AI Summary
5 min readJack McClendon runs Sienna Natural Resources, a small independent oil and gas company that buys older, conventional wells—the kind that have been producing for 70 to 100 years—and tries to squeeze more oil out of them. He started the business in 2018, which might seem like terrible timing given the brutal shale busts of 2014-15 and 2020. But McClendon isn't in the shale game. He operates in a different part of the industry, one that relies on different geology, different capital sources, and a different psychology. The conversation with Odd Lots hosts Joe Weisenthal and Tracy Alloway covers why the much-hoped-for new American oil boom hasn't materialized, what would actually trigger one, and why the people who drill for a living are more cautious than the politicians who want them to drill more.
The Two Kinds of Oil Business
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What you'll learn
- 1 (02:24) **Episode Open & Oil Price Context** - Joe and Tracy set the scene: a major oil price drop on April 17th amid ceasefire optimism, contrasting with the $112 peak in early April.
- 2 (06:14) **Jack McClendon's Business Model: Conventional, Not Shale** - Jack explains Sienna Natural Resources is a small independent producer focused on "conventional" reservoirs, not shale.
- 3 (08:44) **Why Start an Oil Company in 2018?** - Jack corrects the hosts' assumption that he started a "shale" company and explains the post-bust opportunity.
- 4 (13:21) **Landman Reality Check** - Jack weighs in on the accuracy of the hit show.
- 5 (17:13) **The Cost Squeeze: 25-30% Higher Since COVID** - Jack breaks down the two buckets of costs that have crushed margins for small producers.
- 6 (20:43) **The Scarring Effect of Shale Busts on Capital Discipline** - Jack explains why the industry is no longer responsive to high prices.
- 7 (23:38) **How Small Producers Like Jack Get Funded** - Jack details the capital structure for his business, which is very different from the big shale players.
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Guests on this episode
Show Notes
The White House wants gasoline prices to be lower, and it wants to see American oil companies drill for more oil. But of course, these ideas are in tension. If prices are going lower, why drill more? This tension has only grown sharper since the shale busts of the mid-2010s, as American producers got burned multiple times by prioritizing production over profits. So what now? How do US producers think about the recent oil price spike? How are they thinking about the rising costs of their own production, due to higher energy, labor, and steel costs? On this episode, we speak with Jack McClendon, the founder and CEO of Siena Natural Resources, an independent oil and gas company that primary buys odd lots of wells from other companies. We talk about the long-term economics of the industry, including the central role of capital markets in determining how the industry moves. He also tells us whether the show Landman is realistic.
Read more:
Oil Tankers Hauling US Crude Via Panama Approaching 4-Year High
The US Oil Industry Doesn’t Want the Iran War Either
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