Big Digital Energy

0:02 Hey, everybody, welcome to BDE in the second greatest trade in the history of all mankind. We were able to trade Kirk for the total upgrade at power forward, Dave Purcell. How cool is that? Well,

0:16 thanks. I'm glad to be here. Not only are you a better your better player, better in the locker room, much better looking. It's all good. This is so great. So Dave, where were you last? So

0:30 last at Apache, okay, and I've been doing it. So I was executive vice president of development. So at that point, kind of all the global assets reported up through me. So think of that as kind

0:42 of global capital allocation

0:45 directing. Gotcha. Gotcha. What else? What other stops you have in your career? Yeah. So I started out of school Alaska for a few years and worked for Steve hole ditch and college station for

0:56 almost a decade doing hydraulic fracturing back before hydraulic fracturing was cool. Warified acid jobs. That's right. And while we were doing the large hydraulic ones back then, they were the

1:07 first big ones. And then pickering hired me to go to Simmons and Company for a few years, and then we spun out of Simmons and started pickering energy partners. And then that became tutor pickering.

1:24 And then I guess five or six years ago, I moved over to Apache and now I'm working on my farm and probably gonna teach a little bit up at AM, so. No, was that deliberate that you left Holtoff?

1:36 Tutor pickering?

1:38 Well, you know. Don't worry, Maynard, Maynard doesn't listen to this. Our job doesn't listen to this, but not Maynard. So I'm just kidding. You know, I went to Rice with Maynard. Really?

1:49 Yeah, so I've known Maynard forever. If you forced me to find it, I can go find a picture of Maynard in short shorts. really short shorts throwing a keg of beer. So there's like NBA finals, 1972

2:05 kind of shorts. Totally. Yeah, all right, yeah, we've got to have that. Okay, kind of like NFL pants today. Yeah. Exactly, exactly. All right, Mark, you want to kick us off? Well, got

2:19 another event this week. Maybe you - Oh, yeah, okay. A few words. So if you listen to Chuck Yates's job last week, you know that Wednesday, November 13th is the YDC roast. We do it every year.

2:31 YDC, near and dear to my heart, I've been on the board there for over 20 years. It's an after school literacy program. We say it serves Houston's Fifth Ward. It's really a little bit more north

2:43 of Fifth Ward, but that's Houston's roughest and tumbless neighborhood. And YDC, we do an amazing job getting kids through the program. If they'll spend a year in our program, they'll increase

2:56 reading and comprehension scores by two, two and a half type grade levels. And the roast basically funds the organization for the year. So we've done, I think this is our 18th roast. Men of the

3:09 hour have included Ken Hirsch, Will Van Lowe, Mike Lynn, Lisa Stewart. The Rice Brothers The Rice Brothers last year, Brian Sheffield. I got roasted one year and wound up with a tattoo on my

3:23 rear end, so it's a lot of fun. It's Wednesday night, I will literally sell you a ticket if you show up at, or I will sell you a table if you show up at the door that night. So anyway, looking

3:36 forward to it. And this year, the fan of the hour is John Jacoby. And the word on the street is that Doug Brooks is gonna crush it as a roaster So

3:49 It's an important day as well, 1111. Happy Veterans Day, big salute to everyone who has served and is serving. And I don't see the Poppy calling me out. I can't find the Poppy. You didn't have

4:04 to call me out on that. It's also remember the Poppy's day. Remember and stay. Remember and stay in the UK. One of the running things is we talk about the British girlfriend on BDE and such. Yes,

4:16 she gave me a Poppy and now I'm in trouble 'cause Mark called her out, called me out. Well, I am her favorite host. No, horrible. At least last I heard.

4:29 But no, really amazing everyone who has served. The world is a much better place because of the efforts of the US and British soldiers throughout the years. So we had a special last week and I

4:44 think we signed off with the expectation that we weren't going to see. any kind of definitive result just based on recent trends. I'm talking about the US election. But lo and behold, here we are

4:57 six, seven days later and we seem to have a lot of, behind the scenes action going on, a lot of speculation in the press about what this all means for a lot of things, but important to us, energy

5:12 and more specifically,

5:16 oil markets and the US upstream And so one of the things that Dave failed to mention and I had the privilege and the advantage of working as an equity analyst covering the MP sector. A big part of

5:31 his role in research was turning very deep hydraulic fracturing and reservoir engineering knowledge into really a macro franchise, covering oil and gas markets for what, 20 years almost. had a

5:49 fundamentals group at Apache as well. And so I thought it would be good to touch on, the various elements of the policy things that we're seeing, what's coming, and importantly, just give us your

6:06 thoughts on maybe a couple of things. What is OPEC thinking and doing here? And then having recently been part of significant EP budget

6:20 preparation, this is 'tis the season, where that all kicks off. What should we be thinking about and looking for? Mark and I will set up for the next 30 minutes. Well, no, so please don't let

6:32 me ramble. Please

6:34 ramble. I think there's a lot to unpack there. So I think budgets will come back to that because ultimately when you're setting a budget next year.

6:48 and prices are soft and there's a lot of uncertainty, it drives you to being more conservative as opposed to more aggressive. And I think there's a lot of uncertainty as to how this is all gonna

7:00 play out. So when I think about OPEC,

7:05 I think

7:07 there's a lot of moving parts, but I think it's, so I'm gonna simplify it into the Trump administration put some real strong sanctions on Iran. And these are sanctions with teeth. So

7:24 what does that mean? Say a million and a half barrels a day, a voil comes off the market. So that should make

7:32 prices go up, except Saudis ready to open up and they're producing nine today. That'll put them at 10 and a half. They're capable of 10 and a half I'm not sure I believe the 12 million barrels a

7:46 day of. sustainable capacity. So, directionally, they are a million and a half of the 22 kind of nameplate that's part of the cuts that were set for restoration, beginning now. Which they kick

8:04 down, kick the can down the road at least a month. Yeah, so if you think about the Iran sanctions, let's assume that happens. Saudi comes in for the lion's share and other countries come in for

8:18 bits and pieces. Probably the Emirates are the

8:22 next biggest piece of spare capacity. And so that's a push, but I think that also, if you're putting Iran in a corner, then that drives more pragmatic peace discussions with Hamas and Hezbollah

8:39 'cause their benefactor just got put in timeout.

8:45 you have a scenario where you could actually get some sort of a piece deal done. If you can kind of, it's just kind of like the cutting horse analogy, you move a run over here, and then the real

8:57 players have to sit down and have discussions. So in, and there's a lot of things could happen differently, but in that scenario, crude is likely lower or not higher because the risk premium goes

9:11 away. Overall supply and demand balance doesn't change, but the risk is starting to taper off. Yeah, we haven't seen normal risk premium reaction to any geopolitical event for at least 10 years.

9:24 Yeah, it's kind of one of those things people talk about and I'm not sure, I agree with you, Mark. I'm not sure how much is actually in the price. But when I look at the price today, the forward

9:37 curves and backwardation, that

9:40 tells you that markets are tight There's nothing loose about that. current global supply and demand market based on all the inventory numbers you see and based on the price structure. And, you know,

9:53 those are positive things. I don't think you're going to see OPEC wildly increased production. But I think what we just talked about or I just laid out doesn't happen in four weeks, right? That's

10:06 probably something that takes the first half in next year to unfold. And there's your uncertainty. Yeah. And

10:17 this is born of ignorance. This question is, and it may be too much political rhetoric, but it did feel like last time Trump really was able to be somewhat effective on the sanctions on Iran. I

10:33 mean, there were barrels sneaking across Iraq that were were being sold and stuff. But for the most part, it felt like was I was I ran?

10:45 Shouldn't they have predicted that Trump is potentially going to win and we're going to go back to that regime? Are they potentially going to be more effective getting their barrels out? I don't

10:54 know if that's selling to China or whatever. Do you think we can actually put them in time out? I think we can because if you look, Iran doesn't have 10 different export points They basically got

11:10 one, and it's easy to monitor. I

11:15 think what you have to do is not just penalize Iran, but penalize anybody who takes those barrels. So again, it's not perfect. You'll get some leakage. But I think if you look before, I think

11:27 they were pretty effective. And I think you'll have the

11:33 support of the other countries in the Middle East having spent some time over there

11:41 I think there was a lot of concern. around lifting sanctions on Iran, both under the Obama administration and then Biden, because it gives them cash and it frees them up to do bad things. I think

12:01 which has been what's kept the momentum behind the Russian economy with the sanctions They've just not been effective. The best

12:13 retaliation in that scenario is you flood the market and a heavily produced or oriented economy can't continue to be robust and fund the war machine. That's absolutely the other leverage you have on

12:29 that conflict against the Russians is exactly that, is try to impact that revenue stream.

12:39 I think there'll be a lot of regional support

12:45 stronger sanctions on Iran, and I think it could be effective. So bringing in the notion of the campaign theme that we've heard for several months of drill baby drill, despite the fact that we've

12:59 pointed out in the industry in higher profile voices has been saying, look, we're not inclined to behave any differently relative to what we've been through the last five to 10 years, which is

13:12 we're going to be very disciplined, you know, we've, as a component of the SP, we've flirted or, or dallied with, with irrelevance in terms of the waiting in the market. And yet, despite the

13:30 fact that you've seen discipline indicated by declining rate count over the last couple of years, we've got, for a number of reasons we've discussed, we We don't need to get in today, we've got,

13:43 I think, surprisingly buoyant. US production. How does OPEC view that particular element? Because in the past, it's been 2014 and then 2020, it's been more of a market share threat. And I guess

14:02 the question is, is that part of the calculus here with OPEC, if they start to see some more aggressive signs out of the US producer base, is there more of an inclination to maybe bring barrels

14:17 back faster? Yeah, I think OPEC is looking at unconventional, from a position of knowledge today, I think, six, seven, eight years ago, they had no idea. And if you, I was in an OPEC meeting

14:34 None of us did. Yeah, and I was in an OPEC meeting

14:40 and had dinner with the Kuwaiti delegation. and all they wanted to talk about, they reached out to me and all they wanted to talk about was unconventional. And it was clear, it was important to

14:51 them and they didn't understand any of it. It was, to the degree, it was a mystery to us. It was order of magnitude, more of a mystery to them. I think they've gotten smarter about it. They're

15:05 smart people. They're doing some unconventional development over in the region as well I think they look at

15:13 the growth rate, and I don't think the growth rate out of the US scares them. Now, if it accelerates, if you got a million barrels a day or over a million barrels a day, you're on your growth out

15:25 of the US, I think that would change. But I don't think that's going to happen. So as long as we continue to see those growth rates start to diminish in US production plateau, and I would argue,

15:38 given the current price, 70 TI -

15:43 68, thank you, with some uncertainty, I suspect budgets are probably lower. In 25. In 25 on the margin. Consolidation helps with reduced activity, tamper activity, and then price will. So I

15:60 don't think OPEC's gonna be, I mean, they're gonna continue to watch US production, but I don't think anything they see today is gonna scare 'em Like, okay, so I'm gonna be the delegation taking

16:15 you to dinner now.

16:18 It felt like back in 2017 when I was sitting at Cane, all we were doing was dialing fracks back to see, can we save a little bit of money? What does it do to performance? And the rig rate keeps

16:32 falling, but production keeps growing. Did we continue to just get better at this? How are we still going up? The answer is, it's a great question. The answer is yes, 'cause I think a lot of

16:46 people were looking at numbers and saying, well, production should have already peaked or plateaued. I think well performance, per well metrics, you're starting to see that. They're not

16:59 declining, but starting to plateau. But I think it's longer laterals. And you can cut rig count by a bunch, but it's how many lateral feet are you drilling and fracking? And, you know, the

17:14 experience we had at Apache, and it's in the public domain. So nothing, I'm not speaking out of school here, was in a lot of areas, wider spacing and bigger fracks. It was kind of contrary to

17:24 what folks were looking at in 2017,

17:30 2018. And the idea is, you know, there's that balance. You know, how do you, again, it's how do you maximize your economic returns. You know, the real, I was up at AM on Friday, and one of

17:47 the challenges that we talked about was we're still only getting six or seven percent recovery. So we're making great wells, but we're not doing a very good job of reservoir engineering in aggregate

18:01 recovery. And remember, typically you'll recover 30, 40, 50 of the oil in place, so there's a lot to do over time, but it's not gonna grow production. And it was one of the feature parts of the

18:16 rationale that Exxon talked about during the pioneer transaction or the announcement of that was alluding to, I think there was even a number on it, maybe doubling recovery factors, combination of

18:32 four mile versus two mile laterals. But it was more than that, just in terms of the ability to,

18:42 you put a couple of percentage points increments on that. You're talking about a lot of recovery factor. So I think you just explained it for me 'cause back at Caine, I mean, we were early stage

18:52 assets, right? We would drill the first horizontal well in a county. We'd do the first slick water frack somewhere. And what's interesting about that mindset is you sit down with management team

19:06 and if you have an operational engineer in the room, they want to optimize stuff. And you're like, no, no, no, no. Let's hit that rock with everything we can so we can figure out what it

19:16 actually will do. We'll optimize later. And what was, so in 2019, we spent931 million

19:26 just on DNC capital. There was some acreage in there, but not much. We had bought all our stuff. And at the end of the year, looking through our reserves, We had drilled, I think it was a. 32

19:41 rate of return, which normally thinks great. Given what we paid for acreage, we probably needed to drill about 40 or 45. So the reason I'm sitting here and I'm still in a job is because of that.

19:53 But what we found out, trying to figure out spacing was it was the opposite mindset. Instead of let's hit it with everything we got, we were finding if we put too many wells in certain formations,

20:10 you didn't get like, you didn't just overspend to get it out. You didn't get the milkshake out. You had too many straws and there's, something was going on in the reservoir. So we actually during

20:22 that year learned that if you think spacing's gonna be eight wells, do four. And then you can do six the next time if you see the results. There's a few high profile public examples of that, which

20:35 unfortunately, you know, put the. aggressive downspacing under or well-spacing under a spotlight, but you can turn around and spend, I don't know, on a multi-layer, multi-well pad. You can

20:50 spend a couple hundred million dollars before you know you've got a problem. And I think the industry's moved pretty far down the road with that recognition. Unfortunately, at least then you had to

21:02 get a drill it and test it before you knew you had a problem Well, you know, this is, again, I'm gonna geek out here for a brief moment. Geek. This is where, what I believe happens is when you

21:16 over drill and over complete, you're basically getting your pressure depleting right away and you're getting the entire layer below the bubble point immediately which will lower recovery because it's

21:29 not intuitive. It's like, well, if I drill eight wells instead of six I should at least get the same amount of recovery I just overspent, but.

21:39 There's a real small window between optimal well spacing and too much. And one of the challenges companies got in was they'd have a well count target. So we're gonna have 1500 wells that we are

21:56 economic. Well, you're stuck because if you start to downspace and say, well, I need four wells instead of six, I only have a thousand locations Why can't I tell the street that?

22:11 Well, you should, but there's a reluctance to tell the street that. So you kind of continue on this, well, maybe we'll do five. And it's an anchor that prevents you from doing what's right as

22:28 quickly as you should. That's where well count, anybody puts a well count out there, should probably be dismissed right away.

22:37 Well, didn't the market come out basically and say, hey, three or four times cashflow, we don't care what your well count is. I mean, I think did that happen? Or was that being too rational?

22:48 Well, I mean, Mark's the stock guy here, but when you get away from net asset value and you start to look at more cashflow

22:57 multiples, then it becomes well count, becomes almost irrelevant. Yeah, I think that's right And we went through a bit of a pendulum swing back and forth on that as well, being back toward more

23:12 toward net asset value, at least fundamentally with what we witnessed in what I was just talking about where you spent a couple hundred million on a development in a section where

23:26 the drag on a program's returns is

23:32 pretty severe. ultimately translates into what Catholic multiple, the street is ultimately going to assign you. So it's not mutually exclusive, right? So I think, you know, this, this is a bit

23:50 of ancient history. But I think in terms of kind of back to the here and now and looking ahead, the drill baby drill,

24:02 I guess rally charge is, you know, just from a practical standpoint, because of the structure of the US oil and gas industry, a bunch of private actors out there doing things for their own

24:14 priorities and their own stakeholders. Unless there's some

24:20 wild incentive that comes into the formula, you know, we're where we should be relative to the equilibrium or we're closer to the equilibrium in terms of how the US producer group is behaving. And

24:38 I saw a clip or a quote from one of, I think it was in the summer, a North Carolina campaign stop. And, you know, basically, Trump was saying that we're going to make this happen. And if it

24:54 crushes oil and gas companies, I don't care. That's just, you know, that just from a practical standpoint, it's not really a threat. Well, I think consolidation helps create less of a frenetic

25:10 environment.

25:13 But it also helps you drill better wells because you put all this acreage under one, under better operators. The buyer ought to be a better operator than the seller. And they'll reallocate capital

25:25 to where the best wells are. So that's where you can see, again, maybe a bit more runway the well improvements. And I think you'll see that. But on the drill baby drill, that's federal acreage.

25:44 Right. And you're talking Gulf of Mexico, parts of New Mexico, and Alaska. And only one of those is short cycle. And so would I make a long cycle bet, and there's actually, the answer is no,

25:57 would you make a long cycle bet where for years from now, you don't know if that policy's going to be switched. When the next regime comes in with different policies, and so it's basically a new

26:10 Mexico

26:13 part of the Permian where you might see some movement. But I think it's campaign rhetoric and not reality, but I don't know. Mark and I talked the pre-election show, what was that three weeks ago?

26:31 I almost look at it more is it's not drill, baby drill. It's more if you want energy expansion, so we can do AI and all that sort of stuff. It's gonna be us 'cause we're gonna put in rules, a

26:44 place that allow you to lay a line here and do that. So it's more a binary. It's not necessarily gonna be a cost type thing. So did either one of y'all ever interact with Governor Burgum? Burgum,

26:59 'cause they're talkin' that he's the dude. He's gonna be Energieser.

27:06 Well, yeah, not Energies secretary. In fact, he would've been a good participant in the Energies draft. So it's actually gonna become a real thing. Energies are. Energies are. And the way I

27:18 look at it is, I think there's two, he's been the dominant name that's rumored to take on this role, you know Trump just named his borders are Um. but it would be a multi-agency purview that would

27:35 include DOE, Interior, FERC, and the EPA. I'm hoping that they can somehow maneuver the NRC in there, but it's really

27:48 an umbrella authority over all the various agencies that are doing the things that are the impediments to more accelerated development, particularly in BLM and in federal and along with those things,

28:02 rollbacks or cancellations of the temporary LNG pause, there was quite a bit of expanded federal monument designation. In particular in Alaska, we talked about that with the

28:18 mining situation up there and then cutting back the NPRA leasable acreage. So this is not sure how the authority works outside of you know, a formal cabinet post. It's really the way I look at it's

28:35 an, in fact, a replacement to the Biden administration's notion of a climate czar, the most famous of which was John Kerry. John Kerry, yeah. But you've got to have some coordinating mechanism

28:48 from an executive standpoint to be able to get these reforms and rollbacks done in parallel. And that's, I think that's the concept of the notion Well, it's gonna make for some interesting politics.

29:03 Well, I think what she saw in the first Trump administration, if you talk to folks on the ground, they saw less bureaucracy around permitting. Right. And it wasn't necessarily, to your point,

29:16 Chuck, it wasn't necessarily drilling permitting. It was, we got to lay a line across some federal acreage.

29:23 There's just a lot that the government's involved with and the folks on the ground felt like, When the Trump administration came in, it wasn't like, Well, go do what you want to do. It was, Okay,

29:35 we can help you. You still have to do the permits. You still have to do it right. But there was less purposeful bureaucracy getting in the way to slow things down. It was a smoother process. And

29:50 that's what this feels like. It could be. And then you throw an energy czar to try to regulate, but try to get all the different players talking, again, to help create a smoother glide path. I

30:04 think, particularly on some of the power generation challenges, we're going to have around data centers. And there's a lot of opportunity there. Well, midstream infrastructure, new Excel and G,

30:17 et cetera, I think are the real potential areas of impact. I think, as you pointed out, risk-taking on long cycle projects is not going to change and, you know, BLM land is not the dominant

30:31 priority for oil and gas activity. I just looked at the Permian, there's not a tremendous amount of federal land out there. And so, I think to the extent that we can accelerate things and maybe it

30:46 manifests in the form of the Energy Permitting Reform Act that came out of the Senate, the Manchin Barasso Bill, which amazingly is only 75 pages long And addresses these types of kind of time

31:03 deadlines on some of the regulatory action or comment. But it is more midstream and downstream or downstream of

31:16 producing facilities and assets themselves in my mind, the rest of it's a bit, it's fun to talk about, but I don't know changes upstream behavior, all that much, even over the next five to 10

31:28 years. I am, I am feeling a little bit needy and, and sad that my name hasn't been floated as the energy's off. Well, I was going to, I was going to throw it out there with, you need a podcast.

31:41 Yeah, you're going to, you're going to be the Matthew McConaughey. What is he, the Minister of Culture at UT? That's, you're going to be the Minister of Pop Culture For, uh, yeah, I could go

31:52 beat, Governor Bergam, happy to serve as your press secretary. Those would be fun press conferences. The, um, speaking of climate zars,

32:05 knock us out on cop. Well, we've got, if you're paying attention, we kicked off the COP 29 or COP 29 in Baku this week. And I, I just caught my attention it kind of sneaks up on you now. There

32:23 was a tweet over the weekend about the, and we'll attach it here, and I'm gonna butcher her name, but Tracy Schuchart, known as Chai-Gurl. At Chai-Gurl, made a list of non-attendees. Some of

32:38 these are last minute cancellations. Some

32:43 were unresponsive, but it includes naturally President Biden, President Xi of China is not attending, no reason given. And surprisingly, EU President Ursa Vanderlehen is not attending, but

33:01 'cause she needs to prepare for her second term in office, Olaf Scholz, who's potentially facing no confidence vote as early as January, in Germany won't be attending and also surprisingly,

33:15 Canadian Prime Minister Justin Trudeau's not attending. And there was a Bloomberg piece that came out talking about really the. the angst that has beset COP

33:26 29 about really the cash grab. You know, thinking coming out of COP 28, we were, you know, looking to accelerate that100 billion fund that the attendees or the parties to COP had from the West

33:46 were, at least on paper, committed to fund their pro radish era That's, as our recall has been lagging. And now, you know, the conversation over the last, since the last conference of the

33:58 parties has shifted into it. No, it's not a hundred billion. It needs to be, you need to start with the T. And now you've got this

34:07 cross thread, if you will, of Trump coming back into office, which has been a flurry of announcements or indications that we're going to do things like pull out of Paris, whoop-eye out of carp.

34:23 unilaterally, and so what does it all mean? Well, if you lose arguably what would be the largest contributor to transition funding for developing countries, it's a real conundrum. And so Dave, I

34:39 want to get your take on this, but I do want to share this story real quick. And the thing I love about sitting here hanging out with other old guys, you all remember Sun City in South Africa,

34:50 right? This is a big fancy resort and all the, and they were just paying ridiculous amounts, but this was under the time of apartheid, Mandela's still in jail. And basically all the artists

35:04 gathered together and said, we're not going to play Sun City. And they made a song about it that I think little Stephen actually wrote the song, Bruce Springsteen's in it. And they had this big

35:15 press conference, ironically enough, I think they did it at the Plaza Hotel, this press conference. And my friend T. Sean Chan, and who's a stand-up comedian and ultimately did write for

35:26 Saturday Night Live when an Emmy and stuff, back then he was literally a struggling stand-up comedian. He showed it up to it and told the guard, Well, I need to be in there. I've pledged not to

35:38 play Sun City. And somehow made it on stage with all these guys. Just my dog, he was like, Well, of course, I'm noted comedian T. Sean Chan

35:49 And you can see him actually in the video. I mean, it's a flash. So just for the record, I'm not going to COP 29. Well, so I actually attended COP 27. And where was that one? It was in Charmel

36:05 Shake, Egypt. And because Apache is the largest US investor in Egypt and the largest oil producer on shore Egypt, the government asked Apache to participate So, I went and I was

36:20 uncharacteristically. quiet, I was kind of a fly on the wall. A couple of things that are really interesting about COP, if you'll indulge me, please.

36:30 It is a secure environment. There's a blue zone and a green zone, and it's kind of like a bullseye target. So the farther in you go, the more security clearance you have to have.

36:44 And to get into the main conference is a lot of security. You get out of letters, and you go through like two levels of airport security, and it's really crazy. And we come out of security, we go

36:59 into the main plaza, and it's like any conference. There's breakfast and dinners going on outside, but the main meetings are going on during the day. And you go through all this security and you

37:10 come out, and there's all these protesters. You're like, how did these protesters get through this wall of security? It's wild. I mean, they're chanting, you know, end of fossil fuels or

37:23 whatever, and they got this big mural in the background. So a couple hours later, we're walking back through the same area, and there's all these people milling around with their signs on the

37:35 ground, and it's a different group of folks, and the press is getting set up, and there's a guy with a bullhorn protest starts in two minutes, two minutes to protest. And he's like, you gotta

37:48 schedule the protests, so you gotta get approved for what kind of protest you're gonna do. So it's a highly, highly kind of choreographed set of meetings, but what they did, because it was on the

38:04 continent of Africa, and it was developing countries, there was a different vibe there, and the term energy imperialism was used This is two years ago. Europe's. paying all kinds of crazy prices

38:19 for gas, natural gas, because of the Russian Ukraine thing. And they're telling Africa, look, you send us all your gas and you guys just go straight to wind and solar. And the African countries,

38:37 they weren't having it. And the Kenyan oil minister, I think it was Kenya, they had a big project coming online and she was asked by this, she was on a panel and she was asked about it. And she

38:52 said, look, make no mistake, we're gonna develop this the right way, but we are using this project to bring our brothers and sisters and sub-Saharan Africa out of energy poverty. And she used

39:06 that term four or five times and the moderator did not ask her another question. 'Cause one, that woman had more presence than anybody I've ever been around She was awesome. And it's true that,

39:17 and it goes back to the challenge, this is a whole topic in and of itself, but when you have two billion people who live in energy poverty,

39:28 what goes on at COP 28, COP 29, makes no, it has no relevance to those people. How are we gonna get those people out of energy poverty? And we're not gonna do it by whatever they're trying to

39:44 sell at COP 27, COP 28, COP 29. It's basically let them eat cake. It is. I mean, it is. And wars get started over a lot less than this. Yeah, and I think one of the more nefarious efforts to

40:02 force the issue by the developed world has been mainly related to the threats of restricting or eliminating financing I spoke with someone.

40:20 You and I both used to work with the Nigerian native and was making lives in the UK, but he was making frequent trips back home. And their solution, and we've talked about the Nigerian grid

40:33 collapse, it had its six total collapse just a few weeks ago, is everybody who can afford it has got diesel backup generation, which is very expensive And really, the whole mindset is ranted

40:51 toward moving as far away from energy poverty as I can.

40:58 And you're not going to dictate that to me and

41:02 presidents and national leaders of these sovereign nations know that the first way to political instability and sometimes ending in violence

41:14 One, deprive the people, or two, price them out of the ability to afford the basics, which include power and the energy that you need to actually get things done. So, and actually live a

41:28 reasonably,

41:32 reasonably above the subsistence level of day-to-day life. So, I think we're reaching that, and I recall that that shift started to occur, and you heard more from the leaders in the global south

41:47 talk about the very issue of, look, it's about energy poverty first, and everything else comes behind that. That's an immovable priority that we can't be forced to change. Yeah, Scott Tinker at,

42:04 you know, used to run BEG, and he runs, I don't know what the name of his group is, but he talks - Switch energy alliance. Switch energy alliance He talks very. particularly with a lot of

42:15 fact-based discussion around this energy poverty issue and that's the challenge, not what's going on in my mind. Chuck did a special with Scott three or four weeks ago. Maybe a little longer than

42:32 that a couple of months ago, but one point Scott emphasizes and he says we can't be shy, emphasizing is we can't even deal with the carbon issue until everybody's rich. As we quote unquote define

42:47 rich, making more than30, 000 a year or whatever it is, he said we just don't have the wherewithal to do it. And so that's really important. Speaking of energy abundance,

43:02 Diamondback who's been a pretty progressive force, I think, for the US upstream industry recall that. Earlier this year, they announced a memorandum of understanding with Occlo to develop SMRs for

43:19 off-grid power use, think up to 50 megawatts. And earlier this summer, it began talking about bringing natural gas into the discussion, the notion of essentially giving away gas for free in the

43:38 premium has proven to be a vexing problem. And there was a piece out featuring, I think what they said during the earnings call last week, more specifically related to, okay, let's entertain the

43:53 notion of all of this data center demand that's coming and look at using our natural gas resources to generate power, not only for our own use to decarbonize our operations, make more things. like

44:11 electric base take pressure off the grid. But, you know, we were talking before the show started about, you know, what that looks like from an infrastructure standpoint. And, you know, do you

44:23 see the data center hub

44:28 start to develop at pace in the Permian? You know, they said specifically we've got 65, 000 acres of land that we're certainly willing and ready to use to host data center customers, if you will,

44:46 for off-grid power. And, you know, I don't know if Waja is gonna be zero forever, but it's, you know, in light of the GOR discussion and what we're seeing with ever-rising GORs in the

45:03 Permian and the need to build egress every time new development comes around. You know, what do you do with all the gas makes sense? So yeah, I think what Mark's alluding to on the the gas or

45:20 ratio is in the Southern Midland Basin. You know, it was probably 20, 2016. There was this whole kerfuffle around gas or ratios increasing. Well, they should in tight rock. But there was this

45:35 notion that it would actually plateau. So this is how much gas is being produced by an individual well relative to the amount of oil. And it hasn't. It continues to increase and it's going

45:47 asymptotic. So a well starts out producing 3, 000 cubic feet of gas per barrel of oil. That well today might be producing, you know, four or five years down the road, 60 to 70, 000 cubic feet

46:02 per barrel. And it continues to rise. And so until you understand the Reservoir Physics, forecasting GOR. In forecasting gas production from the basin, people are going to continually

46:16 underestimate, which means you're always going to be chasing your tail from a basin evacuation standpoint. I remember having a call with a client, a veteran energy dedicated client around the

46:35 GRR kerfuffle, and I think 2016 was the right time frame, but the

46:43 remedial almost completely ignorant understanding or grasp of what this critical factor is, it's

46:54 something that you're not going to be able to change. It is a feature of

47:02 Permian oil and tight rock production, which I think creates tremendous opportunity to the extent that you can you can align things like, okay, we want to spot more off-grid gas-fired generation,

47:19 which then leads to a conversation about, what does that mean for emissions? And we're in this, what I consider to be a gap period between an avalanche of demand that needs power yesterday, data

47:35 centers and there's a lot of price sensitivity around that and nuclear, which seems to have caught kind of bipartisan tailwind here. You know, what fills the gap? Does anybody got to come around

47:46 and say, well, we're going to spot a, you know, grid-scale or base-load coal-fired facility? I don't think that's going to happen. So I will volunteer two things to my dear friend, Case Van

47:55 Hoff. Number one, and we've talked about this a lot and this is tongue-in-cheek that we talk about a lot, but I seriously think you need to like go to Silicon Valley and go sit down with Google You

48:09 need to sit down with Microsoft. Redmond, but you actually need to talk to these end users because they are wildly ignorant on what natural gas can do. They truly just think, well, it's a

48:21 polluting hydrocarbon. So we've got to go educate them. So I'm happy to go along on that, uh, that trip and, uh, and help facilitate those discussions. Cause I think it would just be total

48:31 baller to hang out with case fan off in

48:35 California. I know he's a, I know he's a SoCal guy, but, uh, we'll, we'll go do NoCal. And then second, I will go to Monahan's Texas and upgrade the food scene so that the data center manager

48:49 doesn't have to eat at that freakin' Benagan's every night. Okay. We'll put in a good restaurant and get a steak, maybe some sushi, something, but I will do that. That will be my contribution to,

49:02 'cause every AI data center, so AI's gonna break down into really time-sensitive type things. If you're in.

49:12 If you're in a hospital and an alarm system, that's gonna be time sensitive and the data center is gonna need to be nearby. But there's a whole host of just training models and stuff that isn't that

49:27 time sensitive. All of that crap ought to be out in West Texas, where the gas is, where you can get solar. Where the free gas is. Where the free gas is, you can get solar. 'Cause running the,

49:39 my understanding is running the computer lines is nothing. They'll run those two and 300 miles and that's no big deal. And you got enough of that stuff in Dallas. You can get it out to Midland.

49:52 Yeah, you could ultimately connect it. And I think that's,

49:56 that will happen.

49:60 And I think it's easy to show gas versus nuclear when you're trying to reactivate through Mile Island versus building some gas fire power. which is quicker and easier and has more certainty around it.

50:14 I'm going, I'm going the gas route, no question. But it's not gonna happen unless case and Toby and all these guys, and I say this with love, unless you guys get on a plane and go sit down with

50:24 these folks, it's not gonna happen to, we cannot depend on the utilities to do this, 'cause these guys just don't have the mindset. Yeah, and hopefully the shift in the political landscape is

50:36 positive for that, you know, that acceleration in that momentum. And, you know, there are examples of certain companies and their leaders providing industry leadership on. So last question,

50:51 just real quick, when the heck are you Aggies doing, putting nukes on campus? I'm kind of - We already have a nuke for one. We already have a one. We have a reactor on campus. We have a one

51:00 megawatt reactor out by the airport, Eastwood Airport. Yeah, it's been there for a long time. Really? This is nothing new. In fact, one of the reasons, you know, so Bill Vongotten, when he

51:13 started his lab, he had it up at AM. Because turns out, if you're an academic institution, it's easier to get nuclear permits. A lot of the lab equipment has some

51:29 nuclear small, it's not a nuclear reactor, but it's got some nuclear bits to it. And so you probably have, so one AM is

51:38 land risk. and rich compared to the sister school in Austin. And this Rellis campus that people talk about, where they're talking about this facility is an old Air Force base. Yeah, it's up in

51:51 Brian. It's up in Brian. I mean, AM is land rich, it's amazing. When you talk to people, where are you? It's like, oh, it's your, AM goes almost all the way out West to the Brazos River And

52:06 so there's plenty of land to put it there and.

52:10 Again, there's already a nuclear reactor on campus. Largest nuclear engineering program in the world as well. And this really

52:20 touches on something that we've talked about in the last couple of weeks, like the bee problem that Zuckerberg has. And really spotting from a land standpoint, how do you control that or provide

52:37 access? And it's gotta be, you know, it's gotta be permitable to spot these facilities. And so, you know, those that have the land like Diamondback 65, 000 acres for SMRs and off-grid gas fire

52:53 generation, that's pretty straightforward. You can get those things built

52:59 in other areas where land and fuel are problematic from either a NIMBY or a permitting standpoint. You know, that's what these players are telling you out front that, you know, bring it here. And

53:15 so I think maybe this breaks a little bit of a log jam. There might be some other players that come out of the woodwork that do have the real estate to be able to get this done to not necessarily

53:28 bypass the permitting process, but it's a heck of a lot more straightforward to do so. If your band could glow in the dark too, that would be total baller That

53:39 would be like the guys there. All right, Dave, close us out. Give us, take it anywhere you wanna go. Thoughts, funny story, serious, whatever you wanna do, and please promise us she'll come

53:49 back on. Well, and I'd love to come back, and I won't tell you funny stories 'cause Maynard once told me that I was the no fun guy. He said, no, you sit over there. We'll tell you when we need

54:00 you. We're talking fun here, so you sit in a corner So, you know, one of the, actually an interesting. thing. This may be too geeky, so it probably hits the editing floor. But one of the

54:12 conversations we're having on Friday around what research needs to be done in unconventional.

54:20 And it's actually a reservoir engineering research, because the question that was posed was, does anybody know

54:29 if we in a nanodarcy rock, how a molecule of gas gets from one end of this table to the other end?

54:36 And the answer is no. That's why we have 5 recovery factors. So there is a lot to do in this space. It's really exciting. You and Mark should literally do

55:03 a podcast on that, because I would geek out on that, because half my partners at Cane were engineers, and they were really smart. And I always said their core competency was they could try

55:04 something, measure it, document it and compare it, but why they were trying what they did. Understanding phase behavior and relative permeability and nanodarcy rock, because it sounds geeky, but

55:14 it's pretty cool to know. Yeah, there's a lot of like, capillarity and wet ability that overtakes

55:21 the Darcy. So it, I mean, it becomes a really interesting question. And when you pose that question to a room full of researchers and none of them say, Oh yeah, I know how that works They're

55:34 like,

55:37 You know you're onto something. So, again, there's a lot to do in the Permian beyond kind of tier one inventory

55:46 over time, but we're not gonna worry about it. It won't grow production. It will just create a very shallow, long lived decline curve. Nothing cures low oil prices like low oil prices. Low oil

55:59 prices, the cures high oil prices like high oil prices Everybody, oops.

56:05 everybody appreciate you joining us. If you liked it, definitely comment. Put lots of comments on how much you enjoyed Dave way more so than Kirk and maybe we're going to be able to talk him into

56:16 coming back on.