Speaker 1 (00:01):
This episode of EnergyCents is brought to you by IHS Markit's Financial and Capital Markets Energy Advisory Group. Our team of experts provides the investment community with actionable insight, and integrated thought leadership, that identify the trends and trend makers of global energy markets. Solutions cover the full energy and natural resources sector from traditional fossil fuels, to emerging clean tech ideas and supply chains, and are available via recurring reports, webinars, robust data sets, and personal engagements with experts.
Breanne Dougherty (00:30):
Welcome everybody to this episode of EnergyCents, the podcast where we speak of everything at the intersection of energy and finance. As always, I've got Hill Vaden with me here today. Hill, how are you doing?
Hill Vaden (00:43):
I'm doing well. Today is my anniversary. I've been married 13 years today.
Breanne Dougherty (00:46):
Wow. And I'm going to guess you're doing something really special, like picking up takeout or going for a walk?
Hill Vaden (01:02):
Maybe going for a walk, my wife asked me if we should go out and we've got soccer carpools and having an anniversary on a Tuesday night is kind of, a Tuesday night anniversary in a pandemic is there's not much to do. Maybe we'll watch a rerun on Hulu or something and have eggs for dinner.
Breanne Dougherty (01:24):
Okay. Just on TV though my latest obsession, this is completely off topic, but Netflix, the Queen's Gambit, so good.
Hill Vaden (01:26):
I don't have Netflix.
Breanne Dougherty (01:30):
Oh, you don't have Netflix. Well, anyways, you should look at it, apparently it's based on a book and it's fiction. It's a fictional novel, I believe. But it's about a young female chess prodigy and so it's in the sixties. It is so good. I am a 100% hooked on it. I'm now on episode four and there's only seven episodes so this is the excitement of my week, Hill, is talking about the Queen's Gambit, again.
Hill Vaden (01:39):
It's better than mine. I'm all in reruns. And I was talking last week with Ed about Star Trek. And Chris, I don't know if you watched Chris DeLucia is joining us today. I don't know if you also watched the old Star Treks, but Star Trek, the Next Generation, which I never watched when I was young and I'm outing myself as being a total nerd. It seems to be the most progressive and forward show where you've got all sorts of females and minorities in positions of leadership throughout, which is awesome.
Breanne Dougherty (01:40):
It was very progressive. Actually the Next Generation is the only Star Trek I ever watched and I really enjoyed it as a kid. And if you want to, okay, let's just out ourselves as complete nerds. I also watch Jeopardy every night. I know I belong in a senior's home. It's very strange. My grandfather grew up and it's this thing I watch Jeopardy. Last night, actually on the progressive string, one of the Jeopardy questions, I watch the rerun so I can fast forward through the commercials. But from last week, one of the episode's questions was, how the Next Generation changed the, what's the slogan of go beyond what is it? Every one beyond. There's a slogan that's always said in Star Trek and when it went to the Next Generation, they changed it from being any man to being anyone which spoke to the progressiveness again of the Next Generation. Look at this, Hill. We didn't even expect to have the synergy going on in our conversation today.
Hill Vaden (01:41):
Well, so my question for Ed Moe, who I'm sure is out there somewhere listening last week was whether Megan Thee Stallion is a Star Trek fan because she's the queen of cool right now, but Star Trek, the Next Generation is kind of the queen of uncool or the magistrate of uncool, but it seems right in her wheelhouse.
Breanne Dougherty (01:49):
Which makes it cool.
Hill Vaden (02:11):
In terms of, yeah. And so I'm very, I don't know if she's a listener, but maybe if Megan's listening out there and you're a fan of Star Trek.
Breanne Dougherty (02:12):
Maybe she's listening.
Hill Vaden (02:49):
I'm really curious to know.
Breanne Dougherty (02:58):
She might have heard Chris DeLucia's with us today so it's possible she's tuned in.
Hill Vaden (04:06):
I hope so. Welcome, Chris.
Breanne Dougherty (04:08):
Speaking of which, we have Chris DeLucia with us. Thank you for joining our podcast. As you can see, we love to talk about energy and financial capital markets, but we also like to talk about nerdy things such as Star Trek, Jeopardy and exceptional things like the Queen's Gambit. If anybody's not watching it, I'm telling you, turn it on. Super good.
Chris DeLucia (04:27):
No, this is good. I have some ideas for the weekend.
Breanne Dougherty (04:30):
Great. The pandemic brings all sorts of excitements. Chris actually is one of our IHS experts that can speak to all things about the global oil integrated companies. And we're very excited to have him on today to talk to us about some of the strategy changes that we've been seeing happening amongst the group. And just generally speak to the corporate landscape. Something that we haven't spoken about actually in the last few podcasts. This is something Hill and I both love to talk about. We're very excited to have you, Chris. Thank you for joining us.
Chris DeLucia (05:02):
No, thanks so much for having me on. It's great to speak with you both. And Hill, congratulations. Happy anniversary.
Hill Vaden (05:08):
Yeah. Thank you. And you're in Portland, right?
Chris DeLucia (05:12):
That's right. Yeah.
Breanne Dougherty (05:12):
Hill Vaden (05:13):
You may be the only oil and gas analyst in Portland.
Chris DeLucia (05:17):
Yeah, it's not a real upstream hotspot. That's for sure.
Hill Vaden (05:22):
Are you able, if you go out with friends in a normal kind of non-pandemic world, are you able to admit what you do? Or do you have to talk about stories?
Chris DeLucia (05:32):
Yeah. The conversations out here are usually more limited to the latest fresh, organic food and that sort of thing, and the best hikes in the area and that sort of a genre. Typically keep it in that realm.
Hill Vaden (05:50):
Oh, Star Trek.
Chris DeLucia (05:51):
Breanne Dougherty (05:53):
But maybe you can start talking a little bit more energy these days, sort of bringing us back to where our topic is here. We're hearing a lot of carbon strategies and energy transition strategies coming out of these big IOCs lately. And something you wrote a wrote about recently, which I found really interesting is it seems as though we're hearing a lot of the same message takeaways, obviously moving towards greener, cleaner endeavors, amongst most companies. That's obviously a very important part to integrate into the narratives these days, but you actually wrote about how you see, although it sounds like everybody's sort of heading down the same direction, there's actually increased differentiation in the strategies that you see coming at play right now. Can you talk a little bit about that? That even though it sounds pretty uniform, there's a lot of differentiation of what's going on.
Chris DeLucia (06:39):
Yeah, yeah, definitely. I think one of the questions that we've been getting a lot from clients and from the companies themselves is, how are these companies going to differentiate themselves as they start to pursue similar tactics as they look to reposition their portfolios, positioned for the energy transition? And it's still sort of playing out because this is a relatively new phenomenon where if you look back, really three, four or five years ago, this was really a topic that was pretty much just kind of on the periphery for most of these companies. There wasn't much discussion in the way of low carbon strategies and integrating that part of the portfolio into their overall corporate structure. But if you look more recently in the last two or three years, that's where you've really started to see a really abrupt shift for some of these companies in terms of how they're starting to emphasize that low carbon element of their portfolios.
Chris DeLucia (07:32):
We're starting to get more materiality in terms of where these segments fit in. And we're starting to see a bit more nuance in terms of how these strategies are playing out. And so I think that's one of the things that we wanted to get across was that while on the surface, it may look like a lot of these companies are all pursuing the same things, there are differences in terms of how they're prioritizing low carbon within their overall portfolios. And then within that, how they're looking to achieve those low carbon ambitions. Whether they're looking to acquire or develop expertise in house, whether they're focusing on individual segments within the low carbon or renewables landscape or if they're taking a more diversified approach, sort of an all of the above approach. There are kind of interesting discrepancies in terms of how these companies are positioning.
Chris DeLucia (08:19):
And I think the big takeaway there for the market is that this really creates more opportunity for these companies to differentiate themselves relative to one another and it creates more opportunity for investors to really start to be able to pursue companies that have views that are more aligned with their own. For example, if we have investors that are thinking that maybe there's a more gradual transition, but they are interested in companies with sort of a gradually growing exposure to the low carbon landscape. There are companies that are kind of taking that more gradual approach. There are others that are taking more abrupt shifts where they're saying, "Look, we really want to de-emphasize or at least start to reduce the emphasis of oil and gas within our portfolios and quickly increase the scale of our renewables components." For investors that see a faster transition, perhaps companies like that with those types of strategies could be more appealing. I think once you really start to look into what these companies are doing and how they're positioned, that's where those nuances start to come about.
Hill Vaden (09:18):
The gradual question, is it your impression that everyone is taking some effort or making some effort to move in this direction and if some appear to be standing still right now, is that more, are we interpreting that as being more of a gradual approach as opposed to not doing anything at all?
Chris DeLucia (09:38):
I guess when I think about the gradual approach, that really involves more of a, what I'd call sort of an, all of the above approach, where companies are continuing to invest in their traditional portfolios, oil and gas and downstream, while at the same time, starting to elevate the prominence of low carbon. For example, I think Total comes to mind as sort of an example of that, where they're quickly ramping up their investments in renewables. They're starting to spend an increasingly material part of their CapEx budget on the low carbon segment, but they're also continuing to grow their oil and specifically their gas portfolio. They're doing kind of that approach where, look oil and gas is still the core part of the portfolio, but they do want to sort of reallocate slightly over time and take that more gradual approach.
Chris DeLucia (10:23):
I don't think there's really, there aren't too many companies that aren't doing anything. There are certainly companies that are focusing 99% or pretty close to a 100% on the traditional portfolio, but it's pretty tough to ignore what's going on for any company, regardless of how they're positioning. Even the companies that we say that are sort of not really emphasizing this part of the portfolio, they're still starting to take into account ways to incorporate ESG elements into their strategy. ConocoPhillips is a great example with the acquisition of Concho last week, where they set out that scope one and scope two ambition by 2050, really sort of the first player within the US landscape to set that net zero ambition over the longer term.
Chris DeLucia (11:11):
Not a company that we've really been thinking about in terms of investing in the low carbon space, but they're certainly thinking about it. They're certainly positioning their portfolio to be able to compete in that type of landscape. And so I think, pretty much every oil and gas company just has to incorporate those elements. They have to really be thinking about what can they do, even if they are choosing to continue to invest in the core business, how can they make sure that they're positioned to maintain that sort of license to operate over the longer term? Even when we think about the majors, one of the things that's sort of been the main narrative in the market is that you have the European majors on one side kind of rapidly pursuing these investments and then you have the US companies that are sort of lagging behind.
Chris DeLucia (11:53):
And I don't think it's really fair to say that they're not doing anything. They're certainly not pursuing these investments as broadly and as kind of abruptly as their European peers, but they are starting to pursue certain parts of their portfolio to account for that. And I think it's just a difference in viewpoint over the longer term. It's a question of, what's the scope of the energy transition going to be? What's the timing of that? And what's the best way to position the company? Whether it's investing in the core business for the longer term, if they expect to see liquids demand continuing to grow towards the middle of the century, or if some of their peers may think that there's a quicker peak in liquids demand that's coming within the next five or 10 years. But even for the US majors, there is that emphasis to look at different areas where they might be able to apply their competitive advantages.
Hill Vaden (12:39)
Question on the US majors, there's a part of me wondering if they're approaching it similar to the way they approached shale, where they let the independents really create the space that became shale and then got in, in a big way, particularly Chevron and Exxon Permian late via acquisition. But there seemed to be a recognition that doing all the experimentation around shale is not within our core capability so we're going to let somebody else figure it out and when they do a good job with it, we're going to buy it. And I'm kind of looking at Exxon and Chevron in particular now and saying, "All right, well, they're recognizing that this isn't their sweet spot so why get in early? Get in late." Whereas others, I think there's a big risk of, Breanne and I were talking with somebody a few weeks ago of corporate fatigue. Where if you get into early and spread yourself too wide, then you start to handicap yourself in a bunch of different ways.
Chris DeLucia (13:32):
No, I think that's a great question. And I think that is a fair parallel here, because there is certainly the opportunity if the energy transition sort of plays out more quickly than these companies are thinking, there is certainly the opportunity down the road to sort of acquire and make your entry that way. Of course, that certainly runs risks of having to pay a premium or a higher premium at that time to get that necessary scale. There are risks to both sides, but certainly if you look at some of the companies that are starting to invest now, there's a question about whether they're getting into early, whether they're investing at the right time or if they should be continuing to kind of focus on their core expertise. I think that is an interesting question and just a function of differing views about how the landscape is going to play out.
Breanne Dougherty (14:21):
That begs, let's call it the multi-trillion dollar question, how is this all getting funded? We're in a low commodity price environment right now so it's not as though we've got stellar returns on one side of the business that are going to fund this expansion within the low carbon side of the business and the low carbon side of the business, correct me if I'm wrong, I don't think the returns are yet at a place that's going to be self-funding at a great degree. How is that working? Is it just they're scaling back exploration programs and that's where the money's coming from? Is it coming out of the dividend? How is this all going to work from a financial standpoint?
Chris DeLucia (14:59):
No, it's a great question. And it is one that these companies are going to have to address. The ones that are spending in scale in the low carbon space, because there is sort of that disconnect there. These investments are really being funded either from reductions in the upstream budget or from cashflow generation, from their core oil and gas business. You have that question as you start to draw down the relative size, either the relative or in some cases, the absolute size of that oil and gas portfolio, how are you going to continue to fund that low carbon investment?
Chris DeLucia (15:27):
And I think for those companies, there's the expectation that now is the sort of the heavy investment period as you try to get to that level of materiality, where you can start to generate some cash flow from those investments. But until then, that's really going to be driven by funding from the traditional business. It will be something to watch going forward to make sure that these companies actually have the ability to continue that investment going forward. And at what point does the pendulum swing where they are able to kind of generate sufficient cash flow from that other business for it to be self-funding?
Hill Vaden (16:00):
How are you looking at this as an analyst covering these companies in terms of cost of capital and hurdle rates? Am I correct that the hurdle rate for some of these quote unquote green credit projects is lower than traditional oil and gas and it helps to, I guess, influence some of the executive decisions?
Chris DeLucia (16:18):
Yeah, that's exactly right. And that's something that we've been spending quite a bit of time on over the past 12 or 18 months, just because that is such a core question. You're looking at a business in the oil and gas business that is traditionally expected returns sort of in the mid to high teens, maybe even higher during some higher commodity price environments. And you're looking at a renewables business where you're tending to see sort of that mid to high single digit level. There's that mismatch as far as what the companies and their investors tend to expect from this business and what these new investments offer. But I think there's a couple of things to point out there that can explain where the appeal might come from these new investments. And the first has been just the performance of the oil and gas industry over the past few years.
Chris DeLucia (17:23):
I mentioned that sort of mid to high teens level that oil and gas traditionally expects. If you look even prior to the 2014 price collapse, we were in a situation where high spending had really driven down those returns to sort of high single digits, maybe low double digits. But as you get more recently, past the 2014 price collapse, we got to a period of sort of low to mid single digits and then even negative returns for a few years there, slight recovery over the past couple of years, when a modest improvement in commodity prices. But certainly as we look over the near term at least with oil prices expected to remain under pressure, there's a question about what's the outlook for getting those returns back to those more traditional levels or even something, even if it's not at the traditional levels, even something just closer to that.
Chris DeLucia (17:48):
And it's certainly going to be a challenge to deliver on those from the core business, even with all the cost cuts that we're seeing from the industry. That's one element there. The other thing that we do see as a benefit from the renewable side and we put out a paper last year talking about this, is just the completely different, I guess, returns proposition that it offers in terms of stability through the cycle. We went back historically and compared returns from oil and gas versus various low carbon segments, including renewables and what we saw was that as you'd expect, oil and gas generates the highest traditional returns, but with far and away the highest volatility. You compare that with renewables and you get sort of that mid to high single digit level, but with pretty remarkable stability through the cycle.
Chris DeLucia (18:34):
And if you look back even since 2001, if you look at the broader industry trend, you have a pretty stable level of returns, even through things like recessions, the Eurozone crisis, various cycles where these returns have proven to be pretty resilient. And I think there's real value in that for, especially for the majors that are driven, really driven on a shareholder distribution proposition where it's about growing. It's generating returns and growing shareholder distributions. And if you have that stability, even at lower levels, but that stability that can sort of smooth the risk profile for these companies' portfolios and sort of provide that layer of diversification, that can give a bit more stability through the cycle, I think there's a real benefit for these companies in terms of integrating that into their portfolios. There is a question going forward about whether those returns that we've seen from renewables will continue to stick, especially as we see this huge flooding in of investment into the industry. That'll be something to watch, but at least on a traditional basis, that returns proposition does have some appeal for some of these companies.
Breanne Dougherty (19:38):
And when we start thinking about all these, obviously all these strategies that are starting to be announced as move to the end of the year and in the first part of the new year, how is the street responding to all of this? What kind of things is being positively interpreted by the street? And what kind of things are still not getting much love out there with respect to the share price? Obviously share prices are still all pretty challenged right now, but what kind of news flow is helping?
Chris DeLucia (20:07):
Well so it's interesting because you look at the share price performance for clean tech versus oil and gas and they're two completely diverging trends. You have basically a straight upward line for clean tech, since the start of the year and oil and gas is down 40, 50, 60% at various points during the year. With that in mind, you'd sort of expect to see those companies that have taken a more aggressive approach to the energy transition, to have a more favorable outcome in the market. And we haven't really seen that across the board. There might be snippets here and there, but I think there are a few considerations that are driving how the market's responding to these strategies. The first is that in some cases, some of these strategies are still being outlined. We've gotten some really good clarity from a few of the companies, especially this year in terms of how they're thinking about low carbon.
Chris DeLucia (20:58):
But I think there's still a lot of questions as far as how some of these targets are going to be achieved for some of these companies, whether it's lowering their scope three emissions targets or whether it's achieving some pretty ambitious renewable generations targets that we've seen some of these companies put forward. I think there's some questions about what does that look like for these companies going forward? The other thing is that even though the needle is starting to move as far as the investments starting to flow into the the segment for some of these companies, it's still a relatively small part of the portfolio for most of these guys. If we look at the majors in particular, across that peer group, we expect that the low carbon segment is going to account for about 6.5% of their total CapEx this year. It's bigger than it was a few years ago. It's a growing area, but it's still relatively small.
Chris DeLucia (21:45):
For these companies, really regardless of their strategies, they just haven't reached that materiality threshold yet where investors will say, "Look, this is a company that's starting to perform on their renewables portfolios," or whatever. Until they get to that point, until they hit that materiality threshold, I think it's going to be tough for the market to really give them credit for shifting these portfolios. And then, there's certainly still challenges on the oil and gas side. It's sort of a catch 22, where if you're continuing to invest in your core business, if you're Exxon Mobile or Chevron, the market's not necessarily giving you credit for that either because that's still a challenged environment. I think at the end of the day, over the next few years, we're going to start to see companies start to execute more on their strategies, whether it's on the traditional oil and gas side or whether it's getting additional materiality within their low carbon portfolios. But until we get to that point, I think it's going to be sort of an in between period where investors are just going to be waiting to see how these play out.
Hill Vaden (22:41):
Are you seeing anybody, you mentioned there's some nuanced differences even within let's call it that the group of Europeans who are making more of a vocal movement, is anything really from your end, catching a lot of positive attention of investors? I'll mention specifically Equinor caught my attention with, I think it's Empire Wind and they sold down. They got into that in a big way. I think when you and I last spoke, a year, year and a half ago, they had gotten into Empire Wind in a big way. And then they sold down part of that to, was it Total?
Chris DeLucia (23:17):
Hill Vaden (23:18):
BP. And that is not at all, that reminded me of how people approach shale, where people would get into a big project in a big way and then sell down the risk to a partner. That was the first kind of deal of that model that I've seen in this oil and gas player and clean. Was that well received? Do we expect that type of thing to be repeated?
Chris DeLucia (23:44):
Yeah. Think that sort of thing is just starting to take off now. As you said, that's something that we see all the time with upstream properties where companies maybe make a discovery and look to farm down some of the risk, diversify the risk profile a little bit and cash in on some of the investment to date. I think we'll start to see more of that going forward, especially as some of these renewables portfolios get larger in size. Right now, they're still in sort of that initial investment mode in a lot of cases so there hasn't really been opportunity to see that just yet. Most of these companies are still in acquisition mode as opposed to farm down mode. But I do think we're probably at a tipping point here, as far as companies' portfolios getting far enough along to see that.
And you raised Equinor, which I think is a good, sort of a good example of what investors might like to see in terms of sort of a really clear strategy about what the low carbon portfolio looks like and how it fits in with existing capabilities. I think for those companies that have that sort of story to tell about where can they compete versus peers? What's their competitive advantage? How are they going to compete in this, really sort of new market for them? I think for those companies that have that story to tell and have those elements to say, "Look, this is why we can execute here with this team that we have in place," et cetera, I think that will be key to the market in terms of helping them understand, what the rationale is and how to compete going forward.
Breanne Dougherty (25:14):
Are there regional themes in this? Are there regions that we see people flocking to as opposed to some regions over the others? Or is it kind of just all over the place?
Chris DeLucia (25:25):
Yeah. Thus far, if we look at where most of the activity has been both from an acquisition standpoint and from an investment standpoint, it's been in Europe, which I think makes sense just considering the types of companies that are driving the low carbon activity to date. But we are starting to see more activity globally. The US and North America more broadly starting to see some picking up in activity. And we're also starting to see sort of an extension of that activity into Asia Pacific and Latin America as well. Starting to get more of a global presence here, as far as where these companies are starting to invest. And I do think, Sub-Saharan Africa will be an area to watch going forward too, as some of these companies look to leverage some of their existing businesses, some of their existing relationships in the region, coupled with the fact that there are some real benefits there in terms of opportunities in the renewable space. I do think that'll be an area to watch, but yeah, thus far it's really been focused on Europe, but we are starting to see that broaden out a bit.
Breanne Dougherty (26:21):
And are they investing, do you think, or there's any appetite to just certain parts of the value chain? Or do you think that they're going to try to capture the whole value chain associated with renewable space? Do we see any trends in that? Obviously historically lots of times they would capture the whole value chain and then sort of divest of it as the market matured, but what's the strategy seem like there?
Chris DeLucia (26:42):
Yeah, it sort varies by company, but one of the themes that we've seen this year with a few of the companies, BP and Total, in particular, announcing their kind of updated strategies around the low carbon space, we are seeing a big push for some of these companies towards integration. And that's been one of the big selling points as far as how they expect to succeed in these new businesses, how they can sort of compete in the industry and sort of have a potential competitive advantage versus some of the incumbents. Sort of leveraging that integrated platform and also that sort of global brand recognition that some of the incumbent players may not have. That's something that we are looking to see, or we're starting to see these companies leverage. Whether it's retail and distribution or in a lot of cases trading as well, where some of these companies are looking to sort of benefit from the opportunity to take advantage of market dislocations as a buyer and a seller. I do think that'll be a key area to watch going forward.
Hill Vaden (27:40):
If we look at the opposite side of that coin and I was reading in the paper this morning that Robert Murray died over the weekend or recently and he was a CEO in charge of Murray Energy, a coal company. And he apparently was working to, I learned all this from the obit, I don't know a lot about the history, but he tried to find scale within coal as coal was put under a lot of pressure for not dissimilar reasons that the oil and gas is under pressure now. And so he scaled up the company and somebody was apparently asked him why that there wasn't more of a move to diversify. And his apparently now famous quote was "Damn it. That's all I know." And so we've seen some deals in the past week that I would put into the damn it, that's all I know camp of, I need to scale up within the Permian and or I need to scale up within Canada in oil and gas to generate the cash that I need to do to operate any business that I want to operate.
Hill Vaden (28:41):
If we put ourselves say 20 years out and look back, we're seeing that the European majors with more of a horizontal approach, the US majors with I'll call it a wait and see approach, preserve the dividend and then we've seen the independents, whether BHP scaling up in deep water, Conoco scaling up in shale, are they all going to work? Do we have more confidence in one of them? Future looking back, what's your crystal ball tell us?
Breanne Dougherty (29:12):
Choose the winners, Chris. We want you to choose the winner.
Chris DeLucia (29:15):
I am definitely not good at doing that, so I'll keep it more broad. But I think that's one of the things that we really have to see playing out. And it's something that we've been kind of looking for over the past few years and it's starting to really happen pretty rapidly now, which is that consolidation across the industry. And it sort of builds on a theme that we've been seeing, kicking into gear over the past few years, which was really emphasizing scale and emphasizing core parts of the portfolio. You mentioned, for example, sort of going back to its core strengths of the offshore, divesting the US onshore position to kind of really focus on what they know best and where they can best compete versus their peers. I think some of the other companies divesting their international auth assets to focus on the onshore specifically.
Chris DeLucia (30:01):
Lots of examples of companies sort of trimming parts of the portfolio or de-emphasizing others to really just emphasize the competitive advantages that they have in terms of just competing on key operating and financial benchmarks versus their peers through just execution of the core business. And I think that's really been one of the major trends that we've seen is that kind of extra emphasis on that kind of benchmarking versus peers. And the way to do that is just to focus on those core parts of the portfolio and benefit from economies of scale. That's where the portfolio rationalization efforts have come in. And that's where more recently, we're starting to see that consolidation come in, where companies can sort of just benefit from synergies and benefit from that scale to compete.
Chris DeLucia (30:47):
And I think that's probably something that we're going to see more of going forward, not just in the US but globally as the competitive environment just gets tougher and tougher. Certainly something to watch for. I don't have any views about which asset classes or companies might perform best, but I do think we'll see the industry get stronger as a result. It's just something that we've kind of needed to see play out. And I do think these companies will benefit going forward.
Hill Vaden (31:15):
Yeah, I think it's been, that's probably a good way to put it that there's people been looking for this type of activity for some time now. And I think at some level it has to strengthen the whole space relative to the competition that was effectively putting everybody out of business over the past several weeks. Or weeks, past several years. And weeks I suppose. Well, good. Well, I think this is the beginnings of, there's a lot more to discuss on the scene and I hope we can have you back to discuss more as these things reach different points of scale and as we get a little, make progress within the crystal ball and figure out which of these call it three or four, kind of four strategies starts playing out best.
Chris DeLucia (32:06):
No, that'd be great.
Breanne Dougherty 32:06):
Let's be honest. If the last couple of weeks is any indicator, we're probably going to have a lot of activity to talk about by the start of 2021 so we'll definitely have you back.
Chris DeLucia (32:16):
That sounds great to me. Happy to come back anytime. And it's been a pleasure. Thanks very much. And we'll certainly be doing more work on the space, both in terms of understanding the low carbon portfolios, as well as the kind of evolving upstream portfolios of these companies as well. Happy to discuss any time.
Breanne Dougherty (32:33):
That's great. And happy anniversary again to you, Hill. I hope you to help you have an amazing Tuesday. Live it up.
Hill Vaden (32:41):
Breanne Dougherty (32:45):
Okay. Thanks, Chris.
Chris DeLucia (32:46):
Thanks very much guys.
Hill Vaden (32:47):
Chris DeLucia (32:48):
Talk to you soon.
Breanne Dougherty (32:48):
Hill Vaden (32:48):
Talk to you soon.
Speaker 1 (32:51):
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Speaker 5 (33:12):
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