American Oil and Gas Reporter - September 2023 - 35

Oil And Gas Industry's
Capital Expenditures
Appear Likely To Climb
By Danny Boyd
SAN ANTONIO-Despite claims to
the contrary, the United States will need
more oil and gas for decades to come as
energy demand rises amid climate change
fears stoked by political animosity against
independent producers, industry and allied
policy leaders say.
Even as renewable energy expands,
so will oil and gas demand, boosting
prices and producer returns as the natural
gas market continues to globalize through
liquefied natural gas exports, industry
experts predict. According to Jud Walker,
chief executive officer at Houston-based
EnerVest Operating Company and chairman
of the Texas Independent Producers
& Royalty Owners Association, capital
expenditures are on the rise again after a
decade of underinvestment.
CAPEX is likely to grow 50% by 2027,
Walker predicted at TIPRO's Summer
Conference, held Aug. 9-10 in San Antonio.
Despite a slow start in 2023, the acquisition
and divestiture market is improving, with
$24 billion in transactions logged through
mid-August, he noted. Although plenty of
voices emphasize renewable sources' growing
market share, he said, demand for oil
and gas will keep going up, although production
growth will be sluggish.
" We have to be concerned about meeting
future demand, " Walker warned. " That
is the next transformative challenge. "
The companies that are most up to
meeting that challenge are likely to be
led by people who already have demonstrated
industry success, key financiers
indicate. NGP Energy Capital Management,
which historically has invested $20
billion largely in upstream ventures, continues
to back proven oil and gas management
teams, Patrick McWilliams, a
partner in the Dallas firm, assured TIPRO.
When the private equity market began
to contract in 2014-16, the company narrowed
its focus to scaled operating companies
capable of aggregating, delineating
and developing positions with a goal of
generating consistent free cash flow,
McWilliams said.
These days, he reflected, the performance
benchmark for new management
teams seeking private equity capital has
to be as good or better than the firm's
current platform companies. " Admittedly,
the bar for adding new management teams
to our portfolio is really high, " McWilliams
commented.
A track record of management success
and a proven strategy of growing through
mergers, acquisitions and bolt-ons have
continued to drive growth for Earthstone
Energy Inc., reported President and CEO
Robert J. Anderson.
In recent years, he said, the Woodlands,
Tx., company operating in the Permian
Basin has spent $3.5 billion in transactions,
including a $1.0 billion purchase of northern
Delaware Basin assets from Novo
Oil & Gas Holdings LLC that closed in
August. Since 2020, the company has
built scale through eight transactions,
with Earthstone production topping
130,000 barrels a day from properties on
223,000 net acres, Anderson detailed.
Industry challenges persist, Walker
acknowledged, including a growing shortage
of industry talent as concerns about
climate change dissuade many students
from pursuing oil and gas careers. He
pointed to a recent study from Texas
Tech University that showed that enrollment
in petroleum engineering programs
shrunk 75% from peak a few years ago.
Student skepticism about the industry
makes it all the more necessary for
industry to engage with students, Anderson
insisted. Moreover, Walker noted, the industry
can point toward its advantages,
such as trends that show new petroleum
engineers earn 40% more than engineers
in other segments.
Although the industry has been a target
of criticism and public policy attacks,
Texas Railroad Commissioner Wayne
Christian emphasized how oil and gas
had lifted millions of people across the
globe out poverty.
Additionally, he observed, TIPRO
members are among those who are helping
meet Europe's energy needs with LNG
after the tumult in energy markets that
followed Russia's invasion of Ukraine.
" You are literally the hope of the free
world, " Christian said.
He went on to observe that producers
had continued to cut emissions. Almost
99% of Texas natural gas production
reaches market as flaring fell from 2.7%
of pre-Covid production to less than 1.8%
today, Christian said.
Further commitments to reduced emissions
can give operators commercial opportunities
to realize price premiums from
natural gas certified as low emission fuel,
suggested Jonah Energy LLC President
and CEO Tom Hart.
In 2022, the Denver-based company
completed one of the first premium natural
gas transactions of scale in the United
States when it sold to a major natural gas
utility, Hart explained. In some cases, he
observed, companies with verified lowemissions
operations enjoy advantages
in capital markets.
Energy Transition
ESG policies and capital constraints will
hinder future oil and gas supply growth
and raise prices, predicts Marshall Adkins,
managing director and head of energy at
Raymond James Financial. During his
remarks at TIPRO's summer conference,
Adkins suggested West Texas Intermediate
prices would range from $80 to $100 a
barrel in 2024 as climate change alarmists
continued to denounce oil and gas amid
slowing global supply growth.
Despite claims to the contrary, the
process commonly referred to as an " energy
transition " could take a century, insisted
Walker Moody, president of Pickering Energy
Partners, an energy-focused financial
services platform. In fact, oil and natural
gas are far from dead, and more coal was
consumed globally in 2022 than at any
time in the planet's history, he observed.
As artificial intelligence and other
SEPTEMBER 2023 35
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