Mailbag, incl: Real talk from an oil and gas expert. April 26, 2026

“Yesterday, the implication was 40 percent higher earnings forever. Today, 40 percent lower earnings forever. That's a, that's a, a lot's got, either sentiment was way over, or maybe there's some opportunity. I don't know, we'll have to have a look at it. But I admit, this is a little peek behind the curtain. There's a real time analysis, right? Like literally just saw it then.”

“Let's take it at face value. Even with that, they're still on a PE of 33... The easy way to think about it is, let's say that they continue earning that forever, and let's say that every single last cent of net profit, they don't keep any, they don't reinvest any, they give it all out to you and you own the whole damn thing, it will take you 33 years to get your money back. Not even counting inflation.”

“It is just true that the cheaper something is, the more it is used. And a reservation scheme makes it cheaper than it otherwise would be. By definition, that's why they have a reservation scheme. The gas reservation scheme has been really useful at lower electricity prices for industry... but it's just true that the cheaper something is, the more it is used.”

“For mega projects offshore, this is a practically impossible reality for a number of reasons... The rig rate costs are now around $2 million per day. So mobilizing a rig down and back from Southeast Asia costs $30 to $40 million even before you start drilling. Therefore, most drilling is done in one big phase due to economics. And for each additional brownfield phase you're adding, you're adding complexity where the activity may damage the existing facilities.”

“Shouldn't we make sure that if we are going to take it out of the ground, the Australian taxpayer is compensated for giving up an literally irreplaceable on any human time scale asset? Of course we should... Why would you sell oil for less than you could get for it if you waited? You wouldn't. Why would you let someone have a better deal and you're getting used to it? You own the assets. They want your assets.”

“The US empire is declining. I don't think that's a controversial statement, but that decline will take decades. And within that, there will be some absolutely spectacular companies. I suspect the next wave of global tech giants will still be US based, right? Despite all their troubles. I am very bearish on Europe. It's just, well, we stop extrapolating forward, just looking at the last 10 years. They have not managed things well.”

“Germany is the powerhouse of Europe... and yet, GDP growth over the last five years has averaged less than 1% per annum in real terms. Now just let that sink in. I'm not talking about some Borat-based, fictional East European basket case economy. This is Germany. And they're not even at one percentage point of average GDP growth over the last five years. It just seems like a really long-shot bet to me.”

“I really reject the idea of it and you can just... as much as diversification protects you from the downside, it protects you from the upside as well. So you just, I really reject the idea of it. It's like, good, high quality ideas are exceedingly, exceedingly rare. So you don't back up the truck and put everything into one asset or even three. But really, once you get to 10... you are done. In fact, all you're doing is you're diversifying. You are protecting yourself from the upside.”