What The Funk?

0:00 a quick round two with Mike Umbro. Tim, why don't you segue us into this one? You know, it struck me with the oil spill that happened in the pipeline offshore of California. And we had such a

0:14 good conversation with Mike, where we kind of friends on all kinds of things, and Mike's had a field day on LinkedIn just really talking it up. And I thought, maybe we should have a new type of

0:23 thing on tripping over their barrel, like, you know, tripping over their barrel shorts So let's, I want to bring Mike back on and really just talk about all these things. We don't need to go back

0:32 to his history. You guys can go check out his episode to get all that, but really want to hit, you know, what's happening down there in Southern California after this oil spill, right?

0:42 Absolutely, I really love this track. So Mike, go through how it evolved and then let's dig into the whole thing. Okay, yeah, so my understanding, I woke up what was that Saturday morning and

0:55 saw in the LA time I subscribe to the LA Times online just to get my daily propaganda, 'cause it's basically Gavin Newsom's PR meeting. So I'm like, oh crap, there's an oil spill. And my initial

1:08 thought was, oh no, I hope it's not corrosion or deferred maintenance. And that was my initial thought. Because you hear about that being out here. And then as it really didn't take long for this

1:22 kind of the news to break, that it was probably a ship anchor and

1:27 it wasn't, what was it, 15, 000 barrels or 5, 000 barrels? And now it's down to 500 barrels. And so everything's kind of in revised down and down and down. Of course, they were quoting in

1:39 gallons instead of gallons. The gallons, yeah, hundreds and thousands of gallons. 126, 000 gallons. And I'm sitting here, I'll wait a minute, divide by 42, oh, 3000 barrels. Oh, and not to

1:51 downplay. That's still a lot of oil to be floating out there, it. It just, it doesn't mean as much because, you know, you got two wells and in West Texas producing that in a day, right? Right,

2:02 yeah. I put a post out, like that's six frack tanks and I put an overhead of a shot. It got like 300 likes when that happens to me. I'm like, wow, that's basically viral for me. But it's like,

2:13 why are we not producing on shore and supporting this more and supporting local California production? Although that's obviously local as well. But, you know, the calls from the regulators were

2:24 immediately to just shut everything down Because I did find it interesting that it was. All right, not focusing on offshore or even very offshore where ship anchors can be, it was everything, the

2:39 entire state that they just, we're gonna go for everything. And, you know, what was kind of the reaction, general public and the industry and so on? Yeah, general public, you know, I have

2:51 some friends that are kind of on the, you know, environmentalist activist side that are surfers and you have that community down here. you know, they're posting stuff like everything should end

3:01 and stop. But interestingly, when you look at some of the Instagram comments of the feedback, a lot of people are like, oh, yeah, you know, we should just shut everything down because all the

3:11 surfers driving Mercedes Sprinter vans and RVs to the different state parks to surf, you know, we can't do it without all. So it's interesting that I was surprised there are some people out there

3:23 that might not be industry experts, but that understand we need oil and gas. So I was surprised on that. Well, there was something else that came out about California recently to about 2024. What

3:35 was that something has to add 24 you can you can no longer buy a gas powered lawnmower lawnmower. Yeah, because they want to drive up the cost for all the landscapers, because you know, like they

3:50 need that. Well, I mean, you could do like Vegas to no one can have a front yard anymore. No more grass. Yeah, Yeah I mean that's just a course they do up for water not for your lawn mowers but

4:03 that's coming next right right it's interesting I always find it interesting that we're going to make it harder for landscapers to do their job but we're going to say nothing about crude tankers which

4:15 bring sixty to seventy percent of the crude oil into California there's it's just nothing crickets nobody talks about what it means and I will go back to go back to a topic that we came on our show we

4:28 talked about on our show the last time which was Ecuador and you you've you've made and mentioned a bunch of times on your link again I think even on this after the spill sort where at the time we're

4:40 talking about three thousand barrels that got cleaned up for the most part agree with people walking around on the beach clean it up and skimmers and everything else and then meanwhile we're going to

4:51 stop production in California or try to stop production in California so important all of our oil, all of Ecuador's oil. Right. You know, when they had a spill, how big was that one? It was like

5:03 15, 000 barrels, and that's what they reported. So it's probably a couple times bigger in that case. And it wasn't cleaned up. No, it's still hard. It's not where it laid. Right, and there's

5:15 still articles now about, you know, 120, 000 people without drinking water because they're using that river, the Koka River to drink and live and, you know, nothing So now, and if you look at

5:29 immigration statistics over the summer, Ecuador was one of the largest groups of people immigrating beer. Probably because it's a mess, but - Yeah, if you can't get clean drinking water, you

5:40 might as well be in Flint. Right, right? Right? What? My financial advisor's from Flint. That's why all the environmental problems together. My financial advisor's from Flint, which is a

5:52 little bit neat, right? And I give him so much credit because he made it out. But it used to be like a bustling area, I guess. His dad was in the automotive industry and it's not what Flint

6:02 became, but that's a completely different story for somebody from Michigan that comes on to. So I'll pivot a little bit, but it's related.

6:12 The container ships that

6:16 are just out offshore California. I mean, I see the CNN clip with a drone flying over and you see the ships that seem to be all anchored out there, a little parking lot. Right I'm just sure, you

6:26 know, just standing out in Huntington Beach or Long Beach or wherever you are, is it just ship after ships sitting out there? It's crazy. Yeah, when we've actually, we went to an event in

6:36 Huntington Beach, the California Independent Petroleum Association, one of the, the president of that group has a place there. And so we took the coast and when we drove up from Laguna Beach and

6:46 Newport, it stacks up for miles, you know, bumping up into Newport Beach and then you're driving through Huntington Beach, ship, ship, ship, ship, all the way to Long Beach and Los Angeles

7:01 Port Complex. It's terrible. It's insane. Why? What's going on? Explain it to me as if I don't know anything. There's a number of factors that are playing, apparently, so you've got the COVID

7:12 lockdowns, which kind of shut down the port, normal order of operations. Then there's word about because California's cracking down on non-union drivers, the owner-operator drivers can't go

7:30 offload at the port anymore. So then you take away those drivers, and then you've got the issues of just hiring anybody, as we know in oil and gas, hiring anybody right now, is next to impossible

7:40 because we're paying people to sit at home. So you've got all the big shortages of drivers just being able to access the containers and move them off the port complex And then there's, you know,

7:56 I've even heard someone say there's an issue with low sulfur bunker fuel that we have a shortage of that. So they're not able to fill the ships back up to get out of there. I don't know how much

8:06 that one's true. But I think the labor shortage is one of the bigger factors in the shortage of drivers. Yep. I've heard people talk about kind of the whiplash effect as well, where

8:19 China and the places where these container ships are coming from shut down for however long And so nothing came out. And so then when it started, it's just like all the inventory went out all at

8:29 once. So there's a little bit of maybe a logistics jam there. But I think, you know, ultimately, just there's no takeaway capacity. And I guess people were complaining here that the ports on

8:41 either east or west coast cannot operate 24 hours. Wow. So there were one shift, one shift to unload the container ships, you know, and then there's not enough drivers to, you know, to get

8:53 everything out of there And now I imagine. just even if you could find enough drivers, I could just imagine the traffic jam there's gotta be down there trying to get all that stuff out of there.

9:02 Yeah. Well, they don't usually have traffic down there anyway. Yeah, I was gonna say it's a nightmare to begin with. It's crazy. What is that freeway, the 710 that comes off of, comes off a

9:13 long beach? It basically ends right there at the port. It's just like, it's just nonstop container trucks just driving out of there. Right. Yeah. But this will all be electric shortly enough,

9:23 right? Yeah, well, yeah, I mean,

9:27 that goes back to kind of the conversation we had with Karthik too, about how United Airlines would love to buy, what are you saying, electric airplane, right? Yeah. And they're putting in

9:35 orders to get it when it's available, but they can't fly an electric airplane right now. Like, you know how far away we are from that, right? So it's very interesting that - Well, I'm sure we

9:45 got into the first mega charger being apparently, they leaked that it was, you know, Tesla's getting ready to have the first mega charger testing area. So I mean, just imagine trying to charge

9:57 one of these electric trucks to be able to drive it out. I mean, you've got to have, I mean, that's a pretty serious, and you're talking about a charger that would charge, would power 10 homes,

10:10 something like that, to be able to charge a truck. So I mean, there's another infrastructure problem coming when you put those electric trucks in. Now, what are you gonna do with the, anyway?

10:22 Long, there's all kinds of interesting things about, yes, we all want this technology, but are we ready? We're not ready for it. There's a whole lot of things that have to happen, complicated

10:34 moving parts. Yeah, they are plugging in the cargo ships though, some that are able to plug into shore power, but that doesn't help if they're all idling off the coast to just speed up. I guess

10:45 that was the next question I have, are they just idling or are they anchored offshore? How does he got to run the, I mean, you got to run the kitchen for the people, the auxiliary engines, all

10:56 that. I mean, it's like a floating city. These things are so big. It's like a skyscraper on its side. So they got to run all their auxiliary engines. So that port complex is the largest source

11:06 of pollution in the LA basin. It out that the socks and knocks emissions from those ships outweigh all the refineries and industrial complexes combined. And now we've concentrated them all in one

11:20 place for 50 days or how long it's stuck there Can you notice, is it like, if you roll down your windows, does it smell bad when you go? Yeah, I mean, you notice more drive, it's just like

11:31 everything is like yellow. It's like you're in a urine filled punch bowl or fish bowl is kind of how I describe it. Like, I don't know why anybody would want to live in that air quality, it is bad.

11:43 You see it, it's just everything's yellow. Wow. So now I guess we're, what, a couple of weeks, 10 days out from the spill And I saw one week post spill. The beach was back open and people were

11:56 surfing and you know, no big deal. So what's what's going on now? Is it? Could you even notice if you're down there at the beach you even know that that spill happened if you're I don't think you

12:06 do I have a buddy with a boat out in the Newport Harbor who's gonna take me out now that it's open We were talking like right after it happened. Hey, take me out and they shut it down We probably

12:16 could have gone out and seen nothing, but Yeah, he showed me I'm like, hey, is it crazy. Can you even boat in that area? And he's like, no, he said he sent me a video and he's kind of moving

12:28 around the container I mean, they're just parked everywhere and he's boating around and You know, they I think they tallied up. I don't know 40 birds were affected and maybe 30 of them died But you

12:41 know, if you look at the NOAA Statistics over a thousand birds die every year from natural seepage in in that that along the whole coast. I mean, My daughter, we get it in San Diego, tar balls

12:54 all the time, and it's just naturally occurring. So I don't think you would see anything out of the ordinary if you went out there whatsoever. Oh, that's good stuff. We're gonna keep this short

13:07 today, like we said, Tim. So we got two more minutes. I have a question. I know you got another one too. I wanna ask you this just to touch on oil prices right now because oil and natural gas is

13:16 going ham. What are some of the things that you're seeing? And let me give you some basis for this. Living here in Colorado because of the political climate, it really hasn't changed much. I

13:26 actually think somebody said the other day there's more active rigs in Kansas or something like that. So we're in a situation where the political desires are still kind of driving out what could be

13:37 an economic boon. Are you experiencing some of that in California? Or what is it looking like for you guys with80 and 550 gas? We were gonna be drilling in December and again in May. Next year,

13:52 but now the Kern County environmental impact report recirculated ERR just got hung up in courts again And so now we can't get drilling permits again So it's it's sad because a lot of a lot of

14:06 producers want to be drilling and they if you didn't have permits already You can't so that they're still doing everything they can to Shut us down from a policy standpoint despite Biden saying, you

14:19 know, we're being anti-competitive Whatever, I mean, it's just it's it's sad. It's really sad. What's going on? But we want to drill. We're ready governor Newsom. We're ready if you're

14:29 listening

14:31 I'm how many will how many wells do you have planned already? We had me we had five planned two two vertical wells and Three horizontals in the spring we were gonna drill in December. We did start

14:42 construction on percolation pond So we'll push forward with that, but we had five in the next, you know, call it six months. We were gonna drill And how many do you have in your area? How many

14:55 wells do you think you could drill in your area assuming success and prices hold up and everything? Full development, anywhere between 120 and 150, producers and around 70 injectors per steam. So,

15:10 full field development will spend100 million on this field. And we've presented that to our state senator at the district level to try to get some, you know, response. So here's, here's for

15:22 hoping you get that done and think about all of the people that you will be employing for that, that100 million development. Exactly. State of California, think about that. There's people making,

15:33 yeah. That oil is going to flow for a long time. Tim, I remember you showing me the client curves in value navigators. Shout out, Valnev version, whatever that was. Absolutely. And you showing

15:46 me some Bakken and then showing me some Kern County. And it was amazing. I'm like, well, when does it go down? You're like, no, it just produces a barrel. Yeah, it's not, it's not, uh,

15:57 it's not crazy. But you know, eight barrels a day for the rest of your lifetime. Right. It's pretty good. It's pretty good at82 a barrel or whatever it is. We pegged everything at 42. So, and

16:08 we make good money at 42. So we're ready. I mean, our, our off X per barrel will be like eight bucks. So. That's incredible. Yeah. That's incredible. Well, hopefully things get straightened

16:18 out Maybe there's, you know, maybe, I don't know. But I'm thinking, is there, is there a way for you? You've put these plans together. How do you bring something green into it? How do you

16:30 bring ESG into it for the way that you're gonna be a socially responsible operator? 'Cause you know what you're getting into in the belly of the beast. So you have to be better. Right. How do you

16:39 present yourself as someone or something that is going to continue to produce responsibly, look to be, you know. you know, net zero carbons, like all those things. How do you, how do you go

16:51 about that? We can do a lot. Our water, our TDS on our water is less than, is 9, 000 to 17, 000. So you got water, you can recycle, sell to AG, really, you know, legitimately. You've got,

17:07 we're looking at EOR technology to capture flue gas off our steam generators, put that down hole and get enhanced oil recovery. Operators are putting solar out there to use solar steam technology,

17:20 and then you generate LCFS credits in California. So there's a lot you can do in California, and an operator like us, we have zero legacy issues. We don't have a thousand idle wells. So it's sad

17:34 that the regulators can't find middle ground for producers that want to develop, you know, the next generation oil field, that oil field 20 that we all talk about, we can do it, But we can't if

17:47 they just - hang on to our permits and, you know, leave us hanging forever. So it's frustrating. But I wish more people could, could listen to this, Tim, because in, you know, I had a

17:58 conversation with an executive at continental resources earlier today. And I was asking him to what he's doing. He said they've put a ton of solar out in the field right now. Like that's been a

18:09 pretty big initiative, not something you're going to hear about in the news, but no, this is the second time today, right, that I'm hearing this And I hope more people just in the universe can

18:19 hear this, right? This isn't just you going out for the sake of being greedy and building out a100 million plan. This is producing responsible energy, but also taking steps to be a better operator

18:30 than how people did it a hundred years ago and even last year. So I commend you for that. Yeah, hopefully we can, and it's affordable and it's known technology. We only need like a megawatt of

18:41 solar. It's not much You spend a million bucks on a solar array and you're off the grid at least during the you know, you spend another million, maybe you could do a battery, but, you know, it's

18:53 affordable and it can happen. And, you know, we're eager to do it if we can get the right policymakers on board with us. Well, next time you come on here, hopefully you're drilling, turn it to

19:04 me. Yeah, absolutely, yeah. We'll have a barbecue out there or something. Oh, count us in. Anyway, hey, thanks. This was very short notice, Mike. I'm glad you're able to make it. And this

19:14 is the first of our tripping over the barrel shorts maybe this will become a thing. Cool. But we'll build a network of people we can bring on and touch these hot topics as they come up. Absolutely,

19:24 anytime. Thanks guys. Nice Mike. Appreciate your mic.