Joe Wisenthal and Tracy Alloway speak with Jack McClendon, CEO of SNA Natural Resources, a small independent oil and gas company. McClendon is the son of Aubrey McClendon, who played an instrumental role in America's shale revolution. Unlike large shale operators, SNA focuses on conventional oil reservoirs - older wells that still have production potential but require different operational approaches.

The conversation covers the current state of US oil production amid geopolitical tensions, with WTI crude falling from $112 to $83 per barrel. Despite calls for increased drilling, the Baker Hughes rig count has been trending sideways or down since 2023. McClendon explains how his business model differs from major shale players, focusing on underappreciated assets that are too small for large companies to bother with.

The discussion explores cost inflation in the oil patch, capital discipline following previous boom-bust cycles, and the political dynamics affecting the industry. McClendon also addresses questions about the TV show Landman and its portrayal of the oil business, while explaining the financing structures and operational challenges facing smaller independent producers.

Small Oil Company Strategy vs. Shale Giants

SNA Natural Resources operates conventional reservoirs rather than horizontal shale wells, targeting assets that are "rounding errors on the balance sheets of large shale companies" - Jack

Conventional reservoirs have higher porosity and permeability, making them geologically superior but largely already exploited over 70-100 years

The horizontal shale game has become dominated by very large companies requiring massive scale, with most production now coming from the Permian Basin

SNA's business model focuses on buying undercapitalized assets and "trying to squeeze a little bit more juice out of each producing well" while reducing costs

Cost Inflation and Service Provider Dynamics

Operating and capital costs have increased 25-30% over the last five years, with personnel costs being the biggest component

"Oil and gas service providers aren't dumb - they see the price of oil go up 20-25% and your day rate on a workover rig has just gone from $175 to $250" - Jack

Service companies quickly add fuel surcharges and raise prices when oil spikes but are much slower to reduce them when prices fall

Recent months have seen some pricing deflation in capital costs due to reduced rig demand as the industry becomes less profitable at current price levels

Capital Discipline and Industry Consolidation

Executive compensation has shifted from rewarding production growth to rewarding shareholders, ending the "grow at all costs" mentality of the 2010s

Industry consolidation has reduced publicly traded companies from 70-80 to about 10 that actually matter, with Exxon and Chevron dominating shale

SNA targets different capital sources than large shale companies - family offices and alternative investment vehicles rather than institutional private equity

"The days of a million barrel a day growth year over year are largely gone" due to both geological constraints and capital discipline - Jack

Drilling Efficiency and Technology Advances

Drilling efficiency has dramatically improved - wells that took 25-35 days to drill in 2015-2016 now complete in under 10 days

The Baker Hughes rig count is less important than previously because companies "can do more with less" due to technological improvements

"Never underestimate the ingenuity of the American oil man" - a favorite industry quote reflecting continuous technological advancement

Companies can now drill wells faster and bring production online much quicker than even 10 years ago, improving capital efficiency

Price Sensitivity and Supply Response

The industry needs sustained oil prices above $80 for 4-8 months to trigger meaningful supply response due to 4-6 month lag times

"I think everybody is very cautious right now" due to three major crashes in the last 10 years and volatile geopolitical price swings - Jack

Current price volatility makes business planning nearly impossible - "a tweet could move the price of the world's most liquid commodity 5-10%"

The Permian Basin has 5-10 years of core economic inventory remaining, depending on price levels and geological factors

Political Dynamics and Industry Sentiment

"Democrats are actually very good for the oil and gas industry, but they're anti-industry, and Republicans are very pro-industry, but they're actually very bad for the industry" - industry saying

Oil country overwhelmingly supports Trump, but there's frustration with his efforts to keep oil prices low, which hurts producer profitability

The current president "demonstratively on a daily basis has shown his disdain and hatred for high oil prices" to control inflation - Jack

Industry seeks a "sweet spot" price around $75 rather than $55-60 (too low) or $90-95 (demand destructive)