China Loves Net Zero But not for the Reasons You Think

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Daily Standup Top Stories

Highlights of the Podcast 

00:00 – Intro

01:21 – DAVID BLACKMON: On Energy, China Knows What The Rest Of Us Must Re-Learn

03:50 – China’s Energy Mix and Investment Made on the Backs of the Western Net Zero Movement

06:39 – Coal is Crowned King Again by President Trump: Montana’s Bull Mountains Mine Expansion and Investment Opportunities

13:11 – Markets Update

15:51 – Frac Count Update

15:55 – US Oil Drillers See Sharp Decline in Activity – How do investors respond?

20:46 – Internal Rate of Return Is Misleading You!

23:40 – Outro

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

Michael Tanner: [00:00:00] China loves net zero, but not for the reasons you think. Next on the Energy Newsbeat Daily Standup. What’s going on, everybody? [00:00:14][14.4]

Michael Tanner: [00:00:15] Welcome into the June 9th, 2025 edition of the Daily Energy Newsbeat Standup. Here are today’s top headlines. First up from our friend, David Blackman on energy. China knows what’s best for the rest of us must relearn it. Sticking with the China theme, China’s energy mix and investment made on the backs of Western net zero movement. Very interesting. Next up, make coal great again. As coal is crowned king again by President Trump, Montana’s bull mountain mine expansion and investment opportunities. Stu will then jump over to me. I will quickly cover what happened in the oil and gas markets. We saw crude absolutely be flying Thursday, Friday. We’ll quickly touch on rig counts and I think there’s some interesting things in there on what that means for you, the energy investor. We will lightly touch on the frat count spread And finally, a article I ran on our paid substack internal rate of return. Is misleading you and what that means about it. We will cover all that and a bag of chips. As always, I am Michael Tanner joined by Stuart Turley. Where do you wanna begin? [00:01:21][65.9]

Stuart Turley: [00:01:21] Hey, let’s start with our buddy David Blackmon. David Blackman on energy. China knows what the rest of us must relearn. Michael, this is huge. This article from David Blackmon is fantastic on the Daily Caller. We highly recommend following him there and on his substack. This is really important from Bloomberg. Bloomberg this week details the reality of energy transitioning isn’t happening and isn’t likely to happen anytime soon. This really is important when you consider even with all the narratives, not to mention all the trillions of dollars in green energy subsidies enacted by governments around the world in recent years, all those bad old fossil fuels still supply about 80% of the world’s primary energy, Michael. So what is power security? The word used by Bloomberg. Power security. I love that. I want to, you start using that. Turley’s law is alive and well, Michael. And this article further goes around China’s coal binge is no surprise to anyone’s taking an honest view of things. [00:02:31][69.9]

Michael Tanner: [00:02:31] No, it’s, you’ve been on this from the beginning. The fact that the more, you know, the more renewables we use, the more oil and gas and fossil fuels will be used. We love a good turleys. It truly is. And it goes to show that China, they don’t really want to play ball with us. They want to pay ball with. When it’s convenient for them and they will take advantage of us. I mean, I was listening to a podcast this morning on my run as we were talk, as they were talking about how You know, we’re the only country in the world that allows foreign nationals to buy land right next to our military bases and people say, well, we are America. It’s a free country. You should be able to. Yeah, but you can’t go do that in China. So China has rules for the but not for them. And so there it goes right in here with the energy stuff. You know they’re going to create themselves a stable grid clearly. I mean, they’re doing that with with the coal. That’s what you know, David Blackman bought this up, You know, they don’t seem to be throwing trillions at the green energy. Now, this is not to say that China is great. China is not great. We should be attempting to subvert them at every point. The issue is what they’re doing is attempting to subvert us. I mean, I wouldn’t be shocked if it came out and find out they’re funding all this green energy stuff. [00:03:50][78.2]

Stuart Turley: [00:03:50] Well, here’s that brings us to this next article. This next article, China’s energy mix and the investments made on the backs of Western net zero movement ties with this story and China’s energy landscape is a study in contrast. The world’s largest coal consumer and carbon emitter. Yet also the global leader in, in renewable energy development. How you ask? Cause they’ve absorbed all of the manufacturing. Their coal grid is 55% coal, 32% renewable, 13% hydro, 9% wind, 8% solar biomass and geothermal 2% natural gas, five nuclear five. But Michael, they have 10 nuclear plants already approved at $2.7 billion each. That’s nothing compared to what the U S is going to cost to build a nuclear reactor, but let’s go into some of this other stuff in here, funding the transition, when you go in and take a look at how did China fund its grid. And it’s on the backs of overcharging for what they manufacture and then what they sell. So the consumers in the EU, the UK, German, everywhere else are paying for China’s grid and nobody is talking about that. The client clean energy exports grew by 40% with revenues reaching 83 billion in 2024. With you Western net zero policies. This is huge. [00:05:35][104.7]

Michael Tanner: [00:05:36] Yeah. And that next sentence, Western net zero policies, including carbon tariffs and subsidies, have created a lucrative market for Chinese products who can profit off the green energy movement without participating in it. 55% of their grid is coal. And you think, and you, the American consumer, believe that a plastic straw is going to save the environment. Good luck. If coal is truly killing us, and we can have that discussion, I’m not against the idea that coal is pretty bad for the environment. It’s pretty clear. I think that it’s not great. There are other forms of electricity and power generation that are better a la natural gas, but we’re not doing a darn thing here to solve what’s now going on in China. [00:06:20][44.6]

Stuart Turley: [00:06:20] No, I think David Blackman’s article coupled with this article is a beautiful picture. David is hit it out of the park. We, I was also writing this article when I saw the daily caller article. And I’m like, Oh, David and I are on the same track today. Yeah, absolutely. Let’s go to this next story. I loved writing this story. And when we take a look at, you know, Michael, energy news beat is really at the intersection of finance and energy. And when we take a look at this one, coal is crowned king again by President Trump, Montana’s bull mountains, mine expansion and investment opportunities. I looked at what was going on in coal, the bull mountains coal expansion, a billion dollar bet on coal is operated by signal peak energy set to unlock Michael. 60 million tons of coal over the next coming years with much of it destined to listen to this export to Japan and South Korea. Hold it. Now that thought got me going on a, wait a minute, the Trump tariffs and chair and trade imbalances. This is tied to that. And Japan is going to be buying from the United States instead of Australia. This is huge And it’s significant president Trump’s coal revival is rooted in a broader push for energy dominance after years of decline. Now, this is where I also added in and took a look. Companies specializing in power generation equipment, emissions control, electrical infrastructure and grid information, and turbines. I’ve got stories and I’m reaching out to CEOs of all of these clean coal technology companies to learn more about it. Michael, this is huge because the failure of the Jap Japan bond market is having them reach out to us to work out trade deals. So. Coal is king again. It may only be a prince for a few years, but it’s a beautiful prince in waiting, man. This is cool. It’s all tied together. [00:08:34][133.2]

Michael Tanner: [00:08:34] Yeah, I think the interesting part that you noted at the beginning of this article is the fact that the majority of this coal is actually bound for Japan and South Korea, two countries which have no onshore domestic energy that they can tap from. They’re not blessed like the United States, they’re not bless like the Middle East and the Gulf States who just have a tremendous amount of energy underneath their feet. So it’s not like a lot of this Coal is necessarily going to be burnt here, but that then brings up the NIMBY argument. Not in my backyard. So people are much, people are fine with having this shipped overseas and used over there, as long as it’s not used here. I think you’re absolutely right. I think this is a temporary fix that I think more has to do with job creation in Montana than it does with this idea that I mean, coal is all of a sudden now in the United States going to come back. I mean I think the big, what, what this is showing is that there’s a need globally for energy. If coal is going to be the solution, well, that is going have a lot of implications. And the question is, why would we be shipping them coal when we should be shipping the LNG? The problem is, California can’t get themselves an LNG export terminal approved. Because I guarantee, if there was an export terminal in California that could handle LNG to Japan and South Korea, where we would be going and we wouldn’t even have to worry about coal. Now again I’m not saying coal is bad. I mean there’s downsides and trades off to everything. I’m very happy that there’s jobs moving into Montana but I find it interesting that the overall as you would say it’s all interconnected. There’s no story that’s out there in isolation and if you’re an investor and all of a sudden like well now do I need to shift into coal? Probably not, probably not, this is probably a short term move that is mainly designed to have some job growth, which is great, but I think the broader portion of where energy is going, it’s definitely, definitely natural gas and oil. [00:10:32][117.9]

Stuart Turley: [00:10:33] Can I make them, can I make a comment? I would say this is going to be highly critical to the Trump offset trade balance with Japan. And that is huge. So this could be a short-term boom for investors, not not long-term. [00:10:48][15.5]

Michael Tanner: [00:10:49] It very much so. So let’s jump over guys and quickly cover oil and gas finance before we do that quickly. Let’s pay the bills. As always, the news and analysis you have heard is brought to you by the world’s greatest website, energy newsbeat.com is doing the team. Tremendous job keeping that website up to speed. Hit the description below for all links to the timestamps links to the articles, check us out the energy news beat.substack.com. It’s a place where we’re writing a bunch of articles that you can’t get anywhere else. It’s really a mold. And as Stu said, that intersection between energy and finance, we’re breaking down all the top stories. Stu has done a great job of writing, really once a day, putting out an amalgamation of what’s going on and how you, the investor, needs to think about it. We’re starting to roll a bunch of custom paid for only content as well. So if you want the inside scoop, you want an inside track to Stu and I. You want our State of the Energy Market podcast that we do exclusively for paid energy subscribers. Go ahead and make a paid subscription there that really helps support the show. Also shout out to friends of the show, Reese Energy Consulting, probably the best folks when it comes to the midstream market. They work with everybody from three guys in a garage and an idea, all the way up to the largest publicly traded midstream companies and everything in between. They have hundreds and hundreds of clients. And they will get you these solutions and get you the progress that you need in whatever support role you need, whether you’re upstream and you need a marketing team, whether you are midstream and need support or need a potential deal that you’re about to do analyze, call up the folks at Reese Energy Consulting. We absolutely love them, guys. And finally, check us out, investinoil.energynewsbeat.com. We get asked all the time, hey, should I invest in energy? I’m thinking about investing in this oil syndication. We have a survey that says, is oil and gas right for your portfolio? Fill it out, and then based on the response, we will get you some information and point you in a direction that suits you because it’s always a good time to invest in energy. The question is, what part of energy? We just talked about coal today. Obviously, we’re big natural gas and oil bulls, so there’s a lot to focus in there. Invest in oil.energynewsbeat.com. Fill out that oil. Portfolio survey. We will get you an oil and gas investing e-book and point you in the direction that best suits you,. [00:13:10][141.5]

Michael Tanner: [00:13:11] Stu. But let’s quickly look at some top line headlines as we jump into finance, Stu, S&P 500 finishes above and closes above 6,000 for the first time since before Liberation Day, up 1.3 percentage points, NASDAQ up about a full percentage point, a two and 10 year olds will up 2.9 and 2.6 percentage points. So some really interesting stuff going on with both the bond markets and the stock markets in general, A dollar index up a half a percentage point, Bitcoin sitting just above $106,000. Crude oil up $64.58. That’s up two full percentage points or $1.22 day over day. Brent oil was only up two tenths of a percentage point. $66.52 natural gas was up 2.9 percentage points to $3.78 XOP, which is our EMP securities contract. That was up to $123.23. That is up 2,3 percentage points. I mean, pretty unbelievable. So really, the reason why oil jumped was a few things. One, There’s possibility that as these trade negotiations go with China, so will oil prices go. If we can get an agreement with them on where that trade, where those tariffs are going to land, that is going to continue to help push oil prices higher. We also did see the US job reports dropped unemployment at 4.2 percentage points, which is steady on a week-over-week basis. It’s. You know, senior analyst with Price Futures Group, Phil Flynn, this was his quote. He said in Reuters, I think the jobs report was Goldilocks. It was not too hot, not too cold, but just right to increase the chance for an interest rate cut by the federal reserve to give you guys an idea that 4.2% unemployment rate under the numbers. Employers added 133,000 jobs, which was also combined with some downward revisions, newsflash their downward revising jobs numbers. And that was 160,000 jobs gained average last year. And, you know, really the idea that this could lead to an interest rank cut, which obviously president Trump runs once, ironically could will boost demand for oil and gas. So it’s going to be very interesting to see what happens there. We obviously know that last week’s, the OPEC organizations decided to, to ramp up output by that previously announced 411,000. Barrels per day. They actually did reject the Saudi recommendation for a bigger output hike, which is again, which Reuters will claim is part of the strategy to win back share for Obeck. I don’t think so. I think it’s a lot more with currying favor towards the Trump administration that it has anything to do with market share. You know, the other things, interesting Stu that we saw, and I want to, I want a lightly touch on frat count spread. Those dropped by four, but I want to dig into rig count a little bit. You wrote a great article on energy news, but US oil drillers. She’s sharp decline in activity. How do investors respond. I mean, rig counts have absolutely plummeted over the last six months, really since Trump took office on the back of this lower oil prices. And I think what a lot of people are wondering is, okay, what does that mean? We can go ahead and throw up that chart here, courtesy of Sandstone Asset Management. You can see what the rig count kind of looks like today’s. I’m mean, you’re seeing really the places where there’s two places where there’s rigs. I love a good bar chart because it really shows you visually the spread. I Really? It’s only the Permian. I mean, yes, there’s some rigs There’s in the Eagleford in the Haynesville and there’s a couple in Anadarko There’s a few in the Gulf of Mexico. Really all the rigs are in the Permians So when you talk about where are where’s rig count going and where are break-even prices? It only makes sense to talk about the Permian, because it’s the only place where you can cut. It’s like, if you’re behind on your mortgage and you’re trying to come up with $3,000 in your budget. No, no, no. Just hear me out here. If you’re beyond on your payments, let’s say you spend $10,000 but you only make $5,000. And you sit down with a finance guy. And he says, OK, let’s figure out what to cut in the budget. Well, naturally, you better take your expenses and filter by largest to smallest, because it’s a lot easier to cut big things than it is to cut small things. You want to cut coffee out of your budget, your $3 a day coffee? Well, that ain’t going to do anything if you’re spending $1,000 a week on Pokemon Go, for example. Maybe cut out Pokemon Go and keep the coffee in there. So when we talk about rig count, it always makes sense. Let’s look at the biggest chunk here in the Permian. And we’ve seen the Permien continue to drop. And the reason, the reason for that is… Is those extremely high breakeven prices, okay? I mean, give you guys an idea in this article here that we wrote, on average, WTI prices need to be net above $75 a barrel to justify new drilling if you’re a public company. And that includes everything. That includes the capital expenditures. That includes that GNA cost that’s layered in there. That includes, the dividend base that a lot of these companies require to put out. Ristad Energy just put a great piece out of that month ago that we covered of the full breakeven cost is not just GNA plus capex plus infrastructure. G&A, capex, infrastructure, dividends, all of the new R&D that companies need to do, and that continues to raise it higher and higher and so that $65 barrel is not the thing. So the question is, how do you go about allocating capital in this space then if rig counts are going down, if all of a sudden the breakeven prices are a lot higher on some of these wells? Well, you have to then look elsewhere. And that’s where, ironically, what you’re seeing… Is you’re seeing the rig counts in other regions, slightly increase a little bit. We’ve seen the Gulf of Mexico, we’ve actually seen on a three month span, we’ve seen two rigs get added to the Gulf of Mexico. We’ve see M&A activity picked up and. Companies are looking specifically with you know, there’s a rumor out there that who born is looking to acquire Devin’s position Well, why well because who born knows how to drill specifically in that mid con area So all of the areas outside of the permeant are be are really taking a second look at Because they might be able to find certain areas where that break-even price is lower I think the other thing you’re going to see is you’re gonna to see a shift back to operational When prices go down, it’s a lot easier to optimize your current production than bring new production on. And with the balance sheets where they are for a lot of these public companies, they can focus not necessarily on as much drilling, but optimizing their production base. Now. What does that mean for prices? Well, if we’re not drilling, and that’s what we’re seeing with the rig count, prices are then going to fall, naturally. Because guess what? Demand is gonna eventually outstrip supply because supply will fall enough to where now demand is bigger and prices will begin to rebound. Well then guess what, rigs will pick back up and it’s this counter-cyclical cycle. And one of the things that I’m working on for Energy Newsbeat Substacks specifically, playing the cyclical nature of oil and gas, knowing where you are in a cycle, knowing where that cycle is going. And how do you play that cycle? If you are looking to allocate capital into this space, but I think it’s all fascinating. It’s going to be very interesting to see where we go forward. But you know, when we talk about rig counts, where’s rig counts going. Start and stop in the Permian. I want to touch on this final thing too. I just want to give a quick, quick plug for our substack. We’ve been writing a lot of great stuff. We appreciate all of our current subscribers there. We just released the first article that we’re going to be writing for our paid only subscribers, specifically in our research thread. And we dropped internal rate of return is misleading you. Why asset managers, operators, and capital allocators are focusing on the wrong underwriting metrics when choosing projects to add to their portfolio. This was a, I had a great time, Stu, writing this piece. And really what it is designed to think about is as you, if you are putting together a, a, uh, a fund in the oil and gas space, if you are put together a project that you’re going to be raising money from non-sophisticated oil and gas investors. This is designed to show you that you need to think long and hard about the projects that go in your portfolio and blindly assuming the IRR of a single well is going to perform adequately when layered into your portfolio is a terrible assumption. I’m just going to give you the shebang here, okay? On a simple portfolio where you have a 2% management fee, 20% carried interest, we call this the traditional two and 20, a single well IRR of 55% when layered into that portfolio, Stu, drops to 8.3 percentage points, a whopping 147% difference. Whereas the discounted multiple on invested capital, or what we call discounted moik, goes from 1.59 to 1, or a 45% difference. So what does that mean? Always, always, always underwrite your deals with multiple metrics. Do not blindly go off IRR. You probably want to consider discounted multiple uninvested capital, and you always, always, always want to net back your returns to you, the investor. And I’ll give you a little hint. If you don’t, if your sponsor that you’re thinking about investing in. DOESN’T? Tell you that and doesn’t tell you the returns net of fees? Woohoo, Stu, woohoo, Stu, you should be wary of them and you should always ask the questions what are the projects going to perform net of fees and net of your carry? Because if you don’t, you’re being played and let’s just be honest, let’s throw it out there. A lot of these oil and gas syndicators pray, and I’m going to use that word specifically, pray the fact that you don’t know anything about oil and gas and they use that to their advantage at your expense we don’t like that so we’re here to call it out it’s one of the reason we wrote why IRR is misleading and we will be writing much much more specifically for our paid subsext some of them might drop free But specifically, guys, check out theenergysme.substack.com. Time for my favorite part of the week. Stu, what are you worried about? I think I have an idea. [00:23:44][633.6]

Stuart Turley: [00:23:45] Oh, you bet. I think we are about to see some shenanigans out of California. Michael, one of our best stories on energy newsbeat.com or dot co energy newsbeat dot co was the story of the two of Alaska and California. Alaska is booming. They’re going to have LNG export. It’s going to be going all, it’s going be powering the state thousands of new jobs, just like the Aliesca pipeline, which I sold equipment to. And then you have California and now you have California with governor Newsom. The last time that a president activated a national guard was 1969. I believe we now have that president Trump activated the national guard. And I think that this is the precursor to a lot of federal involvement in a failed state. Yep. Absolutely guys. [00:24:40][54.8]

Michael Tanner: [00:24:41] We, it’s gonna be a crazy, crazy week. I’m sure a lot will drop. Guys, we appreciate you checking us out here on Energy Newsbeat, where we again, attempt to live at the intersection of energy and finance for Stuart Turley. I’m Michael Tanner. We’ll see you guys tomorrow. [00:24:41][0.0][1474.2]

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