Each year, the NAPE Expo in Houston is a microcosm of the state of the oil and gas industry. This year, despite some pre-convention jitters about the Omicron variant of COVID, the show went on without a hitch. And what a show it was.
To my eyes and ears, the theme around NAPE this year was GREEN.
Green, in regard to ESG. Green, meaning cash.
Our industry has historically done a lousy job of shaping the image of our business. Our product’s fundamental nature in society is unappreciated, and our means of producing it has been demonized. But, having endured the shock of the global pandemic and a freshly-woke culture, the oil and gas sector has genuinely embraced change.
There is, 100 percent, a top-down commitment to responsibly produce natural resources by American-led companies. From the largest super majors to the smallest independent producers, we acknowledge the obligation to extract natural resources with less impact to the environment. There is also an increasing awareness amongst our community to tell the story of the improvements and investments our professionals are making to deliver our product in the cleanest, most efficient way to the world. The oil and gas business does amazing work, and we need to stand proudly.
While the public has driven the ESG angle, capital markets and financial backers have tightened the purse strings and forced management teams into capital discipline. Finally, right? No longer allowed to outspend cash flow generated from operations, the era of “Grow at all Costs” is over. Returning capital to stakeholders is the name of today’s game.
The Post-Pandemic Oil and Gas Industry
We find ourselves creeping towards pre-pandemic levels of demand for refined products, combined with a lack of readily-available incremental production from OPEC+, and large, public company capital expenditure budgets restricted prohibiting growth in a call to return capital. Under these conditions, ExxonMobil announced their 4th quarter 2021 cash flow of $17 BILLION. And they are not alone: publicly-traded entities are buying back shares and returning cash via distributions to shareholders at a furious rate.
The discipline and capital restriction across the larger players has elevated commodity prices and elongated the expectations for this pricing environment for the next several years. But for the small, mid-size, and independent oilman, that’s an environment ripe for making money. New projects, new wells, and new acquisitions have great potential to make good cash returns in a shortened time frame. Now is an amazing time to deploy capital with the potential to make outsized returns.
All this made for a fun week for the PetroLedger team on the floor of the George R. Brown Convention Center, talking all things back office. We had the pleasure to spend time with several existing clients, many of whom are growing. We were also able to meet customers for the first time in-person, having only previously connected via web conferencing. The exhibitor portion of the floor was robust, and the energy was palpable, reaffirming the NAPE motto of “Where Deals Happen.” In this environment of opportunity, we returned home with pockets full of business card leads for new work with future clients.
Green is Good. Cash is King.