How long-term energy plays outshine short-term hype

Foreign.

Welcome to Trader Talk, where we dish out the latest Wall street buzz to keep your portfolio sizzling. I'm Kenny Pulcari coming to you live from the New York Stock Exchange, a place that has been my home for decades and still fuels the pulse of capitalism, entrepreneurship and freedom. Now let's just take a jump into my big take. Stop chasing oil prices. Every time oil moves, investors scramble to react. Prices tick up. Everyone rushes into energy stocks. Convinced oil is heading to $150 a barrel. Prices drop. Suddenly it's all about demand destruction and recession fears. This constant overreaction is exactly why so many people lose money in the energy trade. Here's the truth. Oil is volatile by nature. It's a global commodity influenced by everything from geopolitics to to production decisions to economic cycles. Betting on short term moves is a losing game. Instead, the smart money follows the bigger trend. And that trend is simple. Oil isn't going anywhere. Despite the push for renewables, the world still runs on fossil fuels. AI data centers, global manufacturing and infrastructure projects all require massive amounts of energy. The idea that demand is collapsing just isn't really supported by reality. And at the same time, the US is now a dominant energy producer. Every time oil prices rise too much, American producers step in, increasing supply and keeping a lid on prices. This isn't the OPEC controlled market of the past. There are more players now and that means more stability, more supply in the long run. So what do investors do? Stop trading oil like it's a lottery ticket. Instead of chasing price swings, focus on companies built to thrive. And in any market. Refiners, pipeline operators and energy firms with diversified revenue streams. These are the names that create long term value, not just short term spikes. The bottom Line Oil is about understanding the structural forces at play. Build a thesis and then execute. Now I want to introduce my next guest, Lou Bassanise. Lou is a seasoned Wall street Veteran with over 25 years of experience spanning the gamut of private and public markets, investing, research, wealth management, investment banking and investor relations. He currently serves as the Executive Vice President of Market Strategy at Prairie Operating Company is a NASDAQ listed stock and one of the country's only high growth, low cost, independent oil and gas companies. He's also the founder of the BigSkinny.com, a no nonsense research firm that bridges the gap, the information gap between Wall street and everyday investors to identify the market's biggest and most profitable trends and tech investments. He frequently, frequently shares this market analysis and investment strategies with major financial outlets including Fox Business where I get to appear with him on occasion. Fox News, Reuters and Yahoo Finance. And here we are in this podcast. He holds a BA from the University of Florida and an MBA from the Crummer Graduate School at Rollins College. He currently serves on the board of directors for Endra Life Sciences, another Nasdaq company, NRDA and the Roberto Clemente Health Clinic, while also lending his expertise to the advisory board of the Headstrong Project, one of my pet projects. His diverse role reflects his commitment to both business and excellence and philanthropic efforts. Please help me in welcoming Lou Bassinise to the show. Lou, it is a pleasure to have you. Thank you for joining us.

Good to be here. That intro should have just said I'm a paisan like you. And that's it, we're good to go.

Here we are at the New York Stock Exchange. It's home for me. And so thank you for joining me.

Good to join you.

So I want to talk to you first a little bit about your history. So tell the audience. Just give the audience a little bit of between research and now you're in the energy space, which is all very interesting considering that we're talking about it.

Yeah. So I've pretty much done it all. I started out in Morgan Stanley's private client group and then got into the independent research space, really focused on technology and small and micro cap companies because I believe firmly that that's the last place where individual investors have an edge over Wall Street. Right. So spent tons of years there focusing on technology and that's underpinned by patents. And started my own research firm, built some publishing businesses. And in all that I ended up, and like you said in your energy piece here, finding out that it's best to bet right now on the long term for oil. So I find myself at Prairie Operating Corp. Where which is one of the only small cap growth oil and gas.

All right, so talk about it. Give us a little tell, tell me a little bit because I don't know anything about the company.

Yeah. So this company was started by industry veterans that realized two, three years ago that the pendulum had to swing. It had to come back to sensible energy policy. We couldn't go 100% renewables. It's not sustainable. There is no real energy transition. It might be a rebalancing. So they started acquiring assets in the DJ Basin, which is in eastern Colorado, that that basin had been largely consolidated during the last boom. So what you have is two majors. You have Chevron and Occidental and then a lot of private Small mom and pop, small parcels that could get aggregated and rolled up. So that's exactly what they're doing.

Is it oil? Is it gas? Is it both?

It's oil. It's mostly liquid, so 79, about 70% oil. It's, you know, direct. It's one of the cleanest molecules. It actually gets a premium down at cushing of about a dollar to $3 a barrel because of the gravity. So this is, this is a good old fashioned American growth story.

But is it different from where those Shell and who do you say?

They're so Chevron and Occidental. So we're actually adjacent to their properties here. So this is the play where we're not going out and exploring in unproven areas. We know that there's production there because of the majors.

Right. So this is what always, what always interests me. So explain this to me. If you're here and Chevron's right next to you. Yeah, right. Because you're, you're right next to each other and you're both drilling in the, in the, you're both drilling the same well.

Well, you're drilling in the same reservoir. Right. So but remember, we're not just drilling down anymore. Right. We're going horizontal. And, and this is where people are like why are you attack tech guy now with an energy company? Well, I got news for you. Energy is all about tech.

It's all about technology.

We're going two to four miles laterally drilling using 3D imaging to steer a drill bit in ways that was never possible before. I mean you go back 15 years ago, the first horizontal drilling that happened, and you were really tapping maybe 2 to 3% of the reserves that were in that reservoir. Right now you're double and triple that because of the advances in technology.

So tell me about the reserves in that reservoir.

Yeah.

What's the estimate, how big they are?

I'm not sure. So we're in the middle of an acquisition that would put US at about 29 to 31,000 barrels a day of production.

Right.

The original wells, that vertical wells that were drilled in this basin were back in the 60s and 70s. So it's proven ground. It's not like expanding somewhere where the operators haven't been before.

Is that level of production has that increased? What were you, what were they bruising last year?

So we, this is a roll up strategy. So right now we have 7 to 8,000 barrels a day now going to 29 to 31,000 based on this acquisition. So this is growing organically through the drill bit, but then also through acquisitions. I mean, remember the late, great T. Boone Pickens? He said sometimes it's easier to drill for oil on Wall street, right? Just go acquire it instead of go drilling at all. So it's a combination of that strategy and here's the arbitrage you're being. We're able to pick up this latest acquisition at 2 times EBITDA, so on the cheap and bring it public, where things are trading around three and a half to four times. So it's really a value play, a growth play, which is, which is what attracted me to it with the tech and put all those things together.

All right, so I'm curious because I think that average price of, of, of what it costs to produce oil in this country, or at least what I think it is about $40 or $45 a barrel. Am I right?

You're right. It depends on the basin, right? So if you look at Permian, it's probably on the lower, lowest end, around 40 to 41. The DJ basin is right there. It's a mid-40s, like 43 to 45.

So oil price, oil West Texas Intermediate has come down nearly 10% since Trump's been in office right now. Not because he's been in office, it's just come down since he's been in office. But there's a lot going on. Certainly the non OPEC producers would be us, Mexico, Canada are producing more. You've got the Saudis who, you know, clearly can produce all they want, who are holding back. The question, well, well, I don't know. Let's talk about that.

And that's the dirty rumor in the market is do they have the actual production that they say they can? We're going to trust them. Right? But it's like the old saying, like trust your mom. But, but, but cut the deck, right? Like we're never sure. So there's a tenuous balance because you have strong demand. There's not really an easy way to increase production. I mean, the US is producing 13 million barrels a day.

Right.

Record, which is a record. Right.

So, but, but the Saudis, they're holding back on production. They're actually, they're actually teasing about raising production in April and they, but they.

Need to hold back to keep prices stable. Right. If they flood the market, I mean, they need a higher break. They have a much higher break even than most of the US operators. So I'd argue that it's a tenuous balance because, look, if President Trump wants to put sanctions on Iran, that can take 500,000 to 750,000 barrels a day off the market. Where are you going to make that up immediately? Saudis, maybe US Production could get there. But that's why you're seeing the price volatility is, as you said in one hand, it's a supply and demand. Right. It's a supply threatening, taking supplies off. Will you get more then it's demand we go into. Are we in a recessionary environment? So.

Right. But tell me something, because you made a comment that I'm curious about when you said the cost of production. I thought the Saudi cost of production was like nine bucks.

Well, I mean, again, it's like Chinese math, right. Do we have transparency here? I mean, how many, how many financial statements do you trust from, from China? I mean, I'm just being, well, I.

Trust nothing from China. Let's just say right off the bat, it's trust nothing from China.

Right. So you're trusting an organization and a country that, you know, there's no motivation to be transparent. It's, it's like verbal intervention from the Fed. Right. It's an effective tool that the Fed's used for, for decades.

Right.

Saudis can use it to, OPEC can use it too. We're going to increase, we're going to pull back production that you really, where we're at right now is a sweet spot, 70 to 80 bucks.

Well, I would agree. That is, although the Saudis, along with Qatar and Iraq, I think they need prices to be north of 80 to just pay for their quality of life and their infrastructure and all the things that they do now. It's certainly not trading there at the moment. They want to see it trade there, but I don't think it's going to trade there.

I don't think so either. I mean, you've talked about the pullback since President Trump's taken office. We're basically back where we started.

Right?

Right. I mean, 2023, 2024, we saw maybe a 10, 15% rise in oil and now we just, we're just coming back.

But I don't think, you know, it's so fun. One day the news will tell you that, you know, it's about demand destruction and waning demand. And then the next day they're going to tell, oh, China's back. And so demand is strong. I think demand is strong. I don't, I don't listen to any of it. I don't think demand is going away. I think it's clearly a surprise, a supply issue. We Have a lot of supply.

I agree. So. And I think what the balance in the market's trying to figure out, right. Like now we're realizing that this energy transition moved to 100% renewables is not happening. So that's going to keep demand stable. Now we get into the question is how quickly can we bring new supplies online. And if you look what happened, the majors are in a capital discipline mode right now. They're not in rapid expansion. They're going, right, let's maintain the balance sheet, pay out stated dividends. Because what people don't realize is when you frack a new well, it depletes those reserves 50 to 60% in the first two to three years. Right. So if you start expanding, you have to commit to keep expanding to maintain that level.

Well, so. So is what you're doing in Colorado is that fracking?

Yes. Yeah, it's fracking.

So fracking.

Yeah. So it's fracking and horizontal drilling. Right. So it's what's going on in, in the basin and has been right now that, like I said that that basin started being drilled in the 60s, these traditional vertical drilling. Now what you're doing is, is fracking and horizontal drilling.

So fracking. So because, because then, then explain to me or clear it up for the, for the, for the listener. Fracking versus just drilling fracking.

You're going to go in and split and open up the layers of shale. It's a different geology of the rock. So you're trying to get to those reservoirs and you have to pump liquids down to open up, to break up the rock, to release, to get in there. So traditionally the, you know, most basins like the Permian are very liquidy. You got to pump down a lot of water and sand to get the oil out. The DK Basin is, is much less so that way. So it's minimal water and minimal sand compared to some other basins.

Right.

So again, it gets back to this is one of those areas, an untapped resource that hasn't been exploited as well as some of the. And it's not trading at premium valuations like you see in the perm.

Okay, so are the other independent producers, like. Like Prop. Not so that it's in. Well, it is independent.

It is independent, yeah.

Are there other publicly traded independent. There are.

There's a, there's a couple other names out there. Civitas is one that's out there. They are actually straddling both the DJ Basin and the Permian. They're actually actively and publicly looking to divest Some assets to coach, focus more on Permian. There's about seven or other players that are in that basin that are meaningful, not all public, mostly private. And then you have the Chevron and Occidental.

So is that an opportunity for. If they're looking to, if they're looking to focus more on Permian and get out of it, is that an opportunity?

It is. Right. So we have a billion dollar credit fac set up with Citi that we're leveraging now to make this $600 million acquisition. There's more capacity and there's probably more opportunity to do that. And that's why I say this is, this is why I went long term on oil by saying, look, this is not necessarily a refining play. This isn't a pipeline play. This is a long term demand for oil and gas. Can you roll up, can you grow from a small cap to a smid cap to a mid to large cap and then get.

Right, because prop right now is a micro cap or what is right at.

The, it's a small cap right at that point.

It's right at the post.

This acquisition will be about a billion dollar enterprise value. So right in the sweet spot of the small cap.

What's it trade at?

It's trading right around $8 per share.

$8 per share. So it sounds like an interesting, certainly an interesting opportunity.

Let's do your own research, though.

Do your own research. Right. I'm not, I'm not telling anyone to go out there and buy it or sell it. You're going to do your own research.

I'm heavily conflicted, which is.

Okay.

Someone told me one time conflicts of interest are a really good thing. They tell you where your allegiances lie.

Yeah. Right. It's right. So let's talk about this conundrum with the major tech companies spending more on big oil.

Yeah.

Did this last boom, during the last boom, investors are really coming up with kind of dry investing ideas outside of the usual suspects like Nvidia and Microsoft and Palantir and all that stuff, which, by the way, you know, are amazing. They're actually on sale at the moment. But the great news, Palantir, I think is down again today. I have to actually lie. I didn't look at it. I heard it was as it was lower again today coming in. But I think that's actually a long term opportunity. Yeah. So where should, where do you think investors need to be looking?

Look, I think everyone's captivated by AI. If you missed in video and the thousands of percent run up you're going, I want that.

Right.

Not going to happen again within video. So I think you have to focus on a separate area of the market. If you look at Nvidia Palantir, even in amd they're picking shovel players. Right. They're. I think you need to move and deep seat showed this that type of AI chips and services. AI services is a commodity. Yeah, it's going to be a commodity. You need to find solutions. So find companies that are going to leverage AI to improve their, their technologies or solutions.

Okay, but can't you. So then use that reasoning. Can't you really say that's across the sector because every company, every sector is using AI to improve, but who's using.

It to the most? Right. So I look at it this way. A good example would be drug discovery. Right. A typical cancer drug takes 12 years to go exception to approval in the market.

Yeah.

Those early studies, the first two to three years can now be compressed into weeks in some cases by studying receptive sites for a drug, for a small molecule, by studying the, the chemistry of how these proteins will interact.

Yeah, but isn't. Wasn't the whole point. Don't you need time to actually study that? No.

So we, it was a. Basically a trial and error. Hey, we think this molecule will interact this way. So now we can use machine learning and AI to say it'll tell you that doesn't work. It'll run through this. Or more importantly, there's a company out there, Lantern pharma. It's a small cap, it's speculative but done is They've built an AI database of clinical data points, drugs over 4 billion data points that can look and say hey, this drug didn't look like it did well in humans. But if we separate out these two different populations and combine it with over here, this is actually an effective and safe drug. So you can use machine learning and AI to do. To take actual human data that we have and efficacy to find drugs that we couldn't have found on a trial and error basis.

Yeah. That's interesting. And I know drugs and biotech is another area that you spent a lot of time in. Yeah, right. That you did a lot of research on. Wasn't it one of your.

Yeah, no, it's one of our focuses. I always saw that as an area that, I mean Charles Payne always said to me he avoids biotech because it's just too confusing.

Right? It is.

Right, right.

But you spent a lot of time.

My background was a generalist first and then become a specialist when there's opportunity. And if you look, biotech is one of the places in the market where you can outpace inflation by multiples if you pick the right winners.

Right?

So you gotta. But that's hard, right? You gotta learn.

So that's why you got to do your homework.

Right. So you spent a lot of. I spent a lot of time understanding. I mean I have a medical background coming out of pre med, was always fascinated by it, but then got captivated by Wall street and said, forget medical school, let me invest in medical things.

Listen, let's just take a break. Give me one minute, we'll be right back. All right, so we're back. And thank you by the way. I got to tell you, I love that jacket.

Thanks man.

That's a really good.

I don't think I picked it out. I think my wife did.

That's a really nice jacket. Let's wrap this up with three essential market tips. Right? To keep in mind, no matter which way the wind is blowing, you always want to review the macro outlook. Investors need to analyze the economic data within a broader context rather than just reacting impulsively. Markets move based on expectations, surprises and trends rather than just a one off report. So here's a structured way to interpret economic data week by week. Understand market expectations versus reality. Follow key economic indicators in their market impact. Looking for trends, not just the one off reports. And remember, a single data point doesn't make a trend. It's got to be a three, six month kind of moving average. Right. Understand the Fed's role and their reaction. Remembering that the Fed is not always right. And then watch bond yields. They reveal a lot about market expectations. But most importantly, stay objective and avoid overreacting to the headlines. Remember that algo driven trading exaggerates short term moves. Wait for the confirmation. A disciplined long term approach wins over panicky type reactions. Have an opinion. Investing without an opinion is like driving without a destination. Successful investors don't just absorb the information, they interpret it. They challenge it. They form their own views. The market isn't just about numbers. It's also about psychology, perception and forward thinking. So here's why having an opinion is critical. Because markets are forward looking, so you should be as well. The best investors are contrarians at time, right? Great, great investors have the conviction to go sometimes against consensus when it makes sense. And sometimes it's difficult, right? And if you don't have an opinion, guess what? The market's going to give you one and it's probably going to be wrong if you don't form your own opinion, you're going to constantly react to the narrative designed to manipulate your emotions. Risk management requires that you have an opinion. And if you don't have a view on the economy or industry evaluations, how are you going to allocate your capital? Risk isn't just about avoiding losses. It's about positioning for the right opportunities. No opinion equals no edge. Investing is a zero sum game. Someone wins and someone loses. So having a well researched view gives you the ability to capitalize when others hesitate. Bottom line, an opinion is a strategy. So having an opinion isn't about being stubborn or predicting the future with certainty. It's about analyzing the data, weighing the probabilities and making informed decisions. The best investors don't just react, they think ahead. They take calculated risks and they trust their analysis over the noise, right? No opinion, no edge. No edge, no profits. Now, keep your event calendar up to date no matter what. Always keep kind of a well organized calendar of the key events, updated with upcoming Fed meetings, policy announcement, further future earnings releases that could move the markets, and individual names. This is about being prepared, planning ahead, and knowing when these events occur are going to help you adjust your positions and kind of manage the risk more effectively and avoid surprises. It's a timeless practice that keeps your trading strategy both agile and informed. By reviewing the macro outlook, formulating an opinion, and staying on top of the event, staying on top of the event calendar, you're setting yourself up for success. Okay, so every, at the end of every one of these podcasts, I always end it with a market recipe. And today I've got an all American bison burger for you inspired by a piece of market history from here at the New York Stock Exchange. It's one of the most photographed landmarks in New York. So everybody's seen that flag that's draped across the columns outside on the facade of the building on Broad street, right? But most people don't know the story of where and when that flag came from. The flag idea was born out of the events of 9 11. On September 17, 2001, the New York Stock Exchange was about to reopen after the attack on the World Trade center, the Pentagon in Shanksville, Pennsylvania. And our chairman Dick Grasso and the head of communications, Bob Zito, decided to drop 150,000 on the biggest flag that they could find. And they found a 40 foot by 70 foot American flag because we needed an unabashed statement of American resolve. Today it has become one of the most famous flags in the world. And personally, I think it's the best 150 grand the place has ever spent. So today I'm serving up a burger that honors the American spirit. I'm calling it the Big Boy Bison Burger. Now, the American bison was designated as a national mammal of the United States in 2016. The designation recognizes its cultural, historical, and ecological significance as an enduring symbol of the nation's heritage and the resilience of its wildlife. Very much like the New York Stock Exchange. You're going to find the full recipe in the show notes. Tag me in your bill and your burger builds at kennypolkhari on Twitter. And join me next week for another episode of Trader Talk. But, Lou, I gotta ask you, how's that sound?

That sounds amazing. Are you ready to go get one? Can we?

I'm ready to go make one. I'm not sure I'm gonna find it around here. I don't think I've seen a bison burger on the menu, but actually, bison. It's lean.

Very lean.

But it's very good. Actually, I'm a fan. You should try it.

Definitely.

Thank you. Listen, thank you for coming. And I love that jacket.

Thanks, man. If you remember nothing else, you remember my jacket.

100%.

Thanks for having me.

Thanks.

This content was not intended to be financial advice and should not be used as a substitute for professional financial services.