Postcards: Not All Heroes Wear Capes (The Case for Oil)

Barclays is the first major bank to break the grip of the ESG clown parade. It'll take a lot more political will - especially from banks linked to the European Union. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: Not All Heroes Wear Capes (The Case for Oil)]( Barclays is the first major bank to break the grip of the ESG clown parade. It'll take a lot more political will - especially from banks linked to the European Union. [Garrett {NAME}]( Apr 12   [READ IN APP](   2:45 pm Market Update: Well, we nailed that… If you are a member of the Republic Risk letter, you’ve been warned for the last two weeks about a likely selloff that fuels a larger capital exodus. Today, you received a note at 10:55 am with “RED” in the subject line. Since then, the S&P 500 has been falling in a pattern of lower highs and lower lows. We’ve warned about this since AFTER the March Fed meeting and again starting in April due to worries about tax season and general momentum in the market. Gold, other materials, and energy are increasing due to geopolitical tensions and ongoing expectations for monetary inflation. Now… how long will this last? That’s the BIG question. Interest rates are rising thanks to ugly inflation data. But recall we said that the money markets and bank reserves would face pressures in mid-April due to a drain around tax figures. Finally, you have the geopolitical tensions building, with an attack on Israel by Iran expected. We expect the markets to recover at the back end of this month, so it’s a better time to sell calls on existing positions as volatility rises. Remember, higher volatility brings higher option premia. We skipped a trade this week in Republic Insider ([but highlighted a great name in the energy midstream]( because of the lack of insider buying and the turn negative over the last week. As noted, it’s a good time to read our free Negative Signal update on this site. Make a list and hope that great companies start going on sale in the next 45 trading days…. --------------------------------------------------------------- Dear Fellow Expat: Today… my daughter went on a bizarre tangent this morning about “What’s real” and “What isn’t real.” She said that her mother is always taking a shower. That’s not true… but I said my wife better watch out, or she may become a Mermaid. “Mermaids aren’t real,” Amelia said. I found this an interesting spot to start a dialogue. My daughter believes in Santa, stays skeptical about the Easter Bunny, but remains highly convinced that our former dog, Dagny, leaves her lottery tickets in small treasure boxes around the yard (I don’t have the time to explain this one today…) “So… What is real…” I asked. “Sports teams. Baseball teams. Hockey teams. Football teams. Dogs. Soccer teams.” She was just listing things at this point. That’s when I got distracted by a message from Scott, our analyst at Republic Research. It was a highlight of a message about the energy sector. And I realized that something else is very real. Heroes. Especially the type that doesn’t wear capes. Viva la Barclays… Time for you to meet the work of the bank’s newest energy analyst. Barclays Brings the Sanity English bank Barclays is relevant again. The same week, the U.S. government jacked up rent, lease, and royalty costs on American oil and gas drilling on federal lands, and a British financial institution spoke common sense to power across Europe. Barclays has reinitiated coverage on oil and gas production from the top rope. The bank’s E&P team included a message to the ESG and anti-oil crowd. “Unapologetic oil and gas.” Barclays has restarted coverage of 18 producers and noted: “We believe the sector offers a better value proposition than ever before.” Yes. Oil and gas names are undervalued, as highlighted by data we’ve highlighted before. The numbers from [New York University’s Stern Business School highlight the valuations](. Have fun with this database, because it’s a doozy. Integrated oil and gas players are trading at 5.46 times current earnings. Production and exploration names at 10.8x current earnings. Compare that to the nosebleed figures in machinery and software. Oh… and the semiconductor space. Last month, NVIDIA (NVDA) [was worth more than $100 billion higher]( in market capitalization than the entire S&P 500 SPDR Energy Index. You know… the energy sector that allows us to live comfortably on this planet… More Than Value As Barclays analyst Betty Jiang noted, the E&P names ranging from Exxon Mobil (XOM) to Antero Resources (AN) have “strong balance sheets, low cash flow breakeven prices and significant free cash flow generation, with the group on pace to return some 20% of their market cap on average through dividends and buybacks over the next three years—at strip pricing.” These companies have acted with remarkable capital discipline over the last six years - avoiding the temptation to boost production. Instead, they’ve focused on paying off debt, increasing dividends, and buying back stock. That capital discipline has driven politicians insane as energy prices remain elevated. But there’s more. Jiang deserves a statue in the Florida Republic for speaking the truth. Or replace the Bull on Wall Street… put that thing on a truck and take it away. Jiang indirectly called out the politicians and the stupid people who don’t understand the plain truth: The world revolves around oil, not the other way around. Jiang is a Cornell graduate with a B.S. in Chemical Engineering. At the start of her career, she was part of the incredible Exploration and Production team at UBS, ranked in the Top 3 by Institutional Investor for years. She bolted from UBS’ ESG team to cover E&P at Barclays. [We’ll be watching her analysis regularly.]( The U.S. Secretary of the Energy Department, Jennifer Granholm, meanwhile, studied French and Political Science at Berkeley and then Harvard lawyer who focused on Civil Liberties before becoming a career politician. Take a guess whose opinion we value more here in the Republic? Focus on Production “The world needs oil and gas,” Jiang wrote, encouraging responsible production. She also noted that the U.S. and other nations are “significantly behind” on the Green transition. “We believe a reality check is necessary. One last thing: Jiang used the same arguments I’ve shared for the last 15 years. Natural gas is cheap. It is lower emissions. It has incredible bang for the buck. ([And we don’t need hundreds of square miles for power]( Natural gas is an ideal bridge fuel for any transition. However, people who don’t understand basic engineering still push for intermittent energy sources. Ultimately, I think that Jiang’s attitude will win… especially in the wake of SURGING national electricity costs that threaten everyone. We like the pipeline companies in the oil and gas space: the shortage names, the shippers, and the producers. And if you want updates on Equity Signals and access to our latest Natural Gas pick… [be sure to sign up for Republic Risk Letter](. [Upgrade to paid]( Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. 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