"You’ll Be Timber Experts By The End Of This" Featuring Russell Hagen, Weyerhaeuser

C.O.B. Tuesday

Today we had the very exciting and interesting opportunity to visit with Russell Hagen, Senior Vice President and Chief Development Officer of Weyerhaeuser. Russell is responsible for Weyerhaeuser’s real estate, energy and natural resources businesses. Prior to his appointment as Chief Development Officer, Russell served as Chief Financial Officer from 2016 – 2021. Weyerhaeuser is the largest private owner of timberlands in North America, with 10.5 million acres in the US and 14 million acres licensed in Canada. In addition to timber products, Weyerhaeuser’s businesses include recreation, real estate, land and minerals, wood products, and climate solutions, including renewable energy development, forest carbon and CCS, and carbon credits. We were thrilled to visit with Russell.
In our discussion, Russell shares background on the history and scale of Weyerhaeuser and their business segments, Weyerhaeuser’s sustainable forestry practices, the company’s natural climate solutions business unit and ambitious growth targets for the business (aiming to grow the unit’s EBITDA to $100 million by 2025), and the current state and pricing of voluntary carbon credits. We discuss Weyerhaeuser’s strategy for maintaining high quality and credible carbon projects, the company’s partnership with Carbon Direct, Weyerhaeuser’s approach to acquisitions and the return profile for timber investments, forest management and sustainability, Russell’s approach to strategic development as a former CFO, the natural climate solutions market, and solar and carbon capture projects. We explore factors in determining good locations for forest carbon projects, balancing carbon projects with timber operations, growing recognition and demand for nature-based solutions, particularly among tech companies, technological innovations including the potential for innovations in bioengineering and alternative fuels derived from wood fiber, and the potential for significant innovation and capital investment in both nature-based and technological solutions for carbon management in the future. It was our pleasure to host Russell and we greatly enjoyed the discussion.
Mike Bradley kicked us off by highlighting that over the last 7-8 trading days, the 10-year bond yield has been stuck in a narrow trading range of ~4.25%. There could be some fireworks in the bond market on Friday when the all-important PCE Deflator report drops. WTI price rallied another $3/bbl this past week and pushed WTI price to ~$81/bbl. Global oil demand, rather than supply, seems to be the biggest catalyst to break WTI price out of its recent trading band of $70-$90/bbl. He noted natural gas price has pulled back to ~$2.75/M despite a hot weather outlook and that lower-48 dry gas production has rebounded from a recent trough below 99bcfpd back up to over 101bcfpd, which could prove problematic in reducing the huge current gas storage surplus. Broader markets continue posting new highs as they follow the direction of AI/Tech equities. Broader equities seem to be running on fumes/losing trading momentum as broader market indices (S&P 500 & Nasdaq) still remain technically overbought. Energy was by far the best-performing S&P sector this past week (+4%). He noted YTD performance of Timber Companies, S&P Timber REITs, S&P Materials Sector and REITs Index and rounded out the conversation by highlighting performance (YTD, 1yr, 2yr & 3yr) in EU Carbon Permits. Todd Scruggs flagged the recent bankruptcy of Zachry and subsequent layoffs, highlighting the scale and complexity of industrial projects and the inflationary forces involved (Zachry press release linked here).
Thanks again to Russell for joining us and a special thank you to the whole Weyerhaeuser team for their help with making this episode possible. Our b