What I saw at NAPE 2021

In more than one way, NAPE last week seemed more like a museum exhibition than a trade-show and exhibition, but the meaning remains murky to me.

The hall felt hollow, but it did not echo of desperation.?A small fraction of the regular attendance crawled over the same expansive footprint but walking among more empty space than manned booths.?Partly because the planners conscientiously laid out the booths with more space between and among, but there was more than that. Larger companies and public companies seemed to get the memo and stayed home.?A couple of large spaces had been elaborately set up but left unmanned (oddly, except for a candy bowl).?A number of mostly smaller booths had been reserved and labeled but not used at all, and some booths stood vacant without planned occupant.

Judging by who did show up and their attitudes, the vacancy seems to measure defenses against COVID more than desertion of the industry. People seemed matter-of-fact about recent history and current conditions.?Rather like 2017 or so when prices also had popped back to pleasing heights, the heady prices did not translate to optimism.?In fact, I heard little talk at all about the plump cash flows of recent months, and natural gas prices appeared only as a footnote.?

My survey and conversations uncovered few new initiatives to be optimistic about and even less funding for new plans.?Interestingly, nearly 80% of booths were old-fashioned prospects.?As in previous years, the prospects hailed from every corner of the country with only a little concentration in, for example, the Gulf Coast.?As in previous years, there was practically zero shale acreage for sale and zero new plays of either variety.?As in previous years, interest in the vertical prospects seemed muted.?Mineral companies seemed second most populous, but I recognized almost no new entrants.?

On the other hand, conspicuously absent were funding companies.?Bank of Oklahoma stood out prominently in a landscape otherwise bare of the banks, private equity and private investors who empower new entrants. (Literally two other companies had booths, but I’m not sure whether they were manned.)

Also missing: substantial new innovations.?There were some improvements and smaller innovations with machine learning or otherwise sophisticated algorithms, like ROGII’s tools to interpret (or re-interpret) the landing location of horizontals (even in batch mode) plus an analytical platform to make sense of huge volumes of drilling and completion info and to use it for future planning. ?Mostly, though, it was more of the same.

Plenty of floor-walkers were trying to figure out the next thing for their own careers, and there were plenty of reports of “retirement”, of leaving the industry and of liquidating assets. Still, the tone hovered above melancholy, and there was no visible rush for the industry’s escape route.?Of course, the sample is certainly biased to the optimistic side, but how much I can’t say.

On the other hand, some concrete signs of life could be found in private conversations:?a couple smaller new ideas for growth and a few people in discussions with private equity firms who seem to be at least notionally open to new business.?The most common new strategy this year focuses on non-operated, wellbore-only working interests in Delaware Basin drilling.?An ecosystem has developed for the buying and selling of the rights to participate in drilling, including some kind of payment to the company which is selling the right instead of than consenting to the drilling.?

There is also (limited) talk about buying rights and revenues from wind and solar leases, but those opportunities seem limited. ?At other conferences this summer I heard more new strategies, companies plotting in particular energy storage or carbon capture.

At least among those who did attend, we are holding up, prices buoying our heads above water even as the lost of the last year sink out of sight.?The biggest crowds all day – even bigger than for the open bar – stood to listen at the Renewable Energy Pavilion.?More private equity companies will speak at Hart’s upcoming in-person Energy Transition Capital Conference in October than exhibited at NAPE.?The most visible trend at NAPE this year was nothing present but what was absent – the people, the plans, the innovations and the funding.??

Either way, I enjoyed the conversations, the conference was expertly hosted, and I'm looking forward to the next one. See you there!

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