Jack McClendon on Why It's So Hard to Create a New American Oil Boom

Thanks for listening to All Thoughts. Follow the show on Amazon Music for more future episodes or just ask Alexa. Play the podcast All Thoughts on Amazon Music. Bloomberg Audio Studios Podcasts, Radio, News Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weissenthal. And I'm Tracy Allaway. Tracy, recording this April 17th, big drop in the price of oil today on the headlines, the growing optimism that I think a ceasefire will endure. Anything could happen, but at least for now it appears an extreme left tail of scenario, like $200 oil, maybe off the table. Right, so I'm looking at a chart of WTI at the moment, which might be a little hint as to our guests that we're about to introduce, but it's currently at around $83 a barrel down. The hint was that you didn't say Brent. Right. Yeah, good. Yeah, come on. It's a good hint. Yeah, it's a good hint. Although everyone can already see the headline on this episode if they clicked into it. But anyway, it was at $112 per barrel in March or actually in early April. Yeah, time flies when you're talking energy crisis and more in the Gulf. You know, even sitting beside the war, however, there's a lot that I've been very curious about the future of the US oil industry. You know, we were in Alaska last summer and I think one of my favorite parts of that trip was talking to that company that made the steel tubing for oil companies up on a not the North Shore, the North, the North slope. Oh, yes. For the companies up there, the North Shore, like it's Long Island, you know, the way steel prices were going to affect the break even costs of American oil producers, etc. And the interaction of tariffs and higher services costs, etc. And we know that the US produces a lot of oil and it's an exporter, but prices went up and Chris Wright, he went down to zero week a few weeks ago. So please produce more. But as you've been writing about the ring counts, he been going the other direction. Yeah, that's right. So I mean, this was also part of the Iran story, this idea that well, if we get a huge hike in the price of oil is going to be above $100 per barrel, then maybe we'll see some sort of supply response in the US, right? But if you look at the Baker Hughes oil and gas rig count, it's basically been trending sideways. In fact, the last available data it fell by three. And then if you go out even further, you know, it's kind of been going sideways and slightly down since basically 2023. So, you know, we haven't seen a big supply side push. And that's despite a lot of noise coming out from the administration about unleashing US energy and, you know, letting everyone including your grandma drill. You know, getting it right is it's tricky for all administrations, right? Every in theory is like, oh, yeah, let's produce more. There was a lot of production actually under Biden, but the administration didn't want to brag about it. It's kind of weird. And then you have an administration that does want to brag about it. But they're like, oh, and now there's a bunch of Venezuelan oil on the market, unsanctioned. So what does that mean? Anyway, here's the other thing. I'm really into the show landman. And I really just want to talk. I knew this is just an excuse for you to talk about that. That's correct. And so I like, I got to talk to someone who's just out there independent, small oil and gas company because I have a million questions about how realistic that is. I like it every time we get to talk about Christmas trees of like valves and spools and casings. There you go. Well, we really do. So it's an episode for both of us. You really have written a lot about the technology of oil production. I wrote one article and then I think I revisited it, but it had one of my favorite headlines of all time. It wanted my favorite ever leads, but the headline was how actual nuts and bolts are bringing down oil prices. And it was about standardization of oil drilling parts. Well, we really do have the perfect guest. Someone who is who's in the game, actual got skin in the game in this space. You're going to be speaking with Jack McClendon, CEO of the small oil and gas company called CNN natural resources. Jack, I wanted to have you on the podcast long time. So thrilled you're here. What do you tell us what's CNN natural resource? What's your business? Yeah, sure. Thanks for having me on. Yeah, we're just a small independent oil and gas producer. So we operate in the part of the segment called the upstream oil and gas industry. So that is the actual direct companies that extract the hydrocarbons from the ground. And so yeah, our business is a little bit different from a lot of the publicly traded companies that you see, you know, the the exons and the diamond backs of the world who are drilling kind of horizontal shale wells. There are many more companies that are much more similar to mine, you know, the horizontal shale game has largely become the domain of very large companies. I mean, you've got to have scale to be able to operate in that space. We're a largely production company. So the way to kind of think about it is, you know, we buy assets that we think are undercapitalized under appreciated, try to squeeze a little bit more juice out of each producing well and try to get cost down. Although there are smaller companies that that do do drilling. And we have drilled in the past. And we will likely drill in the future as well too. Would you say you're essentially going around and buying a lot of of gas oil and gas assets that other companies may not be getting the best out of. Yeah, you could say that. I mean, a lot of just, as I said, a lot of the assets that we're targeting are just they're just too small. You know, they're rounding errors. So the balance sheets of these large shale companies who, you know, are buying tens of thousands or hundreds of thousands of acres and drilling, you know, two to three miles under the ground. So it's just we produce the same product is just a very different business. And I'm reading here. It says you started this business in 2018, which I find really fascinating because 2014 2015. So the first thing I noticed was that the oil bust was an incredibly painful moment in time, not just if you were in the energy specifically, but also if you were in other parts of the market, like the debt market at that time. And there was crazy stuff going on at that time, like people talking about oil going down to like zero. I remember being at a restaurant and well, eventually. But that was different. But I remember being in a restaurant and I was talking to my husband about oil prices at that time and some random guy like overheard us at the next table and got up and said like oils going down to, I think it was either 20 bucks a barrel or zero and then just like left the restaurant. That's very heavy. It was so weird anecdote. So it was like a very strange time in the oil market. And yet you decided to start a shale company at that time. What was the thinking? I'm going to correct you quickly and then go back into context. It's not a shale business. We operate largely conventional reservoirs. And so the way to kind of think about it is shale is what is called unconventional. So conventional reservoirs have much higher porosity and permeability. They are actually much better reservoirs from a geologic standpoint. And so for the most part, you'll hear it in the industry parlay. And so those were the easy reservoirs to find. If you go back to like the 1920s, 1930s, drilling a field like the eights field, which is kind of one of the most prolific oil fields, you know, you were basically drilling a thousand feet into the ground vertically. And so they were getting 400 to 500 to 1500 barrel a day IPs, you know, so it's just the conventional reservoirs or the better reservoirs. They've largely been exploited. So when you say shale company, that's the unconventional reservoirs. And so that was the rock that largely was thought it was impossible to produce. And so that was the fact that the poor is on a developed one, a horizontal development so much as a hydraulic fracturing it was because the poor space was just too small. And so there was no way to commercially extract oil and gas from those reservoirs. We knew the oil and gas was there. We just couldn't get it out. So that's just a little point of distinction there. That's the difference kind of between a conventional and an unconventional reservoir. So these are these are reservoirs that were found, you know, anywhere from 70 to 100 years ago and have largely been exploited, but still have plenty of oil and gas kind of left to offer. And so just a little bit of my background. So I kind of grew up in the shale space, you know, my father obviously played a pretty instrumental role in bringing shale gas and shale oil kind of to mainstream America, you know, remind you back in 2005 and it's kind of hard to believe now that there was a lot of fears that America was actually running out of oil and gas production. I think it was as early ago as 2004 2005 the country was only producing about 5 million barrels a day and you know importing anywhere between 19 to 20 million barrels a day. And so there was real concern and you know really really some fears of you know what happens if you know oil runs out and low and behold we have the shale revolution and one of my favorite quotes is never underestimate the ingenuity of the American well man. I just think it's a testament to the tenacity and grit and intelligence of our industry largely maligned by a pretty big segment to the company that do not realize how much this is transformed our country, you know, we've gone from producing, you know, anywhere from 5 million barrels a day now we are now we're the largest oil and gas producer in the world. And so you know it's just it's kind of gone unnoticed and so I wanted to kind of get out and bring that up. Sorry I'm so used to saying shale as a by word for you as oil production like I get the distinction between the horizontal drilling and what you guys are doing. And that's fair and the majority of oil production in America right now is from shale. Yeah you know the largest conventional fields are largely in Alaska you guys. as just mentioned in the North Slow, most of Alaska's conventional. But the Permian Basin and a lot of the other big shale basins, I mean, that's where the majority of the oil comes from these days. I mean, out of that 13 million barrels a day, at least five comes from the Permian and that's mostly from shale. So I think it's fine to kind of conflate the two, to be honest. That's where most of the capital goes and that's where most of the oil comes from. - You mentioned growing up in the business and your dad's role in making America the energy of being with that is today, your dad being Aubrey McClendon. One of the things I know about him was that he is a famed map, a huge map collector and I kind of feel like all oil and gas people are getting really into maps and you tilt your camera and I was like, "Is that map to your right shoulder?" It looks like Texas, a map of Texas. Is that one of your dads, part of your dad's map collections? - No, it's not part of his collection but I did inherit a lot of his loves and one of them is I also love maps. That's an old map of Texas and Oklahoma which was Indian territory back in the 1800s. I think that map was made in like 1870. So I do really appreciate vintage maps and so yeah, you'll see that in the back. And that may be particular to the oil and gas industry as well too because any good oil man, if you all can do a conference room, they're gonna have maps up 'cause you kind of gotta know where you're drilling and what acreage you own and as you said, there's probably a lot of that in Landman. - Well, I noticed you don't have a poster of Billy Bob Thornton in your office. However, I asked this question on behalf of Joe, how accurate is Landman in your experience? - I mean, there are certain aspects obviously that famous windmill speech that he makes is how a lot of people in our industry feel and I believe it's the truth. A lot of it is obviously there's plenty of exaggerations. I don't know too many landmen who have had a gun held to their head from a member of the cartel. There's a lot of truth in the industry. - And then going into business with the financial backer of the cartel, it's a little weird anyway. - Yeah, wait, no spoilers. - Sorry, sorry. - Yeah, sorry. - I'm an imperfect narrator for that as well too because I will admit that I have not watched a show maybe as religiously as other people that have watched it. - Actually, there's another element of Landman that this isn't gonna be a little bit far afield from oil business questions, but this is something I've heard. And feel free to answer this is with any level of tact or delicacy. I have heard that a lot of the wives of the oil industry don't like it as much as the men do because of the high degree of sexualization of both Billy Bob Thornton's wife and daughter in the show. And that the men think, I was like a great show. It shows our industry and that actually there's some gender, families in the patch and the space in the industry. There's some gender divide on the show. Does that resonate? - You know, as I said, my wife watched two episodes with me and she said, this is ridiculous. - Okay, well then I'm, okay, okay, well there you go. - So maybe that's, maybe I'll just leave it at that. (upbeat music) - Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. - And I'm Caroline Hepgett in London with the hosts of the Blue Bag Day Break Europe podcast. - We're up early every week day keeping an eye on what's happening across Europe and around the world. - We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. - From Brussels, I'm following the politics, policy and the people, shaping the European Union right now. - And from London, I'm looking at what all that means for markets, money and the wider economy. - We've got reporters across Europe and around the globe feeding in as stories break. - So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. - It's smart, calm and to the point. - And it fits into your morning. - You can find new episodes of the Blue Bag Day Break Europe podcast by 7 a.m. in Dublin or 8 a.m. in Brussels, Berlin and Paris. - On Apple, Spotify, YouTube or wherever you get your podcasts. - What separates good leaders from transformational ones? I'm Jessica Chen and in season two of "Leading by Example" we'll sit down with executives like Grace Chen of "Burdy Gray" to find out. - It's important to understand where you spike but also really acknowledge where you don't and find people who can fill those gaps. Listen to "Leading by Example," executives making an impact on the iHeartRadio app, Apple Podcast, or wherever you get your podcasts. - Okay, let's talk a little bit of economics even before the recent war in Iran wanted to talk because I am very interested in just like what's happening to your costs and break events, particularly in the wake of tariffs and the wake of ongoing services inflation in the wake of a big dash for commodities because every, there's so much building data centers, et cetera. Talk to us a little bit about the evolution of your costs as a business in the last several years but also maybe in the last year. - Yeah, no, sure. I'm happy to do that and I won't tell you anything that you guys maybe haven't already heard but costs in general, our costs are kind of allocated into two buckets, right? You have your operating expenses which are kind of fixed in variable costs. Those are the day to day costs to run a business, whether that's paying your people who are actually out in the field, the cost of chemicals to treat your wells, the prices you pay for electricity to power your wells and then you have your capital costs which are largely tangible and intangible goods, right? So the day rate of cost to drill, the amount you pay to drill a well, the amount you actually pay for the physical tools and equipment that actually go into a well. That's steel and metal and other human labor. What I will tell you is since COVID and this is, as I said, not unique to us, is cost have gone up, personnel costs are up and back in the day in COVID, the salaries went up across the board and as well as I do, once you raise salaries, it's very hard to get those back down. Chemical costs have gone up, utility costs have gone up. So costs in general are up, I would say about 25% to 30% for my business really over the last five years and as I said, a lot of that is power, a lot of that is chemicals. The biggest chunk of that is people, people cost have gone up across the industry. Capital costs tariffs obviously, have had a material impact on the price of steel and the price of aluminum. Those have largely gone up. What I will tell you though is recently and this is kind of a couple of months, there has been some slack in those markets and a big part of that is kind of do what you identified with the Baker Hughes-Rick count, you know, with prices kind of hovering in the 50s and 60s with those rising costs. The industry is just not as profitable as it once was at 50 or 60. And so, you know, there was really starting to be some slack and the rig market, some slack in the frack fleet market and you know, quite frankly, all of that leads to a little bit of pricing deflation. And so generally speaking, I would say, costs are up across the board, 20 to 30%, even though recently, especially on the capital side, you've seen a little bit of a decrease and that is largely due to the fact that the price has been depressed. And the industry was just not as profitable as it once was. And the other thing I'll mention is well too, and this is largely due to efforts of companies like Kimmerich. And when I say companies, I mean investors. You know, one of the big reasons you had such prolific shale growth, especially in, you know, the 2010s, was compensation, executive compensation was tied to production growth. And so you had a lot of incentives across the board to kind of grow production at all costs. And you know, due to, as I said, you know, there have been a couple of shale busts, right? There was this, that shale bust in 15 and 16. And then you have another, you know, you've had another kind of shale bust when COVID came along. And along those, they've reformed a lot of those incentives. And so, you know, companies are increasingly rewarded for rewarding shareholders versus focusing on kind of production growth. - You know, this is exactly what I wanted to talk to you about, which is the capital situation because one of the running themes on our show is this idea that you can have these boom bust cycles that then like leave a lasting scar on the industry. And I think coming out of the bursting of the shale bubble, a lot of energy producers suddenly decided, like, well, we're not just gonna spend a bunch of money to expand, we're actually gonna pay dividends to our investors. And it's all about capital discipline and being very, very certain about what we're actually spending on and the return for investors. What's the capital situation been like for you? Just, you know, going from 2018 to now, how hard was it to actually convince investors that, you know, you're not just gonna spend money in an unconstrained way? And how difficult was it for you to compete with some potentially bigger players who are also fighting for that same capital? - I'll break that into two parts, you know, I think the industry has had to do a lot of explaining. And a lot of, you know, there's been a lot of kind of show me, you know, investors wanting to see that there actually is going to be some capital discipline. And I think if you look really over the last two years, you know, we've seen that. And I think even with this latest price spike, you've seen that. I mean, people aren't rushing to deploy rigs. I mean, you've had one large company, and resources, because one of the largest private companies say they're gonna increase capex. But I think for the most part, you know, that the industry has been able to attract more capital by actually showing that discipline. And I think part of that too is just, you've had a lot of consolidation in the industry, right? I mean, when I was first getting started as an investment banking analyst in 2008, I don't have the number off the top of my head, but it felt like there were 70 to 80 kind of publicly traded companies. And now, I mean, with all due respect to lots of kind of mid-sized companies, there's really only about 10 companies that actually matter, right? You know, as far as the publicly traded companies go, and the two biggest ones who have really kind of started to corral the market for Shailor Exxon and Chevron, right? And those guys have massive, massive balance sheet, integrated operations. And yeah, I mean, you just, you know, it's just a little bit kind of different. There's still a cowboy element to it, for sure. But yeah, I mean, I think in order to attract capital, the industry has had to show discipline and I think we've done a pretty good job of doing that over the last two years. I mean, the, you know, kind of the days of a million barrel a day, growth year over year are largely gone. And some of that is due to geologic constraints, although, you know, I will reiterate kind of never, never underestimate the ingenuity of the American Wellman. But I think another part of that is, is obviously due to capital and, you know, you've had, you know, two, three crashes really in the last 10 years. And so, you know, investors, investors really are kind of holding everybody's speed to the fire on that. And then I'll say is kind of, as it pertains to my business, you know, as I said, there are a lot more of my businesses than there are of large Shail companies. I mean, this is the business of operating older oil and gas assets, right? And like any business, when things are older, they break more. And so, yeah, no, it's, it's difficult and it's challenging, right? Because you have a lot of volatility and, you know, you're dealing with wells where operating costs are higher, right? We move more water. So I need more electricity for, per well, to move more water. Our operating costs are higher. And so you've got to do a little bit more convincing on that cost discipline side when you're raising capital. But what I would tell you is that the pockets of capital that I'm kind of talking to are going to be very different than the pockets of capital that the larger Shail guys are talking to. I mean, for the most part, the large Shail companies are either publicly traded. And so you're talking to, you know, people that invest in public markets or they're large institutionally backed private equity capital, right? So you have really kind of four to five large energy private equity backed firms, most of them in Houston and Dallas. And you know, they wield large sums of capital kind of in the nine, you know, nine to ten figure range. And for the most part, that's who's backing Shail. You've got to have scale now. It's a consolidation game. And yeah, there's just, it's different from my company where we're largely kind of talking to family offices, alternative investment vehicles, you know, people who are looking to put smaller quantum of capital to work, you know, to kind of find a unique way to put play the space. Because really for these larger companies, it's, it's the permeant of us, right? I mean, that's, that's really, that's really kind of the story. This is great because this allows me to bring it back to Landman again, which is that the Cooper character, it seems like his business is kind of like yours. He went around and there are these old wells that were producing something and he's like, there's probably more potential. And then this was like the key thing. He went out to some like small hard money lender that was based out of Fort Worth and they gave him a good, he gave him a good deal. And then the dad said, there's no way the deal could be that good because I know how financing works. So like there must be a catcher and there was, I won't get into it. But talk to us about the structure. Okay. So here it sounds like you're kind of like Cooper because you're finding these wells for that other people may like be ready to discard. You're going to non PE scale finance here. So though his was again, I related to organized crime. I assume yours isn't. So talk to us about some of the terms of like what is it? Like is it like you're going to pay me back 100% plus 20% interest until we break even. Like how are some of these financing deal structure? Yeah, no, that's a really good point. I mean, you know, largely what I found is on the equity side. It is similar to traditional private equity right where, but you know, money is invested and then you get money back plus a rate of return and then you have a waterfall structure which is based on return to capital. And that can be either kind of based on an IRR basis or on an ROI kind of absolute return of capital. I've seen it both ways, but that's kind of largely the way that the equity capital works. So it is actually pretty similar to a lot of the traditional private equity firms. You know, on the debt side, it's largely bank capital because you know, it's kind of 7 to 8%. And then there are, you know, some of these alternative firms. And so these are more kind of structured credit providers. Yeah. And so that's a really good point. So for every barrel that gets produced, maybe they get a little bit of percentage. And this is obviously after they've gotten their money back. And so the way the capital works for my business is not all that dissimilar to the way capital works for for larger businesses. As I said, it's just there's there's a couple of different ways to play the space. But traditional equity investment is pretty similar to, you know, even the larger kind of private equity investments. So when the price of oil starts going up, say we're talking late March, early April and WTI is climbing. Above 100 and then it hits 112. What actually happens in your business? And what are the thoughts that are going through your mind? Like do you suddenly get a bunch of calls from potential investors going, you know, we're interested in putting some money in the company? Do you start thinking like, well, I need to expand production and maybe ramp up CapEx. Or are you just, you know, sitting there waiting to see what actually pans out with the Gulf situation? How does it? How does it all work? That's, you know, those are really good questions. I mean, obviously there's there's excitement, right? Because, because, you know, the when it would a price, when a price kind of jumps like this, obviously your costs don't rise in tandem. So that is that is profit on top of everything. What I will tell you in 2022, you know, last time we had elevated pricing, you know, we're and that was largely kind of based on the fear of supply loss that never really happened, right? The, you know, everybody was saying that the, you know, Russians were going to lose three to four million barrels a day and, you know, we need, so we need prices to kind of stimulate more production. So everybody got really excited. Everybody got to work, you know, I will say for a company our size, we authorized a fairly large capital plan. Because as I said, I thought that there was some bite to that bark. And what happened was, is I authorized everything in May of June when oil was at 100. And then first production came on in August and September when oil was back to 70. So, you know, you have this, you have this big rise in prices, a commissar at rise and costs obviously not as high, but costs go up. I mean, oil and gas service providers aren't dumb, right? You know, they see the price of oil go up 20 to 25%. They're like, well, you know, your day rate on a workover rig because just gone from 175 to 270. Oh, it's interesting. Yeah. I mean, it's the service, the service companies aren't dumb. The chemical providers might say, well, you know, this is your, you know, this chemical you use is ziling, you use is going to go from, you know, 20 bucks a gallon to 40 bucks a gallon. Because I know you can pay it because I, I have a computer and I can see what the price of oil is as well too. So, you know, what I would tell you and these are in conversations I've had with a lot of other people in our industry. I talk to people on the industry on a day-to-day basis. I have friends at work for large operators, large capital providers, I have friends on the service side, friends in private equity, friends in investment banking. I mean, I think everybody is very cautious right now. You have a president right now who on the record, you know, he's a big part of that. He's a big part of that. I think the industry is largely kind of in a weight and sea mode. So when oil prices collapse, like they seem to be doing today, do the oil service providers start cutting their prices as quickly as they raise them? They do not. They do not. Yeah. They do not. You know, you were starting to see some fuel surcharges on some of those bills. I would imagine if you settle back in the 70s or 80s, those are going to kind of go away. And part of that is kind of tongue and cheek, right? The operators always play a game with the service companies. So it remains to be seen as I said, there's just so much noise in the market right now. I mean, I can't remember the last time we ever lived in an era where a tweet could move the price of the world's most liquid commodity, 5% to 10%. And so yeah, I mean, I think everybody's just kind of waiting to see where this will settle out. It's effectively impossible to plan a business with a price as volatile as it is right now. A live short daily news podcast focused on just one story. But right now, you probably need more. On up first from NPR, we bring you three of the world's top headlines every day in under 15 minutes. There's no one's story can capture all that's happening in this big, crazy world of ours on any given morning. Listen now to the first podcast from NPR. What separates good leaders from transformational ones? I'm Jessica Chen and in season two of Leading By Example, we'll sit down with executives like Grace Chen of Birdie Gray to find out. It's important to understand where you spike, but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading By Example, executives making an impact on the iHeart Radio app Apple podcast or wherever you get your podcasts. Getting burnt seems like just as much as part of the industry is making a lot of money. And you get it on both sides in 2015 and then you mentioned the sort of the fizzling out of the post Ukraine boom, etc. and then here, of course, the war on the spike was too short to make any big plans. But like, and then you have this president who clearly wants more production, but a drill, drill, drill, but also on slower prices and these things are in conflict. Could you see a set of conditions again in which there's real meaningful expansion of US drilling or etc. Or what would it have to take? We're going to really ramp this out again. Yeah, that's a good question. I mean, as I said, I hate to use round numbers, but that's just kind of the world we live in. And I think if you saw a sustainable price above 80 over a prolonged period, maybe call it four to eight months, I think you would see a supply response because there's, you know, there are a lot of, there are a lot of shale wells that work at 80 to 90 that don't work at 50 to 60. Depending on who you talk to in the Permian, you know, there's kind of anywhere between five to 10 years of what you would call core inventory left or economic inventory left. That obviously, that's obviously largely a function of price as well as geology. So a higher for longer price, I think you would, you would, you would see a production response from the industry now. You know, do I think we're going to go back to the days of growing one to one and a half barrels a day? You know, I don't, I don't think so. But could you see, you know, could you see an, an era where, you know, we're growing 300 to 500,000 barrels a day? Yeah, I mean, I think that that's possible. But as I said, you would, you would need to see prices settle above 80 for a prolonged period of time, I think to kind of see a supply response because even shale, which, you know, is kind of called a, that's a short, short supply response, right? That's about a short barrel. The short barrels. Yeah, it's about as short as it gets, right? I mean, you've got, you know, but it's still, it's still a four to six month response time, right? So a lot of the, a lot of the rigs that you saw kind of start to roll off, you know, that's a, that's a six month lag, right? So you had the liberation day tariffs where prices kind of cratered from, you know, 70 to 57. And then we've kind of bumped around the 50s or 60s, but even decisions that get made in, you know, got made in April and May of 2025, you didn't really start to see the rig and supply response for four to six months later. And that's largely, that's largely kind of the turnaround time here. And so, you know, as I said, I think, I think you would need to see higher for longer prices for the next couple of months for us to see a meaningful supply response. But I mean, and, and, and this is kind of the consensus view of, you know, most of the sell side oil research analysts that I follow as well too. But, you know, the, as I said, never underestimate the, the, the, the, the American oil man. Well, setting price aside, one of the things the administration said it wanted to do to get, you know, oil pumping is basically streamlining, you know, environmental review and the leasing process, basically liberalizing the regulatory environment around starting new drilling projects. And I know you're not necessarily specialized in exploring, you know, for new locations. But do you get a sense from your colleagues elsewhere in the industry about whether or not that liberalization has actually, you know, translated into people drilling more or thinking about drilling more? Yeah, you know, I mean, I, I think it certainly helped. But for sure, I mean, price is a exponentially higher dictator, you know, of whether or not somebody kind of chooses to drill. Yeah, I mean, as I would say, you know, there's, there's the old saying in the oil patch that, you know, Democrats are actually very good for the oil and gas industry and, you know, but their anti industry. And that republic, the Republicans are very pro industry, but they're actually very bad for the industry. You know, and that's kind of largely a function of some of those regulations. So I'm not going to say that they don't play an impact. I mean, there's certainly is an impact. And you know, to the extent that the, you know, the Biden administration or some of the other democratic administrations have been more punitive to the industry, you know, that does effectuate a supply response, you know, that is largely beneficial to the industry. But, but I would tell you, I think for the most part, you know, those regulations matter, but they don't matter nearly as much as what the price of the commodity is and then the cost of the impenses. I mean, that's ultimately, as I said, that's an exponentially more important factor than, you know, whether or not there's 50,000 acres in Wyoming that are now open for drilling that weren't open for drilling. Tell us a little bit more about the politics. You know, as you mentioned, we've observed everyone's observed this than actually the oil industry. It's like, why they hate Democrats so much? It always seems like the price of oil is high under them, et cetera. I understand publicly who's on whose side because of a very, you know, very suffolations, et cetera. But like, how do people talk about politics at a country club in Fort Worth or Midland? There's something like that. Well, I don't belong any country clubs in Fort Worth. But I, yeah, not all, I'm going to try to use my words carefully. Of course. You know, I understand. Of course, no, there's no surprise that most of the oil production in this country is done in Republican states. I mean, Texas, Oklahoma, Louisiana, I mean, New Mexico, I guess, is a democratically run state, the parts of New Mexico where the oil is produced are very, very conservative. And so yeah, you know, I would tell you the politics are tricky because obviously oil country overwhelmingly supports Trump. But I also think, you know, behind closed doors, there's a lot of frustration in the industry of, you know, Trump, you know, actively kind of trying to job on oil prices down, you know, I think that there are a lot of people that wish that, you know, as I said, I hate to kind of bring landman back up, that we could just kind of find some happy price equilibrium, right? Whether it's, you know, 70 or 75, you know, not 55 or 50, which I think was kind of what they said is their target price, but you know, not 90 or 95, which is a price that, you know, hurts demand. And so yeah, I mean, the politics are, you know, the overwhelming majority of the oil industry is Republican and conservative. But yeah, I think a lot of people are very frustrated by some of the administration's rhetoric and policies over the last year. You know, I noticed on your Twitter profile, it says your basic Colorado, but you clearly have the Oklahoma roots there. Big fan of Oklahoma city thunder. Oh, you soon, you say your political independence. The senator from Oklahoma just moved to the White House, Mark Wayne Mullin, there's going to be an open seat in 2026. You're going to move back to Oklahoma and run as a independent. Is that any possibility of trying to buy from that seat? An independent oil man is like replacing, I don't know, I could see it. Yeah, no, no, no, no, no, no interest, no interest in politics right now. You know, as anybody right now, right now, no, no, just in politics right now. Yeah, I've got, I've got young kids and, you know, working on growing a business and just politics, politics is increasingly of, you know, a pretty, a pretty nasty game, especially in the country, his polarized desires. You've noticed, you know, you referred earlier to this idea of like short cycle, shell or short barrels from the shale patch. And this is one thing I'm curious about when, you know, given that, again, I'm looking at the Baker Hughes oil red count, but like, has that assumption kind of eroded, given that a lot of these basins have matured and also, you know, we spoke about capital discipline before and investor expectations. It doesn't seem like shale is as responsive as it used to be. Yeah, I mean, I think that that's right. And I think that that does have, you know, a lot to do with the consolidation in these basins. You know, the other thing that I'll say too, and this is why the, the rig count in a certain extent is honestly, you know, the other thing that I'll say too, and this is why the rig count, and in a certain extent is honestly, you know, the rig count is, you know, the rig count It's not as important maybe, it's still very important, but maybe not as important as it was five to ten years ago. And that's largely due to the ingenuity of the American oil man. I mean, back when I worked for a SHL company, this is in 2015, 2016, we were drilling wells in the Permian Basin, and a 7500-foot lateral, which is effectively like a mile and a half, took anywhere from kind of 25 to 35 days to drill. The industry is largely doing it under 10 now. So just the amount of time it takes to drill and complete these wells is just dramatically shorter than it was even ten years ago. And I just, people who don't live in the space, I think, just do not realize how much more efficient these companies have become at drilling these wells. And so effectively, you can do more with less. Because I said, the rig count is important, but it is less important maybe than it was ten years ago, just because as I said, these companies can drill these wells so much faster and get production on kind of so much quicker than they could even ten years ago. But yeah, I would agree with you that I would say on a whole, I think the industry is probably less responsive to some of these price signals. I think honestly, just a big part of it is, we've been burned pretty bad three times in the last ten years, and so it's kind of one of those fool me once, type anecdotes, I guess. I would never underestimate the ingenuity of the American oil man, but in addition to the engineering prowess, and it's all really impressive. Is that all, you have to be a little messed up in the head, is that also, I get the prowess part, but is there also, commercial real estate, I have a friend, and he talks about the sickness that people in this industry have, because they're all just hyper optimists and that nothing can convince them that they can fail. Is that also part of why we should not be underestimating the industry because there's something going on in the heads of people like you. People in this industry have a high-paying tolerance. I think there was a saying in the oil patch, the difference between an oil man and a smart oil man is that the smart oil man makes his money in oil and gas and then puts it in real estate. It takes a particularly sick individual to live through these kind of boom and bust cycles. What I will tell you though is that we are resilient and everybody in the industry firmly believes in what they do, and I think that's a big part of it. You're talking about extracting a substance from under the ground that literally powers everything in our world. I think I read some quotas in an article that without new oil and gas production, if we just were to basically shut off oil and gas development and production, that 60% of the world would starve in six months. I think that there is obviously a little bit of, you got to have a high-paying tolerance. But I think the other thing too is that everybody in this industry really believes in what they do, and we produce a product that powers the modern world. And so I think there's a tremendous amount of pride in that as well too. And I don't think you'll talk to anybody in the industry that does not feel just an enormous sense of pride in what we do. And I think someone said this to me once, and I firmly believe in it, and they said, "Jack, one of the things your dad did that I firmly believe in is without the shale revolution, there would have been a lot more worse." And I really do believe in that because I think that this resource abundance that we've kind of largely taken for granted over the last 10 years has prevented a lot of conflict, believe it or not, because America is largely, we're not wholly energy-suffice-sufficient right? There are different blends of crude. We largely produce one type of oil, which is called light sweet. You don't just produce oil and put it in your car, right? It's got to go to refinery, it's got to get broken down into kind of various products, and you need different blends of crude oil to be able to do that. So we still do import some crude from other parts of the world, whether it's Venezuela or the Middle East or Canada or Mexico. That's blended together to kind of make the products that power the modern world. But, you know, just the fact that we're not worried or talking about running out of oil anymore, I think it's just a tremendous achievement that I just people don't kind of talk about enough. And I think they should. Jack McClendon really appreciate talking to you. Really glad you came on Adlots. Thanks for indulging our Landman-related questions and everything else. Let's check in again in six months or a year or maybe seven years when the 2032 election is happening in Oklahoma and kids are bit older. Well, thank you so much for having me on as I said. I love listening to your house. Oh thank you. Oh thank you. Appreciate it. Those stats about the increased efficiency of the drilling, etc. always blow my mind. They're insane. And the story that I wrote, I guess it was like back in 2016, was actually super interesting to me. And it was literally about like the oil companies getting together to standardize a bunch of drilling components that hadn't been standardized before. And so even eaking out these tiny improvements in cost end up like adding to the overall supply and enabling people to keep drilling even when the benchmark price is really low. I just found it really fascinating. It is really fascinating. You know what else it might be a future episode for us to do at some point, which is the production refinery mismatch in the United States and why it is the case. I'm not that asked that question. I'm like, I'm kicking myself. You know, like we have all these refineries, but mostly they were built from the era of when we imported it. And we're producing and then we start producing a lot more, but I think there's like a new refinery opened pretty recently. But prior to that, I don't think like a new refinery to open in the US like 50 years. Some crazy number. So I always hear different things about this because I hear that story. I hear other people say that like actually the idea that we can't refine light sweet crude. That's just free. It's actually like a bit of a myth that there is some capacity. So I would be very interested in this topic. Jack, get back on the phone. I know I actually wrote this down in my notes and then just started thinking about landman obviously and completely forgot to ask it. Next time. But there's a lot of interesting stuff coming out of that episode. One of them was this idea that when the price of oil increases your costs go up too because all of your suppliers can see that you're making more money. And they can ask for more in return. I you know, that's a little bit obvious, but I'd never really considered it before. And then the other thing that stands out is just that tension from the Trump administration where you know you want American oil producers to drill and boost production. But at the same time, you're very vocal about keeping gas prices low and the industry is very aware of those statements as well. By the way, there was in the last couple of minutes, another headline she said around would reclose the straight if the US blockade persists. So we'll see what's going on there. But it is interesting also this element of like Jack talked about it to show layman talked about finding that sweet spot. But it doesn't seem like it like it doesn't ever seem like it stays. It's a pretty volatile thing. You don't get the sweet spot time for very long. No, yeah, it doesn't seem like it. I do think you have to be a particular type of person to to be in this industry. But shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alley. You can follow me at Tracy Alley. And I'm Joe Weissenthall. You can follow me at the stalwart. Follow our guest, Jack Beclendon. He's @Jack_McClendon. Follow our producers, Carmen Rodriguez, @CermanArman. Dash will be in it at Dashbot and kill Brooks. And from our AdLots content, go to Bloomberg.com/AdLots where the daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord Discord.GG/AdLots. 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