00:00Dan, thanks so much for being with us. We appreciate you.
00:03I want to talk about overall in Houston.
00:06Yeah, you have two Oklahoma energy companies.
00:08They've recently moved their headquarters to Houston, Devon and Expand Energy.
00:13What do you make of these relocations?
00:15Yeah, Julie, I think what we're seeing is that Houston's, you know,
00:19been kind of the energy capital of the world, if you will, at least of this hemisphere.
00:23And what both Devon and Expand are indicating via their actions
00:28is that the connectivity that you have in Houston,
00:31the access to not just other publicly traded upstream companies,
00:35but midstream businesses, the majors are here.
00:39All of the traders are here.
00:41And so, you know, I think what you're seeing is just the ease of access,
00:45networking, connectivity that happens with the Houston headquarters.
00:48Now, Bloomberg did a story back in 2025 about the Houston markets office vacancy rate.
00:53At that point, it was 27.9 in the first quarter.
00:57When you see companies coming here, do you see this as an opening or turnaround?
01:03Yeah, no doubt that there's ample space here in the city.
01:07The question has always been, is it the kind of space everybody wants to be in?
01:12All of the big public companies like to be in new space.
01:15Their employees enjoy, you know, sort of the Class A type amenities.
01:19And so the answer is, it's a nice turnaround for Houston in terms of new companies coming in.
01:27We've had continued contraction of the existing companies.
01:29Some headcount reductions coming across, you know, the energy patch in general.
01:34So I'd say it's a nice indicator.
01:36Is it a dramatic turnaround?
01:37I wouldn't go that far.
01:38Is it still a situation, though, of these companies really want the office parks,
01:42and they want the new amenities that you can build with new buildings?
01:47You tend to see a desire for a campus-like setting, depending on the size of the company, of course.
01:52And so the other issue is trying to be closer to the employee base.
01:57And so we've seen less action downtown and more sort of in the surrounding areas of the city
02:03that are closer to the suburbs where a lot of employees work.
02:06So the answer is, companies always like the flashy new buildings.
02:11They'd like campus-style setting.
02:12They'd like to be closer to workers.
02:14That all talks about more on the perimeter of the city as opposed to the city downtown.
02:19How do you see U.S. oil production shaping up this year versus 2025,
02:24as we really get going here in 2026?
02:28Great question.
02:29Our expectation is that U.S. production will be flat-ish.
02:34A lot depends on price as the year develops.
02:37If price moves lower, lower meaning something in the 50s,
02:41West Texas Intermediate, I suspect U.S. production will be slightly down.
02:46If price were to rally because of an Iran conflict, et cetera,
02:51then maybe volumes are slightly higher.
02:55So my expectation, a tad bit lower, very dependent on oil price.
02:59I suspect flat-down is going to be the answer.
03:02I want to turn to Venezuela, of course, making some very big changes in this industry.
03:08Do you see it as a boon for drillers and refiners that the early forecasts suggest?
03:14Yeah, Venezuela is an interesting one.
03:17Still a lot of in-country risk, not a lot of existing production spiking to the upside.
03:23This is going to be a three- to five-year process to get Venezuelan production up over time.
03:29Again, refiners are the early beneficiaries.
03:31Why?
03:32Some of that heavy crude that had been moving toward China is moving toward the U.S.
03:36It'll come on the Gulf Coast refineries and should be a lower-cost feedstock
03:40than some of the oil that we've been processing here.
03:43So refiners win initially.
03:45Over time, it will be the drillers and the service companies that go in to help boost production.
03:50And then the upstream companies that deploy capital should see a return on that capital.
03:56It's critical that we get some clarity on how business is actually going to work in Venezuela.
04:02So I do think this is something that happens over the next three to five years, not the next three
04:08to five years.
04:09I'm curious, do you already have clients coming to you about this?
04:13I would describe the interest in Venezuela as quite high.
04:17And it should be because this is a province, known hydrocarbon basin.
04:22Production was three and a half million barrels a day.
04:25Now it's down to a million.
04:27So we know there's a big gap of potential opportunity.
04:30That's why interest is high.
04:32I think what has to happen is to translate interest to willingness,
04:37we're going to have to see a rule of law,
04:39an ability to get money out of the country,
04:42an understanding of what fiscal terms are going to be, security measures.
04:46So very high interest, slow willingness at this point with a lot of information yet to be had.
04:52How do you think Houston can benefit from this Venezuelan opening?
04:56Yeah, again, it's in our hemisphere.
04:58We have the refining here on the Gulf Coast
05:01and a lot of the oil companies and gas companies that will be interested in going into Venezuela are headquartered
05:07here.
05:07So what you would likely see if there was a major push into Venezuela
05:12is there would be more people in Houston working on Venezuela projects.
05:17And so what you'd likely see is an expansion of headcount here in Houston
05:22and a lot of the companies that get involved there.
05:25Because of the way this has gone down,
05:27the U.S. influence will be U.S. companies,
05:29most of the U.S. companies headquartered here.
05:31I will be in Houston in March for this.
05:33CERA meetings along with basically everyone else in the energy world, including you.
05:37I'll get to see you in person.
05:38What topics do you think will dominate those discussions?
05:42Yeah, my expectation for CERA week coming up here next month,
05:45a big one is obviously going to be what's happening in the Middle East,
05:50OPEC and OPEC production.
05:52The shale maturity question.
05:55U.S. shale is now in its 20 plus years.
05:58So it's getting longer in the tooth.
06:01Will U.S. shale be able to continue to deliver production?
06:04So I think that one of the things we should start to see over the next little while,
06:09and CERA could be an early indicator,
06:12is interest by U.S. companies in doing things internationally.
06:16And so this is a big global conference.
06:18Will we see more interest in U.S. companies doing things internationally?
06:22That's another topic.
06:23And while this is a big global conference,
06:25what do you think will really be happening in those closed-door meetings that take place there?
06:30Yeah, well, one thing that's been happening for the past couple of years is consolidation.
06:36And so, you know, anytime you have this many people together,
06:39people are going to be talking about deals,
06:41whether that's asset transactions or company transactions.
06:44So I think that's always a topic of conversation.
06:47I think there's going to be a lot of discussion around kind of the geopolitical dynamic
06:52and how that will play out.
06:54And I think that we have seen in the past discussions between OPEC producers and big shale producers,
06:59and that could continue to happen as well.
07:02So a lot of discussion about where volumes are coming from
07:06and what sort of world are we going to be living in when those volumes get produced.
07:10Appreciate your time.
07:11Thanks so much for being with us.
07:13See you in March.
Comments