Jack McClendon on Why It's So Hard to Create a New American Oil Boom
Quotes & Clips
5 clipsConventional reservoirs offer higher porosity than shale
“Conventional reservoirs have much higher porosity and permeability. They're actually much better reservoirs from a geologic standpoint. And so for the most part, you'll hear it in the industry parlance, those were the easy reservoirs to find. If you go back to like the 1920s, 1930s, drilling a field like the Yates field, which is kind of one of the most prolific oil fields, you were basically drilling a thousand feet into the ground vertically, and they were getting 400 to 500 to 1500 barrel a day IPs.”
Shale drilling requires massive corporate scale
“The horizontal shale game has largely become the domain of very large companies. I mean, you've got to have scale to be able to operate in that space. We're largely a production company. So the way to kind of think about it is, we buy assets that we think are undercapitalized, underappreciated, try to squeeze a little bit more juice out of each producing well and try to get cost down.”
US oil production leads global output levels
“Now we're the largest oil and gas producer in the world. We produce more oil than any company in any country in the world. And so it's kind of gone unnoticed. And so I wanted to kind of get out and bring that up.”
Rig counts remain stagnant despite high prices
“But if you look at the Baker Hughes oil and gas rig count, it's basically been trending sideways. In fact, the last available data, it fell by three. And then if you go out even further, it's been going sideways and slightly down since basically 2023. So we haven't seen a big supply side push, and that's despite a lot of noise coming out from the administration about unleashing US energy.”
Siena targets undercapitalized assets as odd lots
“A lot of just, as I said, a lot of the assets that we're targeting are just too small. You know, they're rounding errors on the balance sheets of these large shale companies who are buying tens of thousands or hundreds of thousands of acres and drilling two to three miles under the ground. So it's just, we produce the same product. It's just a very different business.”
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Episode Description
The White House wants gasoline prices to be lower, and it wants to see American oil companies drill for more oil. But of course, these ideas are in tension. If prices are going lower, why drill more? This tension has only grown sharper since the shale busts of the mid-2010s, as American producers got burned multiple times by prioritizing production over profits. So what now? How do US producers think about the recent oil price spike? How are they thinking about the rising costs of their own production, due to higher energy, labor, and steel costs? On this episode, we speak with Jack McClendon, the founder and CEO of Siena Natural Resources, an independent oil and gas company that primary buys odd lots of wells from other companies. We talk about the long-term economics of the industry, including the central role of capital markets in determining how the industry moves. He also tells us whether the show Landman is realistic. Read more: Oil Tankers Hauling US Crude Via Panama Approaching 4-Year High The US Oil Industry Doesn’t Want the Iran War Either Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots Newsletter Join the conversation: discord.gg/oddlots See omnystudio.com/listener for privacy information.