Rockcliff Energy III将行业长期领导者、Rockcliff I 和 II 的前首席执行官 Alan Smith 与前Chesapeake Energy高管 Sheldon Burleson 聚集在一起。两人与私募股权公司 Quantum Capital Group 共同领导新成立的 E&P 公司，并着眼于德克萨斯州 Haynesville 和 Eagle Ford 页岩的资产。他们与《石油和天然气投资者》主编 Deon Daugherty 谈论了他们的计划、他们能带来什么以及唐纳德·特朗普总统领导下新兴的政治环境可能如何影响他们的公司和行业。

Deon Daugherty：我们先来谈谈 Rockcliff III 的诞生过程。Sheldon，你在 Chesapeake 工作了几年。是什么让你对这个机会感兴趣？

谢尔顿·伯勒森：我认为有几件事。[艾伦和我]过去曾在不同的董事会共事，所以我认识艾伦很久了，我了解他的过往，他是一位很好的导师，我可以通过他担任的一些职务与他交流。

我在切萨皮克工作了近 10 年，管理过许多不同的业务部门。但在我任职的最后几年里，我真正关注的是海恩斯维尔和鹰福特。在海恩斯维尔任职期间，我们进行了一些收购，2021 年与Vine Energy合并，并继续关注盆地中的其他运营商。我确实看到了 Rockcliff 正在做的事情，并与 Alan 就他们在德克萨斯州盆地一侧的开发进行了大量互动。

我不仅认识艾伦，而且他对 Rockcliff 的成就、团队的能力以及他们利用该资产所做的一切印象深刻，他们占据了这一地位，并将其发展成一家规模化企业。然后，正如他所说，还有建立中游和矿产业务的所有其他方面。这激起了我的兴趣。

尽管我曾在一些大公司工作过，但我一直有一点创业的倾向。当我们剥离 Eagle Ford 资产时，这为我提供了决定下一步该做什么的机会。我考虑过其他一些上市机会，但私募股权投资才是我喜欢的路线。

时机恰到好处，我开始沿着这条路走下去，然后与Quantum进行了一些互动，并与 Alan 保持联系。我觉得这是一个很好的机会，可以加入并加入一个成功的团队，同时还可以利用我在 Haynesville 和其他多个盆地的背景来探索下一步。

DD：艾伦，是什么促使您有兴趣将您的角色从“亲自动手”的首席执行官转变为执行董事长，并且更具战略性呢？

艾伦·史密斯：我们总是在不断重塑自我，我认为再建立一家公司是一件很棒的事情。我和威尔·范洛在 Quantum 合作了很长时间，我们认为，对我来说，担任 Rockcliff 的执行董事长，然后以合伙人的身份回到 Quantum 是非常明智的选择。现在，Quantum 是一家规模大得多的私募股权公司，让我从（找不到更好的词来形容）企业领导者转变为更明智的人选，并有机会向谢尔顿等其他领导者传授知识，并与 Quantum 和投资组合公司的一些非常有才华的合伙人密切合作。我认为，我已经在创业方面做了 20 年，在领导方面做了 30 年，能够充分发挥我所拥有的天赋和才能。这只是一个担任更具战略性角色的机会，能够帮助和指导其他企业家建立和运营令人兴奋的企业。

DD：这很有道理。这是成长，也是您职业生涯的演变。那么，先生们，您打算继续在 Haynesville 工作吗？或者，您想在哪里部署您的资源？你们俩都从事过不同的业务领域，但 Rockcliff I 和 II 专注于钻探和开发。您希望带领公司走向何方？

AS：好吧，我可能先从高层次谈起，然后让 Sheldon 对一些具体情况发表评论，因为他正处于关键时刻。去年夏天我们开始 Rockcliff [III] 项目时，天然气宏观形势比我们想象的要暗淡一些。当时油价很低，很多事情让你 [质疑] 是否想在 Haynesville 很快建立起一个钻机，我们一开始就认为这不是一个好主意。Sheldon 在 Eagle Ford 有相当多的经验。自从 2003 年开始做这件事以来，我们一直有一个口头禅，那就是我们倾向于认为我们的专长是德克萨斯州，以及与德克萨斯州有关的东西。

因此，我认为 Eagle Ford 和 Haynesville 仍将位居我们的首选。Eagle Ford 拥有多个流体窗口，这很吸引人，我们在那里取得了不错的开局。但该盆地也相对具有竞争力。然后我们进入 2024 年下半年，正如您所知，天然气价格开始走强。作为业内人士，我们对液化天然气的未来发展有了很多了解。它被推迟了，现在您将迎来第一波 60 亿立方英尺/天的浪潮，我认为这将推动天然气价格更强劲、更稳定。

但现在我们也有人工智能运动和数据中心运动，这也将创造更多需求。突然之间，天然气价格大幅上涨。我们开始探索海恩斯维尔。这并不是说我们永远不会走出德克萨斯州，但这需要非常特殊的情况。

SB：这很正确，因为我们很早就开始关注团队的核心能力是什么？这自然而然地导致了 Eagle Ford 和 Haynesville 的关注，因为团队在那里有很多背景，过去，我们也在特拉华盆地做过额外的工作。团队研究了这三个地区，并更新了我们的技术观点。我们确实继续深入挖掘机会，思考哪里有机会获得规模化的东西，以及更多的整合机会，所以我们最近再次将重点放在 Haynesville 和德克萨斯州东部地区。我们认为那里有很多机会。我认为，在石油和天然气这两种商品上，行业投资不足，只关注自由现金流和资本纪律预期。

我认为这两种商品都存在机会，但我们觉得天然气的顺风和结构性前景强劲。我认为许多地方仍有一些可观的头寸。还有一些地区，尤其是德克萨斯州东部，其开发程度甚至低于路易斯安那州核心地区海恩斯维尔的部分地区。我认为有机会收购资产和/或建立头寸并部署资本。

正如艾伦所说，我们已经看到了一些更广泛的机会，我认为，凭借在不同领域工作过的多名团队成员以及我过去在美国六、七个不同盆地工作过的背景，我们拥有运营能力，并且具备油藏和地球科学方面的技术知识，可以真正评估资产。

我们研究了德克萨斯州内外的一些事物，这仍然是我们将继续努力的事情，但它需要成为一项规模化的资产，并且是我们真正能够利用我们的专业知识并加以应用的东西。

因此，这些机会可能与 Rockcliff 过去的市场略有不同，因为我们认为那里对一些大型资产的市场甚至超越了德克萨斯州和 Haynesville 地区。

DD：请再跟我们讲讲这个。你已经购买资产了吗，还是仍在寻找？

SB：我们仍在寻找并努力获得核心资产。我们的目标是获得合适的资产。我们会考虑很多不同的机会，[因为]你真的想确保它符合你需要的标准，这样当你进行收购时，你就可以增加它的价值。

您希望有一些地点可以发展成目前有吸引力的地方，或者在 3 到 5 年内具有吸引力的地方。今天与过去略有不同的是，您可能正在寻找更长的私募股权部署窗口。我们希望找到一些目前非常有吸引力的东西，或者我们可以应用我们的技能，这将是下一个。这是公司调度曲线上的下一个资产。如果我们展望未来 3 到 5 年，哪些库存对于我们消费、开发或其他想要继续寻找增长机会的人来说非常有吸引力？

我认为，我们寻找的最后一点是多种取胜方式。作为一家私营运营商，我们的目标，也是我们的优势，是拥有一支经验丰富、灵活精干的小团队，我们可以通过运营改进、钻井和完井改进来增加价值，或者真正考虑提供低成本结构来开发资产。

这些是获取正确资产的主要要素。

DD：Rockcliff III 与之前的版本有何不同？

AS：嗯，我想说这不是故意为之，但我认为，这在很大程度上取决于我们实际上能够获得的资产的性质，[并且]我们觉得我们最终可以利用这些资产创造大量价值。

Rockcliff 之前的做法是“它有一些潜在的 PDP（已证实的开发生产）生产，但也有大量未开发部分。我想说，这是我们所寻找的任务，但有时有些东西有更多开发空间，我们认为我们可以很好地管理它，但也有更多的未开发潜力，我们希望能够实现。

我认为，我们过去做得好的另一件事，也是我们将非常关注和投入的事情，实际上是我们最终获得的碳氢化合物的营销。我认为天然气市场很复杂，这可能是一个问题，也可能是一个竞争优势，我们一直在寻找竞争优势。地下团队的能力——已经钻探了 300 多口井，我们在 Rockcliff II 上花费了 35 亿美元的资本支出——我们希望把我们过去支付的大部分学费转化为竞争优势。

SB：我认为今天的市场与五年或七年前 Rockcliff II 成立和运营时的市场略有不同。

现有的生产潜力很大，这方面的机会很大。在页岩革命的早期，人们更有可能找到一些土地，然后可以迅速将其转让。这些土地可​​能很小，出口也很短。现在盆地已经开发得更充分了，我认为这将是现有生产潜力很大，未来仍有发展空间的结合。

我认为这是 Rockcliff 团队有能力（做好）的领域之一。这是我过去的经验，负责处理拥有大量油井的大型资产，其中的关键部分是进行生产优化、修井，甚至寻找其他重复压裂机会等。我认为这些都可以增加很多价值。

AS：我们总是说，你必须从最终目标开始。我们是库存建设者。我们将选择一些在其他人的投资组合中可能不那么有价值的东西，因此，它进入市场并可供使用，并真正投入大量精力和执行力......知道无论我们建造什么，它都需要在五年后引起其他人的兴趣。我们必须把所有这些都放进我们的计算器里，可以这么说，因为我们正在寻找机会。

但一般来说，市场最终会决定我们能真正做到什么。好消息是，这支球队已经完成了开发和重大发展战略。我们只需要耐心等待，找到合适的机会。

DD：过去几年，上游领域发生了许多整合，看来 A&D 应该有很多机会。您是否发现现在有更多的选择？

SB：我认为，在所有这些整合中，思维过程是这样的，随着这些公司整合并建立大仓位，有些东西会在他们的库存计划中、在他们的天际线图中更靠后，所以他们可能在一段时间内无法实现它。

我确实认为这将创造机会，现在你开始看到一些机会。飞轮可能需要更长的时间才能启动，可能比很多人想象的要多花一两个季度的时间。我们现在开始看到这种势头正在增强，你看到来自大公司或这些整合产物的交易开始成交。过去一两个月，这种情况发生的速度稍快一些，我们看到今年这种情况开始加速。

我认为，另一个因素是，随着政策和政治领域的一些变化，人们有信心交易很可能会成功。人们对获得液化天然气产能的批准持更积极的态度。

如果大型液化天然气项目有望获得批准，而且这些投资更具确定性，那么这将为我们创造机会，因为我们愿意购买资产并开始开发供应，特别是在天然气方面。

AS：我们注意到，与历史相比，最近的情况有些独特，那就是所有上市公司的杠杆率都比历史水平低得多，许多大公司即使在合并后也不一定背负大量债务。

在某些情况下，即使在合并之后，您也会看到 1 倍 EBITDA 到 -1 倍 EBITDA。正如 Sheldon 所描述的那样，虽然会有一些资产合理化，但我认为不会像您曾经想象的那样多。我认为公司开始明白库存很有价值。这也会让我们更有创造力，因为他们会保留一些东西在他们的投资组合中。

我们不仅要寻求收购，而且我认为我们还必须仔细考虑不同的结构，例如合资企业和农场外包等。

DD：您对石油还是天然气有偏好，或者您对其他资源并无偏好？

AS：我认为，在理想情况下，对两种资产都有一定投资是最佳选择。我们经常谈论石油利润与天然气利润的对比，这就是为什么从生产角度来说，石油目前更有价值，因为利润通常较高，但这也导致天然气资产的价格也随之变化。

我认为，一般来说，我们是不可知论者。我们的工作是为我们的团队和投资者带来丰厚的回报。这才是我们工作的真正动力。但我认为，公平地说，你永远无法预测这种情况会持续下去——天然气的波动性越来越大。这就是为什么我们一直是大型套期保值者。当我们进行重大收购时，我们会对冲几年的生产，然后我们甚至会在一定程度上对冲钻井计划。这就是我们管理波动性的方式。但我们并没有忘记，天然气战略确实带来了一些风险，但同时也带来了一些机会。

DD：特朗普政府的许可和关税等政策变化会对能源行业产生什么影响？

AS：我可能会站在联邦的角度，然后让谢尔顿——他是德克萨斯州石油和天然气协会的新任董事会主席——分享他对德克萨斯州的看法。从联邦的角度来看，事情正在迅速变化。液化天然气 [暂停] 几乎立即被取消。我认为即将全面实施的碳税将被废除或肯定会被取消。我认为获取能源将成为特朗普政府的重点。因此，从联邦的角度来看，有了管理内政部和能源部的两位先生，我认为这将为传统能源创造一个更积极的环境，并为所有我们需要的附加能源创造一个良好的环境，使世界和经济正常运转。

一般来说，我们正在寻找的地方不需要大量 [美国土地管理局的投入] 才能发挥作用。我们一直希望成为我们购买和运营的资产的优秀管理者，因此 ESG 是我们文化的一部分。我们在 Rockcliff II 创造了很多价值，包括生物燃料车队、盐水管道输送以及管理我们所有的排放报告，包括信托井认证。我认为，这一切不会因为政府的更迭而改变，但其中很多仍由各州决定。

SB：正如艾伦所说，各州是其中的关键部分。我认为美国能源行业如此强劲的原因之一是德克萨斯州、南部各州和[其他州]对能源开发持友好态度。

随着你在捕获碳的能力上获得更多的支持，并且能够拥有实现这一目标的油井和基础设施，我认为这对行业来说是一个很好的机会，而且行业拥有技术专长。

[有很多]关于关税及其可能产生的影响的讨论。最近出现的一个问题是钢铁关税。这对我们的业务有一些潜在影响，但当你考虑一下油井成本中有多少是管材钢材时，通常 5-7% 是这些油井的典型百分比。

即使关税导致钢材价格上涨，也可能对油井总成本产生 1% 或 2% 的影响。这确实是一个成本，但我认为我们可以将其考虑在内，并做好计划。

我认为，另一部分就是确保你的供应链不会造成中断。我们规划了我们的业务，而这个行业在提前规划方面做得很好，这样你就可以管理供应链。我认为，拥有一个更友好的环境以及在许可和整体开发方面更加确定的总体影响，与我们看到政府对能源的看法是完全正面的。

AS：我想说的另一件事是，总统经常说“钻探，宝贝，钻探”。我认为上游领域的纪律不会很快改变。这一直是关注资本使用回报率、自由现金流生成、股票回购、通过股息和收益向投资者返还现金。这就是 [E&P] 获得回报的原因。所以，我认为这种情况不会改变。

虽然他们有很多不同的理由来解释为什么对墨西哥征收关税，但这可能与对加拿大征收关税的原因不同。但其中一些理由——取决于那些被“征税”的人如何回应——这可能会导致供应中断，最终可能产生与特朗普真正想要的效果相反的效果，即看到能源价格下降。这些关税可能会产生相反的效果。

油气井最大的开支之一是管材。如果这些关税即将生效，那么你的钢材价格就会自动上涨，这意味着我们的成本结构也会随之上升，这意味着我们需要更高的价格才能获得回报。

我认为，这一切将在今年的大部分时间里得到解决，因为事情一开始就进展迅速，这在很多方面我们都很高兴看到。任何时候，只要有不确定性，人们就会稍作停顿，直到他们觉得自己对自己的投资将如何对待以及投资将产生什么影响有了更多的确定性。因此，尽管有很多积极的进展，但我并不认为美国的投资资本会大幅增加。

Rockcliff Energy III brings together Alan Smith, a long-time leader in the industry and former CEO of Rockcliff I and II, with former Chesapeake Energy executive Sheldon Burleson. The pair are leading the newly formed E&P with private equity firm Quantum Capital Group, and have their eyes on Texas assets in the Haynesville and Eagle Ford shales. They talked with Deon Daugherty, Oil and Gas Investor editor-in-chief, about their plans, what they bring to the table and how the emerging political environment under President Donald Trump may impact their company and the industry.

Deon Daugherty: Let’s begin with how Rockcliff III came together. Sheldon, you were with Chesapeake for several years. What made this opportunity interesting to you?

Sheldon Burleson: I think there were a couple things. [Alan and I] had worked together in the past on some different boards, and so I’ve known Alan for a long time, seeing his track record and him being a good mentor and person I could bounce things off through some of those roles.

At Chesapeake, I spent almost 10 years there, running a lot of different business units. But during the last few years I was there, it was really focused on Haynesville and the Eagle Ford. During the tenure in Haynesville, we’d made some acquisitions, our merger with Vine Energy in 2021 and were continuing to look at other operators in the basin. I really saw what Rockcliff was doing and had a lot of interaction with Alan on their development on the Texas side of the basin.

Not only did I know Alan personally, but I also was impressed with what he’d built at Rockcliff, the capability of the team and what they’d done with that asset, taking that position and really growing it into a scaled business. And then, as he said, all those other facets of building a midstream and mineral business. That piqued my interest.

I always had a bit of entrepreneurial bent, even though I’d worked in some large companies. As we divested our Eagle Ford assets, that opened up the opportunity to decide what I wanted to do next. I looked at a few other public opportunities, but the private equity route is the way I’d like to go.

The timing worked out where I started moving down that path and then had some prior interaction with Quantum and had kept in touch with Alan. I felt like this is a great opportunity to come in and work with a successful team and also bring in the background that I had as well in Haynesville and other multiple basins to go look at what’s next.

DD: And Alan, what made you interested in changing your role from being the “roll-up-your-sleeves” CEO type to an executive chairman and being more strategic?

Alan Smith: We’re always reinventing ourselves a bit and, well, I think it’s great to build another business. I’ve been partnered with Wil VanLoh for a long time at Quantum, and we decided it made a lot of sense for me to move to being executive chairman at Rockcliff and come back to Quantum as a partner—they’re a much larger private equity firm now—allowing me to move from, for lack of a better term, being the leader of a business to more of a sage and getting the opportunity to hopefully pour into some other leaders like Sheldon and working closely with some very talented partners over here at Quantum and in the portfolio companies. I think just having done this now for 20 years on the entrepreneurial side of building companies [and] 30 years in leadership, to just be able to be in a position to utilize the gifts and talents that I’ve been blessed with. It was just an opportunity to go into more strategic roles and be able to help and mentor other entrepreneurs as they build and run exciting businesses.

DD: That makes a lot of sense. It’s growth, it’s evolution of your career. So, gentlemen, is it your intent to continue working in the Haynesville? Or, where do you want to deploy your resources? You both have worked in different areas of the business, but Rockcliff I and II were drilling and development focused. What direction do y’all want to take the company?

AS: Well, I’ll maybe hit it high level and then let Sheldon comment on some of the specifics since he’s right in the middle of it. When we were starting Rockcliff [III] last summer, the gas macro was a little more bleak than we would’ve liked. You had low gas prices, a lot of things that you would [question whether] you want to stand up a rig pretty quickly in the Haynesville, and we just didn’t think that was a great idea right out of the gate. Sheldon has quite a bit of Eagle Ford experience. A mantra we’ve had literally since we started doing this back in ’03 is, we tend to feel like our expertise is Texas and what touches Texas.

So, I think that the Eagle Ford and the Haynesville would still be at the top of our list. The Eagle Ford has multiple fluid windows, which was attractive, and we got off to a pretty good start there. But that basin is also relatively competitive. And then we got into the back half of ’24, and as you know, the gas prices began to firm up. Being in the business, we just had a lot of insight into what’s coming in LNG. It was delayed and now you’re going to get that first 6 Bcf/d wave coming, which I think [drives] a stronger and more stable gas price.

But now we have also the AI movement and the data center movement that is also going to create more demand. All of a sudden, gas has firmed up pretty dramatically. We’ve begun to explore the Haynesville. That’s not to say we would never go outside of Texas, but it would take a very special situation.

SB: That’s spot on, as we really looked early on at focusing on, what’s the core capabilities of the team? That naturally led to the Eagle Ford and Haynesville because the team has a lot of background there, and in the past, we had done additional work up in the Delaware Basin, as well. The team looked at those three areas and did some refresh of our technical views. We really continued to drill into opportunities and think about where there’s opportunity to get something that’s scaled, with more consolidation opportunities, so we’ve focused a bit more on the Haynesville and East Texas areas again recently. We think there’s a lot of opportunity there. I think, on both commodities, oil and gas, there’s been underinvestment by the industry with just the focus on free cash flow and the capital discipline expectations.

I think there’s opportunities in both commodities, but we feel like the tailwinds and the structural look ahead for gas is strong. I think there’s a number of places where there’s some sizable positions still available. There’s also still areas, especially in East Texas, that are just less developed than what you see on even some of the Louisiana core side in the Haynesville. I think there’s opportunity to go and acquire an asset and/or go and build up a position and go deploy capital.

As Alan said, we have looked at some broader opportunities, and I think with a number of the team that’s worked in different areas, and then my background working six or seven different basins throughout the U.S. in the past, we have the operating capability and then the technical know-how from reservoir and geoscience to go and really evaluate assets.

We have looked at some things that are both outside of Texas and inside Texas, and that’s still something we’ll work on, but it would need to be a scaled asset and something that we can really go and take our expertise and apply it.

So, there are those opportunities that may look a little different than Rockcliff was in the past, just because we think there’s a market there for some large-scaled assets even beyond that of Texas and in the Haynesville area.

DD: Tell us some more about that. Have you bought assets yet or are you still looking?

SB: We’re still looking and still working on core assets. Our goal is to capture the right assets. We look at a lot of different opportunities [because] you really want to make sure that it fits the criteria that you need so that when you make that acquisition, you can go add value to it.

You want to have some locations you can go develop into something that is either attractive today or will be attractive in that three- to five-year timeframe. What’s a little different today than in the past is, you’re probably looking at a little bit longer window for private equity deployment. We want to find something that … is either very attractive today or we can go apply our skillset and it’ll be what’s next. It’s an asset that’s up next in the dispatch curve for the companies. If we look ahead three to five years, what will be the inventory that will be very attractive for us to consume, develop or for others that want to continue to look for opportunities to grow?

And, I think, the last piece that we look for is multiple ways to win. Our goal as a private operator, and I think also our strength, is having that small nimble team that’s got deep experience, where we can add value through operational improvement, D&C (drilled and completed) improvements or really look at providing a low-cost structure to go develop assets.

Those are the main components that go into capturing the right asset.

DD: How will Rockcliff III be different from its predecessors?

AS: Well, I would say it won’t intentionally be different, but I think that a lot of it’ll depend on the complexion of the asset that we can actually secure [and] that we feel like that we can ultimately create a lot of value with.

What Rockcliff did previously was … it had some underlying PDP (proved developed producing) production, but it also had a significant undeveloped component. I would say that is the mandate for where we’re looking for, but sometimes there’s something that has more development that we think that we can manage that well, but also have more undeveloped upside that we can hopefully bring to fruition.

I think another thing that we’ve done well historically that we will also pay a lot of attention to and lean into is actually the marketing of the hydrocarbons that we ultimately get access to. I think that the natural gas markets are complex and that can be an issue or that can be a competitive advantage, and we’re always looking for competitive advantages. The subsurface team’s capabilities—we drilled over 300 wells, we spent $3.5 billion of capex in Rockcliff II—we want to take a lot of that tuition that we’ve paid historically and try to turn that into competitive advantages.

SB: I think the market is a little different today than what it was maybe five or seven years ago when Rockcliff II was formed and operating.

There’ll be opportunities that have a lot more existing production. There was a time in the early days of the shale revolution that it was more likely to find some land and then you can quickly turn those over. And it may have been smaller pieces or very short exits. Now that the basins are more developed, I think it’s going to be a combination of something that has a lot more existing production and still has that runway to develop for the future.

That’s one of the areas I think the Rockcliff team has a capability [to do well]. That’s something from my past, working large assets with lots of wells, and a key part of that was doing production optimization, workovers, even looking at other opportunities for refracs, et cetera. Those are all things that I think can add a lot of value as well.

AS: One of the things we’ve always said is, you have to begin with the end in mind. We’re inventory builders. We’re going to take something that’s maybe not quite as valuable in somebody else’s portfolio—thus, it’s on the market and available—and really put an intense amount of focus and execution on it ... knowing that whatever we build, it needs to be interesting to someone else five years from now. We have to put all that into our calculator, so to speak, as we’re searching out the opportunity.

But generally speaking, the market will ultimately dictate what we can actually wrestle to the ground. And the good news is, this team has done both the exploitation and the significant development strategies. We’ve just got to be patient and find the right opportunity.

DD: With all of the consolidation that happened in the upstream space during the last couple of years, it seems like there should be a lot of opportunities for A&D. Is that what you’re finding, that there’s a lot more to choose from now?

SB: I think with all that consolidation, the thought process is that, as these companies consolidate and build big positions, there’ll be things that are further out in their inventory plans, further out in their skyline charts, and so they just may not get to it for a while.

I do think that will create opportunities, and you’re starting to see some of that now. It probably took a little bit longer for some of that flywheel to get going—that maybe took a quarter or two longer than what a lot of people thought. We’re starting to see that momentum build now and you’re seeing deals start to transact that are coming out of the larger companies or that are product of these consolidations. It’s happening at a little bit faster pace the last month or two, and we’re seeing that’s starting to ramp up this year.

I think the other component of it is, with some of the changes in policies, and you think about some of the changes within the political arena, people have confidence that deals will likely go through. There’s more positive sentiment around getting LNG capacity approved.

If there’s a runway where it looks like the big LNG projects are getting approved and there’s more certainty in those investments, then that creates opportunity for us as we like to go buy assets and start to develop the supply, especially on the gas side.

AS: One of the things we’ve noticed that is a bit unique with where we’ve been recently, compared to where we’ve been historically, is the amount of leverage that all the public companies have is significantly lower than it has been historically, where a lot of these larger companies, even after a merger … didn’t necessarily have a lot of debt.

You’re seeing 1x EBITDA to -1x EBITDA, even after a merger in some of these situations. And while, as Sheldon described, there will be some asset rationalization, I don’t think there’s going to be as much as you once thought. And I think companies are beginning to understand that inventory is valuable. It’s going to cause us to be a little bit more creative also because there’s going to be some things they’re going to hold onto in their portfolio.

We have to not only look for acquisitions, but I think we also have to be thoughtful about different structures like joint ventures and farm-outs and things like that.

DD: Do you have a preference for oil or gas or are you resource agnostic?

AS: I think, in a perfect world, having some exposure to both would be optimal. We talk a lot about the margins around oil versus the margins around gas, which is why, generally speaking on a production basis, oil is more valuable currently just because the margins are generally higher, but that causes natural gas assets to price accordingly.

I’d say generally we’re agnostic. Our job is to make a great return for our team and our investors. That’s really what drives hat we do. But I think it’s fair to say also that—and you can’t ever predict that this will continue to be a constant—natural gas has just had more volatility. That’s why we’ve always been big hedgers. When we make a significant acquisition, we hedge out the production several years and then we’ll even hedge out of the gate into the drilling program to some extent. That’s how we manage that volatility. But it’s not lost on us that the natural gas strategy does create some risk while, at the same time, it creates some opportunity.

DD: What might be the impacts of the Trump administration on the energy industry with policy changes, such as permitting and tariffs?

AS: I might take the federal side and then let Sheldon—he is the new chairman of the board of the Texas Oil and Gas Association—share his views on Texas. From a federal perspective, things are changing rapidly. The LNG [pause] was lifted almost immediately. I think that the carbon tax, that was on its way to being fully implemented, will be repealed or certainly pulled back. I think access will be a focus of the Trump administration. And so, from a federal perspective, with the two gentlemen that are running Interior and the Department of Energy, I think that is going to be a more positive environment for traditional energy and a good environment for all the additions that we need to make the world and the economy run properly.

The places we’re looking, generally speaking, don’t require a lot of [input from the U.S. Bureau of Land Management] to make it work. We always want to be great stewards of the assets that we buy and that we operate, and so ESG is part of our culture. We created a lot of value at Rockcliff II around biofuel fleets and piping our salt water and managing all our emissions reporting, including trust well certifications. I don’t think any of that’s going to change just because the administration changed, but a lot of this still resides with the states.

SB: As Alan said, the states are a key part of it. I think one of the reasons you’ve seen such strength in the U.S. energy industry is because Texas, the southern states and [other states] have been friendly to energy development.

As you get more support on the ability to go and capture carbon and then be able to have the wells and the infrastructure to go do that, I think that’s a great opportunity for the industry and the industry has the technical expertise.

[There is] a lot of talk about tariffs and what impact that could have. One that’s recently come out is around steel tariffs. There are some potential impacts there on our business, but when you think about how much of a well cost is tubular goods steel, generally 5-7% is a typical percentage for that for those wells.

Even if there is a tariff that increases the price of steel, it may have a 1% or 2% impact on the total well cost. It’s a bit of a cost, but I think it’s something that can be factored in and we can plan for.

I think the other part of that is just ensuring that you’ve got the supply chain that doesn’t cause disruptions there. We plan out our business, and the industry does a good job of planning ahead so you can manage the supply chain. I think the overall impact from having a more friendly environment and more certainty around the permitting and overall development is a net-positive with what we’re seeing with the administration’s look at energy.

AS: The only other thing I would say is the president is often quoted as saying, “drill, baby, drill.” I think the discipline that you’ve seen in the upstream space is not changing anytime soon. That has been a big focus back to return on capital employed, free cash flow generation, share buybacks, returning cash through dividends and yield to investors. That’s what [E&Ps] are being rewarded for. So, I just don’t think that is going to change.

While they have lots of different reasons for why you might put a tariff on Mexico, it might be different than why you put a tariff on Canada. But some of those—depending on how those who are being “taxed,” for lack of a better word—respond, that could result in a supply hit that could ultimately have the opposite effect of [what] I think Trump would really like, [which is] to see energy prices go down. You could have the opposite effect with these tariffs.

One of the biggest expenses on an oil and gas well is tubular [steel]. If those tariffs are coming on and then your steel automatically increases their price book, that means that our cost structure can go up as a result of that, which means that we need higher prices to make our returns.

I think it’s going to take a better part of this year for all that to sort of settle out because it’s been fast and furious out of the gate, which in a lot of ways we’re really pleased to see.… Anytime you have uncertainty, that can cause people to take a bit of a pause until they feel like they have more certainty around how their investment is going to be treated and what the ramifications to their investment are. So, while there’s a lot of positive developments going on, I wouldn’t expect to see the capital being spent here in the U.S. to go up dramatically.