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Wednesday, February 24, 2021

In Market: How not to screw it up

It was in the early, early days of the Barnett Shale when Fort Worth energy analyst and raconteur Gene Powell began prophesying that this was big, not just for little ol’ Cowtown, but for the world.

“This could change everything,” he would say, barely able to contain his childish glee.

There was oil and gas in this once-impenetrable rock and we could get at it. We had unearthed the Rosetta Stone for shale and that fired Gene’s imagination of what is and what could be. The U.S. chained to the OPEC oil overlords? No so fast …

Still, the old oil man in Gene knew that, more than likely, we could – and would – screw it up. Perhaps royally.

Recall those old bumper stickers from the late ’80s: “Please Lord, give us another oil boom. I promise not to screw it up next time.” Gene, who died about a year ago, had seen it screwed up many a time, done it a few times himself.

This week Rystad Energy said Gene was right. Well, not exactly, but it might as well have. The Houston-based company estimated that total U.S. oil and condensate production has increased from 8.9 to 9.3 million barrels per day between November 2016 and May 2017. The majority of this increases comes from higher shale activity.

Over the last year, investors have laid down $100 billion in the U.S. shale industry. Drilling activity has grown by 60 percent compared to 2016, while completion activity is up 30 percent, according to Rystad.

“The OPEC cuts and subsequent oil price increase triggered renewed investment among U.S. shale producers. In fact, total investments in shale are expected to grow by approximately 50 percent this year,” says Espen Erlingsen, vice president analysis at Rystad Energy. “The spike in activity was first visible in increased rig counts, followed by higher completion activity. Now we are seeing growth in production again.”

And while shale producing an incomprehensible amount of energy is news, so too is how many of these companies – particularly the large multinationals – are doing it.

Stop the presses. They may not be screwing it up.

Harken back to 2009, when ExxonMobil plunked down more than $30 billion – they can do those kinds of things – for Fort Worth’s own XTO Energy. XTO Energy had – and still has – some of the best and brightest people who know that tricky, slick rock known as shale.

But you know how most acquisitions go – companies come in and “rah-rah,” “we don’t want to change their culture,” “it’s a perfect fit” and, “oh by the way, we don’t like the color of your tie.” Before long, the company that was purchased, its great ideas, top management and free Friday pizza are long gone with the wind.

Harken back more recently, to February. ExxonMobil rooted around in its couch cushions and found $6.6 billion in change to acquire acreage in the highly desirable Delaware Basin area of the Permian Basin from Fort Worth’s Bass family.

According to a news report from Bloomberg, ExxonMobil is letting its XTO Energy unit handle the drilling and production decisions for all these new areas in the Permian Basin. That’s right. The big muckety-mucks aren’t muckety-mucking it up.

Here’s a key line from the story by Joe Carroll: “Based largely in the Texas cities of Fort Worth and Midland, XTO’s 5,000-person staff has been exempt from many of the centralized bureaucratic and planning structures of their overlords since Exxon acquired XTO for $35 billion in 2010, according to people with knowledge of the arrangements who weren’t authorized to speak publicly.”

Forget that last bit, that’s journalistic speak for “here’s what I can tell you without telling you.” The other part, in which Exxon basically takes a hands-off, go ahead with pizza Friday attitude toward XTO may be the larger revelation. Few small companies that make acquisitions can figure out how not to screw it up, let alone a company that made a “disappointing” $7.8 billion last year (down 51 percent from a year earlier).

Apparently, Exxon is letting XTO people wear whatever color ties – or scarves – they want.

Somewhere up there, Gene Powell is straightening his own tie, raising an eyebrow and flashing a gleaming smile as he says, “See, I told you so.”

Robert Francis
Robert is a Fort Worth native and longtime editor of the Fort Worth Business Press. He is a former president of the local Society of Professional Journalists and was a freelancer for a variety of newspapers, weeklies and magazines, including American Way, BrandWeek and InformatonWeek. A graduate of TCU, Robert has held a variety of writing and editing positions at publications such as the Grand Prairie Daily News and InfoWorld. He is also a musician and playwright.

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