shale capital restraint into 2022, based on current rig count trends and capex plans from the major American E&Ps.
\n\n\n\nOf course, the story of shale capital impairment has been well covered. The lesser talked about phenomenon is a similar investment pullback among key OPEC+ producers, like Saudi Arabia. The chart below shows the Saudi rig count sitting at the lowest levels in more than 13 years:
\n\n\n\nMeanwhile, there’s growing chatter that Russia – the world’s 3rd largest oil producer – might also be running up against its production limit, as Bloomberg recently reported:
\n\n\n\nRussia failed to boost oil output last month despite a generous ramp-up quota in its OPEC+ agreement, indicating the country has deployed all of its current available production capacity.
\n\n\n\nSo even as OPEC+ remains on the output hiking path, including the recent announcement of a 400,000 barrel/day increase beginning in February, the big question remains: how much global spare capacity exists to meet record highs in demand this year and beyond?
\n\n\n\nThrow in the potential for a geopolitical disruption in a major producing region, like the current turmoil in Kazakhstan, and $100 oil could be just the beginning of the next leg higher in prices.
\nToday’s stock market presents a great dilemma for investors. With valuations inflated to near all-time highs, the broader U.S. stock market (i.e. S&P 500) offers low or negative future returns: Meanwhile, with inflation running at 40-year highs, holding cash guarantees a loss in purchasing power. The energy sector offers a lone bright spot of value,Continue reading “Here’s How Oil Could Hit $100”
\nEnergyFunders announces incredible early results from its Parker #10 well – with initial production coming in at 200 barrels of oil per day. This production rate reflects a 100% increase from our original estimates of 100 barrels per day, which we expected to yield a 78% IRR and 7 month payback period.
\n\n\n\nThe Parker #10 is a proven reserves well located in Dinero Field, approximately 30 miles northwest of Corpus Christi, Texas. The drilling location is nearby the prolific Parker Heirs #1, which has produced over 272,000 barrels of oil in the last 10 years.
\n\n\n\nThis well is part of the EnergyFunders Yield Fund I offering.
\n\n\n\nClick here to learn more about the Parker #10 oil well.
\n\n\n\nTo see a flyover video of the Parker #10 oil well, and also hear our CEO Laura Pommer discuss the technical aspects of the well, watch this video below.
\n\n\n\nEnergyFunders announces incredible early results from its Parker #10 well – with initial production coming in at 200 barrels of oil per day. This production rate reflects a 100% increase from our original estimates of 100 barrels per day, which we expected to yield a 78% IRR and 7 month payback period. The Parker #10Continue reading “A True Gusher: Incredible Early Results from the Parker #10 Well“
\nPumpjack at Rey, in Williams County, North Dakota, United States.
\n","id":"cG9zdDoxMTI=","sizes":"(max-width: 300px) 100vw, 300px","sourceUrl":"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2021/12/GettyImages-1284247197-1.jpg?fit=724%2C482&ssl=1","srcSet":"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2021/12/GettyImages-1284247197-1.jpg?w=724&ssl=1 724w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2021/12/GettyImages-1284247197-1.jpg?resize=300%2C200&ssl=1 300w"},"id":"cG9zdDo5MA==","isSticky":false,"modified":"2021-12-08T15:26:37","slug":"a-true-gusher-incredible-early-results-from-the-parker-10-well","title":"A True Gusher: Incredible Early Results from the Parker #10 Well"},{"__typename":"Post","author":{"__typename":"User","avatar":{"__typename":"Avatar","height":96,"url":"https://secure.gravatar.com/avatar/995d79c485706601a45efb3b791cef96?s=96&d=identicon&r=g","width":96},"id":"dXNlcjoyMTE5Nzk0MTg=","name":"infoenergyfunders","slug":"infoenergyfunders"},"categories":[{"__typename":"Category","databaseId":1371,"id":"dGVybToxMzcx","name":"Crypto","slug":"crypto"},{"__typename":"Category","databaseId":1362,"id":"dGVybToxMzYy","name":"Insights","slug":"insights"},{"__typename":"Category","databaseId":1373,"id":"dGVybToxMzcz","name":"Oil & Gas","slug":"oil-gas"}],"content":"\nA big part of investment success requires being in the right place at the right time.
\n\n\n\nToday, the prospects for direct oil, gas and Bitcoin investing have never looked better.
\n\n\n\nLong-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed, it’s just grown more compelling.
\n\n\n\nIn a normal commodity market, high prices provide a powerful signal for investors: allocate more capital. But in today’s market, that signaling mechanism is broken. For the first time ever, high energy prices have been met with capital scarcity, creating the best buyer’s market of our lifetime.
\n\n\n\nDespite oil trading at multi-year highs, capital remains stubbornly sidelined in today’s market. Consider the difference in rig counts between today versus the prior peak in prices, back in October of 2018 at $75 oil:
\n\n\n\nThe unwillingness of operators to deploy rigs becomes even more bullish when you consider the depleting inventory of “drilled but uncompleted” wells (DUCs). As the name implies, DUCs are wells where the majority of capital has been spent drilling, but the well has not been hydraulically stimulated (“completed”) to maximize production yet. DUCs reflect oil supply that can quickly be brought online through completion, but without deploying new drilling rigs.
\n\n\n\nDuring the shale boom years, excess cheap capital flowing into the shale patch funded a record accumulation of DUC inventories. But in today’s capital starved market, drillers are now harvesting this inventory. The shale DUC count is now at the lowest level in years:
\n\n\n\nToday’s depleted DUC count means less future oil supply, without a major increase in drilling rigs.
\n\n\n\nSo, even as the consensus calls for new record highs in crude oil consumption in 2022, all signs indicate U.S. production likely remains below the pre-COVID peak for the foreseeable future. Meanwhile, the major European oil companies are facing similar capital constraints, all while OPEC is maintaining discipline in keeping supply off the market.
\n\n\n\nThis is a recipe for one thing: higher prices.
\n\n\n\nAt least that’s the bet Wall Street is making. The Wall Street Journal recently reported on the flood of options trades betting on $100 oil, captured in the graphic below:
\n\n\n\nBut $100 could be just the beginning, if traders in the options pit are right. The same Journal article noted a recent spike in bets calling for $200 oil by the end of 2022.
\n\n\n\nDoes Wall Street know something we don’t?
\n\n\n\nBut it’s not just oil prices going through the roof…
\n\n\n\nPropane Apocalypse
\n\n\n\nSimilar supply/demand dynamics have driven a global shortage of natural gas and natural gas liquids (NGLs). NGLs include products like ethane, propane and butane – key feedstocks for chemical processing, and fuel sources for heat during the winter.
\n\n\n\nYou may have seen the headlines about $6 natural gas and a potential winter supply crunch. Less fanfare has been made about an already-dire supply situation in the propane market. The chart below shows U.S. propane inventories falling to their lowest seasonal level of the last six years, ahead of the key winter heating season:
\n\n\n\nThe combination of depleted inventories, stalled production growth, and the potential for a cold winter led one UBS analyst to warn of a potential “Armageddon” scenario in the propane market. While that may prove hyperbolic, Mr. Market is telegraphing a potential supply crunch by sending propane prices towards their highest levels in eight years.
\n\n\n\nThe Opportunity of a Lifetime
\n\n\n\nPut it all together, and we believe today’s energy market offers the opportunity of a lifetime for investors. With large scale capital allocators refusing to put money to work, even at today’s prices, we’re seeing the best buyer’s market ever for deal-making.
\n\n\n\nThis includes proven reserves projects with IRRs exceeding 20% for wells already on-production, and proven development projects with IRRs exceeding 30%.
\n\n\n\nGiven today’s stretched stock market valuations, and near record low bond yields, this type of return/risk proposition is almost unheard of. The only asset offering greater returns than energy in today’s market is Bitcoin:
\n\n\n\nThanks to the new Bitcoin mining opportunities we’ve identified, Yield Fund I investors can now tap into each of these top performing asset classes.
\n\n\n\nJust like oil and gas, the prospects for Bitcoin investors have never looked brighter.
\n\n\n\nBitcoin Goes Mainstream
\n\n\n\nHardly a week goes by without a major new catalyst moving Bitcoin towards mainstream adoption. This week, history was made with the launch of the first-ever Bitcoin exchange traded fund (ETF). Now, both institutional and retail investors can buy Bitcoin through a regular brokerage account.
\n\n\n\nWith millions of new investors able to invest in Bitcoin with the click of a button, it’s no surprise why Bitcoin reached new record highs above $67,000 per coin this week. At current prices, the economics of our proposed Bitcoin mines look even better than the lucrative oil and gas deals available in today’s market.
\n\n\n\nCut Your Tax Bill with Oil and Gas…AND Bitcoin Mines!
\n\n\n\nLooking beyond the returns available, we know a big reason why many investors chose direct oil and gas investing is to reduce their taxable income. Specifically, the intangible drilling cost deductions, that allows for the opportunity to deduct up to 100% of your investment in year one – providing immediate, upfront tax benefits.
\n\n\n\nAfter consulting with tax professionals in recent weeks, we’ve learned that our Bitcoin mine will provide investors with a similar bonus depreciation tax benefit. Timing is everything here. That’s why we’re making an aggressive push to raise capital and put it to work before year-end. This will allow investors the maximum tax benefit for the 2021 tax year.
\n\n\n\nIf you’d like to learn more, click here to schedule a time with someone on our team to learn how you can invest in our Yield Fund I.
\nA big part of investment success requires being in the right place at the right time. Today, the prospects for direct oil, gas and Bitcoin investing have never looked better. Long-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed,Continue reading “The Golden Age of Oil, Gas and Bitcoin Investing “
\n| What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal: invest in a wellsite mining project that will produce Bitcoins for approximately $30,000 per coin. After months of planning, the project is now coming together. Just last week, we officially placed the first order for mining equipment, and started designing the onsite layout. Over the next several months, we hope to have all the pieces in place to begin churning out Bitcoins for $30,000 per coin. (Note: this $30,000 projected Bitcoin cost reflects the estimated all-in costs for the life of the project. This estimate is subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) So what does this mean for Yield Fund I investors? Our current estimates suggest that this Bitcoin mining project could achieve IRRs in the triple-digit range. After speaking with many current and potential investors in recent weeks, we know many Bitcoin enthusiasts are excited about this project. But today, I’d like to provide some basic background information for those new to Bitcoin. Let’s start from square one: why Bitcoin, and more importantly, why now? An Unprecedented Economic Environment As you know, the COVID-19 outbreak delivered a crushing blow to the economy. But only 18 months later, we’re now living through a full blown economic boom. Record retail sales, record corporate earnings and record high asset prices across stocks, real estate and commodities. What happened? The largest monetary and fiscal expansion of all time. Specifically, the Federal Reserve expanded the U.S. M2 money supply by over 30%, from $15.5 trillion in March of 2020 to $20.6 trillion today. That means roughly one-third of U.S. base money supply was created in the last 18 months alone. Meanwhile, the largest fiscal stimulus package of all time pushed the federal deficit to over $3 trillion last year. That’s more than twice the deficit spending deployed to fight the previous recession in 2009, which itself was unprecedented at the time. Clearly, these efforts helped jumpstart economic growth. But here’s where things get tricky… The Bill Comes Due We’ve all been taught that there’s no such thing as a free lunch in life, and economics is no different. After all, why should anyone work or pay taxes if the government can simply borrow and print our way to prosperity? One of the potential costs of record deficit spending and money creation is rising prices, and that bill is now coming due. U.S. consumer prices are currently increasing at over 5% per year – the fastest rate in over a decade. And current evidence suggests more pain for the consumer is in store. That’s because producer prices, the key cost input feeding into consumer prices, are increasing at over 10% per year – the fastest pace in over 40 years: |
| Meanwhile, policymakers claim that today’s inflation is “transitory”. But the chart below shows that economist expectations for consumer prices have only moved higher with each passing month: |
| Even if today’s inflation does turn out to be “transitory”, that’s little consolation for consumers. There’s a reason inflation is known as the “silent thief” – by making your money less valuable, it’s no different than a wealth confiscation in practice. If your bank confiscated 10% of the money in your account, would you not worry simply because it was a one-time event? Bitcoin Solves This Bitcoin is a decentralized, digital monetary network that offers a superior currency alternative. Unlike traditional currencies, Bitcoin is controlled by software – not central bankers and governments. The Bitcoin protocol ensures that only 21 million coins will ever be created, which means no more silent theft through endless inflation. Each transaction is digitally encrypted onto a decentralized network, run by computers all around the world. Some have called it the “internet of money”, because you can seamlessly transact with anyone around the world at the click of a button. No intermediaries or central authorities getting in the way – it’s the people’s money. Beyond offering inflation protection, the Bitcoin network was designed to be super secure and self-regulating. That’s where Bitcoin mining comes in. Here’s how it works… The self-regulating Bitcoin network is maintained through a network of thousands of “nodes”. At each node, high-powered computers – known as miners – keep track of every Bitcoin transaction. These miners compile real-time Bitcoin transactions into data blocks. When a given data block fills up, the miner adds it to the pre-existing block series. These linked blocks form a chain, known as the “blockchain”. So, the blockchain is simply a continuously-updated public ledger, which contains every single Bitcoin transaction of all time. The Bitcoin protocol uses several mechanisms to ensure security and integrity of the blockchain. This includes the fact that 50% of the network nodes must approve each data block before adding it onto the blockchain. This prevents a bad actor from creating false transactions in real-time. Meanwhile, rewriting blockchain history is even more difficult, as explained in the following graphic: |
| In exchange for lending their computing power to the Bitcoin network, miners get rewarded with a certain amount of Bitcoin per each data block they create. The number falls over time, by design, as the total number of Bitcoins approaches 21 million. Currently, miners receive just over 6 Bitcoins for each data block. Now, here’s where we get back to why it all matters for Yield Fund I investors… How To Buy Bitcoin at $30,000 Today Sure, you could bet on the future of digital currencies by simply buying Bitcoin. But why pay $42,000 per coin, when you could instead pay $30,000? That’s the opportunity we see today, thanks to the rise of mobile Bitcoin mining units. Let me explain… You see, Bitcoin mining can be thought of as simply converting electricity into digital currency. So electricity becomes one of the biggest variables driving the mining economics. Over the last few months, we’ve put together a plan for converting wellhead natural gas into electrical power, via gas-fired commercial generators located at the wellsite. The generators then power the mobile Bitcoin mining units, also located onsite near the wellhead. We believe the economics speak for themselves. For roughly $2 million in upfront capital cost, we believe we can produce roughly 6 Bitcoins per month initially for an operating cost of just over $60,000. The end result – a payback period in less than one year, and a project IRR exceeding 100%. (Note: these project economics are estimates, and subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) We’re excited to be offering this opportunity to Yield Fund I investors today, and look forward to updating you on the progress as we start receiving equipment at the mining site. This is a truly unique opportunity, and I am pleased to be offering the chance to democratize Bitcoin mining. |
What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal:Continue reading “How to Buy Bitcoin for $30,000”
\nTop Three Tax Deductions for Oil and Gas Investments
\n\n\n\nThe oil and gas industry enjoys some of the most lucrative benefits available in the U.S. tax code. Starting in 1986, the Federal Government introduced unique tax deductions for investors who directly fund oil and gas wells. Thanks to a new law in place from 2018 – 2023, you can now deduct up to 100% of the well cost in year one of the investment.
\n\n\n\nFor more than three decades, wealthy Americans have used these deductions to reduce their taxable income. Instead of sending a check to Uncle Sam, they’ve put that money towards drilling oil and gas wells. The tax code also offers the opportunity to protect the future income from those wells. The end result: a lower tax bill today, and the potential for years of tax-advantaged income streams in the future.
\n\n\n\nHere are the top three ways you can take advantage of these opportunities.
\n\n\n\nThe non-recoverable expenses of an oil and gas well are known as “intangible drilling costs” (IDCs). These include things that you can’t resell later including fuel, drilling fluids, and wages. IDCs typically make up roughly 65 – 80% of the well cost, and you can deduct 100% of IDCs in year one of the project.
\n\n\n\nFor example, if you make a $100,000 investment into a well with 75% IDCs, you could earn up to a $75,000 deduction against your income tax bill. You also get a little leeway with the timing. IDC deductions become available in the year the money gets invested, even if the well does not start drilling until March 31 of the following year. (See Section 263 of the tax code.)
\n\n\n\nTangible drilling costs (TDCs) refer to the well costs that you can potentially recover, including wellheads, tanks, leaseholds, etc. TDCs typically make up between 20 – 35% of drilling expenses, and they are also 100% tax deductible.
\n\n\n\nIn the past, tax rules forced investors to take TDC deductions over a seven-year depreciation schedule. But thanks to a new 2018 law in effect until 2023, you can now deduct 100% of the TDCs in the first year. So instead of having to apply these tax savings over seven years, you can now bring forward 100% of your TDC deductions into the current tax year.
\n\n\n\nThe end result for investors is that, through at least 2023, you can now deduct up to 100% of the upfront cost of drilling a well from your current year taxes. But that’s not all – as an individual investor, you can enjoy even greater tax benefits after drilling the well when the production comes online.
\n\n\n\nThe 1990 Tax Act allows energy producers under a certain volume limit to exempt 15% of their gross income from federal taxes. The incentive is designed to support independent energy producers and individual investors.
\n\n\n\nHere’s how it works…
\n\n\n\nThe Depletion Allowance applies to small companies that produce no more than 50,000 barrels per day of oil. As an individual investor, you qualify for the Depletion Allowance if your share of production falls under a threshold of 1,000 barrels of oil per day or 6,000 cubic feet of gas per day.
\n\n\n\nEnergyFunders offers the unique opportunity of investing as an active or passive participant in our Funds. As an active investor, you can deduct your investment from active income, including regular wages. If you invest as a limited partner, you can only deduct your investment against passive income (i.e. stock dividends or bond interest payments).
\n\n\n\nImportantly, active investors take on unlimited liability versus limited partners that have limited liability. We encourage every individual to consider their own risk tolerance and tax situation in choosing which option makes the most sense for their personal situation.
\n\n\n\n\n\n\n\n\nTop Three Tax Deductions for Oil and Gas Investments The oil and gas industry enjoys some of the most lucrative benefits available in the U.S. tax code. Starting in 1986, the Federal Government introduced unique tax deductions for investors who directly fund oil and gas wells. Thanks to a new law in place from 2018Continue reading “Understanding the Tax Breaks”
\nA new paradigm has gripped the global energy markets… and it’s creating the most attractive investment opportunity of a generation.
\n\n\n\nIn the past, capital chased economic opportunity in the energy markets. We see this reflected in the historical relationship between prices and rig counts. As you would expect, periods of high oil prices would draw capital into the market, sending rig counts higher. Inevitably, the excess capital would create excess supply, pushing prices and rig counts back down. Thus oil normally follows the same boom/bust cycle seen across most other commodities.
\n\n\n\nBut 2021 ain’t your normal oil market.
\n\n\n\nThe previous relationship between oil prices and rig deployments has officially broken down:
\n\n\n\nLooking at today’s rig count, you’d think oil was trading at 2016 or 2020 levels. Instead, despite the oil and gas trading a multi-year highs, capital remains stubbornly sidelined in the current market. In other words…
\n\n\n\nCapital allocators now avoid oil and gas at all costs, regardless of the returns available.
\n\n\n\nIn today’s article, I’ll explain what’s driving this seemingly irrational behavior, and why it’s creating the best investment opportunity we’ve seen in over a decade.
\n\n\n\nShale Shocked: Investors Recovering from a Decade of Capital Destruction
\n\n\n\nThe capital exodus from energy markets makes sense in the context of recent history. The shale revolution invited record volumes of capital into oil and gas development over the last decade. This excess capital forced up land, lease and drilling costs, and then ultimately oversupplied the market. The one-two punch of rising input costs and depressed energy prices generated hundreds of billions in capital impairment.
\n\n\n\nAccording to Bloomberg, the median internal rate of return (IRR) for private equity energy funds that started investing in 2010 is -5.6% through March 2021. Public markets haven’t fared much better. The following chart of public E&P companies versus the S&P 500 paints the picture of a painful lost decade for energy investors:
\n\n\n\nSo despite a historic bull market where virtually every asset class enjoyed record returns, energy investors have generally lost money since 2010. And we’re not just talking garden variety underperformance – this lost decade included two crushing price collapses along the way, in 2016 and 2020.
\n\n\n\nThe 2016 energy crash delivered a particularly painful lesson. Many tried playing the contrarian game, with tens of billions of dollars flooding into the shale patch hoping to catch a cyclical rebound. But ultimately, too many contrarians acting together turned this into a consensus play. Within 18 months of the 2016 price bottom, a flood of new drilling activity sent U.S. production surging to new record highs. This unprecedented new production growth kept prices capped at around $60, while input costs soared, killing margins and cash flow across the board.
\n\n\n\nThen of course, we all know what happened in 2020…
\n\n\n\nThe Coronavirus delivered a crushing final blow to energy investors, only four years after the previous price crash. Thus, in the wake of two back-to-back oil busts and a decade of negative returns, “shale-shocked” investors are unwilling to throw good money after bad. Meanwhile, countless E&P companies themselves are pulling back from investing in new production growth. That’s because many took on excess leverage during the boom years, and must now divert cash flow towards repairing bloated balance sheets.
\n\n\n\nBut these financial scars only tell part of the story driving today’s capital retreat from oil and gas development. The rest of the story relates to the rise of environmental-social-governance (ESG) investment mandates.
\n\n\n\nESG Forces Fossil Fuel Exodus
\n\n\n\nESG investment mandates have forced a wide scale retreat away from fossil fuel development, regardless of the returns available from the industry. Kelly Deponte, a director for a private equity fund, recently explained in a Bloomberg article that private equity and pension funds are “moving away from investing in oil and gas no matter the returns in pursuit of their carbon neutral goals.”
\n\n\n\nThis includes major pension funds, like the New York State Common Retirement Fund – America’s third largest public pension – which now invests capital with a “net zero” emissions target mandate. Other major capital allocators shifting away from fossil fuel development include behemoths like the California Public Employees’ Retirement System (CalPERS) and Blackstone – one of the world’s largest private equity firms.
\n\n\n\nThese moves go beyond just generating headlines and talking points – it’s translating into a major shift in fund flows. The chart below shows how renewables now attract roughly 80 cents of every dollar going into energy investments, drawing vast sums of capital away from conventional fossil fuel funding:
\n\n\n\nMeanwhile, it’s just not capital allocators throwing in the towel on fossil fuels. Even the leading oil and gas companies themselves are being forced away from investments into hydrocarbon development. This includes the oil supermajors, like Chevron and Exxon – which have each come under fire from activist board members to reduce their emissions footprint. Over in Europe, the supermajors are under even greater pressure from both environmental groups and the legal system. Royal Dutch Shell recently became the first company in history ordered by a court to cut its emissions.
\n\n\n\nBut here’s where the plot gets really interesting…
\n\n\n\nWhile the ESG movement has successfully waged a campaign to cut back on hydrocarbon supply – by attacking the investment side of the equation – they’ve yet to make any meaningful impact on the demand side of the equation.
\n\n\n\n“Peak Oil Demand” Nowhere in Sight
\n\n\n\nIf we rewind the clock back to this time last year, the growing consensus narrative was calling for the “end of oil” as we know it. The headline below is one among countless examples:
\n\n\n\nThe “peak oil demand” theory gained a lot of momentum last year based on the idea that COVID-19 would permanently change our way of life. One of the popular theories said that work from home would create a structural loss in gasoline demand from commuters. Fast forward to July 2021, and the American driver recently racked up a new all-time record high in gasoline consumption – using over 10 million barrels per day of gasoline over the July 4th weekend.
\n\n\n\nMeanwhile, countries like India and China show no signs of slowing their fossil fuel demand anytime soon. After all, hydrocarbons still reflect the cheapest energy source on the planet, and emerging economies need all the cheap fuel they can get.
\n\n\n\nThe bottom line: the end of oil demand remains nowhere in sight. Instead, we’re looking at new record highs looming on the horizon. That’s not my forecast – that comes from U.S. Energy Information Agency (EIA), which recently projected a full post-COVID recovery to new record highs in global oil demand next year:
\n\n\n\nThe Opportunity Beyond the Hype
\n\n\n\nThanks to a combination of poor historical returns and ESG-related mandates, the supply side of the oil and gas equation will likely remain impaired for years to come. Meanwhile, most analysts agree that demand will rebound towards new all-time highs in 2022 and beyond.
\n\n\n\nThus, the stage is set for a structural imbalance between impaired supply and record demand. Not only will today’s capital retreat keep oil and gas prices elevated, but this will also help keep input costs in check, enabling the best industry margins since the dawn of the shale revolution.
\n\n\n\nWe’re already seeing this new paradigm of profitability emerge in the data. The chart below shows that U.S. shale companies are now generating more free cash flow than at any time in their history:
\n\n\n\nThe bottom line: for those willing to choose facts and numbers over headline hype, we’re looking at a once-in-a-generation investment opportunity in today’s energy market.
\n\n\n\nWe believe the EnergyFunders Yield Fund I provides an excellent vehicle for capitalizing on this unique opportunity. The Fund is available for investment today, and will remain open as long as capacity exists.
\nA new paradigm has gripped the global energy markets… and it’s creating the most attractive investment opportunity of a generation. In the past, capital chased economic opportunity in the energy markets. We see this reflected in the historical relationship between prices and rig counts. As you would expect, periods of high oil prices would drawContinue reading “The Generational Opportunity from Today’s New Energy Paradigm”
\nThis is the entire reason for investing in the first place, right?
\n\n\n\nOil and gas investing offers a high return potential. It can also be riskier, which is why EnergyFunders offers you ways to diversify your investment into multiple well projects or investing in several projects at different stages — exploration, development and operation.
\n\n\n\nThe most obvious advantage of investing in oil and gas stems from the large tax breaks for investors Uncle Sam gives. You can deduct up to 80% of your investment within the first year. This gives you a sizable instant return on investment, even if you have a dry hole.
\n\n\n\nYou can also write off the entire amount within five years. Plus, you will receive a 15% depletion allowance against oil and gas revenue every year.
\n\n\n\nMake sure you have a qualified and competent CPA or tax preparer who understands oil and gas investing laws to make sure you get every deduction possible. Read more about the tax breaks for investors.
\n\n\n\nOil and gas investing also offers long-term return potential. Some wells are in production for a decade or more, giving you passive income for years.
\n\n\n\nA profitable oil or gas well can be similar to owning your own annuity that provides reliable, consistent cash flow. With most financial annuities, you have to pay premiums for several years before you can receive a payment. Compare this to a profitable oil and gas project, where you’re eligible to receive a payment in the month or quarter it hits the pay zone. You may only have to wait a few months to a year for that first payment, instead of five, 10 or 20 years.
\n\n\n\nGet the rewards of oil and gas investing. SIGN UP
\nThe Unique Benefits of Oil and Gas Investing HIGH RETURN POTENTIAL This is the entire reason for investing in the first place, right? Oil and gas investing offers a high return potential. It can also be riskier, which is why EnergyFunders offers you ways to diversify your investment into multiple well projects or investing inContinue reading “Why Invest in Oil and Gas?”
\nWe appreciate that many of our investors would benefit from expedited liquidity for their Yield Fund I investment, before the end of the three to five year expected Fund life.
\n\n\n\nThat’s why we’ve partnered with tZERO – a leader in blockchain innovation and liquidity for digital assets. In simple terms, tZERO provides a trading platform for private market assets. By partnering with tZERO, we hope to allow Yield Fund I investors to buy and sell Yield Fund I partnership units in the same way you might trade stocks or ETFs in a regular brokerage account.
\n\n\n\nWhile we cannot guarantee liquidity or demand for the units on tZERO’s platform, we’re optimistic that should we get listed on the platform, investors will have the opportunity for expedited liquidity from their Yield Fund I investment.
\n\n\n\nClick here to read the full press release on BusinessWire.com
\nWe appreciate that many of our investors would benefit from expedited liquidity for their Yield Fund I investment, before the end of the three to five year expected Fund life. That’s why we’ve partnered with tZERO – a leader in blockchain innovation and liquidity for digital assets. In simple terms, tZERO provides a trading platformContinue reading “EnergyFunders Partners with tZERO to Digitize and Trade Yield Fund I Securities”
\nBusiness fund investor planning for investment in crisis recession coronavirus , Covid-19 after stockmarket crash using cryptocurrency,bitcoin, for invest use digital tablet and mobile online trading
\n","id":"cG9zdDoxMDg=","sizes":"(max-width: 300px) 100vw, 300px","sourceUrl":"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2021/12/GettyImages-1299372402-1.jpg?fit=724%2C482&ssl=1","srcSet":"https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2021/12/GettyImages-1299372402-1.jpg?w=724&ssl=1 724w, https://i0.wp.com/blogenergyfunders.wpcomstaging.com/wp-content/uploads/2021/12/GettyImages-1299372402-1.jpg?resize=300%2C200&ssl=1 300w"},"id":"cG9zdDo4MQ==","isSticky":false,"modified":"2022-05-12T14:20:08","slug":"energyfunders-partners-with-tzero-to-digitize-and-trade-yield-fund-i-securities","title":"EnergyFunders Partners with tZERO to Digitize and Trade Yield Fund I Securities"}],"InitialPosts":[{"__typename":"Post","author":{"__typename":"User","avatar":{"__typename":"Avatar","height":96,"url":"https://secure.gravatar.com/avatar/995d79c485706601a45efb3b791cef96?s=96&d=identicon&r=g","width":96},"id":"dXNlcjoyMTE5Nzk0MTg=","name":"infoenergyfunders","slug":"infoenergyfunders"},"categories":[{"__typename":"Category","databaseId":1371,"id":"dGVybToxMzcx","name":"Crypto","slug":"crypto"},{"__typename":"Category","databaseId":1362,"id":"dGVybToxMzYy","name":"Insights","slug":"insights"},{"__typename":"Category","databaseId":1373,"id":"dGVybToxMzcz","name":"Oil & Gas","slug":"oil-gas"}],"content":"\nA big part of investment success requires being in the right place at the right time.
\n\n\n\nToday, the prospects for direct oil, gas and Bitcoin investing have never looked better.
\n\n\n\nLong-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed, it’s just grown more compelling.
\n\n\n\nIn a normal commodity market, high prices provide a powerful signal for investors: allocate more capital. But in today’s market, that signaling mechanism is broken. For the first time ever, high energy prices have been met with capital scarcity, creating the best buyer’s market of our lifetime.
\n\n\n\nDespite oil trading at multi-year highs, capital remains stubbornly sidelined in today’s market. Consider the difference in rig counts between today versus the prior peak in prices, back in October of 2018 at $75 oil:
\n\n\n\nThe unwillingness of operators to deploy rigs becomes even more bullish when you consider the depleting inventory of “drilled but uncompleted” wells (DUCs). As the name implies, DUCs are wells where the majority of capital has been spent drilling, but the well has not been hydraulically stimulated (“completed”) to maximize production yet. DUCs reflect oil supply that can quickly be brought online through completion, but without deploying new drilling rigs.
\n\n\n\nDuring the shale boom years, excess cheap capital flowing into the shale patch funded a record accumulation of DUC inventories. But in today’s capital starved market, drillers are now harvesting this inventory. The shale DUC count is now at the lowest level in years:
\n\n\n\nToday’s depleted DUC count means less future oil supply, without a major increase in drilling rigs.
\n\n\n\nSo, even as the consensus calls for new record highs in crude oil consumption in 2022, all signs indicate U.S. production likely remains below the pre-COVID peak for the foreseeable future. Meanwhile, the major European oil companies are facing similar capital constraints, all while OPEC is maintaining discipline in keeping supply off the market.
\n\n\n\nThis is a recipe for one thing: higher prices.
\n\n\n\nAt least that’s the bet Wall Street is making. The Wall Street Journal recently reported on the flood of options trades betting on $100 oil, captured in the graphic below:
\n\n\n\nBut $100 could be just the beginning, if traders in the options pit are right. The same Journal article noted a recent spike in bets calling for $200 oil by the end of 2022.
\n\n\n\nDoes Wall Street know something we don’t?
\n\n\n\nBut it’s not just oil prices going through the roof…
\n\n\n\nPropane Apocalypse
\n\n\n\nSimilar supply/demand dynamics have driven a global shortage of natural gas and natural gas liquids (NGLs). NGLs include products like ethane, propane and butane – key feedstocks for chemical processing, and fuel sources for heat during the winter.
\n\n\n\nYou may have seen the headlines about $6 natural gas and a potential winter supply crunch. Less fanfare has been made about an already-dire supply situation in the propane market. The chart below shows U.S. propane inventories falling to their lowest seasonal level of the last six years, ahead of the key winter heating season:
\n\n\n\nThe combination of depleted inventories, stalled production growth, and the potential for a cold winter led one UBS analyst to warn of a potential “Armageddon” scenario in the propane market. While that may prove hyperbolic, Mr. Market is telegraphing a potential supply crunch by sending propane prices towards their highest levels in eight years.
\n\n\n\nThe Opportunity of a Lifetime
\n\n\n\nPut it all together, and we believe today’s energy market offers the opportunity of a lifetime for investors. With large scale capital allocators refusing to put money to work, even at today’s prices, we’re seeing the best buyer’s market ever for deal-making.
\n\n\n\nThis includes proven reserves projects with IRRs exceeding 20% for wells already on-production, and proven development projects with IRRs exceeding 30%.
\n\n\n\nGiven today’s stretched stock market valuations, and near record low bond yields, this type of return/risk proposition is almost unheard of. The only asset offering greater returns than energy in today’s market is Bitcoin:
\n\n\n\nThanks to the new Bitcoin mining opportunities we’ve identified, Yield Fund I investors can now tap into each of these top performing asset classes.
\n\n\n\nJust like oil and gas, the prospects for Bitcoin investors have never looked brighter.
\n\n\n\nBitcoin Goes Mainstream
\n\n\n\nHardly a week goes by without a major new catalyst moving Bitcoin towards mainstream adoption. This week, history was made with the launch of the first-ever Bitcoin exchange traded fund (ETF). Now, both institutional and retail investors can buy Bitcoin through a regular brokerage account.
\n\n\n\nWith millions of new investors able to invest in Bitcoin with the click of a button, it’s no surprise why Bitcoin reached new record highs above $67,000 per coin this week. At current prices, the economics of our proposed Bitcoin mines look even better than the lucrative oil and gas deals available in today’s market.
\n\n\n\nCut Your Tax Bill with Oil and Gas…AND Bitcoin Mines!
\n\n\n\nLooking beyond the returns available, we know a big reason why many investors chose direct oil and gas investing is to reduce their taxable income. Specifically, the intangible drilling cost deductions, that allows for the opportunity to deduct up to 100% of your investment in year one – providing immediate, upfront tax benefits.
\n\n\n\nAfter consulting with tax professionals in recent weeks, we’ve learned that our Bitcoin mine will provide investors with a similar bonus depreciation tax benefit. Timing is everything here. That’s why we’re making an aggressive push to raise capital and put it to work before year-end. This will allow investors the maximum tax benefit for the 2021 tax year.
\n\n\n\nIf you’d like to learn more, click here to schedule a time with someone on our team to learn how you can invest in our Yield Fund I.
\nA big part of investment success requires being in the right place at the right time. Today, the prospects for direct oil, gas and Bitcoin investing have never looked better. Long-time followers will recall that we’ve been pounding the table on today’s opportunity for direct oil and gas investors. The basic story here hasn’t changed,Continue reading “The Golden Age of Oil, Gas and Bitcoin Investing “
\n| What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal: invest in a wellsite mining project that will produce Bitcoins for approximately $30,000 per coin. After months of planning, the project is now coming together. Just last week, we officially placed the first order for mining equipment, and started designing the onsite layout. Over the next several months, we hope to have all the pieces in place to begin churning out Bitcoins for $30,000 per coin. (Note: this $30,000 projected Bitcoin cost reflects the estimated all-in costs for the life of the project. This estimate is subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) So what does this mean for Yield Fund I investors? Our current estimates suggest that this Bitcoin mining project could achieve IRRs in the triple-digit range. After speaking with many current and potential investors in recent weeks, we know many Bitcoin enthusiasts are excited about this project. But today, I’d like to provide some basic background information for those new to Bitcoin. Let’s start from square one: why Bitcoin, and more importantly, why now? An Unprecedented Economic Environment As you know, the COVID-19 outbreak delivered a crushing blow to the economy. But only 18 months later, we’re now living through a full blown economic boom. Record retail sales, record corporate earnings and record high asset prices across stocks, real estate and commodities. What happened? The largest monetary and fiscal expansion of all time. Specifically, the Federal Reserve expanded the U.S. M2 money supply by over 30%, from $15.5 trillion in March of 2020 to $20.6 trillion today. That means roughly one-third of U.S. base money supply was created in the last 18 months alone. Meanwhile, the largest fiscal stimulus package of all time pushed the federal deficit to over $3 trillion last year. That’s more than twice the deficit spending deployed to fight the previous recession in 2009, which itself was unprecedented at the time. Clearly, these efforts helped jumpstart economic growth. But here’s where things get tricky… The Bill Comes Due We’ve all been taught that there’s no such thing as a free lunch in life, and economics is no different. After all, why should anyone work or pay taxes if the government can simply borrow and print our way to prosperity? One of the potential costs of record deficit spending and money creation is rising prices, and that bill is now coming due. U.S. consumer prices are currently increasing at over 5% per year – the fastest rate in over a decade. And current evidence suggests more pain for the consumer is in store. That’s because producer prices, the key cost input feeding into consumer prices, are increasing at over 10% per year – the fastest pace in over 40 years: |
| Meanwhile, policymakers claim that today’s inflation is “transitory”. But the chart below shows that economist expectations for consumer prices have only moved higher with each passing month: |
| Even if today’s inflation does turn out to be “transitory”, that’s little consolation for consumers. There’s a reason inflation is known as the “silent thief” – by making your money less valuable, it’s no different than a wealth confiscation in practice. If your bank confiscated 10% of the money in your account, would you not worry simply because it was a one-time event? Bitcoin Solves This Bitcoin is a decentralized, digital monetary network that offers a superior currency alternative. Unlike traditional currencies, Bitcoin is controlled by software – not central bankers and governments. The Bitcoin protocol ensures that only 21 million coins will ever be created, which means no more silent theft through endless inflation. Each transaction is digitally encrypted onto a decentralized network, run by computers all around the world. Some have called it the “internet of money”, because you can seamlessly transact with anyone around the world at the click of a button. No intermediaries or central authorities getting in the way – it’s the people’s money. Beyond offering inflation protection, the Bitcoin network was designed to be super secure and self-regulating. That’s where Bitcoin mining comes in. Here’s how it works… The self-regulating Bitcoin network is maintained through a network of thousands of “nodes”. At each node, high-powered computers – known as miners – keep track of every Bitcoin transaction. These miners compile real-time Bitcoin transactions into data blocks. When a given data block fills up, the miner adds it to the pre-existing block series. These linked blocks form a chain, known as the “blockchain”. So, the blockchain is simply a continuously-updated public ledger, which contains every single Bitcoin transaction of all time. The Bitcoin protocol uses several mechanisms to ensure security and integrity of the blockchain. This includes the fact that 50% of the network nodes must approve each data block before adding it onto the blockchain. This prevents a bad actor from creating false transactions in real-time. Meanwhile, rewriting blockchain history is even more difficult, as explained in the following graphic: |
| In exchange for lending their computing power to the Bitcoin network, miners get rewarded with a certain amount of Bitcoin per each data block they create. The number falls over time, by design, as the total number of Bitcoins approaches 21 million. Currently, miners receive just over 6 Bitcoins for each data block. Now, here’s where we get back to why it all matters for Yield Fund I investors… How To Buy Bitcoin at $30,000 Today Sure, you could bet on the future of digital currencies by simply buying Bitcoin. But why pay $42,000 per coin, when you could instead pay $30,000? That’s the opportunity we see today, thanks to the rise of mobile Bitcoin mining units. Let me explain… You see, Bitcoin mining can be thought of as simply converting electricity into digital currency. So electricity becomes one of the biggest variables driving the mining economics. Over the last few months, we’ve put together a plan for converting wellhead natural gas into electrical power, via gas-fired commercial generators located at the wellsite. The generators then power the mobile Bitcoin mining units, also located onsite near the wellhead. We believe the economics speak for themselves. For roughly $2 million in upfront capital cost, we believe we can produce roughly 6 Bitcoins per month initially for an operating cost of just over $60,000. The end result – a payback period in less than one year, and a project IRR exceeding 100%. (Note: these project economics are estimates, and subject to change at any time. Click here to speak with someone on our team regarding the detailed economic projections.) We’re excited to be offering this opportunity to Yield Fund I investors today, and look forward to updating you on the progress as we start receiving equipment at the mining site. This is a truly unique opportunity, and I am pleased to be offering the chance to democratize Bitcoin mining. |
What if you could own the best performing asset class of the last decade, at a substantial discount to current prices? I’m talking about Bitcoin. Specifically, mining Bitcoin with cost-advantaged, clean-burning natural gas. Over the last few months, I (Laura) have been hard at work putting together this opportunity for Yield Fund I investors. The goal:Continue reading “How to Buy Bitcoin for $30,000”
\nOn Sunday, Saudi Arabia coordinated with several OPEC and non-OPEC member countries to announce a 1.6 million barrel per day (b/d) production cut. The Financial Times reports that
\n\n\n\n\n\n“The surprise cuts risk reigniting disputes between Riyadh and the US, which last year pushed for the kingdom to pump more oil in a bid to tame rampant inflation amid a surge in energy costs.
\n\n\n\nPeople familiar with Saudi Arabia’s thinking say Riyadh was irritated last week that the Biden administration publicly ruled out new crude purchases to replenish a strategic stockpile that had been drained last year as the White House battled to tame inflation.”
\n
The big takeaway here is that Saudi Arabia and the broader OPEC+ coalition is increasingly moving away from the US sphere of influence and supporting the American political agenda of keeping oil supplies flowing and prices low. Instead, Saudi and other key OPEC members are increasingly forging deeper ties with Russia/China. This includes increasingly moving away from trading oil in the U.S. dollar, hastening the demise of the petrodollar, and ultimately, threatening U.S. supremacy in the global economic and financial system.
\n\n\n\nConsider the following headline developments that have occurred in the last few weeks alone:
\n\n\n\nThis is the largest coordinated push against the petrodollar and the realignment of global oil producers against the U.S. since the 1970s oil crisis.
\n\n\n\nIt’s no surprise that both oil and gold are sky-rocketing, each reflecting the diminished status of the U.S. dollar and the realignment of the global energy trade away from the petrodollar.
\n\n\n\nMeanwhile, this is all coming at a time that the U.S. remains vulnerable to an oil shock, as the Biden Administration spent the last year attempting to manipulate prices lower ahead of the 2022 midterm elections, draining the strategic petroleum reserve to the lowest levels since 1983:
\n\n\n\nFinally, when you consider the context of the U.S. shale industry’s crippled production profile, the stage is set for a period of structurally undersupplied global oil market for years to come, with the growing prospect of oil shocks from an OPEC cartel shifting its strategic alliance away from the U.S. towards Russian/China.
\n\n\n\nHistory doesn’t repeat, but today’s environment is rhyming with the 1970s… rampant inflation, diminished status of the U.S. dollar, and growing geopolitical risks of oil shortages as the OPEC+ cartel aligns itself with America’s adversaries.
\n\n\n\nOil has already been one of the best performing asset classes since inflation first broke out to multi-year highs in 2021, while traditional asset classes like stocks, bonds and real estate have suffered heavy losses.
\n\n\n\nThe bottom line: stage is set for a repeat of the 1970s investing playbook, and oil will increasingly provide a safe haven against this new economic and geopolitical environment:
\n\n\n\nIf you’re interested in investing in oil in the current climate, EnergyFunders America First Energy Fund I is open to investments. Book time with our team or login to learn more.
\nSaudi Arabia and the broader OPEC+ coalition is increasingly moving away from the US sphere of influence and supporting the American political agenda of keeping oil supplies flowing and prices low. Instead, Saudi and other key OPEC members are increasingly forging deeper ties with Russia/China. This includes increasingly moving away from trading oil in the U.S. dollar, hastening the demise of the petrodollar, and ultimately, threatening U.S. supremacy in the global economic and financial system.
\nPhoto by Lara Jameson on Pexels.com
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\n\n\n\nCheck out Yield Fund I’s mining location below! If you’re interested in investing in wellhead bitcoin mining, Bitcoin Discovery Fund I is still open to new investments. Join here!
\n\n\n\nEnergyFunders CEO, Laura Pommer, was featured in the March-April 2023 edition of Oilwoman Magazine. Read the article (page 24) to learn how Laura was introduced to bitcoin mining and how her oil and gas experience has led her to this point.
\nCheck out Yield Fund I’s mining location below! If you’re interested in investing in wellhead bitcoin mining, Bitcoin Discovery Fund I is still open to new investments. Join here!
San Antonio, Texas – TheNewswire – December 20, 2022 – EF EnergyFunders Ventures, Inc. (the “Corporation”) (TSXV:EFV) is pleased to provide an interim operational update for its fintech business unit subsidiary, EnergyFunders LLC (“EnergyFunders”).
\n\n\n\nIn 2022, a year defined by inflation and market volatility, EnergyFunders demonstrated its continuing commitment to making oil and gas investment opportunities more accessible and practical for today’s investor.
\n\n\n\nEnergyFunders’ Yield Fund I, which completed its fundraising activities in Q1 2022 and managed the deployment of those investor funds in various oil and gas projects, produced some stand-out results throughout the year.
\n\n\n\nIn response to the positive feedback from Yield Fund I investors, along with rising demand for energy investment opportunities that provide a hedge against inflation, EnergyFunders launched Yield Fund II, along with Drilling Fund I and America First Energy Fund I in 2022. To date, managed investor capital in these four funds is just under $15 million. Total investor capital managed by EnergyFunders since its inception is now almost $30 million since its founding in 2013. EnergyFunders is preparing for a year-end influx of capital contributions to its funds as investors seek to capture the unique combination of tax benefits obtainable through oil and gas investments. Investors can begin to take advantage of this opportunity by creating an investor profile on the company’s website at www.EnergyFunders.com.
\n\n\n\nLaura Pommer, CEO of EnergyFunders, speaks for the entire team when she emphasizes the company’s dedication to breaking down the costly and inefficient barriers to oil and gas investing that are characteristic of the old way of doing business: “Our goal at EnergyFunders is to make wellhead economics available to a larger segment of the community of investors than ever before.” New energy and energy technology investment opportunities are in development for 2023, and more information on those funds will be released early next year.
\n\n\n\nAbout EnergyFunders:
\n\n\n\nEnergyFunders is an industry-leading financial technology investment management firm offering private-market energy deals, sourced and vetted by industry experts. The company’s managed funds include investments in oil and gas wells, as well as mobile Bitcoin mining units powered by wellsite natural gas. By removing the middlemen between investors and the wellhead, the company offers consumers ownership in special purpose entities that directly invest in oil and gas wells and Bitcoin mines. In addition to potential returns from these investments, EnergyFunders’ investors may also enjoy favorable tax deductions unique to oil and gas investments, along with the potential for passive income creation and inflation protection. To invest or to learn more, please visit www.EnergyFunders.com.
\n\n\n\nFor further information please contact:
\n\n\n\nLaura Pommer
Chief Executive Officer
Email: laura@energyfunders.com
EF EnergyFunders Ventures, Inc.
\n\n\n\n716 S. Frio St., Suite 201
\n\n\n\nSan Antonio, Texas 78207
\n\n\n\nTelephone: 254-699-0975
\n\n\n\nMedia Contact:
\n\n\n\nAquila Mendez-Valdez
\n\n\n\nEmail: aquila@hitpr.com
\n\n\n\nTelephone: 210-606-5251
\n\n\n\nForward Looking Statements
\n\n\n\nThis news release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein are forward-looking information. Generally, forward-looking information may be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”,”proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. In particular, this news release contains forward-looking information regarding the Pommer Employment Agreement, the Light Employment Agreement, and the business of EnergyFunders. There can be no assurance that such forward-looking information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking information. This forward-looking information reflects EnergyFunders’s current beliefs and is based on information currently available to EnergyFunders and on assumptions EnergyFunders believes are reasonable. These assumptions include, but are not limited to: the underlying value of EnergyFunders’s common shares, EnergyFunders’s current and initial understanding and analysis of its projects and the exploration required for such projects; the costs of EnergyFunders’s projects; EnergyFunders’s general and administrative costs remaining constant; and the market acceptance of EnergyFunders’s business strategy.
\n\n\n\nForward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of EnergyFunders to be materially different from those expressed or implied by such forward-looking information. Such risks and other factors may include, but are not limited to: volatility in market prices for oil and natural gas; constraints on sour gas production; the availability of commodity markets and third party equipment, infrastructure and services; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; geological, technical, drilling and processing availability, upsets or problems; general business, economic, competitive, political and social uncertainties; general capital market conditions and market prices for securities; delay or failure to receive board or regulatory approvals; the actual results of future operations; competition; changes in legislation, including environmental legislation, affecting EnergyFunders; the timing and availability of external financing on acceptable terms; and lack of qualified, skilled labour or loss of key individuals. A description of additional assumptions used to develop such forward-looking information and a description of additional risk factors that may cause actual results to differ materially from forward-looking information can be found in EnergyFunders’s disclosure documents on the SEDAR website at http://www.sedar.com. Although EnergyFunders has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking information as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Forward-looking information contained in this news release is expressly qualified by this cautionary statement. The forward-looking information contained in this news release represents the expectations of EnergyFunders as of the date of this news release and, accordingly, is subject to change after such date. However, EnergyFunders expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.
\n\n\n\nCautionary Statement: This news release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities of the Corporation or any Fund managed by the Corporation in any jurisdiction in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The securities have not been approved or disapproved by the U.S. Securities and Exchange Commission (the “SEC”) or by any state securities commission or regulatory authority, nor have any of the foregoing authorities or any Canadian provincial securities regulator or stock exchange passed on the accuracy or adequacy of the disclosures contained herein and any representation to the contrary is a criminal offense. None of the securities of the Corporation or any of the Funds managed by the Corporation have been registered under the 1933 Act, or the securities laws of any state and any offer of such securities will be in reliance upon certain exemptions from registration under such laws. Such securities may only be purchased pursuant to a binding agreement for the purchase and sale of such securities.
\nIn 2022, a year defined by inflation and market volatility, EnergyFunders demonstrated its continuing commitment to making oil and gas investment opportunities more accessible and practical for today’s investor.
\nWhat do bitcoin mining and oil and gas exploration have in common? Aside from common geology language, the two seem completely different, but the truth is, they can both be pretty stressful on the environment.
\n\n\n\nFor years, oil and gas operators have been plagued with difficulties when trying to find suitable pipelines for natural gas. Sometimes, the nearest pipelines are 10s of miles away and would cost exorbitant amounts of money to tie into, and other times, they are antiquated and won’t hold up to regular use. As a result of these issues and more, operators have been forced to flare the natural gas in hopes that they’ll eventually deplete the gas layer and be able to produce the oil that may be sitting below it in the formation. We know that burning natural gas pumps more CO2 into the atmosphere, so the practice seems impractical and wasteful.
\n\n\n\nIn the meantime, Texas’ laws have made it easier for bitcoin mining companies to set up their operations there, but they take a heavy toll on the energy grid. With ERCOT’s instability during inclement weather, it seems unwise to add this extra pressure.
\n\n\n\nPerhaps the solution is obvious at this point. Simply utilize the stranded natural gas as a fuel source for the bitcoin mines, and that’s exactly what EnergyFunders’ CEO, Laura Pommer, has done with her team.
\n\n\n\nNot only does this have the benefits outlined above, it also provides EnergyFunders investors the opportunity to accumulate bitcoin at potentially below-market rates since EnergyFunders’ funds own the facilities and mining equipment. Take some time to read more about Laura and EnergyFunders here.
\n\n\n\nInterested in taking advantage of this amazing opportunity? Click here to invest in the Bitcoin Discovery Fund I. EnergyFunders has already begun to deploy capital and aims to close the fund soon. Don’t miss out!
\nWhat do bitcoin mining and oil and gas exploration have in common? Aside from common geology language, the two seem completely different, but the truth is, they can both be pretty stressful on the environment. For years, oil and gas operators have been plagued with difficulties when trying to find suitable pipelines for natural gas.Continue reading “Bitcoin Mining and Natural Gas Exploration – An Unlikely Union”
\nPhoto by Alesia Kozik on Pexels.com
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\n\n\n\nRead a previous article from Texas Innovators with Laura Pommer here. If you’re interested in learning more about the intersection between oil and gas and bitcoin click here to read about the Bitcoin Discovery Fund.
\nListen to our CEO, Laura Pommer, talk about a range of topics from oil and gas to bitcoin to learning more about Laura herself and how she sees the future of oil and gas. In this podcast, Laura goes into detail about EnergyFunders, the way she and her team are revolutionizing oil and gas investing,Continue reading “The Texas Innovators Interviews the CEO of EnergyFunders Laura Pommer”
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