Today is a very special episode because not only is Toby Loftin back, Trip Rodgers joins the show as well. Toby is the founder, managing principal, and portfolio manager of T Boone Picken’s BP Capital Fund Advisors. Trip Rogers, CFA, is the portfolio manager of the BP Capital Twinline Energy Fund. Before this Trip was a portfolio manager at Carlson Capital in the 4 billion relative value group where he directly managed 600 million dollars. He is a graduate of Cornell University and was a starter on a nationally rank wrestling team. He also authored, “Wrestling Old Man Market”, where he discusses the lessons he learned in wrestling and how they apply to the markets. In this episode, we discuss many different topics in regards to energy investing and how BP Capital Fund Advisors approaches energy investing through Twinline and Triline.
Raul: “What has driven the oil price movement?”
Warren Buffett: If You Own A Good Business, Keep It
Toby Loftin: “We will start first with the macro picture and then we will get into the white paper. So, one of the misconceptions that we think that really has put pressure on oil prices over the last couple of years is this idea that the US can flood the world market with shale oil. While the US is the primary source of supply growth globally, representing more than fifty percent of the supply growth around the world in the last year. Well that is notable, however, there are physical constraints some of which we refer to earlier with respect to pipelines, differentials in the Permian. But there are other constraints like truck drivers, sand and logistics, water availability, and all the things that need to take place in order to operate in the Permian or any other basin for that matter. We are noticing physical constraints and in fact we wrote a separate white paper on that that Trip pinned. It details our view from on the ground intelligence by actually going there and touching well site if you will. The other part that is misunderstood is that OPEC has this unlimited spare capacity. If you remember back to November 2016 when the OPEC plus deal was put in place, there was a commitment of one point two million barrels per day of production cuts out of OPEC. But there was an additional six hundred thousand barrels per day from Russia and others. Of that six hundred thousand, Russia represented three hundred thousand barrels. Well I like to use this analogy, they have said they will cut production and they have but they ramped up their production right before they started or effected the agreement. That is the equivalent of saying I am going to be on a diet but right before the diet I am going to have a dozen doughnuts. And so there is a misconception on their ability to have the spare capacity.”
Trip Rogers, “Wrestling Old Man Market”
BP Capital Funds Insights: https://www.bpcfunds.com/insights/
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Previous ValueTalks on special situations here
1:37 – How was the launch of your first ETF?
4:19 – Can you walk me through the process on how you construct and select for the ETF?
10:14 – Can you talk more about the energy value chain and metrics you look at?
13:54 – Can you talk about an idea or company in your portfolio?
20:39 – Can you talk about more on how the US can potentially be a net exporter in the coming years?
22:29 – How has the US shale production affected that and the new technology?
24:21 – How do you construct your portfolio to include all aspects of the energy value chain and how do you position your best ideas?
26:25 – Do you keep the portfolio fairly diversified or concentrated?
27:46 – What has driven the oil price movement?
31:49 – What should investors be aware in regards to oil prices and those misconceptions?
33:54 – Can you talk about the company level execution risk? Are they temporary and can they be fixed?
39:39 – When you visit the oil sites, can you share some stories of your experiences?
42:39 – What are your guys’ favorite hobbies?
49:00 – What are your favorite books?
50:08 – What are your closing thoughts?
Enjoy and thanks for the listen!