>>Voice Over>> The Midland Chambers State of Oil and Gas is made possible with support from Diamondback Energy.

[Intro Music] >>Evan>> My name is Evan Thomas and I'm the President and CEO of the Midland Chamber of Commerce.

It's my pleasure to welcome you to the eighth annual State of Oil and Gas.

And uh we're going to start today with an invocation.

And today's invocation will be offered by Father Bob Hennigan of uh Episcopal Church of the Holy Trinity.

So please stand if you are able.

>>Ft Bob>> Please join me in prayer.

Gracious God Thank you for the gift of creation.

Thank you for the gift of life.

Thank you for all of the resources you have given us, both human and natural.

We thank you, Lord, for this community, for this state, for this nation.

We ask that you continue to bless us and continue to make us vibrant and loving and and uh full of imagination, creativity and skill.

We ask that you bless our gathering today.

Bless our speakers.

Bless our fellowship and this food be with us.

Always guiding and directing us and all that we think, say and do that our words, actions and thoughts would always be pleasing to you and to the benefit of your children.

Amen.

>>Evan>> Thank you, Father Bob.

And I want to thank you all for joining us today, um.

The State of Oil and Gas is a special event for our community and for our region.

You know, in this corner of our of the world, we're fortunate to have, just as he mentioned, incredible natural resources and incredible I love that human resources that have some of the most um hardworking and innovative people around.

We all know that that here in Midland, if you're not directly working in the oil and gas space, which many of you are, you are um indirectly impacted by it.

Everybody is.

It's the primary driver of our community and it influences every business and every aspect of what we do here.

Beyond that, it makes Midland critically important to both the nation and the world.

Our business community understands this and we celebrate this, and uh we gather here today for a presentation and conversation with one of the industry's um premier executives for one of the Permian leading producers, Diamondback Energy.

We are also appreciative of Diamondback Energy as our presenting sponsor and we're truly fortunate to have them headquartered right here in Midland.

Their unwavering dedication to the betterment of our city and the entire Permian Basin shines through everything that they do from their investments in local education to their employee led volunteer initiatives.

So thank you, Diamondback, for sponsoring this event and supporting the Midland Chamber and for being an indispensable part of our city.

So please join me in showing our appreciation for Diamondback Energy.

[Audience Clap] So as I mentioned, today is our eighth State of Oil and Gas but the Midland Chambers history goes much further back.

Last year, we were excited to celebrate our 100th birthday at this event.

However, we are just excited to look forward into the next 100 years.

We're always trying to innovate.

We're always trying new things and and uh want to do them for the benefit of Midland and the region.

So if something looks a little different today where um you might be noticing the cameras, we've got it displayed up here for everybody to see.

I'm a little I'm a little too big for my own comfort.

But um but we uh this year we're excited to partner with Basin PBS.

Laura Wolf, general manager and her and her team are here today to captures uh today's State of Oil and Gas.

The important discussions that we have in this room will be broadcast to our region on Basin PBS, disseminating the information to a broader audience.

It'll be aired in March, so please be on the lookout for updates on both the uh Midland Chamber and Basin PBS Social Media Channels.

Thank you Basin PBS.

[Audience clap] So now, without further ado, I'd like to introduce our keynote for today's luncheon Kaes Vant Hof is the President and Chief Financial Officer of Diamondback Energy.

After his professional tennis career, Kaes worked in the financial sector with a focus on developing operating models and business plans before transitioning fully to the oil and gas sector in 2012.

He brings a wealth of knowledge and experience that he will share with us today, uh, here shortly he will be joined by Maynard Holt for a conversation with Kaes.

Maynard is the founder and Chief Executive Officer of Veriten, based in Houston, and with over 27 years of experience in energy, investment banking and strategic advice, Maynard seeks to convene the brightest minds in and around energy.

Uh so please see our program for their full bios, um and we're excited to hear from them both today and right now.

Let's please welcome Kaes.

[Audience clap] >>Kaes>> All right, Great to be here.

Uh, thank you to uh everyone for having me.

And uh and joining us uh today to talk about the State of Oil and Gas in Midland, Texas, which couldn't be any any better than it's ever been and the future brighter than it's ever been.

So first, I want to thank the uh Chamber for having me as well as uh all the elected officials Evan kind of went through that.

Mayor Blong, thanks for coming, Dr. Howard MSD, thanks for coming, uh my wife, thank you for coming [Laughter] And my mom from California.

Better late than never.

Mom, you can walk over here.

[Audience clap and laugh] We're getting started.

I got my punctuality from her so [laughter] Um.

she went to the Petroleum Club [laughter] right there.

>>Mom>> Im so sorry, oh my God.

[Laughter] >> Perfect icebreaker.

[Laughter] So I'm going to uh put the slides up uh because my general counsel's here.

There's some legal language that I'll let you guys I'll read later and give you a little background on on myself.

Uh, I was born in Newport Beach, California, uh spent time in New York City and somehow ended up here in Midland, Texas, but uh couldn't be happier that I'm here today.

Uh.

Been we've lived here full time now for for eight years, uh, and uh for five years before that I flew flew here every week from New York City.

So uh I I certainly um most of my friends here thought I was an alien when I got here.

But uh I've started to to melt in a little bit to the community and and we love this place and call it home.

I went to USC.

I know that's kind of a a foreign school to most people here, but I will tell you that we beat both Texas A&M and LSU this year [Laughter] with six losses in between.

But uh that's not here nor there.

I moved to New York in 2010 after after playing some some pro tennis, I realized that uh that wasn't quite the uh the lucrative career I thought it would be.

But it was a great time to see the world and and then got here uh after that for from, from five years, I ran a drilling company called Bison Drilling, um.

It was uh quite the experience, you know, learning that side of the business and uh, and then, you know, moved over to Diamondback full time in in 2016.

And uh here we are today.

So uh they're my kids on the right.

Teddy's on the left side, uh and my daughter Valerie on the left.

And she's three old, three years old and has a lot of opinions now, but uh they're both born here and uh happy to call this place home.

You know, this really isn't about Diamondback, but I do want to kind of use Diamondback as a as an example for what's happened uh in this Basin.

Uh you know Diamondback has come a long way.

Um, you know, we we if you go on the right side of the page, we started out as a $700 million market cap company.

That's now over 52 billion.

Uh.

We had an EV of an enterprise value of about the same and uh now 66 billion.

You know, we started this company or Travis and the team started the company and I worked for the private equity group that backed us and uh we were actually forced to go public.

I know people a lot of people know the story, but were forced to go public because nobody wanted to buy the company.

And uh I think that ingrained a uh chip on your shoulder that that lives here today uh with a lot of the Diamondback people in this room and I know the recently added Endeavor employees from across the street.

So it's been a great run.

Uh.

You can see that we've grown our acreage position 17 times.

We've grown oil production 237 times.

So anybody that says tech companies are the only companies that can grow needs to come to Midland, Texas, and see what we're up to here.

And uh cash flow, I didn't put free cash flow on this page because we didn't know what free cash flow was in 2012.

But here we are from a cash flow perspective, up 147 times.

And, you know, I think, you know, Diamondback not only has had this success, but so is the Permian Basin and Diamondbacks kind of the poster child for the success of this Basin and and what we have coming ahead of us.

And uh I always like to say we're just getting started.

I don't know if we can grow production another 237 times, but, uh you know, we we we're certainly going to try and we've got the right uh people in Midland to do that.

So, you know, I think um on the left side of the page, Ill kind of leave this as a leave behind.

But we had three phases and I think these three phases tied to this Basin, uh the first phase was survival.

Uh.

We didn't know, we didn't know anything really compared to what we know today.

We're drilling vertical wells, u not even very economic, $100 oil.

And here we are now drilling 24 well horizontal pads where, you know, $250 million being put in the ground before first oil.

So it's been a a wild ride for us and for the Basin, and we've come a long way.

You know, the second phase success, uh I think the Basin started to have success as well and that in that phase we did a couple large deals, uh energy being the largest and the Basin started to get a lot of attention uh on the on the global stage.

And I like to say, you know, significance would be the third, the third phase.

We had to go through a pretty tough time as a sector and a company in a city in COVID.

And uh I think we learned a lot from that.

I think we learned a lot about our business from that, and we all got stronger because of it.

And uh, you know, now the Permian uh is is being talked about in every boardroom around the world about what we're doing here.

So 6 million barrels a day will get some people's attention and uh it's been a good run here coming out of COVID.

I think the business and the industry is a lot less volatile than it used to be, um and Maynard and I are going to talk about that and and how that applies to Midland and all the great things that, you know, we need to do here over the next couple of decades to continue to grow the place we uh we call home.

So I like to say today we try to we call ourselves the must own pure play.

There's less and less pure plays.

And I know Permian Resources and Vital are probably in the room.

So uh don't take offense to bein us being the must own pure play.

You're both great too, but uh it's my speech, so I'm going to go with it.

[Laughter] And just to put Diamondback in perspective, we're now the third largest company or oil producer by market cap in the country and second largest producer in Texas.

So um and Midland's a huge part of that.

So we should all be proud of that.

This is kind of a noisy slide that shows all the deals we've done uh over the years, but but it kind of talks about the the three phases, and I think it ties to the Basin as well.

And uh you can see we started out with uh pretty small deals blocking up the Midland Basin and then things uh things got a little, little spicier in the success phase.

We bought Brigham Resources for 2.5 billion at the end of 2016, We did the Ajax deal uh as well as the energy deal nearly at the same time.

Maynard and I were talking about that earlier today.

That was a very exciting time when now a lot of our friends I see out in the audience have moved to Midland from Alabama when we uh merged with Energy and moved everybody here.

So that was a that was a big moment for us.

Got us into the S&P 500, which, you know, for the public markets is a really good place to be from an investor perspective.

So that was a big deal uh at the same time, we we started our Viper minerals business, that's that's grown significantly and maybe we'll get them to to speak here next year.

But you know, they're on a good growth profile and I know we've done a lot of deals with a lot of people in this in this room, and I want to thank everybody for that.

And then we have significance.

You know, we ignore the uh oil price in the back of this chart where it went negative for a day, um, but that, you know, that made us stronger.

It made us stronger.

We figured out a lot about what we were doing.

And the best way to develop this resource.

Then we kind of uh had a talk to ourselves at Diamondback and said, you know, we're really good at what we do in the Midland Basin, which is drilling wells as cheap as possible and uh in executing at the lowest cost structure.

And we kind of went on a pretty aggressive run of acquisitions a we did uh QEP and Guidon on the same day at the end of 2020 uh December 20th.

I'll always remember it.

The uh the other side of the both of those deals, I didn't know about it that they're both getting bought at the same time.

So that was an interesting weekend uh talking to them about it.

But we pushed through those deals before Christmas because as you guys know, in our business, uh if you have a deal on the hook, you got to got to get it done.

So those were huge for us, uh and then we did two smaller deals uh in 2022.

And then obviously the the massive merger with our friends at Endeavor across the street, uh you know, putting those two businesses together was a shock to the world uh on Super Bowl Sunday one year ago.

And uh I couldn't be happier with uh how that deal's gone as well as, you know, the amount of people that we put together in this business.

You know, I think deals like Endeavor, where one plus one equals more than two.

And, you know, we get to keep all the people and grow the business and and continue to get bigger and more attention is a good thing.

And, uh you know, I I know our employees in the Endeavor employees didn't like moving 650 offices in a week.

But, uh you know, we've now got each other each other together as one one Diamondback here.

And in 2025.

So very excited about what the future holds for for that combined company.

It wouldn't be the State of Oil and Gas without talking about the state of oil and gas in the Permian.

It's pretty impressive what what everybody's done in this room.

Over 6 million barrels a day of production, almost 50% of U.S. oil production.

So, uh you know, you can see on the bottom side of this page, the black line shows what percent of the Permian is of the entire US.

And, uh you know, if I'm standing here today, I'm going to bet that that number is higher, you know, three or four or five years from now, just given the amount of resource that we have, you know, we'll have to prosecute as well as as well as what we don't know about this resource in this Basin and it continues to get better, more zones, longer laterals, better completion jobs, better, better technology.

All the above is going to continue to grow this Basin.

Now, on the gas side, we kind of got to 26.7 BCF a day by accident um because we we tend to focus on the oil side and gas as a byproduct.

But there's a lot of things that we need to do with our natural gas molecules, as well as NGLs that will continue to grow uh coming out of this Basin Maynard and I are going to talk about a little a little bit a little bit of ideas that we have uh on power generation AI, the big buzzword and all the all that fun stuff.

So uh more to come.

I'm going to bet that the gas number is a lot higher uh four or five years from now as well.

Another topic that I want to kind of go through quickly is consolidation.

You know, there's obviously been a lot of consolidation, and consolidation scares people and, uh you know, I think uh when we were doing uh the Endeavor deal, we said to the employees that we saw a study that changing jobs was a was a bigger concern for a person than changing life partners, which, you know, I think is a little ridiculous.

But everybody gets a little scared when uh when when the job changes and, uh you know, we've done a lot of deals at Diamondback.

We brought a lot of people into our company and uh everybody's had to go through a deal and uh it's a tough thing for people because it does provide a lot of uncertainty.

But I think, you know, from a from a Basin perspective and from a Midland perspective, you know, I'm trying to pitch today that consolidation actually can be a good thing.

You know, we've got a lot of barrels in the hands of well-capitalized large operators, you can see on this page.

And that means a stronger industry that's not as volatile you know, we're never going to get away from the cycles that naturally happen.

But for Midland, for investment in Midland, for investment in the Permian, you know, knowing that we're all going to be here for a long time, these are some of the largest companies in the world, best funded companies in the world.

You know, that's a great thing for the longevity and future longevity of this Basin in this town.

So something I also want to talk about at some point as well.

This was a cool trip down memory lane.

This is my last slide and then we'll get to the fun stuff uh.

All the tickers uh that have consolidated over the years.

On the top side were the IPOs on the bottom, everybody that sold or merged.

And uh you know, listen, this Basin wouldn't be created without all of those people competing with each other to be the best.

And um, you know, you have three three pure plays left, Diamondback.

We've been here the longest.

Our friends across the street are Permian Resources.

You know, they joined the public world three or four years ago.

I think they're still enjoying it.

They haven't had their first down cycle yet, but we'll see how that goes.

And uh and Vital Energy's been around a long time as well.

So, you know, three strong companies still uh represent the Permian as as their only assets with two of those Diamondback and Permian calling uh calling Midland home.

So very exciting times, uh, I'd like to now bring up uh my good friend Maynard Holt, who probably has a more encyclopedic knowledge of the history of this Basin than almost anybody here.

He's probably touched half the deals done in the Basin.

And, you know, we were talking uh war stories about the energy merger earlier today.

So he's a good friend.

He's he's now learning a lot in his new business at Veriten.

And uh I'm very proud to call him a friend and glad that he can make it here.

So let's uh give Maynard a big round of applause.

[Audience clap] >> Hey buddy >> Which side are you want?

>>Maynard>> Oh, I'm easy.

>> It's my good side.

>> Well, I think the best part was you referred to this as the fun stuff.

>> This is the fun stuff I'm going to lean on you for here.

>> That really I uh it's like an ESPN thing.

I'm going to see if I can make Kaes cry.

[laughter] No, I'm joking um now, you know, when your Kaes you were touching on uh particularly the last couple of slides and and consolidation has been a big discussion in the last few years.

When you go back through that history, it's been constant consolidation.

But what's happened is we've just slowed down the creation of new companies.

But consolidation has been a theme since you got here.

>>Yeah, I mean, I think, you know, everyone in the public world, the investors say, when are you going to consolidate?

When you can consolidate?

And I push back and I say, listen, six, six or seven tickers are coming off the board every year.

Now, the size of the deals has gotten significantly larger and we've kind of gone through a period, as you know, where there hasn't been as many IPOs or, you know, energy seemed to not get the capital attention that it deserves um from the public markets.

I think that's kind of a natural uh progression for shale, right?

It's like a new technology.

There's so much money that funnels into it.

We kind of figure out what we're doing.

There's some consolidation, some winners, But but we need, you know, the wildcatter to still be around this business.

>> So so speaking of that, Diamondbacks done so many acquisitions that that becomes a skill set in and of itself like evaluating, um executing and integrating.

And then how do you keep the um you're not 50 plus billion dollars company?

How do you keep that wildcat entrepreneurial spirit alive as the company gets bigger?

>> Yeah you know, we kind of have a a a saying inside of Diamondback, stay humble, stay hungry, uh.

It was a saying from my tennis coach back at USC, and I think that's the mentality we've got to continue to have a Diamondback.

But but I think also Midland contributes to that, right?

Being in Midland, you know, kind of working our way up from nothing, you know, Faskin Towers aren't the nicest buildings in North America.

But, you know, we make it work as home and and, you know, go to work every day, continuing to drive down costs, execute well.

And I think, you know, I think we all know that if we don't execute well, we don't have the right to continue to grow and to buy stuff.

And so that low cost execution was the reason why we were able to get all those deals and subsequently, you know, keep the machine moving, too, because we knew at the time, you know, size does matter for the public markets, for investors.

There's a lot of benefits to size and scale and and, um you know, fortunately we're there, but but we're not done yet.

>> So how do you know that you are much bigger how do you think about some of those advantages and how you drive costs because you are bigger, are drive innovation because you are big.

Like what are the things you're noticing because you're bigger that feel better?

>> Well, I think, you know, the you've you have to have scale to execute these large pads now right.

We went from single well pads to well pads where anybody could go kind of fund a development plan to now, you know, we're drilling and completing 24 wells at a time.

And uh if you're a smaller company, you know, it's the right thing for the reservoir, right?

That we know today.

And there's a lot of money that goes into the ground before you see first production.

It's really like a mini offshore project.

Now, the amount of barrels that come out of a project, uh you know, day one and, you know, being big has allowed us to execute on that plan uh on the outside pretty flawlessly, uh.

But there's a lot that moves around internally, a Diamondback, but um the output is, you know, steady execution.

But if you're a small company and you only have one pad a quarter, it's really hard because investors are are very fickle.

You know, they want everything within a 1% range or 1% window.

And if you miss numbers, they put you in the penalty box.

>> So you mentioned investors.

We might as well talk about them.

You've you've been seeing them for many, many years now.

They've >> All the gray hairs.

>> From the gray hairs they've gone through, leaving us, hating us.

Maybe, maybe, maybe willing to talk to us again.

Maybe like in us.

Like what?

What do you what would you tell the audience about an investor interaction in today's world?

Are they liking oil and gas again?

Are they ready to write a check?

>> Yeah, I think I mean, I think investors are armchair quarterbacks, right?

So they're always right on Monday morning.

But, um you know, a lot of the investors pushed us to grow as much as we did.

It was probably the right thing to do at that time in the cycle.

And and then they get mad at you and oil price goes down.

And, um you know, I think I think we try to remove the oil price from the equation of what we're trying to build as a company.

And that has, you know, reduced the volatility of our business and allowed investors to say, listen, I can own Diamondback and yeah, oil is going to go down $10, but I'm not going to be surprised by what they do.

So, you know, I think um they're cautiously coming back.

I think the the the understanding of our business and what we do and what we're all doing out here in Midland is is starting to come back.

Right.

There was a period of time where, you know, we were all going away in two years, in 2020 and 2021.

And, uh you know, I think the death of our industry was uh greatly exaggerated as as they say.

>> So you you mentioned oil price.

Is oil price something that as a bigger company partnering with even bigger companies and kind of moving in bigger circles that you feel you have anymore visibility on than you did when you were, you know, a $700 million IPO?

>> Zero.

But that's why I brought you here for a low price forecast, because I'm going to stay out of that.

But but we have tried to do is is continue to keep our cost structure low.

And and that's also tied to this Basin, right.

The Midland and the Delaware, two of the lowest cost Basins in the world.

And so if that's the case, then you can survive, uh you know, the the inevitable down cycle.

And, um, you know, we've tried to continue to lower that break even generate free cash.

And if we miss on oil price, it's going to oil price is going to miss to the high side and we generate more free cash and return that to investors.

It's a much uh simpler, safer business model.

>> So you're you're obviously a colossal Permian producer, but you have a lot of visibility around North America broadly.

I think one of the things that comes up in today's world is, you know, where's the next play or where's the next acreage or where's the next what is U.S. North American shale production look like?

What's your sense of other basins or new developments or what plays out in the next five, ten years?

>> Well, you know.

I think there's going to continue to be new plays, explore.

>> Like is exploring going up, do you feel that?

>> I think it has to right because if you're if you're out of inventory where you are today, you need to naturally go explore.

Now, you know, Diamondback, we're not a natural explorer.

We're very good at exploring within the Permian Basin.

But, you know, I think there will be plays that come about, but they're not going to get to 6 million barrels a day, You right.

And that's the the beauty of what we have here.

I mean, what we have here is a world scale asset that can't be replicated.

The Bakken peaked at what, at one point for 1.5 million barrels a day.

The Eagle Ford peaked at 1.2, 1.3.

You need both those combined times to to get close to where we are in the Permian.

>> So you um were thinking the Goldman Sachs conference kicked off the year.

So that's a place where they're going to talk about energy and every source, um oil and gas from every Basin and power and a gazillion other things, uh do you still feel when you're in a forum like that that uh the Permian is is the key, whether it's a 100% Permian company or ExxonMobil talking, do you still feel this Permian is king mentality?

>> It's certainly the top topic on the oil and gas side.

You know, I think what's interesting is the the investor conversations have moved toward energy more broadly, right?

So are more people that know more about nuclear, they know more about renewables.

They know more about power uh than, you know, looking at specific type curves in the Permian and what we're doing.

And so we've kind of moved into a weight class where, you know, they're starting to talk about the Permian in the overall energy spectrum.

But at the end of the day, this from a public markets perspective, there's not a lot of plays to invest in that give you the size, scale and duration of the Permian.

And so it has to be a topic of conversation.

>> Like when you think about it, the Permian is relative importance.

I mean, let's go back um three, four, five years.

And what the Permian is relative importance would have been then and compare it to now, it seems like the Permians relative importance has gone up because it still has the most running room, it still has the most capacity, and it's the right place to do a lot of things.

>> Yeah, you know, I listen, I'm talking my own book because we're here in Midland, but these other plays are running out of inventory.

Right.

And they're they're slowing down in terms of their production.

And so for the US to continue to maintain this 13, 13 plus million barrels a day of black oil production, you need the Permian Basin to to fill that gap because, you know, we have multiple zone stack pay.

We're just getting, you know, scratching the surface of some of these upside zones.

You don't have that in the back and you don't have that in some of these other other other plays.

And that's the beauty of this Basin.

So, um you know, I think the Permian also and what we're doing here applies to what OPEC's thinking, what what the rest of the world is thinking.

I mean, you know, there's only a finite amount of supply, 105, 104 million barrels a day, and we're six of it.

>> So you mentioned this, the consolidation creating a sort of a steady, steadier oil and gas environment, maybe more less volatility broadly.

And maybe that's good for the companies and um the employees and the investors.

Where where do you see that um, where do you see that showing up in your in your business?

Like you're now this really big company, where do you feel that uh smoothness that you didn't feel it before?

>> Well, I think I think slowing down allows you to learn from what you've done, you know, on these pads and these developments and be able to make changes, um you know, more effectively.

I think in the past we were chasing growth so much that we didn't even get to learn from the prior pad before we had moved on.

And so consistency of execution allows us to drive down costs, study the subsurface, you know, with a lot of people a lot smarter than than I am looking at that and trying to improve well, results rather than running so fast that you have to do the next deal and you have to do this.

You know, you tried that.

We tried to do too much.

And kind of the lesson learned from from me and going into COVID is I think Diamondback was trying to do too much going into COVID.

You know, it's slow down, slow the treadmill down, generate some free cash and return money to shareholders.

>> What about people now?

It's always brought up um Midland's always had more opportunity than it had people frequently.

And now your business is really large and it's changed in some new directions.

How do you feel about getting the people you need and the workforce you desire to keep, to keep doing what you're doing?

>> Yeah, we've done we've done a lot of deals and brought a lot of people into Midland, right?

And we had to do a lot of selling to get those people.

>> Youre like a UFC alumni group here.

>> Yeah, there's like two of us.

Okay.

[Laughter] >> But growing.

>> Growing.

Uh, like me and my wife's a UFC fan now, so she, she didn't go there, but she has to.

That's it for me.

But that's about it.

>> Probably required.

Required fanship.

>> Yeah, but we've moved a lot of people here.

Right.

And um and once they get here, they actually want to stay.

It's just convincing them to.

To try it out.

>> What do you notice about the people that, that, that you've brought in or friends that you know have come in.

What are their reflections on moving to Midland and becoming a Midlander and embracing everything that is so cool about the community?

>> I think that just that that it is a real community that we all know each other.

We all, you know, work together, we see each other.

And that's kind of the the beauty of the Endeavor deal, right?

We we merged with the company across the street and and that meant that no one had to leave here.

No one had to move to Alabama, move to Houston.

They're all here working together.

And, you know, listen, we were fierce competitors for a long time, but there's a lot of information that we can now share as as friends.

But in this in the same city.

>> So you had this observation about some people view job changes worse than marital change, which is a dramatic statement.

>> But >> Very.

>> but but so if that's true, how do you you're sort of in the marriage counseling business and like, [Laughter] how do you how do you merge in people and say, um okay, now we're all on the same team and you know, how what's the art of all that?

>> It's an art.

I mean, it takes a lot of work and we've tried to, um, you know, spend a lot of time ourselves introducing the management team to the Endeavor people.

I mean, I think the Endeavor team and what we did was I think we did 15 or 16 breakfasts last fall just to kind of get in a room 20 to 30 people at a time and and just talk about who we are.

And you can only convince people um through your actions over time.

And I hope that the Endeavor people starting to realize we're maybe not the monsters from across the street that uh they thought we were and we're all on the same team looking to a look into, you know do a lot of great things over the next next few years.

>> I was thinking mean you were you mentioned we talked on investors a little bit earlier and and ESG was such a dominant theme with um investors for a while.

And somewhere in there we lost the way as to what ESG really means.

At some level, ESG means community and shared values and a good culture like.

But how do how do you guys think about ESG, its relevance, how you interpret it, and its relevance to how you run the business?

>> Yeah, I mean, I think in the public world, it's become a highly politicized term rather than than what it actually means.

You know, I think for us, it means our environmental and social license to operate.

That's what we call it in the Basin.

You know, I think we all live here, so we want clean air, clean water as best we can, and uh and we want to contribute to the community that we're involved in.

And, you know, I think you have to have a practical approach to it, um.

I think anything that uh for us, you know, as economically viable and environmentally supportive, like that's going to get attention and dollars and um and we try to try to block out the noise from the public on what that really means and kind of stick to your you know, internal Northstar and what ESG should mean to you.

>> I was thinking um a lot of people don't appreciate it, but um ESG, for all its kind of slightly polarizing moments there, there were a number of positive things that have happened um in the in the oilfield.

There's been a lot of improvement, a lot of reduced emissions, a lot of what you just might call just lower impact oil gas.

>> Yeah.

>> Do you from your perspective, can you share some of the big picture observations on how much better it's gotten?

>> Well, I think this Basin is the most scrutinized Basin in the world, right?

We've got satellites flying over.

We got planes flying over looking for methane leaks.

We got, uh you know, the EDF looking for >> This lunch is being monitored >> Yeah, its probably being monitored, but it's made us better, right?

I think as an industry, you know, you get the top ten CEOs in the country in a room not telling you secrets on what zones are completing, what type curves look like, what, you know, hot new play there is.

But you know, we're in this kind of fight together as an industry against the you know, the naysayers about what we do and why we're important.

And so we got together on environmental performance and there's there's a lot of a lot of good things happening.

Right.

I couldn't tell you what methane detection was five years ago.

And now 90% of our oil production is as realtime methane monitoring.

And so I kind of pitched this whole thesis of the the bulletproof barrel rate, The barrel produced in the Permian Basin is the lowest cost, lowest environmental footprint, best regulatory environment, in the world.

Well, what other barrel in the world would you want to produce ahead of that barrel?

And that's why, you know, I think we're going to be around a long time.

>> Do you do you find that message so.

Well, >> Don't steal that in your next podcast.

>> No no, well, would have attribution.

>> Okay, good.

>> Uh Right there with a fight on.

>> Yeah >> But um do you find that that message, I think a lot of us have been frustrated over the years that there there hasn't been an acknowledgment that a a US barrel, let alone a Permian barrel, but a US barrel is a lower impact barrel than a lot of other choices.

Do you think that attitude is changing?

Like, do you notice whether it's investors or congresspeople or policy people that they are getting that?

>> I think it's I think it's moving slowly, but I do think energy general has become such a hot topic globally energy, security, energy, poverty, you know, things you guys talk about a variance and all of those things are starting to get more attention by the layperson.

But, you know, we needed a show like Land Man to get people to pay attention to a what we're doing out here in West Texas.

But I think it's been a good thing.

I mean, there's the show is ridiculous, but, um, but I've got friends, you know, from the coastal cities I grew up in calling me and saying, this is what you do down there.

Like, I'm coming down.

I want to check it out.

>> I want in.

>> Who's Billy Bob?

You know, and >> That's funny.

>> So I'm Billy.

I get to be Billy Bob.

>> Nice.

>> Yeah.

>> You know, >> I dont think anybody believes that.

>> But I was thinking about the Permian and Shale in general has just always had this ever since it started.

Even if you go back to like the, um, the Barnett Shale, for some reason, there was this sense of like, well, this stuff only exists in the Dallas-Fort Worth area.

Like we've always underestimated shales potential.

It's been part of its legacy.

Now when we are talking about whether it's the Bakken or the Eagle Ford, the Permian, do you think we're underestimating the potential of shale to have a next leg up over the next ten years?

>> I I think we're underestimating it at a price.

I think there is a price where other things like secondary recovery that, you know, people in this room know way better than I do, You know, starts to come into play.

And so I think it's kind of for us, it's let's be as late as possible to that.

Let's have as long of inventory duration as possible so that when something else does get invented, because we are only recovering 10%, 12% of the oil in place today, well, there's a lot of oil left to produce.

And, you know, I think you have size, scale and a balance sheet and you're around the hoop.

When that next technology comes about, then you can scale it and continue to grow the business.

>> What a you mentioned 2014.

Right.

And uh I remember if you if you had pulled up in the summer, all the the summer of 14, if you'd pull up all the research for the price forecast of oil for the next 18 months, at that time, I think it would have vary between like high eighties and 105 bucks and we just steered right into it.

>> Yup.

>> Right?

What what is it about, um and we've had a number of those events since then.

What do you think we've gotten better at knowing one of those is coming or do you think we're for some reason less likely to have one?

I don't I don't mean to ask the like, Oh God, something terrible >> This time different?

>> Yeah, I know.

We all we all know you shouldn't say that.

but what, as you reflect on those moments, how do we steer clear of them in the future?

>> Well, well I think when you have those moments, you have to reflect, because if you don't, you're not you're going to make more of the same mistakes.

So I I don't think I can't sit here and say there's never going to be another down cycle again.

But but what I will say is we're more prepared for it.

The more, you know.

>> We're running the companies different.

>> Thats right.

That's right.

There's there's you know, used to be oil goes up $10.

We rerun the model, we add two rigs, then oil goes down $15.

We rerun the model, we cut three rigs.

Now we're going to run.

I mean, we're going to you know, I kind of give the price range of 50 to 100 if the price range is 50 to 100, don't talk to me about Diamondbacks playing because is going to be the same thing.

>> So that.

>> Hopefully I can forecast within that range.

>> But I guess I guess by implication, a lot of people in the room who have businesses which are not oil and gas businesses, but which are tied to it, it just sounds like that's a that's a real positive message about.

>> You can invest behind that.

>> You can invest behind it.

>> And same same with the city, right?

I mean, you can invest behind knowing that there are these large companies with large balance sheets, with significant inventory and a lot to develop here, uh and and that's helped Midland, right?

You kind of see that chart survival success, significance.

Midland kind of fits that, too, because in the early days you couldn't eat at half the restaurant because there weren't enough people.

I was on a three waiting list for an apartment for four months just to get one apartment.

When I first moved here.

And Midland's grown into, you know, the the size of of the economy, >> I was thinking, you, you, you made reference to it a little bit.

The uh the Permian Strategic Partnership has been an interesting um feature of the landscape where companies are trying to partner with the city in a community.

Any observations on those types of efforts?

>> I think it's continued to get bigger and there's been more and more companies and people supporting it, which I think is a good thing.

Um, you know, I think you've seen a lot of investment around town and restaurants and bars and things for younger people to do as the city gets younger.

And, you know, I think uh all that's all that's good.

We need more.

You know, I think uh there's a stat I saw the other day that the Permian contributed $27 billion in taxes to the state of Texas uh this last year.

That is more than 34 states budgets overall.

And I don't think Midland is getting its fair share.

So to speak, of of some of those dollars back.

And uh that to me is kind of frustrating that we we contribute so much to the state and don't get what we probably deserve here coming back.

>> I was thinking Diamondback it's a homegrown company.

It it grew up here.

It's always been headquartered here.

Endeavor, your new partner, same.

What do you make of being um headquartered here and how that affects the culture of the company and affects your decision making, your performance?

What what do you think of that?

>> I think going to all being here is a huge advantage, um.

You know, we learn so much from what's going on here.

And, you know, I also think we kind of stay out of the fray of of the rest of the the country.

Right.

We're kind of the I like to joke that we're the least known $50 billion company in North America.

And thats a really good thing uh for us, and to be able to just execute our business here and and learn here and uh you know, keep that kind of Midland chip on your shoulder >> So I was thinking would shift gears a little bit.

Huge change, uh COVID, the 2020 election, change in energy policy, um A lot a lot of new things came at energy and the world broadly um learned a few things.

Now we've got another change happening.

How how uh relevant or how much do you feel kind of Washington DC thinking in your business?

Do you try to, it's obviously more important to all of us because it just seems like it's more impactful.

But how do you think about the political overlay uh in the business right now?

>> Well I I brought you here for politics, >> Ok >> So, but uh I mean my personal opinion and for Diamondbacks opinion, you know, a supportive administration is a good thing, right?

Our business needs to be supported.

Our sector needs to be supported.

And for the longest time, I don't think that happened.

So it's good to see energy front and center a lot of attention being brought to to our business now from a day to day execution and operations perspective, we really try to separate policy from rhetoric.

Right?

And so policy for us, 100% based in Texas, has been very supportive for a long time.

And so that's, I think, a positive thing.

Now, there's certainly some things that we disagree with policy wise in DC, but most of it's rhetoric, right?

And so we just try to kind of stay in our little corner of West Texas here and execute our business.

>> So you must >> what do you think about the politcial environment?

>> Well, [Laughter] [cough] I think I well I I would >> Its gonna be on TV later so >> I'll tell you, I um I was watching Chris Wright's testimony a little bit this morning.

If you get a chance, it's definitely worth a watching.

I think the way it um kind of simplistically comes across um and I mean this in a good way, as I I think the previous administration had, we are going to decarbonize energy systems.

That is our number one goal.

And I think this is a philosophy of we think more energy is better than less energy.

And we are choosing the path of more energy.

And then we're going to be finding those things which are lower cost, most reliable, least in fact.

But it is a it is a change in what's the goal.

>> Yeah.

>> And I just think that um that's super positive for for for people in energy, for people who care about energy, uh for for people who are managing costs and costs.

I think that I'll ask you this kind of as a way of coming back at you.

But uh because my background was oil and gas and what, of course, has been the story over the last two or three years is power.

Like power is is the dominant discussion.

So we all have to get our heads around power.

But what is a really unreported fact of life in the Western world is that it doesn't matter if you're talking about Germany or Calgary or Australia or California or even parts or Texas.

Power prices have gone up and they have largely of the choices we've been making around the flavors and how those grids work.

>> The inputs.

>> The inputs.

>> Yeah >> So power is a big thing, uh, I think this administration will be focused on it.

But how do you power has become such a big thing?

How as a large energy player do you start to get your head around power and its impact on Diamondback?

>> Well, I think there's two things, right?

I think there's power to execute on our business, which we're short power in the Permian, short power in Texas.

And then there's the cost of power in the gas side of our equation where, you know, we just went through a year where we average 20, $0.20 an MCF to sell our gas in the Basin.

Well, why not build more power generation here and cut off the loop of selling your gas for free and paying full price for power?

And that's what we're kind of thinking about and working on because there's so much embedded power and the amount of natural gas that's being produced here.

You know, in the slides we showed earlier.

>> Do you find that thinking about all this is about the future of Midland, the future of the Permian, and how oil and gas is integral to all that?

The gas opportunity is maybe not discussed as much.

The Permian is such a gas powerhouse.

The gas is so cheap.

>> By accident.

>> By accident.

And if you think about five, ten, 15 years out, what we might be doing with that gas is pretty exciting.

>> Yeah, I think there's going to be a lot more power gen here.

You know, the mythical maybe data center development, I think could be something that's important because you're starting to see all this uh talk about data center development.

Well, they're taking power away from normal citizens around the country to power data centers.

Well, why not do it here where you can do it off the grid with significant scale and not be taking energy away from the regular a citizen or business that needs it?

And so that's the kind of hope I think we're going to learn a lot more about it in the next year.

I mean, I think a year ago today was kind of when we started talking about it internally.

And uh I think it's going to be a good next wave of growth for this this area.

>> It's interesting because if [Cough] you talk about it's easy to fall into the trap.

If somebody says what's the future of the Permian, they start doing drilling location math.

>> That's right.

>> And they shouldn't do that.

Yes, we all care about that.

But there's so much >> That numbers dynamic, right?

>> Yes.

Right.

So there's no technology that can change that dramatically.

But there's so much outside of that that could happen energy wise.

>> Yeah, I mean, that a 1.5 gigawatt plant needs 225 million cubic feet of gas a day.

Well, we're growing gas production to BCF a day a year.

I mean, we could have a massive source of power here for for a long time.

>> I was thinking one thing right after you guys did the Endeavor deal, there was a press release where you signed a partnership with Acklow, which is a small micro nuclear company.

Like, Wow, right?

Like, would you have ever thought you'd be signing a deal with a nuclear company?

And how do you guys think about small scale nuclear and its potential?

>> I, I just kind of see it as an all of the above energy policy, right?

So we need power here.

We need power for our facilities, um.

You know, every little facility is its own you know, power plant.

And, um, you know, I think it's exciting.

I think it's uh it's rare for an oil and gas person to talk about nuclear.

But I think um it's a part of the equation and we a need to figure out a way to utilize it correctly.

Now, technology's a long way away, um but maybe Veriton can advance it faster than than what's going on right now.

>> How do you this gets back to your time, theres >> Im trying to get it back to you >> I know, Im trying I just get so many questions.

It's going to you know, I'm like the tennis ball machine that's just coming across >> Yeah >> the net.

[Cough] >> Yeah >> But how do you maybe this is a little bit about the work we've done together, but you've got to keep up with a lot.

You you referenced it and new technologies.

Diamondback has made some interesting investments um in clean fuels and things that are pretty unique.

Like how do you think about the technology investing the company's done and what might pay off and how you know how to make those investments?

>> Yeah, we've really tried to do things on the side outside of the main business, which is execute, you know, oil and gas production as effectively as possible.

But we try to do some things that could make our shareholders money tangentially to that.

>> Options.

>> Yeah, I mean, a lot of it, you know, in the early days it was pipelines out of the Basin that protects us commercially, gets our crude to big markets and we can make a little money on it.

Now it's power, uh you know, decarbonization like the Verde Clean Fuels investment we're hoping to put in Martin County, takes 35 million cubic feet a day of gasoline for sort of 35 million cubic feet a day of gas and converts it to 3000 barrels a day of gasoline that you could, you know, put your truck connected to it and drive off.

And that's kind of exciting, um you know, >> Really exciting.

>> and the the exciting part is when can you do it at scale and if you can do it at scale, you know, that's where you really drive a lot of value.

And this all kind of ties back to our natural gas production and trying to earn more on our natural gas production than we have you know today.

>> I heard recently investors are as excited about natural gas as they've been in a long time.

>> They should be excited about oil, in my opinion.

>> They should be excited about oil.

Uh.

Well, while they've been excited, natural gas oil's had a nice run here last four weeks.

But what do you a make of the world's conversation around natural gas, whether it's through LNG exports or just um as a fuel do you think natural gas is a We should be optimistic on it from a consumption standpoint over the next decade.

Is it a fuel that captures market share?

>> I think I think 100% it does, because the world's woken up to that being a very viable solution for, you know, baseload power long term, you know, security of energy and, you know, low cost and, you know, the whole, uh you know, movement to renewables, I think kind of is is fallen on deaf ears because you need something to make up for the time when the wind is not blowing, the sun's not shining and uh natural gas is going to play a huge role in that globally.

And you guys study this.

I mean, the amount of people without access, affordable energy and there has to be a way to get them power and energy.

And that in my mind there has to be natural gas or LNG from the US.

>> It's a it's actually a great moment.

And Chris Wright's testimony this morning, he talks about a billion people are living well with lots of energy and but there are 7 billion who are not.

And you can't have energy policies that ignore that equation.

>> That's right.

>> I was going to say when you just uh were talking there about renewables, I was having the Landman flash is there was the Billy Bob Thornton gives this >> This speech somewhere >> yeah this speech at one point about uh energy sources, which is uh entertaining.

>> Certainly.

>> But there's some truth in there.

>> My buddy watches the show.

I think its I think its good for for our sector.

>> Well, yeah.

What what do you think about the um the oil and gas uh industry's ability to communicate, express itself, defend itself, um have it cultivate that good public image like, has it changed?

Why has it changed?

How do we make it better?

>> You know, I ask myself this question a lot.

Why is our industry not good at marketing itself?

And I think the reason is our industry has been taken for granted, right, it's taken for granted that your lights going to switch on, your car is going to start.

And, you know, every barrel of oil that we produce, every molecule gas we produce gets bought every day without having to market it.

You know, we don't have to convince you to buy and you >> Dont have a huge marketing department >> No.

>> You should buy.

>> A lot of engineers in the room.

The engineers aren't quite the best marketers.

They're very, very good at engineering.

But um that's why I think we're taking for granted.

And uh that that uh the momentum shifting people are starting to energy security, that energy poverty.

Chris Wright, all that stuff I think is good for for our story and we shouldn't be ashamed of it.

We have to be proud of it.

We can't try to negotiate.

We've got to say this.

Listen, this is all good, this all important and you know, we're not here to negotiate.

You mentioned the when you had to set up about 700 million to 50 billion and those growth other growth stats you had outside of Silicon Valley, you know, things don't usually have uh stats like that as the tech companies have gotten more interested in energy, need more energy, so on and so forth.

Do you feel that community of people changing, coming to Midland, wanting to understand energy better?

Like what?

What would you tell us there?

>> I think they're wanting to understand energy better.

I don't think they've come to Midland in in a big way yet.

But but I think, you know, again, you went on this power theme.

And if we start to make some announcements on the power side and say, hey, here's this place called the Permian Basin land super cheap, there's a lot of water for cooling, there's a lot of natural gas for cheap power and, uh you know, we can do it off the grid.

Itll get some attention from the from the tech players in this you know AI rate.

>> We're going to get more Californians in Midland.

>> No just me and my mom, that's that's the only two Californians [Laughter] that are allowed here right now.

But hey I moved from California to Midland before it was cool.

So just just remember.

>> Well, so I was just as we pause and reflect on some of the things that have come up here um and everybody here is interested in and how does this community look over the next, you know, their kids, their grandkids, the future, um capital of US oil, um incredibly growing gas, um talented engineering base, technology focused community, a place where you can do stuff right.

You can do stuff if people want to build stuff, they want to make it happen.

And all these options we've talked about, whether it's data centers or anything else, I mean, it just it seems like we've painted a picture unwittingly, of just like that's the capital of the United States is energy world for a decade or two or three at a minimum.

So why shouldn't we be optimistic about all that?

>> That's kind of the key themes to be optimistic today.

So I'm excited.

>> I'm just checking the logic there.

>> Yeah, felt a lot.

>> Felt pretty good.

Now it's Midland's got a lot a lot of growth opportunities ahead of it.

I mean, for a city to grow as much as it has over the last ten years, kind of eight 10% GDP growth a year for ten years, I mean, that is massive and uh and it put this city on the map.

And so, you know, there's still a lot to do and a lot of people to grow up here, like kids to grow up here.

You know, the average age continues to get get younger.

And we need to invest in the community to uh to support that.

>> So unfair question.

We covered a gazillion things.

What do we not talk about or what's a what's what's the fun thing we should have touched on?

I didn't get a chance to make you cry.

>> Not yet >> I was hoping to.

>> I mean, I mean, I was worried 20 minutes ago you were going to stop, but here you are 20 minutes later.

But uh no, it's been a pleasure to uh to be here and be in front of all of you and call Midland home.

And I appreciate you coming to keep the conversation moving.

>> Well, it goes without saying as quite an honor to be here to be with you in this community and to get to share this uh moment.

So for me personally, thank you.

>> Thanks a lot.

Awesome.

>> Thanks.

Kaes.

[Audience applause] >> Wow, that was a great conversation.

I really appreciate you guys.

Um, Kaes thank thank you for your insight.

Thank you for your leadership here in our community.

Maynard, um I think you just proclaimed us the energy of the world.

So just take that back to Houston with you, if you don't mind.

[Laughter] Um I want to again thank Kaes and Maynard gentlemen, thank you so much.

We do hope that whenever you a come to events like this, you're able to to take that information and apply it to your business or or to a your activities in our community.

So uh I hope that uh I hope that you found it useful and as an engaging as I thought it was.

And um with that, we hope you have a great afternoon.

Let's all make Midland the best place we can thank you guys so much.

[Audience applause] [Outro music] >>Voice Over>> The Midland Chambers, State of Oil and Gas is made possible with the support from Diamondback Energy.