It's Time To Drill
Vivek Ramaswamy is a man on a mission. The Co-Founder and Executive Chairman of Strive Asset Management has a history of doing things his own way and calling out the world’s issues as he sees them.
The son of first-generation immigrants, Vivek grew up in small town America and went on to graduate with a science degree from Harvard and a law degree from Yale. He was a hedge fund partner in his 20s and then became the founder and CEO of a multibillion-dollar biotech enterprise.
In 2021 Vivek wrote the book Woke Inc., where he makes the case that ideology and social causes shouldn’t be driving decision making in the boardrooms of American corporations. Until recently this was an unpopular viewpoint to have in the investing community. Following the lead of Larry Fink and Blackrock, the ESG investment movement has proliferated in popularity among the largest capital allocators in the world. Causing what many people, Vivek included, believe is a massive misallocation of capital.
The release of Woke Inc. turned out to be quite timely. Since the book was published the world has been gripped by an energy crisis and has seen historical levels of inflation decimating the global economy. Many of the corporate policies that have been pushed by these “socially responsible” investment managers have stoked the fire of this current economic disaster.
Vivek is now focusing his efforts to right the ship. Last week his firm Strive Asset Management launched its flagship index fund $DRLL (Drill). The fund is hoping to unlock the true potential of the U.S. energy sector and help facilitate increased domestic drilling for oil & gas.
Strive has a mandate to reject ideological agendas and focus on traditional capitalism (i.e. increasing shareholder returns) while also using its proxy voting power to drive management decision making focused on profits, not politics.
The new Strive fund is pulling in a ground swell of support by retail investors with an average trade amount of $4,000, versus the other funds in this category which are typically seeded by large institutional investors like Vanguard, with average trades at over $5 million dollars per trade.
Rather than letting OPEC+ countries like Saudi Arabia and Russia take the dominate market share of the world’s oil production, $DRLL aims to keep American oil & gas as the leader of the world’s energy markets.
“The largest U.S. asset managers have shackled U.S. energy companies with so-called ‘Scope 3 emissions caps’ and other destructive mandates that contributed to the American energy crisis today,” said Vivek.
“The right answer isn’t to complain about it, but to solve the problem. We’re proud to offer investors a new choice to align their voice and vote with how U.S. energy companies behave – by helping maximize long-run profits over short-run social fads.”
Vivek and his team are changing the narrative around energy, and it has been a welcome breath of fresh air for many in U.S. oil & gas industry. $DRLL is a positive shift in momentum that couldn't have come at a more critical inflection point in the current world energy crisis.
The recent episode of the Talk Energy Podcast featured David Heikkinen, the new Head of Energy Strategy for Strive Asset Management. If you want to hear more about the mission of $DRLL, give this one a listen.
Market Update
Crude Oil
The prompt month contract has seesawed this week, trading as low as $85.73 on Tuesday to back up above $90/bbl throughout. WTI is currently $2.50 higher today at $90.61/bbl as the EIA storage report this morning showed a huge 7.0mm bbl decline in inventory to 425mm bbls, well below the 512.5mm bbls in inventory just two years ago and 26.5mm bbls/6% below the 5yr average. U.S. crude exports notched a new record at 5mm bpd. Economic/recession related worries are likely going to keep WTI from going too much higher. Although off recent highs, crude prices are still $20/bbl above where they sat at beginning of 2022.
Despite a general sentiment that a slower global economy will translate to weaker demand, not all share the view. OPEC Secretary General Haitham al-Ghais is still bullish on global demand and the recent sell-off in oil doesn’t reflect fundamentals, but is more fear driven. “We still feel very bullish on demand and very optimistic on demand for the rest of the year”, he told Reuters in an interview published today. He also noted that fears of a major Chinese economic slowdown is overblown. OPEC sees world oil demand growing by 3.1mm bpd this year.
Additional details on EIA report in chart below, with the full report here: www.eia.gov/petroleum/supply/weekly
Rig Count Update:
The U.S. O&G rig count dropped six on the week, according to Enverus, all of which came from gas rigs. Oil rigs stayed flat at 669 and with the drop gas rigs total 188. The Permian and DJ both dropped three apiece to 339 and 19, respectively while the both the SCOOP-STACK and Eagle Ford dropped a rig to 43 and 84, respectively. The Bakken was the only major oil play to notch a gain, adding two rigs to 46.
Natural Gas
Natural Gas priced soared past $9 this week as supply concerns continue to be the driving force. After opening at $8.67 to start the week, prices bounced past $9.60 in this morning’s trading. European supplies continue to grow tighter as the Nord stream pipeline remains at minimal flow and low water levels on the Rhine river in Germany have hampered commodities moving thru Europe. LNG demand continues to be strong as Freeport TX LNG facility is looking to open the end of October. As we head into the fall weather pattern and the most active part of hurricane season, look for the bullish pricing trend to be tested.
In the Midcon, total demand is projected to decline as power demand takes the bulk of the hit, dropping to 5 Bcf. Residential demand, on the other hand, reached a one-month high yesterday, driving prices up for the second consecutive day. The 324 MMcf gain pushed demand to 7.8 Bcf. According to Platts Analytics, gas flows from the Midwest to the Southeast are down, the result of decreased demand and a rise in gas flows headed north on NGPL and Trunkline. Today’s Midcon prices have ANR-OK coming in $0.79 off Henry Hub at $8.72 while NGPL-Midcon follows behind at $8.60.
The EIA posted storage numbers this morning, indicating a +18 Bcf build against a +28 market expectation, bringing total stocks to 2,519 Bcf and 296 Bcf below year ago totals and 367 Bcf below the 5yr average. The prompt month contract showed a brief surge following the release, but has since retreated and is currently ~$0.04 lower on the session at $9.207.
Natural Gas Liquids (NGLs)
Big movement in Isobutane and Ethane in both markets, 11% each in Mont Belvieu and 12% each in Conway. All other products were fairly calm with the exception of MB N. Gasoline, which had a modest 4% drop on the week. The product prices holding and crude down overall from last week, prices as a % of WTI all increased (chart below).
