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

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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.


Speaker 1:

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. 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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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.