On a day when the price for WTI rose to $92 and change, the mood was expansive at the annual meeting of the Permian Basin Petroleum Association, held as always in the sumptuous confines of this city’s Petroleum Club.
A slate of speakers and panels addressed issues, ideas, and initiatives affecting the membership of the Permian Basin Petroleum Association, convening here Sept. 27-28. A luncheon keynote address by Jeffrey Tillery of Veriten highlighted the occasion.
The 61st Annual Meeting of the PBPA served up the usual informed roster of experts and decision makers, sharing insights on policies, production, technologies, and trends. On the pages that follow we share images of the event’s proceedings.
On the evening of the 27th, attendees mixed and mingled at the icebreaker welcoming reception held at Midland’s impressive Petroleum Museum. A highlight was the screening of a commemorative video celebrating the 100th anniversary of the gusher known as the Santa Rita No. 1, the well credited for opening the Permian Basin to development. The film was shown again during the day-long session held on Thursday.
On that day, the 28th, a full lineup of speakers and panels addressed a full house of attendees. We share snippets from the talks of several. But we hope to impart a flavor of the day’s dialogues.
Thursday began with a lavish breakfast that segued into the day’s first speaker, New Mexico Representative Ryan Lane, his party’s (R) minority leader. Said Lane:
“If you understand how the New Mexico state budget is built, you understand that essentially half of our entire budget—and if you actually factor in higher ed, it’s 60 percent of our budget—is consumed by public education. Well, which industry do you think provides this funding source for public education? I can promise you it’s not the film industry in New Mexico.
“It’s the oil and gas industry. The oil and gas industry provides real dollars in support of every classroom in New Mexico, as well as in Texas, and that touches every child that goes through the public education system.”
The View from Washington
Moments after Lane finished, Steven H. Pruett, CEO of Elevation Resources and former chairman of the PBPA, took the podium at the Permian Basin Annual Meeting to share a few remarks just three days after attending the American Energy Security Summit at the Hamm Institute of American Energy, in Oklahoma. Said Pruett:
“One of the themes of the [Sept. 25] conference was that the energy transition is a crock. There is no ‘transition.’ We’re going to be using oil and gas for many, many decades to come…. It’s really about energy expansion and energy abundance. But clearly the subsidizing of renewables has cost—well, certainly Ercot and some other grids—a whole lot of money paid for by the rate payers. That means you and me and the people in New York, California, and elsewhere—they’re paying excessive energy prices for their renewables or for energy transition strategy.”
And moments later, there was this also from Pruett, who now serves as the chairman of the Independent Petroleum Association of America:
“Permitting reforms are supposed to shorten timelines. We haven’t seen that yet, but there are a lot of LNG projects. I think we just had one approved a few days ago, so that was a win. But make no mistake, IPAA is in the halls of Congress working for you to blunt the Biden Administration’s efforts. The House is listening, a few members of the Senate are listening, and then when we are able we get into the agencies [they are listening as well, but…] The [current] EPA, unlike that of any other presidential administration, including Obama’s and Clinton’s, is much harder to get into than it was. But it’s not hard for the Environmental Defense Fund and the people on the other side to get in there. My hope that I can offer you is we have a great House of Representatives.
“We have a lot of younger, next-generation reps, including August Pfluger, who’s just a star and who’s brought 30 congressmen or so to the Permian Basin over the last four years to see what we do at field hearings, rig tours, etc. And I offer a thank you to any of you in the room that have given these congressmen your time to educate them. As for the Senate, not as much hope there, but there will be multi-generational terms turned over. They can’t stay there forever, Schumer and even Beloved Mitch McConnell. But we’ve got to get into the White House, so stay tuned on that.”
Next came the Texas Legislative Panel, moderated by PBPA President Ben Shepperd. The four panelists were Texas Rep. Tom Craddick (District 82), Rep. Brooks Landgraf (District 81), Rep. Drew Darby (District 72), and Texas Sen. Kevin Sparks (District 31).
We share just some remarks from Rep. Landgraf, chairman of the House Committee on Environmental Regulation during the Permian Basin Annual Meeting:
“We’ve had to take a strong stance in the Environmental Regulation Committee and the reason is that, unlike at any other time in our industry’s history, or the nation’s history, we’re under threat from within. Typically, we always have to account for OPEC and geopolitical forces that are really outside of our jurisdiction, outside of our control. But right now we’re seeing threats from Washington that we’ve never really had to encounter before. And so we wanted to make sure that we addressed that as well as we could through the Environmental Regs Committee because that’s the battle front where so much of the Biden Administration’s threats are coming from.
“But before I get into that, I do want to mention that it is easy for us to talk about the bills that we passed that we’re proud of, and I’ll get to some of those. But we’re equally if maybe not more proud of the bills that we unceremoniously killed in the Environmental Regulation Committee because we did—and it’s an increasing number of proposals that are basically next-generation ‘Green New Deal’ types of proposals that are inspired by federal lawmakers like AOC. And they have acolytes in places like Houston and Dallas who want to [be]Texas versions of those names. They come to my committee with things to ‘help’ the PBPA and others. We do a really good job of making sure that those don’t get any oxygen or see the light of day because they would be absolutely debilitating to us in the Permian Basin and just detrimental to the Texas economy.
“So we played offense on quite a few things, and I’ll get into that, but defense is just as important and we really appreciate everybody here in the Permian Basin speaking with one voice to help support some of those other attacks from within Texas.”
Following a short break, activity resumed in a separate banquet hall within the Petroleum Club as PBPA staffer Michael Lozano, who handles communications and government affairs for PBPA in Austin, moderated a panel on “Innovations in Industry.” The participants were Robert Crain of Texas Pacific Water Resources, Chris Davis of Milestone Carbon, and Ricky Kostner, of ChampionX. The segment lived up to its name, yielding insights on technologies that are truly innovative.
PBPA’s, and the Permian’s, Contributions
From there, a networking break filled time until activity resumed in the main banquet hall. There, PBPA President Shepperd spoke during lunchtime, sharing these remarks, among others:
“The bottom line is that the Permian produces 45 percent of the nation’s oil, about 15 percent of the nation’s gas, and those numbers continue to grow. And not to be left out, there is New Mexico. We heard from a bit this morning from Minority Leader Lane, about the enormous contributions oil and gas producers make to the state of New Mexico’s budget. It’s $6.1 billion there. And $18.4 billion over here on the Texas side. These are tremendous numbers that you heard. The legislative panel discussed providing opportunities to help improve conditions in both states. And I think we need, as one of our primary missions, to make sure that members of the legislature understand and appreciate the value we bring and the opportunities we bring with jobs.”
From there, President Shepperd led the attendees through a review of the various challenges and issues PBPA is working on, including the Endangered Species campaigns and such.
Following Shepperd’s talk, keynote speaker Jeffrey Tillery, founding member and COO of Veriten, took the podium. Tillery previously spent 17 years at the energy-focused investment bank Tudor, Pickering, Holt, and Co. He directed some of his remarks to the state of the economy and the prospects for O&G, not just as producers but as companies being publicly traded:
“Profitability as evidenced by return on capital and interval weighting in the S&P 500 track pretty well,” Tillery said, referencing one of his Powerpoint charts. “You can see, coming out of 2020, that profitability or return on capital for the industry is returning quite significantly. Stocks have gone up but not anywhere close to the degree that the returns of the business have. And as we think about that, that won’t persist through time. What the market is suggesting is that it does not believe the return [of] the business is sustainable and there could be multiple underlying things that caused that. It could be a view on oil price. I think more specifically, it’s questioning the depth of, or the durability of, the assets of the energy business, saying, ‘Do you have enough inventory? Do you have the asset quality to sustain returns at a given commodity price?’ And I think time will tell how all that plays out, but the reality is those lines will converge [here he referred to his Powerpoint slide]. Either the returns of the business will come down or the weighting in the S&P 500 will go up.”
Conversation with a CEO
Wrapping up the event, Endeavor Energy Resources CEO Lance Robertson participated in a “Conversation with a CEO,” which took the form of a Q&A, with PBPA chairman Tommy Taylor sitting in as interviewer.
“We’ve been really focused on growing our EBITDA as an enterprise. We view it internally as ‘EBITDA yield.’ We needed to get our EBITDA yield to be closer to our asset base. So we’ve been growing. I heard Jeff [Tillery] talk about how important energy is for the world, all types of energy. I think at Endeavor we like to think we’ve been doing our part to create abundant, affordable energy for the world. We were averaging 40 to 50 percent annual growth for about four years straight. This year we’re more on a 20 percent growth rate year over year. So we’re very disciplined about growing, but just [also] recognizing that as our base has gotten bigger, it’s really hard to grow at those same rates.
Moments later, at the Permian Basin Annual Meeting, when the topic turned to commodity prices, Robertson had this to say:
“Tommy. I’m really bad at forecasting on the gas prices. We tend to take a conservative approach. For example, we came into this year with a planning model of $70 oil. We run our business off a lower price model. It helps us remain disciplined in everything we do. I think Jeff did a really good job of illustrating the reality of… [the fact that] even in a world with relatively tepid economic growth, the demand for product is slowly rising on the commodity side and the supply is struggling to keep up. I think it’s helpful to keep in the framework part of the reason [why] supply is struggling to keep up, [which is] that OPEC+ is taking two and a half million barrels a day out of the cycle.
“So we’re in a good price market, but we didn’t get there driven by demand. We got there by supply being taken off the market. So it feels, at least to us, it’s a good place, but it could be a little bit fragile—and OPEC+ doesn’t stay disciplined—so we’ll continue to forecast a price a little bit below where the market is, for discipline. I mean, it’s clearly going to be in a place where we can all afford to develop economically this year and for the next many years. And I think there’s a real risk that the under investment, which is on the order of two to $3 trillion over the last 10 years, is really going to come home and land on the world where we’ve just under invested for a long enough period of time that if world economy synchronized and really start to grow strongly again, 2, 3, 4 years from now, I think we’re going to collectively struggle to meet that demand. Partly because the Permian has matured and I think it’s hard for the Permian at this scale to grow the way it did 2, 3, 4 years ago. There’s still growth there for sure, but those big growth years are going to be hard to replicate in our business. And we tend to take a pretty stingy approach with our inventory. We want to maximize the durability of it for that value chain for the long haul for our owners.”
Let’s end with the beginning—with remarks from the first speaker of the day, Ryan Lane, with his admittedly unconventional talk about “legacies.”
“So I’m going to give a little bit of a different talk than maybe typically hearing in this kind of setting,” Lane had said. “But I want to talk to you about legacy. So I ask you a question. ‘How do you want to be remembered?’ For some, they want to be remembered for fame. For others it’s fortune. Most, sadly, give no eye to their future, as their focus instead on only themselves and only on today with no thought of tomorrow or the world around them. But a very select few live their life with a purpose.
“[These] people seek to improve the lives of those around them. They dare to be bold and they dare to be different. And dare I say, in a world that demands conformity, they insist on being themselves. And I’m convinced that if we spend more time truly considering our legacy, it would no doubt better guide our future.
“So how do you want to be remembered? It’s a question that, as a legislator, I think everyone in the legislative realm should consider. And in fact, I think we should grapple with that question on an ongoing basis. I’m convinced that if we thought about legacy, it would lead to better policy making, more deliberation, and, most importantly, actual solutions that benefit the lives of everyday Americans. So why am I boring you with my philosophical musings and what does this have to do with PBPA and the oil and gas industry in New Mexico and Texas? How do you want to be remembered? It’s generally a question we pose at the individual level. But I submit, it’s also a question we should be asking at the industry level because, like it or not, this industry, it has a legacy. Oil and gas has a legacy that’s been written and is being written as we speak. But how many of these chapters have actually been written by industry itself? And instead, how many have been written by the local opponents of the oil and gas industry?
“And whether you like it or not, each one of your legacies, including my own, are tied in with the legacy of the oil and gas industry. Otherwise, we would not be sitting here subjecting ourselves to a long-winded politician this morning. But what is the legacy of the oil and gas industry? Or maybe a better question is, ‘What should it be?’ Some 23 million people a year die from indoor air pollution, and the majority of those are people who have to burn wood and dung as their only fuel source. Over the next 10 years, it’s estimated that more than 50 million children under the age of five will die from poverty. Fifty million children under the age of five whose deaths are both preventable and predictable. Studies have shown that if you do not have access to reliable and affordable energy, you will never escape poverty. It becomes generational.
“The bedrock of escaping generational poverty is access to reliable and affordable energy. And what, if anything, does the oil and gas industry provide but reliable and affordable energy? In the early 1800s, 90 percent of the world’s population lived in extreme poverty. Ninety percent. Today, less than 10 percent of the world’s population lives in extreme poverty. The difference, I submit, are two main drivers. One is unleashing the power of a free market system, and the second is the discovery and utilization of fossil fuels.
“The oil and gas industry in a very real way over the last century has led to countless people escaping poverty. How does this industry want to be remembered? I think of jobs. The oil and gas industry provides real economic jobs in local and rural communities, areas where there’s not much economic activity, let alone opportunity…. This industry also offers unique opportunities in the area of entrepreneurship. It’s one of the things that I really love about this industry….
Quality of Life
“How do you want to be remembered? By improving quality of life out of a single barrel of oil? There’s more than 6,000 products that come out of it. I mean, seriously, if you look around, whether it’s my glasses frames or cell phones, the clothes that we wear, the asphalt on which we drove here, in laptops, smartphones, medical equipment, plastics, increased lifespans, all attributable to petroleum products. So I would challenge this notion that we need to transition completely away from fossil fuels. Do we need to pursue all forms of energy, wind, solar, geothermal, nuclear? Certainly, of course we do. But this notion that fossil fuels are evil and that we must somehow transition away from them at all costs transition away from emissions…. Well, at the end of the day, the war on fossil fuels really is a war on those who are impoverished. I can also tell you it’s very easy for me to support this industry. If you’ve ever been subjected to watching me on the House floor, you understand that I give a lot of talks along these lines, but I’m open in supporting and defending this industry. And it’s not because this industry writes a lot of checks to our campaigns, which of course we appreciate that. But it’s because of what this industry means for New Mexico and what this industry means for the state of Texas. But I can tell you in New Mexico, we’re not done. We’re actually trying to build a future, a better path, a more positive way.”
Ryan Lane has served District 3 in New Mexico as their Representative in the House since 2021. He was selected by his peers to be the House Minority Leader for the 2023 legislative session.
The PBPA announced during the meeting proceedings that C. Richard “Dick” Sivalls, President and CEO of Sivalls, Inc., in Odessa, Texas, will be the 2023 Top Hand Award Recipient. Watch for further details on this honor, and its banquet event, in upcoming issues of PBOG Magazine.