The Future of Private Operators: Is the Permian Still King?

A dynamic interchange on the current landscape for private operators in the energy sector. We discuss strategies for growth, competitive positioning, and the importance of networking to navigate challenges effectively. 

• Highlights of the roundtable discussion in Midland
• Strategies for focusing on undervalued assets
• The critical role of cost management for operators
• Importance of collaboration and communication in finding opportunities
• The significance of niche markets and specialization in private operations

Thank you to all participants at the roundtable and sponsors for making this enlightening discussion possible.

Transcript

Speaker 1 0:00

Thank you very much . Hello everyone , welcome to a new Energy Crew podcast . I'm your host , jp Warren . On this episode we're going to be diving in on what we discussed around the Crew Club Operator Mastermind Roundtable in Midland on January 28th . Operator Mastermind Roundtable in Midland on January 28th , where Drew Limbacher , the CEO of Cedar Creek Energy Partners , led a fantastic discussion , kind of diving into what challenges our private operators face these days .

Appreciation for Participants

Speaker 1 0:54

And also he also tacked on the question is the Permian Basin still the crown jewel ? And in this conversation we dive into what private operators are focused on right now , how they need to position themselves , what strategies they need to take and also what areas , what bases are they focusing on . We also have some other key takeaways that we talked around the table that I'm going to share with at the conclusion of this podcast , but again , kind of to give a little context on the roundtable that we had in Midland Um , I asked Drew uh Limbacher , uh , who was the COO of Venser Energy , to lead our first ever uh round table discussion last year in 2024 .

Speaker 1 1:33

And this was after the success of sale events , or this is um , and it was interesting uh , cause he his first topic that he led was um , how to navigate the future environment as a private operator . You know pretty much after the sale of Ensor , what is his and his team , what are him and his team going to do looking forward in 2024 ? And it was kind of interesting to come back to the table after a year , in 2025 , to see kind of what came to fruition and what didn't . One thing's been definitely made clear is that private operators in this day and age are taking a very different approach and it's a very different market and we're going to find out why on this episode of Energy Crew . All right .

Speaker 1 2:13

So first off , it was a packed house at the table in Midland . I want to thank , first off , everyone for attending . We had people , everyone from Chevron to Cedar Creek Energy Partners , obviously , diamondback , black Swan Operating a lot of great different Chevron Again , I mentioned that a lot of companies , but I want to thank our sponsors out there also . These OFS companies have access to the table in all these conversations . So at the table is WorkRise , welldrive , lfs Chemistry , mojo AI , the Baldwin Group and R360 Environmental . All right , so the point of this conversation was pretty much that Drew Limbacher , after selling Venser , has been on the hunt for a new deal , building a team and going out to try to execute and find these new deals , and he came to the table and shared very candidly on kind of the challenges and strategies that operators probably should be taking in this day and age .

Speaker 1 3:02

I'm going to kind of go through this . We got about four takeaways for private operators of what we discussed around the table how they should start focusing . So number one private operators they can maintain competitive in today's environment by focusing on a couple of key strategies . The first strategy is targeting undervalued assets . Okay , I'm going to read here , then I'm going to kind of give my thoughts . So private operators should seek out underrepresented assets in regions that are not primarily focused on larger companies . For example , areas like the Unita Basin and the San Juan Basin have been identified as having higher potential compared to more saturated markets like the Permian . All right , so here's the deal .

Speaker 1 3:38

At the end of the day , there's all these companies that are out there that are focused on trying to build teams , getting out there and get deals . A lot of people are focused on the Permian Basin . However , just because people are focused on the Permian Basin also , drew said that you know , once these deals , you know , do hit the internet . You know , chances are it's probably too late . But not only that . Competition is so fierce because private operators aren't just competing as private operators anymore . Private operators right now are competing against , you know these publicly super major companies that are kind of coming in and bidding on the same acreage that they want to bid on . So again that kind of blows the competition out of the water whenever the super majors are coming in . So where can private operators focus ? What areas , what formations are their old deals that they can come back to the table and look at ?

Speaker 1 4:25

A lot of the times , private operators now are thinking of new and innovative ways to look at historical deals that they might not have found attractive . And I think right now , I think one big thing that private operators need is a sense of entrepreneurial spirit . You're going to have to look at the landscape , the environment , in completely different ways . You have to put together projects and packages and different acreage positions and present that to your private equity backers in new ways , in innovative ways . So again , it's a completely new market right now , higher competition After again , a super intense , crazy 2024 mergers and acquisitions landscape . So now again , you've got to be creative in this , all right . So what is the second thought ? That here it is . Oh , that's not it , Apologies , all right . The second thing is is that when is it ? I apologize , guys and girls , all right . The second thing is that the private operators I mean .

Speaker 1 5:25

Obviously now , in this day and age , cost is king . Cost is driving decisions . There's been historically difficult to get capital to come back into the market . So , again , innovative cost management is going to be something that private operators have to focus on . Capital budgets are tightening . Efficiency is coming to the surface . It's coming part of every single discussion . So private operators need to immediately adopt a production mentality . All right . This is to get cash flow back into their system and to keep operating in a positive cash flow . All right . This is understanding the cost baselines and seeking efficiencies in operations to maintain profitability , all right . So operators now , rather than you know , I think , 10 years ago , let's punch a couple holes in the ground and flip it . Operators now are thinking more of the farming mentality , where it's hey , listen , we have an asset , we're going to hold on to this perpetuity and hold on , continue to operate under a cash , positive cash flow basis . All right .

Speaker 1 6:21

Another thing that operators can do to be competitive is collaborate and communicate . This is where I don't care . Again , I talk about networking all the time and a lot of things I speak about . A lot of people think networking is extremely important when you're when you need a job Okay . However , um , something that's always pops up around the crew club tables and a lot of conversations I have on whether , how people you know find opportunities and stuff like that , whether it's finding opportunities , finding capitals , finding deals and I'm just thinking about a private operator now finding vendors If you're going to a new basin , all of this is through your networks .

Speaker 1 6:55

All of this is through communication . So private operators , rather than be behind a computer , go through , you know source the deals that hit the Internet . They need to be out there networking , talking to people , talking to companies that may not even have stuff on the market . But again , communication is king . Now , cost is king . Communication is king . Ok , enhancing communication between , enhancing communication between private equity firms and their portfolio companies , can create synergies and operational efficiencies . All right , that makes sense . By coordinating efforts and sharing resources , private operators can better manage their assets and uphold competitive pressure . All right . So , again , not just collaborating and communicating to find deals , but also , once you find the deals , communicating that to the private equity group and maybe they can disseminate that . Maybe there's a way to be more competitive as a unit of one versus all these individual companies .

Speaker 1 7:49

Another thing is and Drew focused on this and we talked about this a lot at the table is private operators need to be focused on their niches . So niches are going to get them reaches . Go with me there , all right . So focus on niche markets . Our specified technological advancements can set private operators apart . I don't think we're at the time . Where is coming from super majors , not just private operators , because a lot of things are more competitive . You have to really kind of specify and tell your story as a niche player , if you will . All right , this specialized approach allows private operators to compete more effectively against the larger players who may not have the same agility , may not have the same entrepreneurial mindset and ability to navigate this landscape . All right . So let's see if I have anything else when it comes to the when it comes to private operators strategy book in today's market . All right , let's see .

Speaker 1 9:00

We talked about different basins the unit of basin , the East Texas potentially over the Permian basin , um production mentality over uh drilling new wells . And this is something that kind of keeps on being echoed throughout the industry . You know people always saying you know , is the rig count going to go up ? You know what's the expected rig count going to go to ? Um I ? The common conversations happen around the industry is that rig count is probably not going to go up Even if , even if the price of oil goes up um to triple digits , chances are rig count will probably not go up . Now , when it comes to the gas plays at Haynesville , hey , that's wild card . Who knows about that ? But right now , again , because that all these private operators are operating in these , uh , farming modes , these cashflow , these cash flow positive methods , they're not going to be able to , they're not going to be wanting to pick up rigs and really fluctuate that . So , again , chasing rigs , I think , is going to be the thing of the past and I think now some companies , service companies , don't have to compete more when it comes to technology , when it comes to efficiencies and when it comes to also collaboration .

Speaker 1 9:59

All right , so let's dive into . Is the Permian Basin still the crown jewel for private operators ? All right , so , first off , permian Basin is always going to be hot . Okay , that's going to be . I think it produces I don't know why I just threw that out there , I don't even know but it's a huge portion of domestic energy .

Speaker 1 10:17

All right so , but the problem right now with the Permian Basin is that everyone wants to be there , everybody wants to be there . And then you have these supermajors that purchased all this acreage , all stuff and I think they might be , you know in order for private operators to kind of get in the market there . Those conversations are going to happen , that are going to have to happen between the supermajors and the private operators , just so there can be some deal flow . Hey , listen , you want to farm out this acreage . Hey , we want to divest this . But I'm not sure if those conversations are happening yet . I've heard they are starting to happen , but they're not happening yet .

Speaker 1 10:51

So , number one there is an increased cost as the market for prime locations such as Permian Basin becomes overly saturated . All right , costs are going to continue to escalate , making it challenging for operators who require higher returns on investment . So , again , it's going to be more difficult to operate in a permanent base , all right . And so adapt , adapt , adaptation to market dynamics . Operators may need to shift strategies toward more sustainable practices and innovative drilling technologies to thrive in this competitive environment . So understanding market trends and being adaptable adaptable will be crucial for success . Again , this is taking an entrepreneurial mindset . So again , the Permian Basin is going to continue to be a great place for opportunities . Private operators must leverage unique strategies and innovation to stay competitive in these rapidly evolving market landscapes . All right , so again . So yes , the Permian Basin obviously is ideal for a lot of private operators , a lot of companies . However , because of cost of capital , because of the availability of capital , it might not be flowing and so they might have to be looking elsewhere .

Speaker 1 11:49

Another interesting thing about private equity is that historically , private equity , let's say , it took them six months to raise the funds that they were looking for . Now it's taken them about three times that length to raise the same amount of funds . So what took six months in the past , now taking 18 months . And they're also saying private equity companies are also saying , traditionally , one third of our historic investors are back . That means two thirds left the building . All right , now has that changed the new administration ? Potentially . Has that changed everything going on ? When it comes to commodity prices , probably not , I don't know . To commodity prices , probably not , I don't know , because commodity prices are still not that good , um , and you know where people want to be . But , that being said , um , um , I was going with that . So , anyway , that being said , private equity is still coming . So private operators still have to put together these deals to make them enticing , tell their story and and communicate the value in what they actually plan to go with . Versus historically , If something sounded good , felt good , they would move forward with it .

Speaker 1 12:49

This is going to be much more scrutinized conversations . All right , so what else do we kind of talk about ? All right , so , um , a couple of key takeaways , uh , remaining takeaways that we had around the table . Uh , was this , uh , first off communications key ? All right , whether I again , I don't care if you're on the service side , operator side , looking for capital , or your private operator , private equity , it doesn't matter if you're not having the proper communication networking group around you and you're not actively pursuing your networks and communication . That's what uncovers opportunities . So , again , if you're behind your desk , behind your screen , if you're relying on correspondence such as emails and text messages , chances are you're not uncovering all the opportunities that are out there . Text messages chances are you're not uncovering all the opportunities that are out there .

Speaker 1 13:36

One member around the table said sometimes we might start having to look at obstacles in a very macro way and need to approach them more inclusively . All right , so this is kind of taking everything as a collaboration within the industry and moving forward that way , all right . Another thing that we talked about around the table again , these were tangents that we got onto , but I think also there's a lot of good information and knowledge to be shared in teams . So one of the tangents we talked about was you know , we have to acknowledge the wins and learn from our failures as companies . All right , regularly sharing success and failures within teams is crucial for fostering a culture of transparency and continual growth . All right , an example was shared of a past practice where team members celebrated each other's achievements . You know , they use , I think , a sticker of Chuck Norris . Whenever they celebrate like a win , they would pass around a sticker of like Chuck Norris , and it might have been a small jest or something like that , but it also brought people on board , motivated people , inspired people , understood what they were celebrating . So not just built a group camaraderie , but also illustrated the importance of recognizing everyone's efforts consistently . We live in this world where we're constantly focused on the negatives , focused on the failures , focused on the challenges . It's important also to keep people inspired , motivated , by focusing on the wins . What else ? What else is important right now ?

Speaker 1 14:57

There's a lot of people leaving the industry . I just did a podcast yesterday on my other podcast , lead , with Soft Skills dealing with laid off to leveled up . There's going to be over 21,000 people that are going to be let go from the industry . What is that little hair doing ? I don't know . There's going to be 21,000 people let go from the industry . What is that little hair doing ? I don't know . Does it mean 21,000 people let go from the industry ? So that's a lot Okay . So it's a lot of knowledge left , that's a lot of experience left on the table .

Speaker 1 15:22

So again , mentorship support , getting out of your bubble , asking people how they perform their work , how they perform their jobs how did you get to your job ? Having these innerice conversations , industry conversations , would be so crucial to share knowledge , to learn stuff and to just kind of make the industry better . So again , having mentorships , having conversations , is going to be key . All right , one person said mentorship is huge . If you have a leader in your organization you respect . You got to create a connection with them . It's going to be up to you to create those connections with mentors . All right , don't leave it up to them . All right , what else ?

Speaker 1 16:01

You have to be adaptable in these times , okay , whether it's going to be tariffs affecting AFEs , whether it's going to be competition , where you actually can't get any acreage , whether it's going to be service costs , whatever it is , you have to be adaptable . You have to think outside the box . Gone are the ways of . This is how we've always done thing , and that's something that I think historically has kind of anchored our industry and kind of changed us . That we've always done it this way . That's how it has to be done , moving forward . But if historic practices don't work , we're going to have to change how we approach new obstacles , all right .

Speaker 1 16:32

So another thing is we talked about diversity in perspectives , all right . So we're talking about gathering people from a wide range of backgrounds . This kind of goes up to the mentorship . Whether it's experience , whether it's different cultures , whether it's different upbringings , whether it's drilling , completions , production everyone at the table . Sharing your perspectives from a diverse point of view can only make this industry better , can only make you more efficient at your job because you're learning something new or you might be providing some new information to someone else out there . So again , um , yeah , uh , I think this is kind of uh . At the end of the day , this was kind of the conclusion of the conversation that we had around that table .

Speaker 1 17:05

Again , I want to thank everyone for being a part of uh this discussion we have . We probably host about two to three of these discussions , these conversations , uh , around seven different locations and they're all fascinating , they're all great . Every subject is very different . However , things , common things , common topics , common things that are shaking this industry always pop up and it kind of helps create this beautiful , beautiful understanding of what's happening in the industry . So I want to thank everyone out there for tuning in . I want to thank Drew Limbacher and the sponsors and everyone at the table for chiming in , sharing the perspectives .

Speaker 1 17:35

And one thing is certain if you're a private operator , you need to be in it for the long term . You got to have some grit , you got to have some connections and you also have to be specialized . So that's where the riches will be found in your niches , riches , niches . All right , y'all , thank you for tuning in to the Energy Crew Podcast . Hope everyone has a great day out there . Reach out to people , connect . I encourage you to keep building your networks because , at the end of the day , that's where opportunity comes from . In a volatile industry , it's our networks that create stability . So I want to thank everyone out there and we'll see you all soon , thank you .