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.”
ARK Invest is known for targeting high-growth technology companies, with one of its most recent additions being DraftKings. In an interview with Maverick's Lee Ainslie at the Robinhood Investors Conference this week, Cathie Wood of ARK Invest discussed the firm's process and updated its views on some positions, including Tesla. Q1 2021 hedge fund letters, Read More
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 I have been in the business forever. I got out of school in ’51, geologist. And I have been in it ever since. That’s what, 100 years ago? And but I’ll be 87 next month. And so it’s every day is another very — I won’t say every day is a thrilling day. That sounds like a woman talking about it.
RUHLE: Well it would be okay if it was a woman talking about it.
BOONE PICKENS: Well of course it is. Women engineers, geologists or have it, women say things like I’m thrilled. Men don’t say I’m thrilled.
RUHLE: They don’t say they’re thrilled, maybe excited. Let’s talk about alternatives for a moment. I remember last year we talked about wind. You had a big bet on wind and you took it off. You said it wasn’t working, but we’re expecting an announcement.
BOONE PICKENS: Well I lost.
RUHLE: I’m trying to be nice. We’re expecting an announcement out of Tesla, possibly an alternative energy storage. Could this make you want to get back in the wind space, the solar space?
BOONE PICKENS: Oh I would. Solar is harder for me. I mean they haven’t been able to show me where anybody has made any money yet. And but the — the wind is, sure. I could get back into wind. I understand it. But I want $6.00 natural gas when I get back into wind, because the power is priced off the margin, and the margin of fuel is natural gas. So here it is $2.50. It’s — it’s not a good time for me to get into wind.
RUHLE: What is it a good time for you to do right now? What are you most, I’m not going to say thrilled, what are you most excited about?
BOONE PICKENS: Well I —
RUHLE: Being long oil as the price goes up.
BOONE PICKENS: 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.
So that is exciting for me. It’s always exciting for Boone to drill. But I have got five funds. And I have developed teams in each one of those funds that I consider to be the best guys in the business. Our results are good. And it’s — I enjoy that work. But I’m there every day. You know that.
RUHLE: I love it. I want to talk about shareholder activism for a minute. In the past you have said you like it, you love it. You like people fighting against lazy CEOs, those who aren’t doing much, but most recently we have heard from Larry Fink and Stan Druckenmiller that CEOs are not making long-term decisions for the betterment of their company anymore. They’re making decisions to just fight off shareholders that want results tomorrow. What do you think?
BOONE PICKENS: Well what’s new about that?
RUHLE: Well I mean —
BOONE PICKENS: I mean that takes you — that takes you back to the ’80s when we — when we tried to take over Gulf Oil. And the price had never been above $35. And the company was worth $85.
RUHLE: But you are also a long-term investor. A lot of activists today are not long-term investors. They want to make a lot of noise.
BOONE PICKENS: Well you say long-term investors. I mean they are in there investing, and no question. But they are a lot of CEOs. And they have some good ideas and all. And so it’s not a bunch of lazy guys, but there are some.
But you’ve got Carl Icahn out there, and what is it, Steve Cohen and those guys. I mean they will — they will jerk you around a little bit if they see great values that you are not — you’re not getting for the shareholders. And I made Carl mad the other day.
RUHLE: What’d you do?
BOONE PICKENS: Well the “New York Times” asked me, said what about Carl Icahn, activist. I said back when I was in the business they called us raiders. Now they’re activist shareholders. I said Carl has made more money more money for companies than any CEO I have ever known anywhere. And I said, Carl, he’s a moneymaker, serious man. And I said he’s about as smooth as a stucco bathtub. He called me.
RUHLE: And what did he say?
BOONE PICKENS: What are you doing? I’m smoother than a stucco bathtub.
RUHLE: Smoother than a stucco bathtub. I have to talk to you about something else.
BOONE PICKENS: How would like to get in a stucco bathtub?
RUHLE: Well, Boone, but you know what? I don’t want to get in a stucco bathtub with Carl or alone, ever, and maybe not with Jeb Bush. But you’re a fan of Jeb Bush. You’re going to get behind him in a big way, aren’t you?
BOONE PICKENS: Well I’m supporting Jeb Bush.
RUHLE: Why? Why is he the best candidate?
BOONE PICKENS: Well I don’t anything, but Bushes.
RUHLE: But isn’t — that’s not a problem?
BOONE PICKENS: Well I know —
RUHLE: To say I don’t know anything but Bushes, and to be okay with that, makes many Americans feel like we need a new game in town.
BOONE PICKENS: Well my wife says that America is tired of the Bushes and the Clintons, and said neither one of them are going to go anyplace. So that’s her prediction. I — I think Jeb Bush is going to have a tough go of it.
BOONE PICKENS: Well it’s just not that easy. You’ve got — you’ve got serious people in there. And I — I can’t even believe the Democrats are so pitiful. I mean here you have got one candidate who is in trouble, and all — and then it’s backed up support group, Harry Reid, Nancy Pelosi? I mean what —
RUHLE: But do you really think Republicans are in better shape? I mean the Tea Party has really split the Republican Party. It seems that they can’t get their act together, so many different voices. Do you actually think the Republican Party is strong today? I’m not saying the Democrats are, but are the Republicans?
BOONE PICKENS: Well who is it that controls Congress and the Senate? Republicans. And are they strong? Of course they’re strong, I mean. And look who controls the State houses? Republicans. Yes, I think they are strong. And I think that you’re talking about politics, and politics is — and it is not ever a line straight up, and neither is the market. And so but, yes, I think that the Republicans are vastly superior and stronger than the Democrats. When I look over who their leadership is, you laugh.
RUHLE: Well I laugh when I get to talk to you. Boone, I don’t want to take a bath in a stucco tub anytime soon, —
BOONE PICKENS: You say and —
RUHLE: — but I will talk to you any day of the week. In fact, I’d be thrilled to do so.
BOONE PICKENS: Thanks, Stephanie.
RUHLE: Boone Pickens. He is the Founder and CEO of BP Capital.