Irreplaceable energy assets offer double-digit yields
The guest argued that select energy companies with low-cost, long-tail assets offer highly attractive double-digit free cash flow yields at $75-$80 oil.
The argument
He explained that high barriers to entry, such as prolonged permitting timelines for pipelines and infrastructure, protect existing assets. He also noted that physical oil realizations are currently trading significantly above futures market models.
The thesis, stress-tested
✓ What validates it
- ✓Physical oil prices continue trading at a premium to futures
- ✓Energy companies report sustained double-digit free cash flow yields
▸ Risks discussed
- ▸A severe global recession dampening oil demand
- ▸Sudden resolution of geopolitical conflicts lowering risk premiums
Hear it yourself
"But sometimes, it seems like just yesterday. 1999 was the year I graduated business school alongside some amazing past guests, like Rodrigo Bittar, Matt Botein, Rodney Comages, Meredith Jenkins, David Lyon, Rick Heitzman, Alex Sacedote, and Matt Spielman. When I see any of them, twenty seven years feels like yesterday. But there's another dynamic worth talking about. In nine years of doing the podcast, I've never once mentioned the Knicks. The Yankees roll off my tongue, but mentioning these Knicks now easily puts me in the bucket of a fair weather fan."
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