BP Capital Founder and CEO T. Boone Pickens spoke with Bloomberg Television’s Stephanie Ruhle at the Milken Institute Global Conference today about Iran, the price of oil and geopolitics.
On interfacing with Iran and OPEC, Pickens said: We do not need Mideast oil. You don’t need it. And I don’t think the President or John Kerry understand that. I don’t think they understand the oil market. I don’t they think they understand the oil business. And I think what they understand about it is they don’t like. So it’s — I mean and why don’t we open the Keystone Pipeline, start there?”
Pickens said he shut down all three of his drilling rigs: “I had three rigs draining and they are all down. We shut them down. And we have got plenty of locations to drill, but not for $40, $45 oil. Now I know oil as the price come back up, it takes a little bit for that to work back to the field price. But you go back up to $65 a barrel, and I will go back to drilling again.”
On 2016, Pickens said: “I’m supporting Jeb Bush…I think Jeb Bush is going to have a tough go of it.”
Boone Pickens: We Shouldn’t Negotiate With Iran
STEPHANIE RUHLE: Well oil is surely coming back, well to triple digits by the end of next year. That is what our next guest, the one and only energy mogul, Boone Pickens thinks. He is the Founder and CEO of BP Capital, and he’s with me now. We have got to start with the Iran. There were reports this morning that a U.S. ship was seized. That has now been clarified, but doesn’t change the fact that it seems that every day there is another headline, a scary headline about the political unrest in the Middle East. How does that affect your outlook?
BOONE PICKENS: Well you’re asking me a geopolitical question. I will relate it to oil, if I could.
RUHLE: Please do.
BOONE PICKENS: Yes. The Iranians, I can’t believe negotiating with these people. I mean they have elevated themselves to not a superpower, but they’re operating like a real country with the United States trade on Iran, and John Kerry trying to make a deal it seems like nobody wants to do. Then now they’re talking about releasing the sanctions that they had, and that they’ll start producing more oil.
Well what concerns me first, they have got 30 million barrels of oil in tankers. Now then they talk about they could produce another million barrels a day. I don’t believe that to be the case. I don’t — I don’t think they have that capability. And I see where they are going to produce 200,000 barrels a day.
So I would say they’ll produce closer to 200 than they will a million barrels a day. The 30 million barrels in the tankers give me a little bit of a heartburn, and but it’s — I cannot believe wasting your time with those people, because they don’t tell the truth. I mean you are — you’re dealing with people that have lied to you continually. And so —
RUHLE: But does John Kerry have a choice? Don’t we have to interface with them? You have said before that OPEC is the enemy, but can you — can you ignore OPEC?
BOONE PICKENS: Well Iran is not OPEC, to start with.
RUHLE: But I’m saying whether we’re saying isn’t a viable counterpart, OPEC’s the enemy. These are forces that you might not respect, but you have got to face them.
BOONE PICKENS: Well no. Why do we have to face them, because the United States has — has plenty of resources. We do not need Mid-East oil. You don’t need it. And I don’t think the President or John Kerry understand that. I don’t think they understand the oil market. I don’t they think they understand the oil business. And I think what they understand about it is they don’t like. So it’s — I mean and why don’t we open the Keystone Pipeline, start there?
RUHLE: All right. You do understand the oil market and the oil business. Why do you think we will be at $70 a barrel by the end of 2015 and $100 by 2016?
BOONE PICKENS: Okay. We had 1,600 rigs operating five months ago. We now have, and this is for oil, in the United States we now have a little over 700 rigs, 702 rigs. So you have cut 900 rigs off of the —
RUHLE: And this is just supply and demand.
BOONE PICKENS: What’s going to happen to you when you shut those rigs down, well then supply will go down, because wells drilled now today in the shale and the horizontal hole with multiple frack jobs declined very rapidly. So you are going to see already the Bakken has rolled over. It is in decline. The Eagle Ford in South Texas has done the same. And you will see the same thing in the Permian Basin in West Texas.
So you are going to start to decline. And that will — you already, the last from Cushing last week, it was — it drew instead of filled. So you may be seeing the first of your draws, and they will continue on. As you bring down your supply, your — your demand is very strong, much better than last year, twice what last year was. So here you are, your demand going up and supply coming down, perfect for increased price.
RUHLE: Economics 101.
BOONE PICKENS: It is. That’s exactly what it is.
RUHLE: The Shell/BG deal, what does that say about consolidation in the industry in general? Is it a one-off, or did they just get the ball rolling and we’re going to see a lot more of it?
BOONE PICKENS: You know it’s interesting. Shell announced they could not drill the horizontal wells in West Texas. I don’t know whether you saw that or not, but they said they could not drill them cheap enough to justify drilling the wells. Well they — there’s a lot of companies that can drill them cheap enough and they drill a lot of them. And so I think Shell decided the way to play the ongoing industry to grow their reserves was to acquire somebody. And BG was kind of a floundering one out there that hadn’t been able to do much. And consequently Shell picked them off.
RUHLE: Will we see more M&A activity? As oil prices rise, these smaller companies aren’t going to be suffering as much.
BOONE PICKENS: As what?
RUHLE: These smaller companies won’t necessarily need a big guy to come and acquire them, so if prices go up.
BOONE PICKENS: Oh exactly, oh sure. If the price goes up, well they’re home free.
RUHLE: Okay, okay.
BOONE PICKENS: But there will be some of these big independents in the United States will probably go to the Exxons, or Shell or Chevron is what will happen. But we haven’t seen that happen yet. Shell made the BG acquisition, but we will see how it unfolds. I love it.
RUHLE: Why do you love it?
BOONE PICKENS: Well, you know