00:00 Josh Lipton

Welcome to goodbye or goodbye. Our goal here helping you cut through the noise to navigate the best moves for your money. I’m here with Hennessy Energy transition Fund portfolio manager. That would be Ben Cook. Ben, welcome to the show. Let’s get you going here with your buy. We’re going to start there. Now this is name expand energy. It’s up about 7% this year, Ben. I would say most of the analyst on the street, Ben, about 90% who cover this name, they they tell their clients this is a buy. Can actually zero sell. So you’re in good company. Let’s run through the list of reasons, Ben. You say it is a smart place to commit capital. The first reason, geographically advantage, walk us through what you mean by that.

00:45 Ben Cook

Yeah, thanks for having me, Josh. You know, we believe that Expand Energy has an advantage set of assets located primarily in Northwest Louisiana. That’s in close proximity to where we see much of the growth in LNG export capacity over the next several years. They’ll benefit from higher production as well as better pricing because of that asset footprint.

01:08 Josh Lipton

All right, and second reason, benefiting from lower leverage.

01:14 Ben Cook

Yeah, Expand was formed last year with the merger between Chesapeake Energy and Southwestern Energy. And since that time, they’ve done a good job at reducing their leverage. They’re now embarking on a a production growth phase where they’re able to, because of that lower leverage, spend more money and that’s going to benefit them longer term.

01:37 Josh Lipton

Final reason you say this one’s a buy, Ben, significant free cash generation.

01:43 Ben Cook

Yeah, the company’s articulated a cash return profile to investors that’s extremely attractive to us. They pay a base dividend, they’re going to be paying down debt and they’re going to be paying a variable dividend and repurchasing shares as well.

02:00 Josh Lipton

So now you made a good case, Ben, but before folks all pile in, right? Remind people, what are some downside risks you think they need to consider?

02:10 Ben Cook

Yeah, we see some significant tailwinds to natural gas demand growth over the next several years. If there’s any kind of change to that picture, that could pose a risk to expand energy. Part of that would be a change to the LNG export outlook here from the United States or any kind of deviation from the strong trend we’re seeing from AI power demand for natural gas.

02:34 Josh Lipton

All right, so that’s your buy. Let’s move on to a name you would avoid, Ben. That would be Occidental petroleum. This one is down about 10% year to date. You still still want to avoid. Go through the reasons there. One, crude oil production waiting challenge.

02:51 Ben Cook

Yeah, as as as the market might well knows, this is a company that’s that’s grown through merger and has has grown its oil production by the acquisition of Anadarko petroleum in 2019, and again, Crown Rock last year. Companies waiting towards oil production is roughly 52%, which is higher than its peers, and we think that could create some headwinds given the headwinds to oil prices here over the next six months.

03:20 Josh Lipton

Second reason, significant leverage waiting.

03:25 Ben Cook

Yeah, as I mentioned, you know, the acquisitions that the company has undertaken over the last several years has has resulted in above average leverage. And as a result, they’re required to really the market wants to see them pay down that debt before they start returning significant significant cash levels to investors.

03:46 Josh Lipton

And third and final reason you say this wanted to avoid Berkshire Hathaway’s large stake.

03:52 Ben Cook

Yeah, the name Berkshire Hathaway is generally associated with a bullish outlook on a stock. Berkshire owns roughly 28% of the common shares and they own a significant preferential issue as well. Obviously a succession issue at Berkshire Hathaway, Greg Abel coming in from for Warren Buffett’s seat. Any kind of communication that would suggest less interest in the equity, we think would be an create an overhang on Occidental stock.

04:26 Josh Lipton

All right, now before you avoid it though, what would be the upside risk you got to think about?

04:34 Ben Cook

Yeah, great question. Obviously any any move that would support a higher move to the crude oil price would be beneficial for Occidental. So we we’ll be watching for any kind of change in crude fundamentals over the next six months.

04:48 Josh Lipton

All right, so there is a buy expand energy, avoid Occidental petroleum, Ben, great to see you. Thank you, sir.

04:54 Ben Cook

Thank you very much.