Chuck Yates Needs A Job

0:20 All right, Rose, so we figured out we met at Pappa's brother Steakhouse at Lucas's deal. That's right. Yeah. So,

0:30 how do you know Paul, man, I've known Paul since 1995, you know, he was a customer for a long time and then became a good friend. Was that kind of Tom Brown days for Lucas just kept morphing into

0:46 whatever entity he went to, you know, we usually did work for him when I was with Patterson drilling. We drilled for him and then, you know, we got to be friends and we were middling country club

0:59 alums and hung out and just always stayed close friends. And then, you know, of course, at NAIP, we always did that fundraiser

1:09 and so, yeah, became good friends It was kind of a wild story on that fundraiser because his son was born.

1:19 was something, something about how his legs were, I forget what the exact story was, and there was one place on the

1:30 planet that could fix them. Right, Shriners. Shriners up in Dallas. Right, right, it's a great story and you've heard it multiple times, but Paul's been the champion of theirs for years and

1:43 it's a great cause and easy to support So I did like you, I showed up and usually drank too much wine and bid on things that I didn't need or want. Yeah, it seems like every year, 'cause we backed

1:57 them through four iterations of adventure and it felt like every year I would get drunk and buy the shotgun at the auction and only about

2:11 twice did I come home with the shotgun It felt like I bought it and then we do it. Donate it back and auction it again and and all that fun stuff, right? I was the guy in the back running your bit

2:25 up. Yeah, I'm not

2:28 Exactly I did that the the the one year Pete I remember going to peach here as partners saying alright Pete you got to buy the shotgun this year Right, we've made enough money and all and I ran it up

2:40 on Pete That

2:45 those are those are enjoyable memories for sure So so levels set us where are we in the energy business? You know, well, it's a tough time for

2:58 Service companies in the oil markets the gas markets are pretty strong But the guys that are in the oil markets are are You know finding that drill baby drill is not happening and You know, Rick

3:14 counts falling in the oil markets 60-something rigs. It's been

3:20 offset by some gas rig additions with gas prices in the mid-3s. It's down today. But gas has been pretty steady. And I think there's a lot of bullishness out there around gas for LNG export and

3:40 power for AI and data center. So gas seems to be the

3:48 the winner right now. But oil's definitely got a lot of customers in these oily markets, rethinking their

3:59 CapEx, curtailing their drilling programs, their FRAC programs. I'm in production services in my private equity fund. So cash flow becomes very important,

4:14 because they maximize cash flow when they're not drilling and so the existing production becomes a focus point and so we do artificial lift and a few other things and so production services is It's

4:27 always important, but it becomes more important when these guys are trying to maximize the cash flow with the existing production that they have but new well development and especially projects that

4:42 are step-outs They're They're under a lot of constraint right now. So

4:50 There is there's definitely hasn't been a drill baby drill kind of mentality in The market it's been the opposite and the administration has said there's no imminent Push to fill the SPR and they're

5:04 not planning on it anytime soon They've been vocal about that. That's that's that hasn't helped

5:13 been vocal about cheap gasoline prices. That hasn't helped. They pushed OPEC and the Saudis in particular to produce more barrels, to try to drive inflation down through gasoline prices. And

5:30 that's had the opposite effect on domestic production. We've seen US. production flatten for the last six weeks. Today, it was down 100, 000 barrels a day. Again, it fell last week, 50, 000.

5:44 This week, it fell 100, 000.

5:48 So I think that that is

5:51 indicative of the red count falling, the duck count rising, the drilled and uncompleted well count in the oily basins. So far, the

6:05 administration, Trump administration's declaration that we're going to be and maintain energy independence, energy dominance. It's just not coming to fruition at all. So I think there's a little

6:17 flux out there. Everybody's scratching their heads, trying to figure out, you know, where's old headed? Is it headed to the high fifties?

6:25 That would shut down a lot of stuff. Basins with, you know, transitionary cost and like

6:36 the Bakken where they, you know, these basins where they have a hard time moving their crude and it's expensive

6:47 to move. Those basins are going to come under a lot of pressure. They're going to be at lifting costs break even pretty fast if they're not already there. So I think that we're seeing, we're still

7:00 seeing some transactions out there, Hess and Chevron, being the latest that got the green light. But I think that we're going to see a continual, reduction in CapEx for new well development if

7:19 things stay where they are. So at some point, I'm hoping that the administration says, whoa, we've put too much pressure on domestic producers and we are in a free market and these guys don't have

7:39 to drill, baby drill, if they don't want to. You can open up all the federal leasing that you want, but they're not gonna buy it and they're not gonna drill it if the prices don't justify it. So,

7:52 you know, maybe inflation kind of moderates, comes under control, interest rates come down some and crude prices show some sort of bottoming or strengthening at some point and then we'll go back to

8:11 development I think the thing to remember. or the oil field in particular, not really the gas markets as much, but for the oil field, we can shut it down fast. Ramping it up is very difficult

8:27 once we've shut it down. So, 'cause we'll have a lot of employees that have left the sector, so we'll have to rehire, retrain, that creates continuity issues, efficiency issues.

8:39 We'll have a lot of green hats out there, learning the business, drilling will be less efficient, fracking will be less efficient, at least while we're training. So, ramping back up is not a

8:53 flip of a switch. In a lot of countries where the government is subsidizing all of the drilling, these guys, when the rigs shut down, they go home, they still get a paycheck, and they just watch

9:06 TV or get on the internet or do whatever they wanna do, while they're waiting on their equipment be reactivated.

9:15 in the US. and all of the free market, like Canada, these places, these

9:20 employees scatter. They scatter and they go to work in different industries. They find other jobs, they have to. No one's subsidizing them, and they have to go find other things to do to make a

9:33 living. So these fits and starts within the oil patch can be really problematic when you're trying to ramp back up. I think that's probably the thing the administration doesn't recognize is that if

9:48 they want

9:50 US production to increase, it takes a lot of momentum, a lot of confidence, has to be built up for producers to say, Okay, I believe in the price and I'm ready to spend these CapEx dollars.

10:04 Otherwise, it'll just keep softening. And we've already seen the role of production in the US. flattened and now it's tapering off, and I think that's going to continue. And we're gonna look up

10:19 and be below 13 million barrels a day as a producer and headed south from there. And it's gotta just fall like a rock. It will fall, it will fall,

10:31 I think it'll be gradual. But let's look at

10:36 the decline curves in the shells. They're steep You're very familiar with drilling these shell wells. You know how fast they decline. You have to backfill that if you wanna maintain that production

10:48 level. So if guys say, well, I'm going from, you know, 10 rigs to seven or 10 rigs to five or 10 rigs to three, that's

10:60 pretty impactful. You know, when you look at what that does to production rates. So you're just kicking that can farther and farther and farther if you say, Okay, we want to. try to reactivate,

11:14 you know, prices are good, everything's good, we wanna start up again. Takes a long time to get that train moving. Yeah, you know, my take that I've said a few times on here and you know, I'm

11:27 a below-veating podcaster who hadn't drilled a well in seven years. So

11:33 my take was anyone that's surprised that Trump is a low oil price guy, just wasn't paying attention 'Cause he's always been a low oil price guy. It's always been his thing. I think where we missed

11:48 as an industry is we're kind of new, best case, we'd hang out in the '60s 'cause he'd go beat up Saudi Arabia or bribe them or whatever to get more oil out there. Couldn't we have walked in with a

12:04 wish list? 'Cause he'd do anything else for us. Could we ask for oil to relieve from federal lands 55. I'm kind of making this up. Could we get permitting so that we could build any of the

12:18 pipelines we want to build anywhere? Well, he sort of talked out of both sides of his mouth during the campaign. He was drill, baby drill. We're going to be energy dominant. We're going to make

12:28 a lot of oil. And then, okay, if we do, we run the risk of having too much supply and you have to have strong demand. And his thing was, well, I'll make sure the demand is there and, you know,

12:46 prices will be healthy enough that everyone's going to want to drill.

12:51 You really can't have your cake and eat it too in that scenario. There has to be a strong demand out there. And this tariff talk and all the work around tariffs that we've done has really put a huge

13:05 question mark globally on what is the economic health What is the global demand going to going to look like on a go for it? If you look at the strip today, the strips telling you, people don't

13:16 think there is a ton of demand that the demand is going to be soft compared to supply. So I think

13:25 everyone who's running for an election says whatever it takes to get elected and he really played both sides I agree with you, you know, if you were listening and paying attention, he is a low oil

13:40 price guy. He's not an80 a barrel guy. He's something, you know, in the much lower than that and he's proven that so far. So, but I think what they're seeing right now is producers in the US.

13:54 and Canada will react and they will curb their CapEx and they will stop drilling and stop fracking And so, well count, we'll shrink and. these guys probably, I think, underestimate continually

14:15 what it takes to flip that switch back on. And that's the part that there's a disconnect on. And I've been vocal about it. I put out post on LinkedIn and other things where I've said, you know,

14:27 you need to be watching these canaries in the coal mine because they're telling you that things are rolling over And if you're going to look up and when you need US production the most, you're not

14:40 going to have it. And then you're going to ask for it. And it's going to take a lot of time to build it back up. Right. And I mean, I know at the end of the day, the DOE actually looks after

14:51 nuclear policy more so than oil and gas type stuff. But I would say Chris Wright knows this. You know, so there is someone sitting at the table. I think Doug and Chris both know it. Yeah. I

15:04 think their voices are, you know, just two out of many. within the administration, so they're going

15:13 to have to say whatever they say behind closed doors. And then back in front of the TV cameras, they're going to have to say whatever the talking points are, because they don't want to vary from

15:23 the president. But

15:26 they have a tough job, both of them, and they're walking a fine line. I know they're hearing from the industry I've talked to several people who

15:38 are tight with them and saying, Hey, what the hell? This is not going in the right direction

15:45 for strong US production. And I think the promise is always, Well, the demand's going to come. We're going to get these tariffs done. We're going to settle these trade agreements. Everything's

15:57 going to be great. Just wait until next year. That kind of thing. And

16:04 I think that's fine. You just better recognize the damage you can do in the meantime. And that's the part that worries me the most, is that they don't recognize how long it might take us to

16:17 reactivate some of this

16:22 capacity to increase production. It takes a lot. Yeah, and the thing that gets me is, I think you're right, I mean, Doug and Chris both know that, and why they aren't more proactive in terms of,

16:36 because you know, price is the revenue side of the equation, are there costs they could drive out of the system? I mean, could they take the Jones Act

16:48 and disable it for the energy business and boom, all of a sudden we've got more markets, we can do more things. Could they potentially exempt steel tariffs on oil field stuff? They could and they

17:02 should, in my opinion, they should. They should be looking for in these tariffs. agreements or trade agreements that they're trying to make with these global partners, I think US energy export

17:13 ought to be part of the program. And the things you mentioned, Jones Act being one,

17:22 still tariffs on everything that we use between drill pipe and tubulars in the oil field could definitely be impactful.

17:33 I don't know if that thought has gone in there or if they think if they placate too much to the industry, they're going to get called out for it. But I do think that they need to be constructive in

17:44 some ways to bolster and put a firm

17:50 backstop behind the industry with some of these levers that they could pull. If they do that, then that confidence level and the conviction level for producers would re-emerge.

18:07 there are a lot of viable oil prospects at65, 70

18:14 a barrel. But you get sub 60 and a lot of things don't make any sense and a lot of rigs are gonna lay down. Yeah, no. But a 60 rig drop from the first of the year is not insignificant. I think,

18:28 like I said, that's a canary in the coal mine, people need to be paying attention. Yeah No, it's so early to middle of my career, you used to, if you told me how many rigs were running, et

18:46 cetera, I could tell you six months out what production was gonna do. And starting in about 2017, 2018, just lost the ability to forecast it anymore. I was always under appreciating. much oil

19:02 per rig we were getting and well then drilling efficiency improved, frack efficiency improved. So a lot of things have changed in that six year window that you're talking about eight year window

19:13 that you're talking about. I think there's been a quantum leap in efficiency improvements. I don't think we're going to see like another one in the next eight years. I don't think we're going to

19:27 drill these wells in a day. I think we're getting pretty damn good at it and we're pretty good at drilling them. These guys are drilling exceptionally long laterals now.

19:40 At some point that's going to taper off a little bit until we find some new revolutionary technological improvement to get us to the next level, whatever that is. So I think we're going to plateau a

19:54 little bit as far as efficiency improvements go. I think we'll do things differently, you know, electrification of everything that we've done in the oil patch continues to increase. So that will

20:09 be a burden on the grid, which is going to require more power. But we're solving that. We're engineering our way through most of that. I think the grid will be taxed though. In the next few years,

20:22 I've seen several reports that show a lot of stress on the grid between AI and everything else that we're doing within not just our industry, but all industries. So

20:35 these data centers require ton of power and there's more and more are going to be going in if we're going to keep up with everyone else as far as AI and data center globally, that capacity globally.

20:46 So it's going to require a ton of power. And I think all power has a part to play, whether it be renewable or nuclear or hydrocarbon.

20:60 We're gonna need it all. We're gonna need every bit that we can get. I love the term energy Transition aside from whale blubber. I don't even know. I don't even think no I don't even know what

21:10 energy transition means anymore, and I don't think a lot of people do either would today Then we've ever burned for fuel I mean and that's pretty embarrassing that that some countries still don't

21:21 have access to natural gas When it's readily available for them and there's plenty of it and I hate to throw how Purbly around but I'm a podcaster. So that's what I do But I I say time and time again.

21:33 That's why wars are fault fought. You know, I mean you you start denying the third world Power cheap power. Hey guys, we got ours. Sorry. You have to use this That's that's bad. That's why I

21:48 think LNG export should be a bigger part of the discussions in these global trade agreements because There's there's there's a lot of it And it's not just the US, I mean, there's a lot of LNG

22:01 capacity coming online. And I think that ought to be part of these trade agreements. If it's not, they're not speaking about it, if it is. But if it is, I just think they should talk about it

22:13 more and make it a bigger deal. I think it would bolster the whole industry. But

22:18 we'll see. The Marshall Plan for today, I've said time and time again, if we really wanted to do something, we should be financing LNG infrastructure and in other countries really cheap. Let's

22:34 build them receiving terminals. Well, one thing the administration has done is green light a lot of infrastructure that the previous administration had their breaks on. That's been good, but it

22:50 does take a lot of time to see it come to fruition It's gonna be interesting to see how that works. plays out with just executive orders versus actual laws. 'Cause it's, I'm sitting there deciding

22:56 to

23:04 spend a billion dollars. I got an executive order, so I got a small window. Who's the next president? What are they gonna do? Exactly, and I think under the previous administration, the

23:15 judicial branch felt a lot of empowerment to

23:20 put some of these projects on hold for various environmental reviews and other things. They constantly found ways to roadblock them. Will the next administration be one that does the same thing?

23:35 That's a danger.

23:38 If I was a huge infrastructure builder, it's certainly something I would be considering when you're talking about a project that takes five to seven years to complete. and billions of dollars to

23:53 invest in. And then you get really close to the finish line and someone, you know, you're Charlie Brown and Lucy pulls the football away. And that's the danger

24:08 those guys are constantly dealing with. I had Ian the on podcast Bradbury from AXPC.

24:16 And she's way more in touch with DC, obviously, being there leading the charge for our industry. She swears there's bipartisan support, particularly when it comes to permitting type stuff, that

24:29 there's a true shot we could get a bill passed with Democrat support, easing the restrictions on

24:40 permitting type stuff, particularly when it comes to electricity. 'Cause at the end of the day, you want your solar, you want your wind, we need wires, I don't disagree. I would just say

24:53 there's some activist judicial

24:58 courts out there, you know, that have been very problematic, you know, one or two,

25:06 you know, antagonists can really stir up a lot of problems in a court and they've been, they've shown a propensity to, to tap the brakes on projects and, and call for additional studies and do

25:22 things to slow them down. You know, I remember when I would fly into Brownsville, Texas, I've, I've got a little place down in South Padre and what I like to fish at and I would fly in there and

25:38 see all the natural gas infrastructure being built for

25:45 all along the ship channel there in the Brownsville ship channel. And, you know, one day it was flurry of fire ants out there. You were so many people and cranes moving and everything was going

25:57 and then it was just dead because of a court order. From a fourth circuit DC court, shut the

26:06 whole thing down. I think that's the court.

26:10 And some activist judge just killed the whole thing and said, Now we have to study the bird flight and make sure this is not disrupting the shrimp or whatever. There was some reason why they wanted

26:23 to put a hold on it all and just shut the whole thing down and all those people were out of a job. Thousands of workers were out of a job the next day and just stroke of a pin by a judge. So

26:38 I was down there the other day and it was busy again. That was good to see. But that's the kind of fits and starts I'm talking about that cause a lot of problems and it takes a long time to get that

26:49 all back going again. Yeah, you know, he's jokingly say the reason the blunt nose leopard lizard is almost extinct is because it's the stupidest animal God put on the face of this planet. He used

27:02 to come and jump into the side of a truck It was that dumb and so I'm not really sure we needed to protect it like like we did. But yeah, I mean part of that regular that that permitting reform

27:17 would have to be Judicial oversight in terms of what they could actually do. What kind of hoops you'd have to jump through? Well, I think the springports addressing some of that right now, which

27:30 is good in my opinion because I think activist judges, you know shouldn't be able to stroke a pin and and or throw the gavel and and and be able to affect things all over the United States, but

27:43 especially when they really don't have all the facts and they don't understand the all of the consequences of what they're doing. But it has been a problem in the past and things have a way of coming

27:57 back around and history repeating itself. So I'm watching that, I'm concerned about it. Every fail safe that this administration or this Congress could put in place to stop that would be good for

28:10 the industry. I don't see a ton of that being done right now. The Supreme Court's been very helpful, but I haven't seen, I don't think enough initiative on the part of our legislators to try to

28:26 remedy that. And

28:30 our, you know, our administration on the executive side kind of does one thing to help us and one thing to hurt us, you know, and they're kind of back and forth and back and forth. So

28:42 I hope they get inflation where they want it interest rates where they want it and the economy kind of going in a direction that they want it, and they'll, you know, you know, take the handcuffs

28:54 off of the industry that they're kind of putting on it right now. I always find the arrogance of a federal district judge funny and they're perfectly fine issuing a nationwide TRO on something, you

29:10 know, we can do that. But then you go, well, why don't we just make other district judges opinions binding on you? No, no, no, no, we don't have to, we don't have to follow precedent of the

29:23 other district judges. It's kind of like, huh? Okay, I don't get that. But so you were talking earlier, I always have said that, you know, the, the shell revolution with hindsight, you could

29:39 at least see that it was going to happen because I mean, we drilled our first horizontal well. in America, I think in 1937 offshore. My running joke is John Wilkes big before he shot Lincoln, his

29:55 job. He was actually a frecker. He was throwing dynamite down the hole, but you

30:02 know, blowing up, blowing up well wells. And so you at least had the tools and the shed and you throw really, really high gas prices on there. So okay, in hindsight, you can look back and see,

30:14 okay, this makes sense that it could happen. You can see how, I mean, I remember drawing early days of the shale revolution, you're drilling oil well, that was a kiss of death, oh my gosh. But

30:26 we figured out how to make the fracks work for oil wells, so you could kind of see that. Do you see, and you kind of said no earlier, but I'm gonna circle back to the question, do you see

30:38 technologies out there that possibly in five years are game changers? 'cause I really don't. Well, I think AI is going to change some of the way that we evaluate prospects, because there's so much

30:53 data that we've gathered that can be processed by AI to give answers, to questions that the human mind has a harder time wrapping itself around. So I think

31:12 the geology that could be a big help with targets and figuring out different zones and where the dips are and where the faults are. And, you know, that's usually the biggest issue with horizontal

31:27 drilling is just staying on target in zone and making sure that you're not, you know, getting out or getting into something or too close to something that once you do frack, you're going to frack

31:40 into a bunch of water or you're going, you know, salt water, by the way, uh. salt water by the way not fresh water but you're gonna end up with more salt water than you want.

31:51 I think that there's definitely some technology there that could improve, continue to improve the efficiencies around how we drill and how we frack and how we stay in zone and make sure that we're

32:06 getting right to the right rock that we wanna be in.

32:11 So yeah, I do see some advancements there, but there is a limitation to the metallurgy. You know, there's a limitation to how far and how much we can push and how far we can drill.

32:29 The

32:32 laterals today are unbelievably impressive. You know, we drill a two mile lateral today, like it's nothing. I mean, that's a quantum leap. I can remember when some of my friends in the Permian

32:42 and we had the drilling rigs on the wells you know, they were drilling 100 foot horizontal or a 500 foot horizontal, and that was a big deal, you know, and now we're going two miles and more. So

32:54 I

32:57 think that

33:00 there's always room for additional advancements in technology, but the metallurgy's going to probably hold us back a little bit, you know, there's only so much our tubulars can stand and can do,

33:13 and the reach is only so far on some of these things. The pressure gradients that we're having to use right now to get the fracks we want, the sand that we use today, there's limitations. Physics,

33:29 yeah, physics master. Gravity's a real thing and physics is a real thing. So, but I always think there's tweaking and improvements that can be made and that'll constantly keep happening So, I

33:40 mean, no, I'm a 10 oil in place, we're getting out. I mean, right. And so, and I don't know if the numbers 10 or what it is, but the, the secondary and tertiary recovery systems that we're

33:54 going to, we're going to employ 10 years from now, 20 years from now, you and I can't even fathom it. It's going to be amazing that the links that we're going to go to, to extract the rest of the

34:06 hydrocarbons that we don't get today. So, you know, my dad used to tell me, you know, don't go into the oil field. We're going to drill it all up. You know, here he was a pioneer of the

34:18 industry and he was like, don't, don't, don't come into this business. By the time you get old enough to make any money, it's going to be over. And I've seen enough in my career that, you know,

34:30 my sons in the industry today and I tell them it's going to keep getting better and we're going to keep getting better at it. And, you know, we're going to find new ways to extract more and more,

34:42 you know. Don't be afraid of this industry, it's not going anywhere. I think he'll retire in this industry and be glad he worked in it because it can be very rewarding. I've definitely had my

34:56 lowest of lows and some pretty good highs, but

35:01 so the cycles tend to kick your butt pretty good, but it's still a great place to try to earn a living and make a life and a career Well, and I think today with AI,

35:15 just when you look at it in terms of global significance, I mean, AI is a game changer. It can change warfare. It can change everything. We cannot see leadership of that to the Chinese or the

35:31 Russians. We just can't. We have to remain at the forefront of AI, US companies doing it, doing it here domestically And at the end of the day, that means energy, right? I mean, it runs at all.

35:44 And so I think if there were, I mean, historically, I mean, I was jokingly say that the Allies won World War II because of the East Texas oil field, you know, we were able to power all our ships,

35:57 et cetera. I mean, I think AI is that level important going forward and we've got to have energy here to do it. The power is a big deal. I think where the good news is, you know, as much as we

36:12 complain about our grids, they're the best. As much as we complain about our power generation, it's the best. So we already have a leg up from that standpoint. We have a capitalist society which

36:28 fosters AI and any other innovation that's going on out there And so I think we've got a lot of -

36:40 we're already - many steps ahead of some of these other countries. I agree with you, we can't lose our spot, but I feel pretty good about our spot. Yeah, yeah, no. And natural gas

36:55 in my view is like the best, one of the best assets this country's sitting on is it's reserves, the natural gas reserves. They're incredible, and it's such a

37:10 great cushion and backstop for the country. And we can't ever forget it, and we have to use it in the right way, and we have to be smart about it, but it is definitely one of our greatest assets.

37:24 You know, I've been snarky about

37:27 this, I was speaking at NAIP this year, and I asked everybody, I'm like, I mean, the crowd's what, 200, 300 people. I'm like, who here has natural gas in their portfolio? And of course

37:40 everybody's hands raised. And I go, when's the last time any of y'all went and sat down with Microsoft, Google, Amazon, Oracle, and tried to sell them natural gas, or actually what you should

37:56 be doing is selling them power based on your natural gas. All the hands went down. 'Cause I agree with you. I mean, I think it's a huge strategic tool. I just worry that we're sitting there going,

38:08 well, if we produce it, somebody's gonna build the power and somebody's gonna sell that to Big Tech. And I think, you know, I think ultimately at the end of the day, we as an industry have to go

38:20 do that. I mean, Toby Rice needs to go sit down with Mark Andreessen and, you know, Larry Ellison and all these guys and educate 'em. 'Cause I don't think it's the rational decision, but just

38:34 where Big Tech's mind is, they're gonna choose nukes.

38:38 I mean, that's carbon free, you know, makes sense to them. And I don't know that they understand the full impact. Now Zuckerberg's getting smart. He puts John Arnold on his board so that he's

38:50 getting insight into the energy business. But that's what I worry about, that we're not being proactive about that enough. I definitely think that even with nuclear, micro nuclear power generation,

39:06 as that becomes a more relevant thing, you're still going to need natural gas to bridge gaps, and you're still going to need natural gases of a backup. It's gotta be there. You're, there's so

39:21 much power demand that even the micro nuclear space probably can't fill it all, and you still have the not in my backyard issue with micro nuclear.

39:33 So we'll see where it goes, Like I said earlier, I think all of these different power contributions, whether it be renewable, nuclear, hydrocarbon, they all have a role to play because the

39:49 demand is going to be so great. And it's not just in the US, it's globally. Like you said, these countries that are still burning, you know, cow dung to heat food and to heat homes and to clean

40:02 water, they're still chopping down trees And that's the only source of energy that they have.

40:11 At some point, you know, we're going to need to take care of those folks and because they're going to need that power and we're going to have to bring them into the proper century where, you know,

40:25 they're burning a cleaner, burning fuel and natural gas has a role to play in that and that migration transition or whatever you want to call it. And I think that,

40:41 I think that probably these executives

40:47 are having some of those conversations that you mentioned, they may not always go the right direction because it seems that whatever's politically popular at the time seems to lead the conversation.

40:60 And if it's not, you know, at one point during one administration, if it's not renewable, they don't want to talk to you about it.

41:08 And then the next administration, it's like, yeah, natural gas, not so bad, and we can talk to you about it. So I think some of that's happening. You know, today there was an announcement

41:18 between Oaklow and Liberty Energy for a combination nuclear natural gas sort of bridge that they want to offer customers for implementing

41:32 that transition to mobile power and you know

41:38 off the grid power

41:41 for these data centers and this AI generation. So I think that's coming.

41:50 The things that

41:52 hurt it is bad regulatory moves and things like that. So let's hope that that doesn't stymie it. But I think that there's some

42:05 real momentum right now out there with some of these large companies that are going to demand a ton of power to seek out all of the above, and hydrocarbons definitely in the conversation. All right,

42:24 give me a crazy, funny oil field story. And while you're thinking of one, I'm gonna tell you one about Lucas.

42:33 So Paul Lucas and Peach here have known each other third grade. They've been friends forever. We back him at Kane Anderson and we're looking at, this is early days, the first deal we do with them.

42:50 We're in a board call and at one point, Paul threatened to quit because we weren't going to bid18 million for something and Pete only wanted to build16. And Paul was like, Kane

43:04 Anderson, will you go back me? I'm going to quit and start my own company. We're just sitting there. And Pete's like, Now Paul, don't you go scaring those boys from Kane Anderson. They don't

43:14 understand that you've been doing this since the third grade, blah, blah, blah. But ultimately, how that deal went, and it was a great one, is a publicly traded company had some, had morphed

43:26 to Appalachian, had some stranded Permian assets, and they ran a sale for it. And we were the high bidder.

43:36 three weeks to get back to us and they said, okay, we'll take your deal and we're like, well, oil's down 20, you know, in the last three weeks. We can't honor that. And they go, okay, we'll

43:46 give us another bid. So we give them another bid. And again, same thing, three weeks, oils down another 20. And while we can't honor that bid, I mean, oil keeps moving. And so we all got

43:59 together and there was enough good faith around the table that we just said, why don't we do this? Let's just go negotiate the PSA, put it in place.

44:10 We'll give you a bid. You in 24 hours say yes or no. And if you say yes, we'll put the hedges in place. And that way, you know, we're closing. We will locked everything. Everybody agreed to do

44:22 this. So it comes down to, they're like, okay, we got the PSA done. We're ready to go. Give us your bid. And we're having the board call where we're talking this through. And Paul is like, we

44:34 need these assets. We're bidding 18 million and Pete's like, we can't pay more than 16 million or we're going to lose all our money. And we're talking all through this. And Pete goes, hold on

44:45 just a second. And he obviously walked away from the phone, he walked in and he said, he said, we're bidding 16 and that's final. And Paul goes, how can you say that? And he goes, that was our

44:56 building manager. The public company just canceled their lease on this building So we're only gonna bid 16 million. It's like, fair enough. We got the asset for 16 million. That's good, the

45:09 great story. You know, I've got a ton of, some are funny and some are not so funny. I guess they're all, they're always, they're always, they're always funny later, but they don't seem funny

45:21 at the time. I've lived that too often. You know, for me personally, You know, and I have some great stories of Patterson drilling, you know, the fits and starts that it went through and all

45:32 the things that Clos and Dad did, uh, things that, that wrecked them and things that saved them and the miraculous, you know, providence of God, you know, just if it was any, you know,

45:46 there's no other way to describe it. It was just, you know, a blessing out of the blue on something that they had been totally wrong on and it turned out totally okay. But I had that in my career

45:59 too, you know. I had some bard rigs that I was running, shallow water, golf, work over barges and my largest customer came to me and said, you know, I don't like these prices that you're

46:14 charging me. I'm going to build all my own work over barges and you're going to lose my business And he was more than half of our business. And I said,

46:29 well, that doesn't sound like a really good thing for us. You're kind of one of the biggest in this market. We really need your work. I don't want you to build your own work over barges. So we

46:41 got to find a way to work this out. And he said, well, I guess I could buy yours. And I said,

46:48 they're absolutely for sale.

46:51 And so we made a deal over the phone in about five minutes And it was done. And I got a question later, like, why wouldn't you sell those work over barges? They were very profitable. And I said,

47:03 well, when the guy that's responsible for over 50 of your utilization says, sell them or else, you sell them. And man, it worked out super good for us as a company. But looking back, pretty

47:18 fortuitous, pretty funny conversation with him on the phone, just - Um, we went from him telling me he was fixing the release on my rigs to him buying them all in about five minutes. And that

47:29 worked out pretty good. Yeah. Um, close and dad decided coincidentally enough to go offshore during the bust. They, they were offered a chance by the bank of New York, melon to bid on, um, a

47:46 couple of offshore rigs These were jackups and they had, they were land drillers. They didn't know anything about offshore drilling. They didn't know anything about, you know, working in the golf.

47:57 Uh, but, uh, melon was desperate to, to sell. They didn't know more than melon. Probably did, but not much. And, uh, you know, they, they bid a, but they thought was an embarrassingly low

48:12 number on the rigs and they got them both up and one was working. And so they took the rig over, they were running the rig, they were losing5, 000 a day in cash. They just couldn't get the cost

48:25 right, they couldn't get the right right, they couldn't do anything right. And it was just killing them, you know? And they were already in a bad spot. And the rest of the drilling company was

48:38 teetering on the verge of bankruptcy. And

48:43 they were losing money every day. Well, when they bought the rig, because of the Jones Act and some other things, they had to ensure that rig for replacement cost value. So they had a huge

48:55 insurance policy on the rig.

48:59 One day they went to lunch and they were fighting and arguing over what the hell they were gonna do with these, this rig they had brought and the contract they were under and all the money they were

49:09 losing, you know, with this one rig in the Gulf of Mexico, well, the rig had a punch through fell over, it listed 45, 45 degrees, sorry. And

49:23 they were like, oh my God, you know, the rig's about to fall over. And so they hurried down there to figure out what the hell they were gonna do and got their insurance company involved. Got

49:32 everybody off the

49:36 rig safely. Thank God, no one got hurt. But here's this rig, just completely at a 45 degree angle and the golf with a punch through. And

49:50 they're scratching their heads, trying to figure out what the hell we were already losing5, 000 a day. Now our rig is, we may not be able to get it back. And sure enough, they couldn't. It was

50:03 a total loss and it was declared a constructive total loss. And so the insurance company called them and said, We're declaring this. constructive total loss and they're like, well, what does that

50:15 mean? We don't have a clue what your hell you're talking about. And they said, well, we're going to give you 100 of your policy on it. You know, they got real quiet on the phone and said,

50:24 you're going to give us, you know, the two and a half million dollars on what we bought for like 200, 000. And they said, yeah, that's what we're doing. And that saved Patterson drilling. That

50:37 insurance check really was a turning point for the company and brought him out of a really bad spot. They were able to pay a bunch of debt off and recover the company. And had it not been for the

50:51 rig following over, you know,

50:54 they probably wouldn't have made it. So, you know, it's crazy things like that happen in this industry. You know, when you think things can't get any worse, and you're hearing the worst news in

51:05 the world over the phone, and then five minutes later, something really miraculous happens and yeah and you're you're sitting in a good spot again. So that can, you know, those are the things

51:15 that make me laugh and make when I look back and kind of make you go out. How in the hell did that happen, you know? I love the large number of people in our business that had a Will Cox play that

51:30 they put together all the acreage on. And lo and behold, there's a shale underneath there. And oops, yeah, they wind up really rich and they become really good CEOs, you know?

51:44 Success has a way of making you look good, whether you were really good or not. Yeah.

51:50 Dad had a saying, you know, a drunk monkey can run this when old's, you know, high, you know, anybody can do what we're doing. Right. And then when things are tough, you know, that's when

52:02 you really earn your money, you know, and you're either good at this or you're not good at it it shows up fast when things turns out So, um, I think that, you know, history always has a way of

52:17 repeating itself. I think these things kind of come around, but you see the talent in the industry from some of the masterminds out there that have been there done that. You know, I'm in my 31st

52:28 year of being in this industry and I don't feel old and I don't feel like one of the OGs, but apparently, you know, I've lost enough hair that now I am one of the OGs, but all I did was try to

52:42 emulate those guys before me who made really cool decisions. You know, I can remember a lot of my mentors and things they said and things to remember. And the Ted Collins, you know, the

52:56 Colustal, it's a Glenn Patterson's, you know, these guys who I looked up to and admired and learned a lot from, and I remember as much of their good stories. But I remember the bad ones too, and

53:14 I'm not going to repeat that. I'm not going to do that again. I'm not going to make that same mistake. And that's how you learn. And so people say, well, what makes you a good leader or a bad

53:24 leader in this industry? Don't repeat the mistakes. If it's hot, don't touch it. And

53:31 that's

53:33 how I've tried to lead. And I don't want to be the quarterback anymore For my days that are over and done, and I'm much happier being in the press box or on the sidelines and just sort of watching

53:47 and coaching and giving advice.

53:50 But that's the how I give advice. I just repeat those things that people have told me over the years.

53:59 Think about this. Why don't you think about it this way? And you pick up all those tidbits of wisdom and then try to apply it to what you're doing And now I just try to spew all that back out to

54:10 everybody that I did. you know, that all the portfolio companies we have, I just try to give those leaders those little tidbits of knowledge, you know. I can, and I hear the voices in my head,

54:20 you know, Spencer armor saying something some way or, and I'm just, you know, like, wow, that was really good. Where'd you hear that? I'm like, well, Spencer armor told me or close to

54:31 albatones, you know. And so I'm, and

54:35 they heard it from someone, you know, in their career, right? And, you know, some of the stuff you kind of come up with on your own, but it's very little. Well, mostly what you're doing is

54:43 just sharing, you know, the good habits and the good tidbits of wisdom so that people don't step in the same pile of shit. Well, and I never thought I would relish being the old guy 'cause I was

54:56 always the youngest guy in the room, right? I totally love being the old guy 'cause you don't actually have to be that smart. It's, you know, it's the Bill Murray line from the movieGroundhog's

55:06 Day.

55:09 And maybe God's not so smart. It's just he's been around so long. He's seen it all. That's really what it is. 'Cause I tell Colin, I tell Colin two things around here when we're doing digital

55:21 wildcatters stuff

55:23 is number one. If I see something and I think it's wrong and you think it's right, I'm probably correct about that because Colin is day to day in the weeds here And I'm somewhat removed kind of

55:40 being a being the, as I like to say, I'm the talent around here, but being kind of more of a board member.

55:48 And I always say, it's because if I see something's wrong, it's got to be bad wrong for me to see it, you know? And then the other thing I always tell them to is, I really can't tell you what to

56:01 do, but I can usually tell you what not to do, you know? 'Cause I've stepped into that Yeah, well, and I also think. You know, when you're in the firefight,

56:11 you know, it's hard to see some things. When you're two steps away from it and you're able to view it from a different vantage point, you can see things that maybe other people can. Some people

56:22 call it force for the trees, et cetera, but it's hard when you're really in the trenches and you're dealing with all of these things coming at you day to day and you have tons of initiatives that

56:31 you're trying to work on You may not see what is to someone else who's standing a little bit farther away is a very obvious issue.

56:43 So as that guy now in these companies, I try to just, and

56:51 then when I want to bring that up, I do it in the most constructive way that I can. Not critical, just what do you think about this? I saw this, this is what I think. I get to, yeah, I get to

57:07 get another question here. Yeah, one more question and just prod them. It's so much better when it's their idea, when it dawns on them that, oh yeah, that is an issue. And I do need to address

57:18 it and wow, I'm glad you said that and I'm glad you brought it up. And I, you know, it didn't have to be my idea. It was really their idea. I just pointed out all the things so that they kind of

57:28 got to it and got back to it. That's good spot to be in It's a lot easier to learn my one trick is a lot of times I would just kind of argue with him, even if I agreed with him, 'cause I realized

57:41 neither one of us had truly thought it all out. So I would just take the other side and argue. He's now figured that out. So he reverse in runs me on that now. And sometimes he'll take a position

57:52 and then I'll argue with him and he'll go, Oh, you're right, change 180 degrees immediately. And I'm like, All right, fair enough, you caught me. That's a good dynamic And I know a lot of good

58:01 teams that are set up exactly that way. And that's really what boards are for. They're supposed to be those guys, you know, if boards are being super active and trying to invoke all the

58:13 initiatives and come up with the strategies, some, sometimes that's a bad thing. They just need to be sort of a great sounding board. No pun intended, they need to be where you can bounce ideas

58:26 and throw darts at the wall and hear that good feedback of, Hey, I did this once, it didn't work, or whatever. But learning in this industry is definitely

58:40 driven by failure and more so than success. I mean, a lot of what we do that works is just extremely fortuitous. Despite ourselves. Despite all things, you ended up in a really lucky spot, a

58:56 good spot, a blessed spot

59:00 I talk about that in the book. crew blessings that I wrote, you know, dad would always say, you know, I'd rather be lucky than good, but then he'd always followed up and say, have you ever

59:11 noticed how hard I'm how lucky a hardworking man can be, and

59:18 more I practice the luck here. I get right. And so I think that in our industry, it's a lot of, was I lucky or good? Or did I just pick up on the failures and quit repeating them, you know, and

59:33 not do it again?

59:36 There's a lot of that in our industry, you know, you learn way more from those things, those buckets that you step in that you wish you never did. And you're in, I think being the OG and being

59:49 two steps away for all the guys that are in that, in that category today, they just seen a lot and they've made a lot of mistakes and they're great at coaching you. and telling you, don't touch

1:00:04 that, it's hot. I did it and it didn't work. And it always sounds good, it always sounds good, it looks good and it might be about debt or it might be about taking on new projects and stepping

1:00:19 out and being aggressive in an acquisition or

1:00:25 taking on

1:00:27 a partner, doing a JV, all of these things that are really dangerous in our industry. And it sounds good and it looks good. And then when you do it, you're like, oh, crap, what did I just do?

1:00:38 I'm really in a mess now. And then you have to try to undo all that. It's great to have somebody there standing on the sidelines saying, well, what if this happens this way? Right. Instead of

1:00:52 this way, here's the mess you're going to be in. Now, let's weigh the pros and cons from there. And in my career, that was so important to have guys like that around who were so good at telling

1:01:05 me, You know, you might want to think about that and know that looks good on paper, but here's how bad it could go and here's the fallback position that you're going to be in. And that was

1:01:19 instrumental in keeping me out of some bad mistakes. Now, did I make mistakes? 100 percent I made a ton of them, but boy, did I learn from them, and boy, do I have the scars that I could share

1:01:33 with people? And I actually have come to really enjoy, as weird as this sounds, I enjoy sharing the failures with people because I just don't want to see a young guy or gal make the same mistake I

1:01:49 made. If I can keep them out of a ditch, I mean, so what if they think I'm stupid? I totally agree and I think. Sharing the failures, I feel like it's almost like my duty. It's like my job that

1:02:01 I need to be doing. And some are embarrassing. And you have to take your humble pie and just eat it because you got to tell somebody, that's just what I did. And this is how bad it worked out.

1:02:14 And they're like, oh my God, why would you ever do that? Well, at the time

1:02:20 it looked pretty good. It sounded like a good idea

1:02:25 I don't care, I'm past being prideful in this industry. They robbed me of my pride like 20 years ago, it's gone. So, I feel like that's my responsibility to go ahead and share that stuff. And I

1:02:41 feel like really mentoring and being a leader now in the positions I'm in, as I look at, and it affects how we invest today too in our private equity firm, you know, I can go in and quiz. a

1:02:56 leader of an organization pretty quick. And I get a vibe real fast. You've done this a hundred times as you're studying a portco and doing your due diligence to decide if you're going to invest or

1:03:07 not. You pick up on something and whoa, whoa, whoa, that was a red flag, you know, that stuck out to me. Or you get in there and you're like, this is not that great of a deal, but I love

1:03:20 those guys. I love the team, I love everything they're trying to do And I love the vibe and I love everything they got going. They've really got their head on straight. So I'm going to figure out

1:03:31 a way to invest here where I normally wouldn't. I could look at this on paper and pro forma and go, mm-mm, I'm out. But I went in there and met the team and fell in love with the team and knew

1:03:43 that I had something to work with and something to build on. With the right cap stack and the right plan, these guys are going to execute or you go in and these guys are executing. and you just

1:03:54 hear a few things from one of the leadership and you're like, I don't want to touch this with a 10-foot-pole, I'm out because I can't make that guy any smarter than he already is. He's already the

1:04:08 smartest guy in the room. He's not going to listen to any coaching and so pass. No matter how good the deal looks. My story on that, I was talking at a conference and this was, do you remember

1:04:20 Cameron Smith having the Costco conference before heart, oil, and gas bought it? No, I guess it ultimately became the Doug conference. But anyway, I was on a panel and I was sitting right next

1:04:32 to Will Van Lowe and they asked Will, how do you scrub down a management team? And Will, who I think, I like Will a lot, I think he's really sharp. He gave a 30-minute answer where he went into

1:04:45 stuff like I call their high school teachers, you know, I do this, I do this And it got to me and one, I just, I don't think myself very seriously, but two, he had said anything possibly that I

1:04:58 could say, and they go, Chuck, what do you do? And I go, Well, we go to LTM, but we order the mixed grill. And if we're still drinking margaritas at 11 o'clock when they shut the restaurant,

1:05:08 I do the deal. If not, I don't do the deal. And, you know, it was kind of a flippant remark. Of course, oil and gas investor quotes that. So I'm, you know, I'm on the phone with the CEO of

1:05:18 Kane Anderson. What the hell are you saying? And I'm like, Well, I would've said, I call Will and ask him for his notes. It's like

1:05:27 you're not into a, exactly. I will give Will credit for this. One time Will did a deal that I had looked at and I passed on and I went and had lunch with Will and I go, How'd you do that deal?

1:05:39 You know, and I wasn't like going, You're stupid. I'm just like, how'd you do it? And Will said, Oh, Chuck, I agree with everything you said about that deal. But would you have been willing

1:05:50 to do it at this price? And I said, Oh yeah, yeah, I would have done it then. And he goes, Well, that's what I told him. I said, I can't do this, but I can do it here. Well, and that's it,

1:05:60 you know. You do, I see. Ken Anderson, you guys did great and Will's got a super track record. I guess Will probably called my high school teachers a few times because we had never to deal

1:06:15 together. But no, I think, you know, I think Will is, he's probably, you know, hitting on something there that you have to be thorough in your diligence. So you don't want to inherit a problem

1:06:28 and sometimes you can get a great vibe in a room and then you do a little bit of research and you find out and that was all for show or whatever. So you got to do your homework. I'm not saying you

1:06:37 don't have to, but I get a lot off of the vibes, you know, initially and then I do my homework. That's whether or not I want to do my diligence and whether I want to, you know, check on somebody

1:06:49 and really decide about something, but. You know, I think it was dizzy philosophy that you used to say, I can tell how a man plays jazz, by the way he stands. Sure. You know, there's a lot of

1:06:59 truth though. Well, the other thing I would say is this is a very small industry and reputations, you know, they stick. If your hand shake means something, that will

1:07:16 always be something you're known for And if you're dirty and you do things the wrong way and you burn somebody, that sticks with you even longer. And so, you know, if you're kind of a, you have

1:07:28 the reputation for being a fair trader and, you know, close and dad had a mantra that if we can't do a deal where everybody wins and they meant everybody. You know, customers, employees, all

1:07:40 stakeholders, they have to be a winner here. If there's gonna be a loser in the deal, don't do the deal because you're stuck with it. It's going to stay with you and you're going to regret it.

1:07:52 And it'll come back around the haunt you in some way. I still try to transact like that. I still try to make my

1:08:01 handshake mean something. And my word be a bond, whether it's on paper and signed with a signature, with blue ink or not. I want people to know that what I say is what I'm going to do. And good

1:08:18 or bad, that's what I'm going to do Do you remember Paul Van Wagenen who used to run Pogo? I knew who he was, I didn't know him. So I bought his house. And anyway, we had some things going

1:08:33 through the house thing, but you know, always worked it out really easy. You know, he was fair and all that. One of his guys that I met later on, I said, Yeah, I bought Paul's house. One of

1:08:45 the stories they say about him was, Paul used to run around and say, I don't care what the contract said, what did we tell them? Oh, we told them we were going to do that, then we better do it,

1:08:54 you know, and always kind of like that. That's a great way to run your business. You know, it is a small industry and, you know, when I'm running around globally, talking to people, I realize

1:09:07 how small it is, it's so small. And

1:09:13 if you cross someone, it's amazing to me how long that sticks with people But if you get this reputation for being fair-minded and honorable in your dealings, you may get a little credit or you may

1:09:31 get a lot of credit, but at least you don't have that black cloud following you around of doing a bad deal and, you know, burning somebody. So I try to look at these transactions and every time

1:09:46 we're buying and selling companies and say, Who's winning? who's losing, is anyone losing,

1:09:53 stop the presses if we've got a big loser in this, you know?

1:09:60 And sometimes it's unavoidable, right? Sometimes there's an issue where some stakeholders just gonna miss out. But I've been in transactions before with counter-parties where they were just adamant

1:10:14 that they were gonna be this huge winner and everyone else was gonna get the leftover scraps of the table. And I never saw one of those workout good for the guy that was orchestrating the deal.

1:10:28 That guy always got burned in the end. Something came around and bit him in the ass. You can call it

1:10:36 karma. You can call it whatever you wanna call it. But the

1:10:43 old saying around Patterson was, be careful they ask you're kicking today. It might be the one you're kissing tomorrow And man, that's. pretty damn true. Yeah, I always took the approach with

1:10:53 all my CEOs, like Lucas and stuff. When they called and asked me something, I just tried to get to best and final immediately. So they never felt like they had to negotiate with me. You know,

1:11:05 'cause stuff just moves so fast and can we do this? And if you're negotiating, and yeah. That's a great point. Our industry moves really quick and ambiguity is a bad, dangerous thing And when you

1:11:19 leave people on an island without an answer and you know, you don't get back to 'em or we don't come to a closure and decide together, this is what we're going to do. Good or bad, this is what

1:11:30 we're gonna do.

1:11:33 You usually miss an opportunity or you end up digging a bigger hole than you were in, you know, because you didn't move, you know, fast enough.

1:11:43 This business moves pretty quick and you can be decisive and wrong and still be okay. Right. But being decisive is the most important thing. And I try to coach that all the time, you know. You

1:11:58 know, aim, I want you to aim. I don't want you to do the ready fire aim thing. But I'll, so I want you to aim. But if you, all you're doing is aiming, we're missing opportunities or we're

1:12:09 gonna get bit by something, you know, you gotta pull the trigger. Yeah, no, that's, that's right. You miss every shot you don't take The, bro, this is cool. I appreciate you coming on.

1:12:22 Happy to be here. The standing invite anytime you wanna, you wanna come back, the, yeah, no, it was funny. I think, I forget who, who set this up but thank you to you as well. Yeah. Whoever

1:12:38 set it up. Well, I appreciate it. It was good to see you and good to catch up. We need to go back to the steakhouse and see if, Paul, Paul, throw out a shotgun that we can all bid on again.

1:12:51 Actually, what we oughta do is we oughta run over to Papas by stake and fancy wine and send the build up. Paul, it's probably what we ought to do. That's what we should do. I agree.