Doug Terreson - Can't Deny It

26:16And the performance of the split up companies has doubled those of the companies that did not split up, Exxon Chevron, BP Shell, Total. Now, is it likely that those companies will split up? Probably not. Would it be best for their shareholders? as the evidence suggests it would. Yeah. This brings us to refining. Talk about the supply and demand that you've seen in your career, particularly in the 2000s. We've seen that Hawley Frontier has been a great company in that space. So for deep value investors, there's a chapter in the book called The Golden Age of Refining. And if you're an oil analyst and you basically come out with a call like that, especially for an industry that was probably the worst subsector in S &P 500 over the previous 20 years, and there were 85 subsectors in S &P 500, you had better be right about it.

27:04And not only did we come out with such a flashy title, but the Wall Street Journal quoted me saying, buy them all, it won't matter which ones you own. And that 2003 will be the best year, will be a good year in global refining, but 2004 through 2006 will be the best three years of the past couple of decades, in 06 will be the best year of all. Again, this was the worst business in the global economy. But because it was the worst business in the global economy, there was a lot of underinvestment. The sell side, I don't think was doing the work. They were just assuming that it would continue to be negative.

27:35And so in 2003, the refining margin was 350. Then it rose to six. Then the next year it rose to 10. Then next year it rose to$12.50. The earnings estimates rose by a factor were 50, 5-0, and the refining stocks, Valero, Sunoco, Holly Frontier, were a 17-bagger. 1 ,700 % they rose during a period in which the S &P 500 rose by 55%. So people will say, well, Doug, that was probably the call of the decade in energy. I'm going, no, no, no. That was the call of the decade on Wall Street that semester. I mean, that decade. I mean, maybe there was another one, but... And that was a tough time to make money in general outside of a space like that.

28:16Oh, yeah. It was difficult. And so what we did was we really did add up all the capacity coming in on the refining end of the market based on every single refinery plan or on construction worldwide four years out. So we really did think we knew exactly how supply and demand were going to change over the four-year period. And because the street was so negative, in fact, when I came out with a call, I had a couple of guys basically say, not only is he wrong, but I'm putting a$0 price target on the stocks he's recommending. I mean, those guys weren't employed two years later. But anyway, it turned out to be a fabulous time.

28:46But it just shows that even though commodities like crude oil and refined products, gasoline, diesel, kerosene, jet, are very complex, you can get to the right answer if you put enough horsepower and hard work behind it. And I actually think that the next four or five years are going to be very positive and refining for the same reason. And specifically, if you were to call your favorite sell-side analyst and say, hey, how much supply is coming into the market? There's not that much over the next four to five years. Why? Well, if you think about it, with all the movement towards EVs and what have you, I think the last place that people want to invest in some cases is refining.

29:24Sure. And so, therefore, let's take a look. Let's do a little work. So back to your kind of global point. I mean, here we have very topical news this morning. We are now tariffing Canadian oil, but this is a global commodity. It's a global market. Can you explain? You mentioned this in your book, and I'll tip your hand on this, but why is there so much correlation in the profit margins of, say, U.S. refineries correlating with non-U.S. refineries? Teach us about that. It's really pretty simple, Cole. So the way to think about it is that refineries that have a similar configuration or setup and have similar energy costs are going to have manufacturing costs that are pretty close together.

30:11And that's before you consider that Exxon has refineries in the United States and in Europe and in Asia. And so if there's a technological breakthrough in Baton Rouge at their refinery, they're going to want to transfer that to these other regions so they can benefit there as well. So the manufacturing cost for the gasoline that you bought this week, whether it's gasoline, diesel, kerosene, or jet, is really pretty similar for all these different refineries around the world, and the transportation costs are relatively low. So the simple way to think about it is that if there's a storm on the Gulf Coast this summer, let's hope not because I live there, and the refining capacity exits the market, then we'll have to get new supplies from a more distant market, which will cause the price to rise until the dislocation is solved.

31:00And so the reason that we looked at refining globally is because when manufacturing costs are similar, transportation costs are low, you're going to see a connection between refining margins around the world, and it's been about 90%. So what that tells you is that if you're not doing global refinery analysis, you know, supply and demand, you're not going to get the right answer for the right reason. And that's the reason I did it in the first place. Sure. Now, I do like when we run out of oil tankers because I like to get that market squeezed, too, just so you know, which plays into your refinery idea.

31:31But you mentioned in your book your straw hats and the winner strategy and the refiners. It's one of those things where until it gets arbed away, it's there for your taking. Can you explain that to us? So it's kind of crazy, but I think in 15 out of 18 years, this trade worked, and I called it straw hats in winter. And what that means is that you buy straw hats in the winter when folks, unless they live in Arizona, are not playing golf, not going to the beach, what have you. It's kind of cold in a lot of parts of the country, and you sell them in the summer when people are going to the beach and they are playing golf or what have you.

32:05And so the analogy with refining was that in kind of the fourth and first quarter of the year, supply-exceeds demand, inventories decline, margins, or supply-exceeds demand, inventories build, margins decline, and the street raises estimates. And typically, when they had that backwards, supply-exceeds demand, inventories build, margins decline, street lowers estimates. Okay. And so what happens in U.S. refined products markets is in the first three or four months of the year, earnings estimates are coming down. The street can't get more negative, trying to downgrade the stocks so they can try to differentiate themselves.

32:47But for the next couple of quarters, what happens is that demand and seed supply, inventories decline, margins rise, and then the street raises estimates. And so – Like a seasonality. It was just complete seasonality, completely predictable. But when estimates are declining, you know, folks are getting out of the stocks. When estimates are rising, you know, it seems like they want to buy more. But it's the exact opposite wrong thing to do. You're warping my five - to ten-year brain with that thought. Is the oil industry too jaded because we lived through 2008 and 2020? Are the wounds too fresh to think rationally at times?

33:25No, I don't think so. I mean, my industry, I'm sure John will talk about this later, takes a very long-term perspective on things. I mean, you know, we care about, you know, quarterly earnings just like everybody else, but these larger companies have to have kind of a medium-term time frame with their thinking because these projects, you know, take years to build, and they're huge and they're leaders in the market. And so, you know, with energy, really the most important thing is whether or not the companies are managing capital in a way that is competitive with that which you can get in other parts of the market.

34:05And the era of the super major was a phase in which they did that, and the pledge, which is still underway, is another phase in which the energy companies position themselves to succeed and prosper. And that makes them investable. You have to have the commodity work for you, but the commodity is probably going to work over the next several years because it's pretty clear to me that the Saudis and the others in OPEC that matter really kind of need 80 to 85 to keep the engine growing. You'd go to OPEC meetings. You're not just saying this as the guy sitting in Pensacola saying, here's what I think the Saudis are going to do.

34:39So I don't go to OPEC meetings anymore, but I don't really need to. During my career, I would visit with the people that mattered in Saudi Arabia at least once a year. And there's some stories in my book where they invited myself and my 10 largest institutional investor clients to meet with them and others. And after a while, just like a relationship with anybody, you kind of know what's on their mind and what matters. And so you don't need to go. I don't really need to go to the OPEC meetings anymore. I kind of know from the smoke signals what matters. And when particular people say certain things to pay attention, and when others say things, you say, well, that may or may not matter.

35:18So you see 80, 85. What price do you think would cause demand destruction? Where would we go to bring back Jimmy Carter's legacy? So typically, the price of oil is going to be set by the marginal cost to produce and OPEC's budgetary needs. Meaning if the price of oil goes to 40 and OPEC is running a deficit, they're going to figure out a way to remove supply from the market and have prices higher just because that's when politicians or rulers or dictators begin to lose their footing. So that's the lower end of the bound. And then the upper end of the bound is typically the consumer spends between 3 % and 9 % of his income on energy.

36:07And so when he's around 9%, we tend to see these petroleum-induced economic shocks. And then to Bill's question, the oil price would have to go to$130 per barrel, all things being equal, for us to start seeing meaningful demand destruction. The whole point here is that we're a long way away from the price that the consumer has to back off. Sure. We think about the fuel efficiency of vehicles today. If you look at wallet share, I mean, it's kind of uncanny how much more fuel efficient our vehicles are. So we agree. You touched on this earlier, but talk about the pledgers. Yeah. And, you know, I mentioned Munger in my opening.

36:41It's called A Book with Legs. You know, I'm kind of a Charlie Munger nut. Why was Munger right? He said, you know, when you hear EBITDA, you should just hear bullshit earnings. Okay. Earnings before everything that matters. Thank you. And I support that in my book. And so the pledge, so when we exit the era of the super major, energy is 14 % of S &P 500. We're feeling pretty good about our sales in the oil industry. Then the shale boom happens. And during the shale boom, the industry started to spend tons of money in relation to what they were distributing to shareholders. And any time you see that in any cyclical industry, whether it's materials, industrials, or technology, there's usually a train wreck in the stock market right around the corner.

37:26So between 2010 and 2014, the industry started spending tons of money. They were growing production, irrespective of whether or not they were creating value. And as they did that, it began to concern me. And so we get to 2014, the price of oil is$110 per barrel. As I mentioned earlier, I go to my annual visit in the Kingdom of Saudi Arabia. It was crystal clear in 2014 that they were unhappy with how much the U.S. was increasing supply. And they were kind of tired of losing market share. And there was an OPEC meeting that same month, which is part of the reason that I went over there. And Wall Street widely believed the comments from the head of OPEC that Saudi Arabia was going to reduce production.

38:12Everything that we heard when we were in the kingdom suggested they weren't. So we did this conference called all these clients and they said, buckle up. They're not going to increase production. Oil prices are going to go a lot lower. And they didn't. It was called the Thanksgiving Day massacre in 2014. Oil prices were low in 15. They were low in 16. They eventually touched$30 per barrel. We saw 450 bankruptcies in the United States oil and gas business. And in 2016, I'm the number one oil analyst on Wall Street. And I said, I need to use my platform to try and affect change. And so we introduced what was called the pledge for greater capital discipline and enhanced corporate governance.

38:48And the pledge had three steps and there were no exceptions for any company. Number one, we wanted companies to keep their spending low, even if the oil price increased. What happens if the oil price increased? Well, you can't go take the money and spend it again. You have to return it to shareholders. Number two, we asked companies to... These are crazy ideas. Yeah. By the way, at the time this is going on... Or for my industry. Remember, we were coming off of Chinese exceptionalism, if you folks would like to think in terms of what's going on now. Anytime they think a country is exceptional, you're in trouble.

39:24So I spoke in Tulsa to about 22 people and the CFO of Magellan Petroleum was in the audience and I was as bearish as you could be about oil. I was as bearish as you could be about China. And he comes up to me and he goes, you know what? There's not a single piece of land that we could buy right now that makes any economic sense in the oil business. And that That was in 2014. Okay, well, we're getting close. And so three points to the pledge, three steps. You've got to keep your spending low even if the price of oil rises. And if it does rise, you have to return capital to shareholders number two.

39:58Let's start using performance measures that connect to intrinsic value in the stock market, not to be confused with EBITDA. Yeah. ROCE and EVA were fine with me. And number three, let's connect these performance measures to CEO pay. Okay? Okay, so we were basically asking, so Energy had gone from 14 % of S &P 500 in 2008 to 6 % by 2016. And I said, it's going to 2 % by 2020. So I'm in the process of making everybody unhappy with me again, because I was basically saying that the business models were somewhere between dysfunctional and obsolete, and these stocks are going down a lot more unless there is change.

40:34And so I prosecuted this. Every single month, I put it in my research. and again I'm the most highly rated analyst on Wall Street and so it's going everywhere. It's not hard to understand what my position was and there was a lot of pushback but I knew I was right because in 2016 with the oil price at$75 per barrel the return on capital in my industry was three, three percent. Okay and so what we found starting in 2007 was companies, many of them were already doing it, subscribe to the pledge. Phillips 66, Valero, Marathon, ConocoPhillips, Chevron, there were eight of them. And so we get to the end of the year, and I said, you know what, this is a step forward.

41:22Eight of the 30 companies in S &P Energy have adopted the pledge. I said at the outset, the companies that adopt my Pledger model will have superior performance in the stock market. Guess what happened? At the end of 2017, the pledgers, again, we had eight out of 30 in S &P Energy, were 80 % of the top 10 performers in S &P Energy. And so everybody said, well, Terrence, you got lucky. Well, guess what happened after that? Happened again in 2018, then it happened again in 2019. So if I were to come to you guys in 2016 with the pledge and said, listen, I've got a call that's going to deliver 80 % of the top 10 stocks in any sector, in any market of the world, you'd have said, I'll take the other side of the trade.

42:11That's highly improbable that any call in any sector, any market's going to deliver 80 % of the top 10 stocks three years in a row. But that's exactly what it did. And so because the model was demonstrating, just like it did during the era of the super major, that companies that subscribe to the value-based model, it was really just the same model, but with a different name, different marketing campaign. Then boards and management teams said, you know what, we probably should adopt this model as well. There were holdouts. Exxon was one, Marathon Petroleum was one, Equitable was one, Oxy was one, but they all had activist campaigns in their stock.

42:45And so I said, you know what, the industry, this is 2020, the industry had declined to 2 % of S &P 500, unfortunately, like I predicted. but I said, they've adopted the model and we're going to turn positive on the sector. Meaning I had this caveat emptor negative view on the sector and I just said, they're doing exactly what I want them to do. They have value propositions in business models that are competitive with that which you can get in the other parts of the market and it's time to turn positive. You may remember that was probably the peak of the ESG fundraising model. And at that time, a lot of investors were convinced that non-financial factors were going to drive valuation in the stock market, disrupting centuries of valuation and return, the valuation and returns connection.

43:30From 2017 to 2021,$438 billion was invested in ESG ETFs and funds, and$2 billion was invested in the oil and gas. How'd that work out? Yeah. So in the oil and gas business today, though, so we— Call John Kerry on that. We talk about the pledgers. You can look at this from the company side. You can also look at it from the investor side. Sure. We were talking about this at dinner last night. I call it the energy vigilantes. Like if John walks in or either of the Johns that we have today walk in and say, I'm going to raise my CapEx, the investors will sell their stock and they'll be down 5 % to 8 % that day.

44:08Okay. So let me finish my point. I want to get to that. Okay. So we were dead negative from 2015 to late 2020. And I said, it's time to upgrade the group. So November 9 rolls around. And I published a 60-page research report that said you should double or triple weight energy. And you go, well, who wants to read that? But I wanted everybody to know that I was turning positive. S &P Energy goes up 14 % the day I upgraded the group, which was flattering to me. I mean, I said, oh, my gosh. Would you believe that the day that I upgraded S &P Energy was the lowest point in S &P Energy versus S &P 500 in my 35-year career?

44:48And as analysts, we try to get close to the bottom. We never expect we're going to get it right to the day. And then I get a call about two months later from the guys at Crude Chronicles who do excellent work. And they said, Doug, this is a little bit creepy, but we're going to tell you anyway. They said, not only was that the lowest point in S &P Energy versus S &P 500 in your 35-year careers, It was the lowest point in S &P Energy versus S &P 500 since they started keeping records in 1911. And I go, well, that is a little creepy. It's more likely to get struck by lightning a few times in your life than that happening.

45:19But what I cared about was less so that my industry was positioned for prosperity. And they were positioned to succeed. And sure enough, we tripled off the bottom. It was the best performing group in the market, et cetera. Cole asks a really good question. Cole's question is, okay, so you were saying companies, Exxon, Chevron, BP, Shell, every company in S &P Energy, you have to manage your capital in a more effective way. The pledge never said they could not increase spending. The pledge only said that if you increase your spending, you have to demonstrate to investors how and over what period of time they're going to be rewarded.

45:57John Chrisman's a great example. when John when Apache comes up to speak today they're going to talk about Suriname Suriname is a superior project, it has quality returns they're an effective capital manager you want companies to be investing in projects in which they can demonstrate to the market that we should be investing in this because we're going to have superior returns, it's going to lead to better valuation and last time I checked that's what causes stocks to go up so there's a little bit of a caveat there and so it's okay for companies to spend money, but they have to demonstrate to the market, to investors, how they're going to be rewarded.

46:36And not over eight years, it's got to be transparent. What we find interesting about it is the idea that investors don't want actual investment in a way, right? When they're doing that, they're saying, listen, we're not going to go between and look and say, is this maintenance or is this growth, which obviously you're saying that's growth, capex, but should drive incrementally higher returns. But we find it interesting where they're just saying like don't invest at all in some respects, which back to the supply side should be a good environment as we move forward. So remember, and the reason that investors, big institutions around the world have that viewpoint is that my industry did go from 28 to 4 % of S &P 500 because of misguided capital allocation between 1980 and 1998.

47:18My industry did go from 16 % of S &P 500 in 2008 to 2 % by 2020 before we turned positive and upgraded the group. And a large part of the reason why was because the competitive structure was unfavorable, but companies kept investing anyway, and that led to lower returns and lower valuation. And the best companies said, we're going to back away from this until we have a better industry structure. When the industry structure gets better, then there's a great opportunity to renew your assets and to reinvest all new. But it's hard, but you have to know where you are in the cycle to some degree, And you just have to be really disciplined because the market penetrates whether or not companies are really investing in projects that are likely to generate returns above the cost of capital.

48:02And if they do, they get rewarded. And if they don't, they're going to get punished. And it's not about EBITDA either. You pointed out something we observed. Oil prices in 2008 and 2014 were similar, but returns went from 22 % to zero. Most people think that oil price determines profitability. But that's not how life plays out. It can. So there are other periods whereby when companies are investing in projects that earn returns below the cost of capital, if you think about it, the more they spend, the more their returns, valuation, and share prices are going down, and it's just a matter of time.

48:39And that was the hardest thing for me. The buy side was on board with me during the pledge. but a lot of the companies just, I think they just felt we have to spend and become larger. And I think the Wall Street Journal quoted me saying that the market does not care whether you're larger or smaller, it wants you to be more valuable. And that, you may say, well, that's a little cliche or whatever the phrase is for that. But I think that was the hardest learned lesson in my industry during the past 30 years. like your stock can go up just as much if your production's down five percent as if it's it's up five percent it's it's all about returns on capital and you know to cole's point a minute ago there's been a lot of emphasis on on ebbet die and as long as ebbet die connects to returns on capital then that's fine but if it doesn't it's a yellow flag and investor psychology in other words when everybody hates the industry and something positive is happening they just ignore Right.

49:36Randomly out of the book. Bill and I are reading your book. Your framework is a lot, how we think about things. And we appreciate that because if you're wondering, if you're sitting side by side with us as investors, we do have to ask ourselves, are we just lost our mind? Are we just crazy? And so reading Doug's book is a great way of thinking about a framework. It's randomly like a footnote in the financials. You start to chirp in your last chapter, I think you mentioned coal stocks. I mean, first off, are you that bad of a person to like speak positively about the coal business of all places.

50:07But I just say that because you looked at some of the fundamental factors that you think are there in place, and they're not dissimilar in a lot of respects to the oil and gas business. Maybe kind of give your view of that. So everybody in this room is in business to make money. Last time I checked, notwithstanding the fact that they are coal stocks. But seriously, when you think about the refining stocks in 2003, again, arguably the worst business in the global economy during the previous years. But for deep value investors, it's time to take a look. Because again, when it's a poor business, there's a likelihood that there's a lack of investment capital.

50:43And we may wake up and see supply falling. And if demand rises, then it could turn out to be decent stocks. Well, Japan had 34 nuclear reactors before Fukushima. I think they have seven. And they've gone now to electricity produced by coal. and the Germans are also heavy in coal electricity. Well, a lot of the cars in China are driven by coal, right? Yeah. Powered by coal. EVs, I mean. And Animal House, was it all over when the Germans bombed Pearl Harbor? So with that, I actually do want to open it up to audience questions. You know, I think we have a couple of mics floating around. Can I get a wave of mics?

51:25I think we got one back here and up front. Do we have any questions from the audience for Doug? Could we give him a mic real quick? Might be rolling over. Sure. Back to the supply. Back to the supply. So a few minutes ago I said during the last decade North America accommodated 100 % of global oil demand, which required us to increase production by 10 million barrels per day or about a million barrels per day per year. There's a lot of credible sources out there. whether I'm one or not anymore, I'm not sure, that believe that they were going to probably go negative with North American supply growth this year.

52:03John will be up here in a little while. He's obviously an old hand in the Permian. His company's involved there. But I think we're probably in the seventh inning with U.S. shale. Now on oil, on the gas side, there's tons of opportunity for us to increase U.S. shale gas production and convert that to LNG. And that's just because it's getting gas here in the Permian? Well, not necessarily that. It's just there's so much gas in the Marcellus, but we can't get it to the coast because we can't get pipelines permitted. But his question, I think, was about oil. And I do think that – but you're correct, Cole, that the gas-to-oil ratios are increasing.

52:43But we may have flat production growth in North America this year. And you may say, well, help us, give us some comparisons. Well, it's probably grown at 17 % three or four years ago. per year. That's strange. That's not what the guy voted for said. That's strange. Isn't something like 70 % of the production in a fracked well come out the first three or four years that it's in existence? Probably. Yeah. Sounds about right. Other questions?

53:11My question was around refining in the Trump tariffs. As I understand it, our light crude has to be blended with heavy crude from, say, Mexico and Canada. And so do we have alternative sources of heavy crude that won't be tariffed, or are we going to see price increases come through on that as we import tariffed heavy crude to blend for our refineries? So that's a good question as well, and it's a good question for the Synova CEO because they're in the refining business as well. And so the answer is yes. You can build, you know, blend light and heavy and make medium. But the most important point about the tariffs is that these refineries are configured to process particular types of crude, meaning it's unlikely that a refinery that processes heavy crude oil will just say, no big deal, we're not going to receive as much crude from Canada, and we'll just run light sweet through it.

54:10The metal energy and what have you just doesn't work that way. And so the way that I think about this is that if the oil price is$70 and there's another$7 that has to be paid here, the E &P companies in Canada are receiving prices that are well above variable costs. So they will keep supplying as long as they can have purchasers, which are primarily in the Midwest and in the Gulf Coast in their markets. Valero last week, which had seasonally weak earnings, just like Phillips 66 did, and just like Marathon's going to in the refining industry, is basically suggesting that our margins are pretty low today.

54:51They're low seasonally. If the price of oil increases by$3 or$4 per barrel because of this, then we may have margins that are below variable costs, which means that we're going to run less crude. We're going to get tired of losing money. Shut down capacity. Well, temporarily. Yeah, temporarily. Which is what commodity markets always do to alleviate low prices. So what they'll do is they will reduce runs. And you say, well, what's the point? Well, the point is that inventories will then decline and margins will rise. And that's how you get to higher gasoline prices. So the way I simplistically think about it is that the Canadian producers of the$7 per barrel, they may end up eating$4.50 per barrel.

55:32And the refiners will end up$2.50. And I know that's very precise, but you all would ask me to be more precise, so I was precise ahead of time. That's kind of the way I think about it. Probably two-thirds, one-third E &P companies in Canada, U.S. refiners. It does make a difference. This is a good time to be doing it if you're going to do it because it's a seasonally weak period of demand for gasoline. I mean, you don't want to do it during the summer driving season because if you do that and then you have a storm in the Gulf of Mexico, then, you know, could prices go up 40 or 50 cents at the pump?

56:02Sure. Easily. Next question in the back there. If you put your sell side hat on for just a minute and notwithstanding the stocks in the E &P and the integrated space that Smead Capital owns, would you give us your top picks for 2025? I don't think – I mean, I hate to chicken out because that's what I did for 30 years is demand people own my stocks because I thought they were going to be the best ones to work. But, you know, I don't know as a board member of a company I'm allowed to do that anymore. So I probably shouldn't. But what I would say. But what the hell, let's do it anyway.

56:42But what matters to me is that, you know, during the era of the super major and the pledge, we went through these phases trying to affect change. And what I cared about was that my companies prospered and that they had valuations. I'm sorry, they had value propositions and business models that were competitive and that the value that they were creating would be reflected in the stock market. And that's really the first box you have to check, really for any sector. But we're in a good place right now. The light's green, and it was red between 1980 and 1998, and it was red between 2014 and 2017 when the pledge started.

57:18But the light's green today. There's just going to be a lot of moving parts. So if you're not positive on the market, like Bill, there's another important point. In 2008, between 1998 and 2008, S &P 500 was flat. And that's a period in which energy went from 4 % to 14 % of S &P 500. And so you may say, well, we care about absolute performance too. That's relative. I understand that. But energy is in a position to prosper, especially if you believe the MAG-7 are overdone, which some of the gurus believe. As the son of an avid fisherman, we want to hear about your boat. His boat is called Can't Deny It, if you can believe that.

58:01And so talk a little bit about your fishing in the Gulf there. The Gulf of America. Yeah, the Gulf of America. Sorry, guys. Sorry. So can't deny it is a dual-meaning title, if that's such a phrase. And because I was this person on Wall Street for 30 years that when I had an idea, it was in print and it was time-stamped, you can't really deny what I said and when. It's just the way that Wall Street research works. And then there's lots of commentary or quotes from, you know, the Financial Times and Wall Street Journal. So anyway, you can't deny that the stories in the book happened. But in 2018, I had a boat.

58:50It was a 48-foot Viking called Can't Deny It. And my son and my – or myself and my captain and my son and four of his high school friends fish these big blue water tournaments on the Gulf Coast. There's a big one in Mississippi called the Mississippi Gulf Coast Billfish Classic. There's one in Alabama with a similar name. The best one's called the Emerald Coast Billfish Classic in Destin, Florida. And these are competitive. 92 boats,$2 million in the pot. Some of these boats are, I don't know, 100 feet long,$10,$15 million. They bring in these ringers from Costa Rica and Panama. I mean, this is real competition.

59:26But even though it was myself and my captain and my son and four of his high school friends, we thought that we knew what we were doing. So between what my captain learned from the captain speak and some of the data science guys that I talked to, we decided to go 140 miles south of Destin, Florida. If you think about that, we're due west of Tampa. We're in the middle of the Gulf of Mexico. And so we get there, and we go, oh, my gosh, we picked a great spot. And we were looking at screenshots of the Gulf of Mexico and we're analyzing it in a way that you analyze stocks Kind of thing look at squiggly lines and you say this is a virus But anyway, so we go we're 140 miles out in the Gulf of Mexico And we get there and we go oh my gosh this place is live.

1:00:06This is a fantastic spot We caught blue marlin a couple of Mahi Mahi some white marlin the first day didn't catch the one that we wanted Now the next day we wake up we go back to the same place right around three o 'clock in the afternoon a gigantic blue marlin jumps jumps into our spread we get him in the boat get her in the boat we head back to Destin we get to Destin Friday night scales are closed it's 10 o 'clock so we have to let our fish sit out in the hot Florida sun for 18 hours which probably cost us 10 percent of our body weight so anyway the next day we We weighed the fish. She's 699.2 pounds.

1:00:46Usually to win one of those tournaments, and the fish probably would have been 750 had it not had to sit out in the sun, but that is what it is. We got a comforter out of the state room and wrapped it around her and kept her wet. And so the other two boats, one was from Biloxi, one was from the British Virgin Islands, came in second and third place. And so we were the champions of the Emerald Coast Billfish Classic. The next day at the award ceremony, this would have been Sunday morning, we go to the award ceremony and, you know, they gave us a standing ovation because these are high school kids.

1:01:14So we're in the Marlin Magazine. We're in USA Today. We're in all these radio and TV stations across the southeast. And, you know, some of the guys said, it's like an amateur winning the Masters. Well, we go, no, no, no. We're not amateurs. And if we come and fish the next tournament, we may win it too. And, you know, these are cocky, you know, high school kids, right? So then, because they're now living legends, they get these summer jobs on boats and the Gulf Coast and the Bahamas and the Bermudas. I'm going, guys, where are you going? And so they kind of vanished on me. And they were doing all the work, and I didn't want to do it.

1:01:50I didn't know how to do it. So I ended up having to sell camp tonight. But we'll always be bound by the experience. It was fabulous. They're legends. But it's a lot like investing. When you think about being in a tournament like that and competing against the best, you have to be prepared. you have to pick your spot and you have to be ready when your number's called and you have to believe in yourself and you know investing takes courage so doug where can our listeners and the folks here in the audience follow you well outside of your form four filings at philips 66 that is yeah so we so we put posts periodically on linkedin or on my website which is dougterrison.com The book is available on Amazon and Barnes & Noble.

1:02:36It's done really well. It's been the top oil and gas and the top commodities book on Amazon, which has obviously surprised me a little bit. But anyway, I hope people like it, and I also hope that you find shades of your journey in mine. I've had a fabulous career, but a lot of people in this room have had fabulous careers. They're just a little bit different. but this is just such a investing in the whole industry is such fun and always keeps on your toes yeah uh we we really appreciate you being here with us this is just a blast and and um our tribe in attendance today at the smita investor oasis all have a copy i received a copy of doug's book that i have here in my hand so there should be your tables uh i already stole doug's signature in the book if you haven't done that i highly recommend um can't deny it our listeners online I need to go out and get a copy today or shameless plug, they could sign up for the 2026 Smead Investor Oasis early to get a copy of our next live podcast with someone like Doug.

1:03:38If you'd like to understand where the oil and gas business has come from, Doug's story will teach you that. It will also leave you with a framework for understanding what drives this industry over time. It's not much different than other industries to be downright honest. It comes down to the returns on capital, but the oil and gas industry like Doug has taught us has had trouble with that idea for a lot of its history. If you enjoyed this podcast, go to Apple, Spotify, YouTube, or wherever you listen to A Book With Legs. Give us a review. Tell others about the great authors like Doug Terrison that we have the opportunity to understand and study the world with and through.

1:04:10For our tribe, if you have a book you'd like to recommend, email podcast at smeadcap.com. That's podcast at smeadcap.com. You can also send your suggestions to us on X. Our handle is at SmeadCap. Thank you for joining us for a Book with Legs podcast. We look forward to the next episode. Big round of applause for Doug, everyone.

1:04:33Thank you for listening to A Book with Legs, a podcast brought to you by Smead Capital Management. The material provided in this podcast is for informational use only and should not be construed as investment advice. You can learn more about Smead Capital Management and its products at SmeadCap.com or by calling your financial advisor.