Episode summary
Jack McClendon on Why It's So Hard to Create a New American Oil Boom | Odd Lots
Odd Lots
· · 46 min · Hosts: Tracy Alloway, Joe Weisenthal · Guests: Jack McClendon
Summary
Jack McClendon, founder and CEO of Siena Natural Resources, said his company is a small upstream producer that buys undercapitalized, underappreciated conventional oil and gas assets and tries to squeeze more value from older wells. He drew a distinction between conventional reservoirs and shale, arguing that many of the remaining opportunities are in mature fields that were discovered decades ago but still have oil and gas left to produce.
He said costs across the business are up about 25% to 30% over the last five years, driven mainly by labor, chemicals, electricity, and higher steel and aluminum costs from tariffs. Even so, he argued the larger shift in the industry has been capital discipline: after the 2015-16 shale bust and the COVID shock, investors now reward shareholder returns and cautious spending more than aggressive volume growth.
McClendon said the recent oil-price spike did not trigger a broad drilling surge because companies are wary of another boom-bust trap. He expects a meaningful supply response only if prices stay above $80 for four to eight months, and even then he does not expect a return to the fastest growth years. He also said the industry’s efficiency keeps improving, so rig count matters less than it used to.
Key takeaways
- Jack McClendon said Siena Natural Resources focuses on older conventional assets and buys wells that larger shale companies often treat as rounding errors.
- McClendon said operating and capital costs are up about 25% to 30% over five years, with people costs the biggest driver and steel and aluminum also higher.
- He argued that investors now demand capital discipline after the 2015-16 and COVID-era busts, which has reduced the appetite for growth-at-all-costs drilling.
- McClendon said oil needs to stay above $80 for four to eight months before he would expect a meaningful US supply response.
- He said drilling efficiency has improved so much that a lower rig count no longer means the same thing it did 10 years ago.
Notable quotes
“we buy assets that we think are undercapitalized under appreciated try to squeeze a little bit more juice out of each producing well and try to get cost down”
“costs in general are up, I would say about 25 to 30% for my business really over the last five years”
“if you saw a sustainable price above 80 over a prolonged period, maybe call it 4 to 8 months, I think you would see a supply response”
How the episode opens
Bloomberg audio studios podcast radio news
Hello and welcome to another episode of the odd lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway.
Tracy recording this April 17th big drop in the price of oil today on the headlines the growing optimism that I think I'm you know ceasefire will endure anything could happen but at least for now it appears the extreme left tail scenario like $200 oil maybe off the table. 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
Was that you didn't say Brent. Right. Yeah good hint.
Yeah good hint. It's a good hint. Yeah yeah it's a good hint.
Everyone can see 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. 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 the Not the north shore the north the north slope.
Oh yes. For the companies up there The north slope. The north shore of Alaska like it's Long Island you know the way steel prices were going to affect the break even cost of American oil producers etc and the interaction of tariffs and higher services costs etc and we know that the US produces a lot of um oil and it's an exporter but prices went up and Chris Wright he went down to zero week a few weeks ago he's like please produce more but as you've been writing about the rig counts have been going the other direction.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil supply policy
- shale busts
- oil price spike
- production cost inflation
- capital markets in oil
Companies and tickers mentioned
- Siena Natural Resources
Watch the episode
Watch “Jack McClendon on Why It's So Hard to Create a New American Oil Boom | Odd Lots” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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