Marketplace - Cons-oil-idation

Episode Date: February 12, 2024

Diamondback Energy said today it will buy Endeavor Energy Resources, continuing the consolidation trend in the oil industry. In this episode, why oil and natural gas companies keep merging, especially in the Permian Basin region of Texas. Plus, robotaxi vandalization may represent resentment of Big Tech, lavish quinceañeras spawn a booming industry and some streaming services struggle to provide lag-free viewing.

Hello, listeners. If you're hearing this, I'm going to assume you're at least interested in money and understanding the economy and finances. And some of us want our kids to have that knowledge, too. Check out Million Bazillion, Marketplace's award-winning kids podcast that breaks down money to help dollars make more sense. A whole new season is out now. Million Bazillion is presented in partnership with Greenlight, the debit card and money app for kids and teens. Greenlight helps kids and teens learn to earn, save, spend wisely, and invest. You can learn more at greenlight.com slash million. And tune in to Million Bazillion wherever you find your favorite podcasts. Oil, banks, and Hallmark holiday movies. Honestly, what more does one need?

From American Public Media, this is Marketplace. In Los Angeles, I'm Kai Risdell. It is the 12th day of February today. Good as always to have you along, everybody. We begin today, this Monday, in West Texas, the Permian Basin, the most productive oil and gas field in the world's biggest oil and gas producing country, this one. With such productivity and on the theory that in many things, industrial and corporate, the bigger really is better, comes a drive to consolidate, which manifests today in the news that publicly held Diamondback Energy is going to buy its privately held competitor Endeavor Energy Partners in a deal worth, give or take, $26 billion. And if you're thinking you've been hearing of more than just a couple of

oil and gas mergers lately, you have. There was more than $100 billion worth of oil and gas mergers and acquisitions in this economy alone in the last year. Marketplace's Sabri Beneshour explains what this consolidation craze is all about. Not all oil wells are created equal. Some are easy, like squeezing water from a sponge. Others are closer to squeezing milk from a stone. Oil companies would much rather drill where it is cheap and easy. We know essentially where the good drilling locations are. And so there's been a scramble by companies to secure those. Andrew Dittmer is with Embarrassed Intelligence Research. He says the U.S. has

oil and gas for decades of drilling, but the good stuff, the easy stuff, the highest quality rock, you do start to draw that down the next five or so years. So there has been a rush to gobble those sites up by gobbling up the companies that already own them. Diamondback Energy, Dittmer estimates, has an easy oil drilling runway of about eight years. Buying Endeavor, he says, would get it about one more. Which doesn't sound like a lot, but in the context of the fact that it's hard to make big advancements actually is an appreciable bump. The other thing about oil drilling in the Permian is a lot of it is

horizontal and there is a limit to how far you can reach horizontally. Dittmer says it's around four miles, but a lot of drillers will hit a property line before they ever get that far. Josh Young is with oil and gas investment firm Bison Interests. These guys have a lot of land that's next to each other, and so it's going to allow them to drill longer laterals. But Young says there are a lot of reasons for the merger and acquisition frenzy that have little to do with oil. Executives' compensation these days is tied pretty heavily towards shareholder returns. It's in executives' interests to grow their companies. Shareholders like it too because

they get bigger dividends. And the more highly valued the company, the easier it is to buy more companies in the future. But the mosh pit of mergers is calming down. We're getting to the point where there's very few remaining buyout targets. In fact, Andrew Dittmer's company, Inveris Intelligence, predicts there will be no further Permian mega mergers this year. In New York, I'm Sabri Beneshour for Marketplace. Wall Street on this Monday, kind of a data-free day today, actually. That will be fixed, though. Tomorrow, the latest reading on consumer inflation will be upon us.

There was, though, still some trading done on Wall Street. Today, we'll have the details when we do the numbers. Shares of New York Community Bank fell another two-tenths of a percent today. That, though, is practically a win after the last couple of weeks the regional bank has had on fears that it was going to go the way the other regional banks went a little bit more than a year ago. South is the way they went. By May of last year, Signature Bank, Silicon Valley Bank, and First Republic had all failed. The immediate crisis didn't last all that long, thanks in large part to government intervention. But there had been concern, as happens with bank runs, that other banks might fail too if depositors lost confidence

in them. Marketplace's Justin Ho spent some time last year, around this time, on the phone, talking to business owners worried about the safety of their money. Here's an update. Just after Silicon Valley Bank failed last March, a lot of businesses were saying something like this. To be candid, our business has an account at a community bank, and we are going to be opening another account at Chase because it's too big to fail. That's Nate Tobik, the founder of Complete Bank Data, which sells market data to banks and needs banking services of its own. The problem, Tobik says, was that he was keeping more than $250,000 in his bank. That's more than the limit protected by the Federal Deposit Insurance Corporation. Tobik decided to spread out his

money among accounts at different banks, all with balances below the FDIC limit. We went from one to three accounts and figured that was enough to keep the risk to an acceptable level. But since then, Tobik says he's allowed his balances to rise above the FDIC-insured limit again. And even though he could technically lose money if one of his banks fails, Tobik says he sleeps just fine at night because the fears that people would run on their banks and cause more of them to fail

never materialized. Especially because even though deposits left in many of these cases, it wasn't a widespread thing. Most deposits stayed still once the dust settled. Also, Tobik says he realized that managing all of those bank accounts for his business is a ton of work. The biggest thing is actually managing the balances on those accounts and transferring money back and forth to try and make sure that they'd all be below the limit, and then also figuring out how to run payroll through those things. A lot of banks have come up with ways to deal with those headaches and still keep FDIC protection. Spiro Papadopoulos is the CEO of Schlau Restaurant Group, which operates seven businesses in several states. Last year, he signed up for a program his bank offers that automatically moves money to and from other banks if the balance exceeds the FDIC

limit. If we were building a new restaurant or something and had to write a check for an amount greater than that, we wouldn't even have to do anything. The bank would just automatically pull money back from another account. Papadopoulos says businesses like his need to hold on to a lot of cash. A restaurant's payroll, for instance, could be $70,000 a week. And even though the risk of an actual bank failure is a lot lower now, Papadopoulos says he's still going to keep his money protected because last year's banking crisis was a big reminder to stay vigilant. Because it's so easy for us to, like, hone in on our business, on restaurants and what's going on with this food price and that and the other thing. But, you know, we could be negligent if we're not aware of the bigger machinations in the economy. That said, a lot of other businesses weren't really all that shaken by the banking crisis.

I haven't even probably heard about it since the month it happened. That's Laurelyn Wilson, an accountant and owner of Lake Oswego Tax in Oregon. Wilson says none of her clients pulled any money out of their banks. One reason is that businesses that have a lot of cash on hand want to use it to make more. Like if you're sitting on money, let's make the money work for you. So it's more, is there mutual fund? Are there some bonds you can invest in? Wilson says most of the clients she works with, including retailers, healthcare providers, and marketing companies, tend to spend the cash they earn pretty quickly. And so most of their concerns right now are not with like,

will the banking system fail? It's, will I have enough money to cover my bills with the rising cost of everything? In other words, those businesses are a lot less likely to keep more than the FDIC's $250,000 limit in the bank. I'm Justin Ho for Marketplace. I saw an estimate earlier today that 126 million people tuned into the Super Bowl last night. I'm using tuned in liberally there. There was the CBS broadcast, as it were, some other platforms as well, including Paramount Plus, CBS's streaming service.

But that particular live stream left some longing for the good old days of cable as the feed was interrupted by some extended buffering episodes and some crashes. Consumer reported incidents on the website Down Detector. Said problems spiked during the pregame continued into the game itself. Paramount Plus says only a small number of users were affected. But when you're making big bets that live sports are going to pull in new subscribers, well, buffering ain't great. Marketplaces of NMR has more. During Usher's halftime performance yesterday,

a group of watchers, including TikTok user SagiLove08, were singing along when all of a sudden, ludicrous freezes and the dreaded spinning buffer wheel appears on the screen. Ross Benesch, an analyst with eMarketer, says those kinds of glitches are a real bummer. But the big streamers have come a long way on this front since, say, five years ago. You would see like a guy running and the screen would freeze and then like it reload and he's 30 yards down the field. Live streaming is not what these services were built for. And especially when millions of people are watching

at once, that puts pressure on their technical infrastructure, says Eric Sorensen with Parks Associates. You know, when you think about bandwidth and bit rate and acquiring enough data to provide a live stream. It's actually kind of a miracle there aren't more disruptions, Sorenson says. But Sundis Alfie with Oxford Economics says subscribers are expecting a seamless viewing experience. subscribers are expecting a seamless viewing experience. It's so easy to be frustrated these days with a service just not getting something right. Ross Benesch with eMarketer says streaming is a competitive market right now. The audience isn't going to follow and advertisers aren't going to want to pay to be in front of the audience if the viewing experience sucks.

He says streaming companies are hoping that sports and other live events will be the thing that makes their subscription a must-have. But one bad live stream can sour their viewers. I'm Savannah Marr for Marketplace. Whether you've cut the cord and are all in on streaming or are still somehow tied to the cable bundle, there are some programming mainstays we're all familiar with. For us today, the Hallmark movie.

Last year, Hallmark produced a whopping 42 movies and is releasing a slate of five of them for Valentine's Day this year. Danielle Smith is a contributing writer at New York Times Magazine where she wrote about Hallmark's enduring appeal. Danielle, thanks for coming on. Hey, thank you.

For those unfamiliar, describe your typical Hallmark movie, would you? I mean, it's amazing. I mean, I had so much fun reporting this piece. Every single Hallmark movie is not perfect, but they are very cozy and comforting, especially in these times. That's right. And cozy and comforting sometimes is what you need. I will say here, full disclosure, I have a friend of a friend who is a writer and does Hallmark movies. And, you know, every, you know, June, July-ish, he holds up and gets to writing.

And I say this, I ask this question with no offense to him or anybody else who makes their living writing for movies or anything else. Hallmark is a little bit formulaic, no? It is, but my argument is aren't rom-coms in general? Yeah, well, yeah. You know, there's the meet-cute. There's the we don't like each other very much

at the beginning. It's everyone else in the movie can see that we're perfect for each other but us. This is what happens and really it's been happening since the taming of the shrew in the 16th century. Man, we're going way back. The point

being though that Hallmark has kind of perfected it and they do it at scale, too. Oh, they do. It's so popular now. A Merry Scottish Christmas, which was the biggest movie of the recent Hallmark Christmas season, was actually the most popular movie on all ad-supported cable last year. Is it a little cookie cutter? It is. People are loving it, though.

Yeah, I mean, look, sometimes you just need something comfortable. Let me ask you this, though. Rom-coms on the big screen, they are out of favor. I mean, we're long past When Harry Met Sally. I know. It's kind of sad, actually. Some people say there aren't enough famous people left to carry an entire rom-com. How can that possibly be?

Everybody's famous for 15 minutes. That's what I'm saying. Where's Tom Cruise? Where's Jamie Foxx? What are we doing? Exactly. Exactly. A note of realism here.

Hallmark, although improving, these movies are very, very, very not diverse, shall we say. Oh, my God. Well, you know, that's a problem with Hollywood in general. It is definitely, you know, a problem at Hallmark, but they are making strides. There's a great film about a Chinese-American family at Christmas this year. great film about a Chinese American family at Christmas this year. There's a whole portion of Hallmark that is called Hallmark Mahogany, which centers African American stories. It really has been changing. Is it where it should be? It is not. But it is getting better. Right. And neither is Hollywood where it should be. So and look at many parts of the society. All right.

Last thing. And then I'll let you get back to work. You must have seen a gazillion of these things in the writing and researching and reporting of this piece. Do you ever get sick of them? What keeps you going back? You know, what keeps me going back is so many shows. The first scene is somebody getting strangled. A woman getting strangled.

I would rather go to like the most cookie cutter, Valentine's Day, high school reunion, where the two people that hated each other in their senior year finally get together. You can count on a happy ending at Hallmark. And I'm not saying that's reality, but sometimes in these days, it's what we need. Amen. Amen. Danielle Smith, she's a contributing writer at the New York Times Magazine. Danielle, thanks a lot. I appreciate your time. Thanks for having me. Coming up. I think like the age of 15 is really like when your family's like, oh, you're cool.

One hopes. Anyway, first, though, let's do the numbers. Dow Industrials up 125 today, about a third of 1% closed at 38,797. The Nasdaq subtracted 48 points, about three-tenths percent, 15,942. The S&P 500 gave up four points, just shy of a tenth percent. Finished at 5,021. Those streaming glitches. Marketplace's Vanna Mar was just telling us about sure didn't seem to hurt Paramount Global's shares.

Gained almost four percent today. Competitor Comcast, which owns NBC's Peacock, added almost one and three-tenths percent. Apple, which streams Major League Soccer, lost nine-tenths percent. Amazon.com, which is going to be getting its own slice of next year's NFL playoffs according to the Wall Street Journal, slipped 1.2 percent today. That oil merger that Spree Beneshor was telling us about was great

for shares in Diamondback Energy. Ticker symbol there, FANG. They gushed up just shy of 9.4 percent. The other party to the merger, Endeavor Energy, is, as I said, privately held. Bond prices were up. Yield on the 10-year T-note down 4.18%. You're listening to Marketplace. This is Marketplace. I'm Kai Risdahl. San Francisco is a tough city to drive in.

Those famously narrow and winding streets, the hills, plenty of traffic and a constant stream of pedestrians. For self-driving cars, there is another obstacle to be had in the city by the bay. People trying to set you on fire. On Saturday night, an unoccupied Waymo robo-taxi was set ablaze in San Francisco's Chinatown. Waymo, by the way, owned by Google. Wasn't the first time Waymo cars and other self-driving cars have been vandalized, which does maybe tell you something about what these cars are coming to symbolize, as Marketplace's Matt Levin reports. In 25 years of working on autonomous vehicle safety, Phil Koteman has never had the urge to smash a windshield or puncture a tire. There's no call for beating up on a poor robo-taxi. No matter how frustrated you

might be, and I know people are frustrated. Kotman is an engineering professor at Carnegie Mellon. He says a lot of that frustration comes from robo-taxis blocking emergency responders or clogging traffic, not to mention some high-profile accidents, situations that might have been prevented if these cars still had human backup drivers. The companies could have handled that a lot better, but they didn't. They could have put people back in the cars until they got it together and stopped making those kind of messes.

They chose not to. Waymo declined an interview request, and there aren't many details yet on what exactly provoked last weekend's vandalism. But these robo-taxi attacks have been happening for a while now, and not just in San Francisco. Douglas Rushkoff at Queens College CUNY says the autonomous vehicle is becoming a symbol of big tech. These cute little autonomous vehicles, you know, they're the vulnerable extension of the tech bro billionaires. According to a J.D. Power study, consumer confidence in self-driving cars has actually slipped since 2021. And while hopping in a robo taxi may come with some stigma now,

management professor Sam Ransbotham at Boston College doesn't think that stigma will last very long. I think you will get in whatever car is cheaper for you. And that's the way that this is going to play out. Because, he says, that's how economic history almost always plays out. I'm Matt Levin for Marketplace. If economic history is your thing or anything else that we cover on this program, we've got a podcast, you know. Marketplace.org is where you can get it,

or obviously you can follow us on the platform of your choice. It is just a fact of life and a fact of commerce that rites of passage for one family somehow inevitably become business opportunities for another. For a lot of Latino families, the quinceanera is an important traditional way to celebrate a young woman's 15th birthday. 15th birthday. There are, almost always, parties. Parties that often are extravagant and parties that sometimes become costly, very costly, with total price tags reaching and sometimes topping $20,000, which is where the business opportunity comes in. Marketplace's Elizabeth Troval took in a quinceañera expo in Houston. There's a lot going on at the spacious NRG Arena, a fashion runway for quinceanera dresses, hundreds of people milling about, mostly moms and daughters, checking out dozens of vendors advertising photography, invitations, dancers, DJs, hairstyling, and cake. Lorena Locke is passionate about her business Million Cakes, which has its own booth with free samples and colorful tiered cakes. They can run from $325 to $7,000. Prices

she's had to raise slightly because her costs increased. She designs the cakes to fit the quinceañera's theme. Like Beauty and the Beast or Cinderella. She got into the business for fun, making cakes for friends while her husband was studying in university. Then she went pro, much to her surprise. Now, cakes to her surprise. Now, cakes are her bread and butter, especially the ones for quinceañeras,

which make up roughly 70% of the cakes she sells. She employs 17 people and they make about 50 cakes a week. She says it's been a blessing. I walk over to the rows of folding chairs surrounding the quinceanera catwalk. Carla Auses is there with her daughter Eva. For her upcoming quinceanera, her mom gave her a choice between a big trip or a party. She chose the quince. This is a kind of experience not everyone gets to have and because it is a lot of money and it's like a one-time thing. Her mother Carla is trying to rein in spending. We initially wanted to stay close to $20,000 but if we see that you know this year a lot of things have changed prices are increasing and whatnot so I think it's going to be a little

over. And if you're already going over budget, you might as well spring for a party bus, right? There are several parked side by side at the expo. Luis Cavazos owns a fleet of party buses. He gives me a tour of one with black leather seats and colorful LED lights. Now, check how amazing this is, okay? You got this wide space just to make sure her dress is, you know, comfortable, not squashed in. He says families can really feel the pressure to go big on these celebrations.

Once the first girl gets started and everybody has, you know, a pleasant time and it's all nicely decorated, you know, they all want the same thing. Friends and family can help foot the bill as sponsors. They're called padrinos. But sometimes that financial support falls through. So therefore they're having to, you know, scratch up at the end to, you know, fulfill whatever or even eliminate the service. Like a party bus. As far as his own family, Cavazos doesn't want to think about how much he's spent on his daughter's recent quinceanera. I think I'll start counting at about $4,500.

And I don't mean $4,500. But you've got to spend big when you're in the quince business. His wife runs a dress shop. She's also here with their youngest daughter, Kaylee. She's 17 now and is modeling one of the dresses. It's this beautiful fuchsia sparkly dress, very glam. My mom designed bits of it. She remembers her quinceanera fondly,

especially when she wrote and sang a song to her dad. I think like the age of 15 is really like when your family's like, oh, you're cool. Like, oh. So I really think it's like, oh, you're cool. Like, oh. So I really think it's just, it's really about the family. Honestly. Family and an extravagant party and a big old bill. In Houston, I'm Elizabeth Troval for Marketplace. This final note on the way out today, which comes with the stipulation that, yes, in relationships, money is the root of many a disagreement.

Still, though, this seems a tad clinical. A new dating app for people with good credit scores. Score, it's called. Zero points for creativity. That's the score. Zero points for creativity. That's the score. Our daily production team includes Andy Corbin, Elise Hassan, Richard Cunningham, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sophia Terenzio. I'm Kyle Rizdal. We will see you tomorrow, everybody.

This is APM. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy. We have gotten this wrong in New York and all across the nation. And it's happening because of a podcast. I think your podcast has changed my life.

And I'm going to share this podcast with everyone I meet. Sold a Story investigates how teaching kids to read went wrong. New episodes of Sold a Story are available now.