Jack McClendon on Why It's So Hard to Create a New American Oil Boom

Summary

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Odd Lots Podcast Summary

Episode: Jack McClendon on Why It's So Hard to Create a New American Oil Boom

Date: April 20, 2026
Hosts: Joe Weisenthal & Tracy Alloway
Guest: Jack McClendon (CEO, Sienna Natural Resources)

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Overview

This episode delves into the challenges and realities facing the American oil industry today, from rising costs and changing capital discipline to regulatory and political pressures. Joe and Tracy are joined by Jack McClendon, CEO of the independent oil and gas company Sienna Natural Resources, who discusses why creating a new American oil boom is difficult, the legacy of the shale revolution, and what it's really like to run a small upstream oil business in today’s market.

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Key Discussion Points & Insights

1. The State of the U.S. Oil Market

• Oil Price Volatility

• Recent large swings in oil prices, caused in part by geopolitical tensions (e.g., potential ceasefire in the Gulf) (01:40).
• WTI prices dropped to around $83/barrel from over $110 just weeks earlier (01:59, 02:15).

• Stagnant U.S. Supply Response

• Despite high prices and calls for more production, U.S. rig counts have been flat or trending slightly down since 2023 (03:15).
• U.S. oil output is at all-time highs, but the pace of new rigs and drilling remains subdued.

2. The Business of Independent Oil Production

• Sienna's Model & the Difference from Big Shale

• Sienna operates mostly conventional (not shale) reservoirs, acquiring older, smaller fields deemed insignificant by major producers (05:24, 06:36).

• “We buy assets that we think are undercapitalized, underappreciated, try to squeeze a little bit more juice out of each producing well and try to get cost down.” – Jack McClendon (05:24)

• Conventional vs. shale: Conventional fields are geologically better but mostly exploited; shale is “unconventional,” harder to extract and dominated by large firms now (07:53).

• Majority of U.S. oil now comes from shale, especially the Permian; small independents focus on different types of assets (10:56).

• Family Legacy & Industry Ingenuity

• Jack comes from a family with deep roots in shale. His father, Aubrey McClendon, was pivotal in pioneering the industry (09:05).
• “Never underestimate the ingenuity of the American oil man.” – Jack McClendon (09:32), reinforcing resilience through industry cycles.

3. Economics & Cost Dynamics

• Cost Inflation Since COVID

• Operating and capital costs are up 25-30% over five years: salaries, chemicals, electricity, steel (tariffs) (16:19).
• Some recent easing in services/equipment prices due to lower activity, but overall, inflation remains structurally higher.

• Boom-Bust Impact on Capital Structure

• Years of boom-bust cycles—especially post-2015 and COVID—left lasting scars.
• “Now we're not just going to spend a bunch of money to expand, we're actually going to pay dividends to our investors. It's all about capital discipline…” – Tracy Alloway (19:23)
• Jack explains investors now require real capital discipline and consistent returns before committing money (20:19).

• Consolidation

• Industry consolidation: from ~80 public companies in 2008 to a handful that matter now. Exxon and Chevron dominate (20:19).
• Small players like Sienna must seek out smaller, alternative, or family office capital, rather than large institutional sources (22:47).

• Financing Structures for Small Oil

• Similar to private equity: capital gets repaid with a required rate of return, and there can be override royalty structures for upside (24:58).
• Alternative lenders take more collateral risk for higher return or share of production revenue.

4. Investment & Production in a Volatile Environment

• Decision-Making in a Price Spike

• Price spikes bring excitement and temptation to ramp up capital spending—but timing is risky (27:10).

• “I authorized everything in May or June when oil was at 100, and then first production came on in August and September when oil is back to 70.” – Jack McClendon (27:27)

• Costs follow prices—service and chemical companies immediately raise their rates when they see oil spike (28:19).

• The current approach: pay down debt, wait and see rather than rush to drill.

• Service Costs’ Sticky Downside

• Oil service providers raise their prices quickly as oil rises but are much slower to cut them when prices drop (31:04).
• Difficulty planning when “a tweet could move the price of the world’s most liquid commodity 5 to 10%” (31:33).

5. What Could Create the Next Boom?

• What Would It Take?

• “If you saw a sustainable price above 80 over a prolonged period, call it four to eight months, I think you would see a supply response…” – Jack McClendon (34:53)
• But the “million barrels a day” growth era is gone; best possible now might be 300k–500k bbl/day annual growth.

• Time Lags in Production

• Even with shale’s famed short cycle, it’s still a 4–6 month response from when prices rise to when new production hits (36:05).

6. Regulation, Politics, and Perceptions

• Regulation vs. Price

• Regulatory streamlining (faster permits, relaxed environmental review) helps, but “price is an exponentially higher dictator” for drilling activity (37:38).
• Jack reiterates: rules matter, but much less than commodity price and input costs (38:19).

• Political Cross-Currents

• Oil country (TX, OK, LA) overwhelmingly Republican, but even in those circles, frustration with both major parties’ policies is common (39:13).
• “I think a lot of people wish that we could just kind of find some happy price equilibrium. Right. Whether it’s 70 or 75, not 55…but, you know, not 90 or 95, which is a price that hurts demand.” – Jack McClendon (39:49)

• Industry Attitude and Resilience

• High pain tolerance and optimism are a feature—“it takes a…sick individual to live through these kind of boom and bust cycles” (44:00).
• “We are resilient and everybody in the industry firmly believes…we create and we produce a product that powers the modern world.” – Jack McClendon (44:40)
• Abundance of American oil has reduced global conflict risk (“without the shale revolution, there would have been a lot more wars”) (45:38).

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Notable Quotes & Memorable Moments

• On the “Ingenuity of the American Oilman”
  “Never underestimate the ingenuity of the American oil man. I just think it’s a testament to the tenacity and grit and intelligence of our industry, largely maligned by pretty big segments of the company that do not realize how much this has transformed our country.” – Jack McClendon (09:32)

• On the Cost Structure Shift Post-2015
  “Companies are increasingly rewarded for rewarding shareholders versus focusing on production growth…” – Jack McClendon (18:57)

• On Financial Discipline and Raising Capital
  “There’s been a lot of…show me, of investors wanting to see that there actually is going to be some capital discipline.” – Jack McClendon (20:19)

• On Why Drilling Doesn’t Respond Instantly to High Prices
  “…I authorized everything in May or June when oil was at 100, and then first production came on in August and September when oil is back to 70.” – Jack McClendon (27:27)

• On Oil Industry Psychology
  “People in this industry have a…high pain tolerance. It takes a kind of a particularly sick individual to live through these kinds of boom and bust cycles.” – Jack McClendon (44:00)

• On Industry’s Broader Social Value
  “...Without the shale revolution, there would have been a lot more wars. And I really do believe in that because I think this resource abundance...has prevented a lot of conflict...” – Jack McClendon (45:38)

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Timestamps for Key Segments

• Introduction and market context: 01:33–05:02
• Jack explains Sienna’s business and the difference between conventional/unconventional: 05:24–07:59
• Family background and the arc of U.S. oil production: 08:00–10:48
• Industry cost structure, inflation, and capital discipline: 15:51–23:58
• How independent oil financing works: 24:58–26:34
• Behavior in response to price surges and crashes: 27:10–31:13
• What’s needed for a new supply boom: 34:09–36:05
• Regulatory and political impact on production: 37:03–40:30
• Industry psychology and why people stay in oil: 44:00–46:24

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Overall Tone & Final Thoughts

The episode was candid, technical in parts, and peppered with both pride and frustration about operating in such a volatile, misunderstood, and politicized sector. Jack McClendon gave listeners an insider’s look at the unglamorous, high-stakes business of scraping new barrels from old fields, the psychological resilience required, and the deep-seated conviction that the oil industry still powers the modern world—despite enormous obstacles to ever seeing another true “boom.”

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Further Exploration

• Potential Future Episode: U.S. refinery mismatch and challenges with refining light vs. heavy crude (47:36–48:25)
• Contact & Social: Follow Joe (@TheStalwart), Tracy (@TracyAlloway), and Jack McClendon (@JackMcClendon) for updates or feedback.

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Transcript

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[Joe Weisenthal]

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

[Tracy Alloway]

And I'm Tracy Alloway.

[Joe Weisenthal]

Tracy recording this April 17th big drop in the price of oil today on the headlines, the growing optimism that I think, you know, a ceasefire will endure. Anything could happen, but at least for now, it appears the extreme left tail scenario of a $200 oil may be off the table.

[Tracy Alloway]

Right. So I'm looking at a chart of WTI at the moment, which might be a little hint as to our guest that we're about to introduce, but it's currently at around $83 a barrel down.

[Joe Weisenthal]

The hint was that you didn't say Brent, right? Yeah, good hint.

[Tracy Alloway]

Yeah, that's a good hint.

[Joe Weisenthal]

Yeah, it's a good hint.

[Tracy Alloway]

Although everyone can already see the headline on this episode if they clicked into it. But anyway, it was at $112 per barrel in March or actually in early April. God, time flies when you're talking energy crisis and war in the Gulf.

[Joe Weisenthal]

You know, even setting aside the war, however, there's a lot that I've been very curious about the future of the US Oil industry. You know, we were in Alaska last summer and I think one of my favorite parts of that trip was talking to that company that made the steel tubing for oil companies up on a Not the North Shore, the north. The North Slope. Oh yes, for the companies up there, the North Shore, the North Shore of Alaska. Like it's Long Island. You know, the way steel prices were going to affect the break even costs of American oil producers, et cetera, and the interaction of tariffs and higher services costs, et cetera. And we know that the US Produces a lot of oil and it's an exporter, but prices went up. And Chris Wright, he went down to Syra week a few weeks ago. He's like, please produce more. But as you've been right about the rig counts have been going the other direction.

[Tracy Alloway]

Yeah, that's right. So I mean, this was also part of the Iran story, this idea that, well, if we get a huge hike in the price, if oil is going to be above $100 per barrel, then maybe we'll see some sort of supply response in the U.S. right. But if you look at the Baker Hughes oil and gas rig count, it's basically been trending sideways. In fact, the last available data, it fell by three. And then if you go out even further, you know, it's kind of been going sideways and slightly down since basically 2023. So, you know, we haven't seen a big supply side push. And that's despite a lot of noise coming out from the administration about unleashing U.S. energy and, you know, letting everyone, including your grandma, drill.

[Joe Weisenthal]

You know, getting it right is. It's tricky for all administrations, right? Every. In theory it's like, oh yeah, let's produce more. There was a lot of production actually under Biden, but the administration didn't want to brag about it. It's kind of weird. Then you have an administration that does want to brag about it, but they're like, oh, and now there's a bunch of Venezuelan oil on the market unsanctioned. So what does that mean? Anyway, here's the other thing. I'm really into the show Landman, and I really just want.

[Tracy Alloway]

I knew this is just an excuse for you to talk about.

[Joe Weisenthal]

That's correct. And so I like, I got to talk to someone who's just out there, independent small oil and gas company. Because I have a million questions about how realistic that is.

[Tracy Alloway]

I like it every time we get to talk about Christmas trees of like valves and spools and casings and there you go. Well, we really do an episode for both of us.

[Joe Weisenthal]

You really have written a lot about the technology of oil production.

[Tracy Alloway]

Well, I wrote one article and then I think I revisited it, but it had one of my favorite headlines of all time and one of my favorite ever leads, but the headline was how actual nuts and bolts are bringing down oil prices.

[Joe Weisenthal]

There you go.

[Tracy Alloway]

And it was about standardization of oil drilling parts.

[Joe Weisenthal]

Well, we really do have the perfect guest. Someone who is. Who's in the game, actually got skin in the game. In this space, we are going to be Speaking with Jack McClendon, CEO of the Small oil and gas company called Siena Natural Resources. Jack, I've wanted to have you on the podcast. Long time. So thrilled you're here. Why don't you tell us what's Sienna Natural Resource? What's your business?

[Jack McClendon]

Yeah, sure. Thanks for having me on. Yeah, we're just a small independent oil and gas producer. So we operate in the part of the segment called the upstream oil and gas industry. So that is the. The actual direct companies that extract the hydrocarbons from the ground. And so, yeah, our business is a little bit different from a lot of the publicly traded companies that you see, you know, the Exxons and the Diamondbacks of the world who are drilling kind of horizontal shale wells. There are many more companies that are much more similar to mine. You know, the horizontal shale game has largely become the domain of very large companies. I mean, you've got to have scale to be able to operate in that space. We're largely production company. So the way to kind of think about it is, you know, we buy assets that we think are undercapitalized, underappreciated, try to squeeze a little bit more juice out of each producing well and try to get cost down. Although there are smaller companies that do do drilling, and we have drilled in the past, and we will likely drill in the future as well, too.

[Joe Weisenthal]

Would you say you're essentially going around and buying odd lots of gas, oil and gas assets that other companies may not be getting the best out of?

[Jack McClendon]

Yeah, you could. You could say that. I mean, a lot of. Just as I said, a lot of the assets that we're targeting are just. They're just too small, you know, they're rounding errors, you know, on the balance sheets of these large shale companies who, you know, are buying tens of thousands or hundreds of thousands of acres and drilling, you know, two to three miles under the ground. So it's. It's just we produce the same product. It's just a very different business.

[Tracy Alloway]

And I'm reading here it says you started this business in 2018, which I find really fascinating because 2014, 2015, the shale bust was an incredibly painful moment in time. Not just if you were in the energy specifically, but also if you were in other parts of the market, like the debt market at that time. And there was crazy Stuff going on at that time, like people talking about oil going down to like zero. I remember being at a restaurant and, well, it eventually went to negative 40, but that's a very separate thing. But that was different. But I remember being in a restaurant and I was talking to my husband about oil prices at that time, and some random guy, like, overheard us at the next table and got up and said, like, oil's going down to. I think it was either 20 bucks a barrel or zero. And then just like left the restaurant.

[Joe Weisenthal]

That's very heavy. That's a weird anecdote.

[Tracy Alloway]

So it was like a very strange time in the oil market and yet you decided to start a shale company at that time. What was the thinking?

[Jack McClendon]

I'm going to, I'm going to correct you quickly and then, and then go back into context. So it's not a shale business.

[Tracy Alloway]

Okay, sure.

[Jack McClendon]

We operate largely conventional reservoirs. And so, you know, the way to kind of think about it is shale is what is called unconventional. So conventional reservoirs have much higher porosity and permeability. They are actually much better reservoirs from a geologic standpoint. And so for the most part, you'll hear it in the industry parlance, those were the easy, easy reservoirs to find. Right. If you go back to like the 1920s, 1930s, you know, drilling a field like the Yates field, which is kind of one of the most prolific oil fields, you know, you were basically drilling 1,000ft into the ground vertically and they were getting, you know, 400 to 500 to 1500 barrel a day, IPs, you know, so it's just the conventional reservoirs or the better reservoirs, they've largely been exploited. So when you say shale company, that's the unconventional reservoirs. And so that was the rock that largely was thought it was impossible to produce. And really until the advent of horizontal development, horizontal development, so much as hydraulic fracturing, it was because the pore space was just too small. And so there was no way to commercially extract oil and gas from those reservoirs. We knew the oil and gas was there. We just couldn't get it out. So that's just a little point of distinction there. That's the difference kind of between a conventional and an unconventional reservoir. So most of what we operate is conventional reservoirs. So these are, this is, these are reservoirs that were found, you know, anywhere from 70 to 100 years ago and have largely been exploited, but still have plenty of oil and gas kind of left to offer. And so just a little bit of my background, so I kind of grew up in the shale space, you know, My father obviously played a pretty instrumental role in bringing shale gas and shale oil kind of to mainstream America. You know, I'll remind you back in 2005, and it's kind of hard to believe now that there was a lot of fears that America was actually running out of oil and gas production. I mean, I think it was as. As early ago as 2004-2005, the country was only producing about 5 million barrels a day and, you know, importing anywhere between 19 to 20 million barrels a day. And so there was real concern and, you know, really, really some fears of, you know, what happens if, you know, oil runs out. And lo and behold, we had this shale revolution. And one of my favorite quotes is, never underestimate the ingenuity of the American oil man. I just think it's a testament to the tenacity and grit and intelligence of our industry, largely maligned by pretty big segments of the company that do not realize how much this has transformed our country. We've gone from producing anywhere from 5 million barrels a day now. We're the largest oil and gas producer in the world. We produce more oil than any country in the world. And so, you know, it's just. It's kind of gone unnoticed. And so I, you know, I wanted to kind of get out and bring that up.

[Tracy Alloway]

Sorry. I'm so used to saying shale as a byword for US Oil production. Like, I get the distinction between the horizontal drilling and what you guys are

[Jack McClendon]

doing, and that's fair. And the majority of oil production in America right now is from shale.

[Joe Weisenthal]

Yeah.

[Jack McClendon]

You know, the largest conventional fields are largely in Alaska. You guys just mentioned the North Slope. Most of Alaska's conventional. But, you know, the Permian Basin and a lot of the other big shale basins, I mean, that's where the majority of the oil comes from these days. I mean, you know, out of that 13 million barrels a day, you know, at least five comes from the Permian, and that's mostly from shale. So it's. I think it's fine to kind of conflate the two, to be honest. That's where most of the capital goes, and that's where most of the oil comes from.

[Joe Weisenthal]

You mentioned growing up in the business and your dad's role in making America the energy behemoth that is today. Your dad being Aubrey McClendon. One of the things I know about him was that he is a famed map, a huge map collector. And I kind of feel like all oil and gas people are get really into maps, and you tilt your camera And I was like, that. Is that map to your. Your right shoulder? It looks like Texas. A map of Texas. Is that one of your dad's, part of your dad's map collections?

[Jack McClendon]

No, it's not part of his collection, but I did inherit a lot of his loves, and one of them is. I also love maps. That's an old map of Texas and Oklahoma, which was Indian territory back in the 1800s, I think. I think that map was. I think this map was made in, like, 1870. So I do really appreciate vintage maps. And so, yeah, you'll see that in the back.

[Joe Weisenthal]

And.

[Jack McClendon]

And that. That may be particular to the oil and gas industry as well, too, because any good oil man, if you walk into a conference room, they're going to have maps up because you kind of got to know where you're drilling and what acreage you own. And as you said, there's probably a lot of that in Landman.

[Tracy Alloway]

Well, I noticed you don't have a poster of Billy Bob Thornton in your office. However, I asked this question on behalf of Joe. How accurate is Landman in your experience?

[Jack McClendon]

I mean, there are certain aspects, obviously, that that famous windmill speech that he makes is how a lot of people, a lot of people in our industry feel. And I believe it's the truth. A lot of it is. Obviously, there's plenty of exaggerations. I don't know too many landmen who have had a gun held to their head from. From a member of the cartel. There's a lot of truth in the industry.

[Joe Weisenthal]

And then going into business with the financial backer of the cartel, it's a little weird anyway.

[Jack McClendon]

Yeah, exactly.

[Joe Weisenthal]

Spoilers, please.

[Tracy Alloway]

Spoilers here.

[Jack McClendon]

I'm an imperfect narrator for that as well, too, because I will admit that I have not watched a show maybe as religiously as other people that have watched it.

[Joe Weisenthal]

Actually, there's another element of Landman. This is going to be a little bit far afield from oil business questions, but this is something I've heard, and feel free to answer this with any level of tact or delicacy. I have heard that a lot of the wives of the oil industry don't like it as much as the men do because of the high degree of sexualization of both Billy Bob Thornton's wife and daughter in the show. And that they, the men, think, oh, it's like a great show. It shows our industry. And that actually there's some gender families in the patch, in the space in the industry. There's some gender divide on the show.

[Jack McClendon]

Does that resonate you know, as, as I said, my wife watched two episodes with me and she said, this is ridiculous.

[Joe Weisenthal]

Okay, well, then I'm okay. Okay, well, there you go.

[Jack McClendon]

So. So maybe, maybe that's. Maybe I'll just leave that.

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[Joe Weisenthal]

talk a little bit of economics. Even before the recent war in Iran, we wanted to talk because I am very interested in just like what's happening to your costs and breakevens, particularly in the wake of tariffs, in the wake of ongoing services inflation, in the wake of a big dash for commodities because every there's so much building data centers, et cetera. Talk to us a little bit about the evolution of your costs as a business in the last several years, but also maybe in the last year.

[Jack McClendon]

Yeah, no, sure, I'm happy to do that. And you know, I won't tell you anything that you guys maybe haven't already heard, but costs in general, you know, our, our costs are kind of allocated into two buckets, right? You have your operating expenses which are kind of fixed and variable costs. Those are the, the day to day costs to run a business, whether that's paying your people who are actually out in the field. You know, the cost of chemicals to treat your wells, the prices you pay for electricity to power your wells, and then you have your capital costs, which are largely tangible and intangible goods, right? So the day rate or cost to drill, the amount you pay to drill a well, the amount you actually pay for the physical tools and equipment that actually go into a well, that's steel and metal and other human labor. But what I will tell you is since COVID and this is, as I said, not unique to us, is costs have gone up, personnel costs are up. And you know, back in the day in Covid, you know, salaries went up across the board. And you know as well as I do, once you raise salaries, it's very hard to get those back down. Chemical costs have gone up, Utility costs have gone up. You know, so costs in general are up, I would say about 25 to 30% for my business, really, over the last five years. And as I said, a lot of that is power, a lot of that is chemicals. The biggest chunk of that is. Is people. You know, people. Costs have kind of gone up across the industry. Capital costs, tariffs obviously have had a material impact on the price of steel and the price of aluminum. Those have largely gone up. What I will tell you, though, is recently, and this is kind of a couple. A couple of months, there has been some slack in those markets. And a big part of that is kind of do what you do to what you identified with the Baker Hughes rig count. You know, with prices kind of hovering in the 50s and 60s, with those rising costs, the industry is just not as profitable as it once was at 50 or 60. And so there was really starting to be some slack in the rig market, some slack in the frac fleet market. And quite frankly, all of that leads to a little bit of pricing deflation. And so generally speaking, I would say costs are up across the board, 20 to 30%, even though recently, especially on the capital side, you've seen a little bit of a decrease. And that is largely due to the fact that the price has been depressed and the industry was just not as profitable as it once was. And the other thing I'll mention as well, too, and this is largely due to efforts of companies like Kimorich. And when I say companies, I mean investors. One of the big reasons you had such prolific shale growth, especially in the 2010s, was compensation. Executive compensation was tied to production growth. And so you had a lot of incentives across the board to kind of grow production at all costs. And you know, due to, as I said, you know, there have been a couple of shale busts, right? There was that shale bust in 15 and 16 and then you have another, you know, you've had another kind of shale bust when Covid came along and along those, they've reformed a lot of those incentives. And so, you know, companies are increasingly rewarded for rewarding shareholders versus focusing on kind of production growth.

[Tracy Alloway]

You know, this is exactly what I wanted to talk to you about, which is the capital situation. Because one of the running themes on our, our show is idea that you can have these boom bust cycles that then like leave a lasting scar on the industry. And I think coming out of the bursting of the shale bubble a lot of energy producers suddenly decided like, well, we're not just going to spend a bunch of money to expand, we're actually going to pay dividends to our investors. And it's all about capital discipline and being very, very certain about what we're actually spending on and the return for investors. What's the capital situation been like for you? Just, you know, going from 2018 to now, how hard was it to actually convince investors that you know, you're not just going to spend money in an unconstrained way and how difficult was it for you to compete with some potentially bigger players who are also fighting for that same capital?

[Jack McClendon]

I'll break that into two parts. You know, I think, I think the industry is, has had to do a lot of explaining and a lot of, you know, there's been a lot of kind of show me of, you know, investors wanting to see that there actually is going to be some capital discipline. And I think if you look really over the last two years, you know, we've seen that and I think even with this latest price spike, you've seen that. I mean people aren't rushing to deploy rigs. I mean you've had one large company, Continental Resources, who's one of the largest private companies, say they're going to increase CapEx. But I think for the most part the industry has been able to attract more capital by actually showing that discipline. And I think part of that too is just you've had a lot of consolidation in the industry, right? I mean when I was first getting started as an investment banking analyst in 2008, I don't have the number off the top of my head, but it felt like there were 70 to 80 kind of publicly traded companies. And now with all due respect to lots of mid sized companies, there's really only about 10 companies that actually matter you know, as far as the publicly traded companies go, and the two biggest ones who have really kind of started to corral the market for shale are Exxon and Chevron. Right. And those guys, those guys have massive, massive balance sheet integrated operations. And yeah, I mean you just, you know, it's just a little bit kind of different. There's still a cowboy element to it for sure. But yeah, I mean, I think in order to attract capital, the industry has had to show discipline and I think we've done a pretty good job of doing that over the last two years. I mean, the, you know, kind of the days of a million barrel a day growth year over year are largely gone. And some of that is due to geologic constraints. Although, you know, I will reiterate, kind of never, never to underestimate the ingenuity of the American oil man. But I think another part of that is obviously due to capital. And you know, you've had two to three crashes really in the last 10 years. And so, you know, investors, investors really are kind of holding everybody's feet to the fire on that. And then I'll say is kind of as it pertains to my business, as I said, there are a lot more of my businesses than there are of large shale companies. I mean, this is the business of operating older oil and gas assets. Right. And like any business, when things are older, they break more. And so yeah, no, it's difficult and it's challenging. Right, because you have a lot of volatility and you know, you're dealing with wells where operating costs are higher. Right. We move more water, so I need more electricity per well to move more water. Our operating costs are higher. And so you've got to do a little bit more convincing on that cost discipline side when you're raising capital. But what I would tell you is that the pockets of capital that I'm kind of talking to are going to be very different than the pockets of capital that the larger shale guys are talking to. I mean, for the most part the large shale companies are either publicly traded and so you're talking to people that invest in public markets or they're large institutionally backed private equity capital. So you have really kind of four to five large energy, private equity backed firms, most of them in Houston and Dallas, and they wield large sums of capital kind of in the nine to ten figure range. And for the most part that's who's backing shale. You've got to have scale now. It's a consolidation game. And yeah, it's different for from my company, where we're largely kind of talking to family offices, alternative investment vehicles, people who are looking to put smaller quantums of capital to work to kind of find a unique way to play the space. Because really, for these larger companies, it's the Permian or bust, right? I mean, that's really kind of the story.

[Joe Weisenthal]

This is great because this allows me to bring it back to Landman again, which is that the cooperation character, it seems like his business is kind of like yours. He went around and there were these old wells that were producing something, and he's like, there's probably more potential. And then this was like the key thing. He went out to some, like, small hard money lender that was based out of Fort Worth, and they gave him a good. He gave him a good deal. And then the dad said, there's no way the deal could be that good because I know how financing works. So, like, there must be a catch here. And there was. I won't get into it, but talk to us about the structure. Okay, so you're. It sounds like you're kind of like Cooper, because you're finding these wells for that other people may, like, be ready to discard. You're going to non PE scale financiers. Although his was again, related to organized crime, I assume yours isn't. But talk to us about some of the terms of. Like, what is it like? Is it like you're going to pay me back 100% plus 20% interest until we break even? Like, how are some of these financing deals structured?

[Jack McClendon]

Yeah, no, that's. That's a really good point. I mean, you know, largely what I found is on the equity side, it's. It is similar to traditional private equity, right, where, you know, money is invested and then you get money back plus a rate of return. And then you have a waterfall structure which is based on return of capital. And that can be, you know, either kind of based on an IRR basis or on an ROI kind of absolute return of capital. I've seen it both ways, but that's kind of largely the way that the equity. Equity capital works. So it is actually pretty similar to a lot of the traditional private equity firms. You know, on the debt side, it's largely bank capital, which, you know, is kind of 7 to 8%. And then there are, you know, some of these alternative firms. And so these are more kind of structured credit providers. You know, there are some that largely just operate in the energy space. And, you know, you're paying 400 to 500 basis points above what you would pay a bank, but they're willing to lend a little bit more aggressively against the collateral, maybe give you a little bit more credit for, for reserves you have that are not currently being produced. Currently being produced, and they'll ask for a little bit of upside. So whether that's in the form of an overriding royalty payment, so just think about that as basically just a cut of the revenue. It's similar to a royalty deal in music. So for every barrel that gets produced, maybe they get a little bit of percentage, and this is obviously after they've gotten their money back. And so the way the capital works for my business is not all that dissimilar to the way capital works for, for larger businesses, as I said. It's just there's, there's a couple of different ways to play the space. But traditional equity investment is pretty similar to, you know, even the larger kind of private equity investments.

[Tracy Alloway]

So when the price of oil starts going up, say we're talking late March, early April, and WTI is climbing above 100, and then it hits 112. What actually happens in your business and what are the thoughts that are going through your mind? Like, do you suddenly get a bunch of calls from potential investors going, you know, we're interested in putting some money in the company. Do you start thinking like, well, I need to expand production and maybe ramp up capex? Or are you just, you know, sitting there waiting to see what actually pans out with the Gulf situation? How does it, how does it all work?

[Jack McClendon]

That's. No, those are really good questions. I mean, obviously there's, there's excitement, right? Because, because you know, when it would, when a price kind of jumps like this, obviously your costs don't, don't rise in tandem. So that is, that is profit on top of everything. What I will tell you in 2022, you know, last time we had elevated pricing, you know where. And that was largely kind of based on the fear of supply loss. That never really happened. Right. The, you know, everybody was saying the, you know, Russians were going to lose 3 to 4 million barrels a day. And, you know, we need, so we need prices to kind of stimulate more production. So everybody got really excited. Everybody got to work. You know, I will say for a company our size, we authorized a fairly large capital plan because, as I said, I thought that there was some bite to that bar. And what happened was, is I authorized everything in May of June when oil was at 100, and then first production came on in August and September when oil is back to 70. So you know, you have this, you had this big rise in prices, a commensurate rise in costs. Obviously not as high, but costs go up. I mean oil and gas service providers aren't dumb, right? You know, they see the price of oil go up 20 to 25%. They're like, well you know, your day rate on a workover rig has just gone from 175 to 250.

[Tracy Alloway]

Huh?

[Jack McClendon]

Yeah, I mean it's those, the service, the service companies aren't dumb. The chemical providers might say, well you know, this is your, you know, this chemical you use, this xylene you use is going to go from you know, 20 bucks a gallon to 40 bucks a gallon because I know you can pay it because I have a computer and I can see what the price of oil is as well too. So you know what I would tell you and these are in conversations I've had with a lot of other people in our industry. I talk to people on the industry on a day to day basis. I have friends that work for large operators, large capital providers. I have friends on the service side, friends in private equity, friends in investment banking. I mean I think everybody is very cautious right now. You have a president right now who on the record, demonstratively on a daily basis has shown his disdain and hatred for high oil prices. A big part of that is I think he kind of sees oil prices as the easiest and most visible way to keep inflation in check, which leads to kind of his goal of getting interest rates down, which is beneficial for a lot of other sectors. And so I think similar to just about every other industry player here, I think we saw prices go up and this is not some Chinese super cycle like you had in the early aughts, right? Where effectively you had to, the country was industrializing kind of in front of our eyes. And so you had this step change in demand growth which any oil man will tell you that is, that is kind of the beautiful increase in prices, right. Versus this sudden geopolitical driven supply shock. When prices rise this fast and this high, it's really kind of not beneficial for anybody. And so I think the tenor of the industry and the tone of the industry is really kind of wait and see. I mean sure you're going to have some companies that are going to look to put a rig to work, are going to increase capex, but we're just able to pay our debt down a little bit more and we're going to kind of cash flow. And I'm, I'm really interested to see kind of where everything settles out. You obviously had that announcement today that Hormuz has been open. But if you listen to the Iranians, they've been saying Hormuz is open for the last six weeks. You got to play by our rules and you got to play by the Iranian Republican Guards rules. So I'm not quite sure what has changed, but I tweeted this out a couple of days ago. The market kind of clearly thinks that the war is over. And, you know, you're kind of seeing that wash today in prices. And so I just would. It'll be interesting to see where prices are going to settle out. I don't think we're going back to the 50s or 60s, you know, are you going to see, you know, to get back into Landman, are you going to see that sweet spot at 75, you know, that that would be a better baseline for us than 65 and 60. And so to reiterate what I said earlier, I think the, you know, I think the industry is largely kind of in a wait and see mode.

[Tracy Alloway]

So when oil prices collapse like they seem to be doing today, do the oil service providers start cutting their prices as quickly as they raise them?

[Jack McClendon]

They do not. Yeah, they do not. You know, you were starting to see some fuel surcharges on some of those bills. I would imagine if you settle back in the 70s or 80s, those are going to kind of go away. And part of that is kind of tongue in cheek, right? You, the operators, always play a game with the service companies. So it remains to be seen. As I said, there's just so much noise in the market right now. I mean, I can't remember the last time we ever lived in an era where a tweet could move the price of the world's most liquid commodity 5 to 10%. And so, yeah, I mean, I think everybody's just kind of waiting to see where this will settle out. It's effectively impossible to plan a business with a price as volatile as it is right now.

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[Joe Weisenthal]

burnt seems like just as much as part of the industry is making a lot of money and you get it on both sides in 2015. And then you mentioned the sort of the fizzling out of the post Ukraine boom, etc. And then here, of course the war and the spike was too short to make any big plans. But like, and then you have this president who clearly wants more production but a drill, drill, drill, but also wants lower prices and these things are in conflict. Could you see a set of conditions again in which there is real meaningful expansion of US drilling or etc. Or what would it have to take? What would be the, the constellation of events that would have to happen for like, okay, we're going to really, we're going to really ramp this out again?

[Jack McClendon]

Yeah, that's a good question. I mean, as I said, I hate to, I hate to use round numbers, but that's just, yeah, kind of the world we live in. And I think if you saw a sustainable price above 80 over a prolonged period, maybe call it four to eight months, I think you would see a supply response because there's, you know, there are a lot of, there are a lot of shale wells that work at 80 to 90, that don't work at 50 to 60, depending on who you talk to in the Permian, you know, there's kind of anywhere between five to 10 years of what you would call core inventory left or economic inventory left that obviously change, that's obviously largely a function of price as well as geology. So a higher, for longer price. I think you would, you would, you would see a production response from the industry. Now, do I think we're going to go back to the days of growing one to one and a half barrels a day? I don't think so. But could you see an era where we're growing 300 to 500,000 barrels a day? Yeah, I think that that's possible. But as I said, you would need to see prices settle above 80 for a prolonged period of time, I think to kind of see a supply response. Because even shale, which is kind of called, that's a short, short supply response, right? That's about as short as it gets.

[Tracy Alloway]

Short barrels?

[Jack McClendon]

Yeah, it's about as short as it gets. Right. I mean, you've got, you know, but it's still, it's still a four to six month response time, right. I mean, because a lot of the, a lot of the rigs that you saw kind of start to roll off, you know, that's a, that's a six month lag, right. So you had the liberation day tariffs where prices kind of cratered from, you know, 70 to 57. And then we've kind of bumped around the 50s or 60s. But even decisions that get made in, you know, got made in April and May of 2025. You didn't really start to see the rig and supply response for four to six months later. And that's largely, that's largely kind of the turnaround time here. And so, you know, as I said, I think you would need to see higher for longer prices for the next couple of months for us to see a meaningful supply response. But I mean, and this is kind of the consensus view of, you know, most of the sell side oil research analysts that I follow as well too. But you know, the, as I said, never underestimate the ingenuity of the, the American oil man.

[Tracy Alloway]

Well, setting price aside, one of the things the administration said it wanted to do to get, you know, oil pumping is basically streamlining, you know, environmental review and the leasing process, basically liberalizing the regulatory environment around starting new drilling projects. And I know you're not necessarily specialized in exploring, you know, for new loc. But do you get a sense from your colleagues elsewhere in the industry about whether or not that liberalization has actually, you know, translated into people drilling more or thinking about drilling more?

[Jack McClendon]

Yeah, you know, I mean, I think it certainly helped, but for sure, I mean, price is an exponentially higher dictator, you know, of whether or not somebody kind of chooses to drill. Yeah, I mean, as I would say, you know, there's, there's the old saying in the oil patch that, you know, Democrats are actually very good for the oil and gas industry, but they're anti industry and that the Republicans are very pro industry, but they're actually very bad for the industry. And that's kind of largely a function of some of those regulations. So I'm not going to say that they don't play an impact. I mean, there certainly is an impact. And to the extent that the Biden administration or some of the other Democratic administrations have been more punitive to the industry, that does effectuate a supply response that is largely beneficial to the industry. But I would tell you, I think for the most part, those regulations matter, but they don't matter nearly as much as what the price of the commodity is. And then the cost of the inputs is. That's ultimately, as I said, that's an exponentially more important factor than whether or not there's 50,000 acres in Wyoming that are now open for drilling, that weren't open for drilling.

[Joe Weisenthal]

Tell us a little bit more about the politics. You know, as you mentioned, we've observed, everyone's observed this, that actually the oil industry is like, why they hate Democrats so much. It always seems like the price of oil is high under them, et cetera. I understand publicly who's on whose side because of various affiliations, et cetera, but like, how do people talk about politics at a country club in Fort Worth or Midland or something like that?

[Jack McClendon]

Well, I don't belong to any country clubs in Fort Worth, but yeah, I'm going to try to use my words carefully here. There's no surprise that most of the oil production in this country is done in Republican states. Right? I mean, Texas, Oklahoma, Louisiana, I mean, New Mexico, I guess, is a, is a democratically run state. The parts of New Mexico where the oil is produced are very, very conservative. And so, yeah, you know, I would tell you the politics are tricky because obviously oil country overwhelmingly supports Trump. But I also think, you know, behind closed doors, there's a lot of frustration in the industry of, you know, Trump, you know, actively Kind of trying to jawbone oil prices down. You know, I think that there are a lot of people that wish that, you know, as I said, I hate to kind of bring Landman back up, that we could just kind of find some happy price equilibrium. Right. Whether it's, you know, 70 or 75, you know, not, not 55 or 50, which I think was kind of what they said is their, their target price. But, you know, not, not 90 or 95, which is a price that, you know, hurts demand. And so, yeah, I mean, the politics are, you know, the overwhelming majority of the oil industry is Republican and conservative. But, yeah, I think a lot of people are very frustrated by some of the administration's rhetoric and policies over the last year.

[Joe Weisenthal]

You know, I noticed on your Twitter profile it says you're based in Colorado, but you clearly have the Oklahoma roots there. Big fan of the Oklahoma City Thunder. Oh, you Sooners, you say you're political independent. The senator from Oklahoma just moved to the White House. Mark Wayne Mullen. There's gonna be an open seat in 2026. You're gonna move back to Oklahoma and run as independent. Is that any possibility of trying to fight for that seat, an independent oil man, like, replacing. I don't know. I could see it.

[Jack McClendon]

Yeah. No interest, no interest in politics right now. You know, does anybody tell you right now?

[Joe Weisenthal]

Right now, no interest in politics right now?

[Jack McClendon]

Yeah. I've got young kids and working on growing a business and just politics is. Politics is increasingly, you know, a pretty, a pretty nasty game, especially in a country as polarized as ours.

[Tracy Alloway]

We've noticed, you know, you referred earlier to this idea of like short cycle shale or short barrels from the shale patch. And this is one thing I'm curious about when, you know, given that, again, I'm looking at the Baker Hughes oil rig count, but, like, has that assumption kind of eroded, given that a lot of these basins have matured. And also, you know, we spoke about capital discipline before and investor expectations. It doesn't seem like shale is as responsive as it used to be.

[Jack McClendon]

Yeah, I mean, I think that that's right. And I think that that does have, you know, a lot to do with the consolidation in these basins. You know, the other thing that I'll say too, and this is why the rig count in a certain extent is honestly, it's not as important, maybe as it's still very important, but maybe not as important as it was five to 10 years ago. And that's largely just due to the ingenuity of the American oil man. I mean, you know, back when I worked for a shale company, this is in 2015, 2016, we were drilling wells in the Permian Basin and 7,500 foot lateral, which is, you know, effectively like a mile and a half, you know, took anywhere from kind of 25 to 35 days to drill. The industry's largely, largely doing it under 10 now. So just the amount of time it takes to drill and complete these wells is just dramatically shorter than it was even 10 years ago. And I just, people who don't live in the space, I think just don't do not realize how much more efficient these companies have become at drilling these wells. And so effectively you can do more with less. And so as I said, you know, the rig count is important, but it is less important maybe than it was 10 years ago just because, as I said, these, these companies can drill these wells so much faster and get production on kind of so much quicker than they could even 10 years ago. But yeah, I mean, I would agree with you that I would say on a whole, I think the industry is probably less responsive to some of these price signals. And I think honestly just a big part of it is we've been burned pretty bad three times in the last 10 years. And so it's kind of one of those fool me once type anecdotes, I guess.

[Joe Weisenthal]

I would never underestimate the ingenuity of the American oilman. But in addition to the engineering prowess and you know, get it's, and it's, it's all really impressive. Is that all, like, you have to be a little messed up in the head? Like, is that also, like. I get the, I get the prowess part, but is there also, you know, in, in commercial real estate? I have a friend and he talks about like the sickness that people in his industry have because they're all just like hyper optimists and that nothing can convince them that they can fail. Is that also part of why we should not be underestimating the industry? Because there's something going on in the heads of people like you?

[Jack McClendon]

Yeah, people in this industry have a certain, have, have a high pain tolerance. You know, I think there was a saying in the oil patch that the difference between an oil man and a smart oil man is the smart oil man makes his money in oil and gas and then puts it in real estate. You know, it takes a, it takes a kind of a particularly sick individual to, to live through these kind of boom and bust cycles. And yeah, you know what, what I will tell you though is that we are resilient and everybody in the industry firmly believes in. And I think that's a big part of it, right? I mean, you're talking about extracting a substance from under the ground that literally powers everything in our world, right? I mean, I think there was, I read some quotas in an article that without new oil and gas production, if we just were to basically shut off all oil and gas development and production, that 60% of the world would starve in six months. And so I think that there is, there's obviously a little bit of, you gotta have a high pain tolerance. But I think the other thing too is that everybody in this industry really believes in what they do and we create and we produce a product that powers the modern world. And so I think there's a tremendous amount of pride in that as well too. And I don't think you'll talk to anybody in the industry that does not feel just an enormous sense of pride in what we do. And I think someone said this to me once and I firmly believe in it. And they said, jack, one of the things your dad did that I firmly believe in is, you know, without the shale revolution, there would have been a lot more wars. And I really do believe in that because I think that this resource abundance that, you know, we've kind of largely taken for granted over the last 10 years has prevented a lot of conflict, believe it or not, because, you know, America is largely, we're not wholly energy self sufficient. Right. There are different blends of crude. We largely produce one type of oil which is called light sweet. You don't just produce oil and put it in your car, right? Yeah, it's got to go to refinery, it's got to get broken down into kind of various products. And you need different blends of crude oil to be able to do that. So we still do import some crude from other parts of the world, whether it's Venezuela or the Middle east or Canada or Mexico, you know, that's blended together to kind of make the products that power the modern world. But just the fact that, you know, we're not worried or running a, you know, talking about running out of oil anymore I think is just a, you know, just a tremendous achievement that I just. People don't kind of talk about enough and I think they should.

[Joe Weisenthal]

Jack McClendon, really appreciate talking to you. Really glad you came on. Odd lot. Thanks for indulging our landman related questions and everything else. And let's check in again in six months or a year or maybe seven years when the, the 2032 election is happening in Oklahoma and the kids are a bit older.

[Jack McClendon]

Well, thank you so much for having me on. As I said, I love listening to your else. Thank you. Appreciate it.

[Joe Weisenthal]

Those stats about the increased efficiency of the drilling etc always, like, blow my mind.

[Tracy Alloway]

They're insane. And the story that I wrote, I guess it was like, back in 2016, was actually super interesting to me. And it was literally about, like, the oil companies getting together to standardize a bunch of drilling components that hadn't been standardized before. And so even eking out these tiny improvements in cost end up, like, adding to the overall supply and enabling people to keep drilling even when the benchmark price is really low. I just found it really fascinating.

[Joe Weisenthal]

It's a. It is really fascinating. You know, it also might be a future episode for us to do at some point, which is the production refinery mismatch in the United States and why it is the case. Right.

[Tracy Alloway]

I meant to ask that question. I'm kicking myself.

[Joe Weisenthal]

You know, like, we have all these refineries, but mostly they were built from the era of when we imported a lot of oil.

[Jack McClendon]

Right.

[Joe Weisenthal]

And we're producing. Then we start producing a lot more. But I think there's like a new refinery opened pretty recently. But prior to that, I don't think, like, a new refinery had opened in the US like, 50 years. Some crazy number.

[Tracy Alloway]

So I always hear different things about this because I hear that story and then I hear other people say that, like, actually the idea that we can't refine light. Sweet crew. Jo, that's just for you. Thank you. Sorry. Is actually like a bit of a myth that there is some capacity. So I would be very interested in this topic.

[Joe Weisenthal]

Jack, get back on the phone.

[Tracy Alloway]

I know. I actually wrote this down in my notes and then just started thinking about Landman, obviously, and completely forgot to ask it. So. Next time.

[Joe Weisenthal]

Next time.

[Tracy Alloway]

But there's a lot of interesting stuff coming out of that episode. One of them was this idea that when the price of oil increases, your costs go up, too, because all of your suppliers can see that you're making more money and can ask for more in return. That's a little bit obvious, but I'd never really considered it before. And then the other thing that stands out is just that tension from the Trump administration where you want American oil producers to drill and boost production, but at the same time, you're very vocal about keeping gas prices low. And the industry is very aware of those statements as well.

[Joe Weisenthal]

By the way, in the last couple of minutes, another headline she said Iran would reclose the Strait if the US blockade persists. So we'll see what's going on there. But it is interesting also this element of like Jack talked about it, the show. Landman talks about finding that sweet spot, but it doesn't seem like it. Like it doesn't ever seem like it stays. It's a pretty volatile thing. You don't get the sweet spot time for very long.

[Tracy Alloway]

No, it doesn't seem like it. I do think you have to be a particular type of person to be in this industry, but it shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the All Thoughts podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our guest Jack McClendon. He's at Jack McClendon. Follow our producers Carmen Rodriguez at Carmen Armand, Dashiell Bennett at dashbot, and Kale Brooks at Kale Brooks and for more Odd Lots content go to bloomberg.com odd lots we have a daily newsletter and all of our episodes and you can chat about all of these topics and 247 in our Discord Discord GG oddlots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you want us to do a follow up episode on U.S. refining capacity, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.

[Joe Weisenthal]

Sam Foreign

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