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Greed corp engine7/25/2023 ![]() White is emphatically on the side of those he calls the “anti-monopolists,” contesting corporate authority, though he admits that most of them were racists who blamed immigrant Chinese workers for their precarious economic situation as much or more than they blamed the bosses. Unlike Veblen, White strongly identifies with the Indians who were dispossessed in part by the railroads and with the railroad workers who did the dirty and dangerous jobs for low pay and little freedom. ![]() The builders made a lot of money for themselves, but why did so many people give them so much capital? No rational need existed for decades, yet a railroad-building frenzy went on and on. ![]() But then why did so many investors, including shrewd Germans and Brits, throw money into these enterprises as well? Not until the 20 th century would there be enough white settlement and shipping traffic in the West to justify such investments. White explains that largesse as a result of political corruption. The Union Pacific alone raked in $43 million in interest subsidies on federal loans, and railroads east and west of the Mississippi River received more than 131 million acres in free land. Instead, they persuaded Congress to lay out enormous subsidies. The money that built those lines did not come from the railroad men themselves-Leland Stanford, Collis Huntington, Henry Villard, James J. White debunks the legend, arguing that the achievement was shoddy and chaotic and benefited the nation very little. After that came the Northern Pacific the Great Northern the Atchison, Topeka, and Santa Fe * and other lines that brought a transportation revolution to the West. There is a legend-making photo taken at Promontory Summit, Utah, May 1869, when the Union Pacific and Central Pacific joined tracks and reunited a war-divided people. Add the US refining and marketing business to that, and roughly half of Chevron’s operating cash flow will be Made in the USA.One legendary moment of greatness was the completion of the first transcontinental. By next year, about 40% of the company’s operating cash flow would come from pumping oil and gas from onshore and offshore fields in America, according to Citigroup Inc. In both, Chevron is now one of the top producers. In expanding beyond the Permian into a second US shale basin, Chevron is becoming even more American, quickly reversing its internationalization following the merger with Texaco about two decades ago, when it created mighty business units in far flung locations like Australia and Kazakhstan. The oil game today is all about the Permian and the DJ basins. Another basin, the Anadarko-Woodford in Oklahoma, has probably peaked too. Of the five major American shale basins, two – where the revolution largely originated - are already past their prime: production in the Bakken, in North Dakota, and the Eagle Ford, in southern Texas, has peaked. From a business perspective, the question isn’t why Chevron is buying, but why PDC is selling. Yet, there’s a strategic angle to it too. The purchase speaks volumes about the geographical and business shift ongoing in the US shale industry. The company expects the transactions to be accretive to its shareholders immediately, adding about $1 billion to its annual free cash flow, a number that may go up as the synergies could be significantly larger than what Chevron indicated. PDC wasn’t an exception, and Chevron has bought oil and gas reserves relatively cheap, paying about $7-a-barrel for the inventory. Certainly, Chevron appears to have taken advantage of the fact that any oil company heavily exposed to Colorado tends to trade at a discount due to investor worries about environmental regulatory risk. In its much better-known Permian location, it’s pumping about 800,000 barrels a day.On the surface, the deal may look more opportunistic than strategic. ![]() If the deal closes by year end, as expected, Chevron would pump about 360,000 barrels of oil equivalent a day there, quickly approaching 400,000 barrels a day by 2024. Dig deeper, however, and the scale of the new business is evident. Almost out of the blue, the DJ basin will become one of Chevron’s top-five assets in terms of production and free cash flow. Together, the two relatively small all-stock deals will transform Chevron into the largest oil and gas producer in the so-called Denver-Julesburg shale basin, which spreads across Colorado, Nebraska and Wyoming.In Chevron-speak, the DJ basin ads “another piston” to its already strong shale engine.The location may surprise, because Colorado tends to fall under the radar of Wall Street, and the state is seen as more risky from a regulatory point of view than Texas or even New Mexico. second, on Monday, it announced a $6.3 billion deal to buy PDC Energy Inc. First, it was the $5 billion deal in 2020 to acquire Noble Energy Inc. ![]()
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