33:35 Lena: Alright, let's get practical. For our listeners who are thinking about how to position themselves for this new Permian reality, what should they be considering? This shift from growth to plateau changes everything about how you evaluate opportunities.
33:50 Miles: You're absolutely right, and I think the first thing investors need to understand is that the old playbook doesn't work anymore. During the boom years, you could almost throw a dart at a list of Permian operators and do well because rising production lifted all boats.
34:03 Lena: So what should investors be looking for now?
34:06 Miles: Focus on operational excellence rather than pure growth metrics. Look for companies that demonstrate superior well productivity, lower breakeven costs, and strong cash flow generation. The companies that can extract the most value from each well are going to be the winners.
34:21 Lena: Can you give us some specific metrics to watch?
2:12 Miles: Absolutely. Pay attention to initial production rates per well, estimated ultimate recovery numbers, and drilling and completion costs per foot. Also watch cash flow per barrel and return on capital employed. These efficiency metrics matter more than total production volume.
34:39 Lena: What about balance sheet considerations?
34:41 Miles: This is crucial. Look for companies with low debt levels, strong cash positions, and demonstrated ability to generate free cash flow across different price environments. The companies that survived the 2020 oil crash in good shape are probably better positioned for the plateau phase.
34:56 Lena: And I imagine dividend policies become more important?
21:42 Miles: Definitely. Since growth is moderating, investors are increasingly focused on cash returns. Look for companies with sustainable dividend policies and consistent share buyback programs. But make sure those returns are backed by operational cash flow, not debt.
35:12 Lena: What about the different types of operators? Are there advantages to focusing on the majors versus smaller independents?
35:18 Miles: Each has pros and cons. The major integrated oil companies like Chevron and ExxonMobil have deep pockets, advanced technology, and can weather downturns better. But they're also large bureaucracies that might move slowly.
35:31 Lena: And the independents?
35:32 Miles: The surviving independents that have adapted to the new environment can be very attractive. They're often more focused, more nimble, and may offer better growth prospects if they have high-quality acreage. But you need to be more selective—not all independents have successfully made the transition.
35:46 Lena: What about geographic focus within the Permian? Does it matter which sub-basin companies are focused on?
2:12 Miles: Absolutely. Remember those productivity differences we discussed? Companies with prime acreage in the Delaware and Midland sub-basins are generally better positioned than those stuck with Central Platform locations. Look at acreage quality, not just quantity.
36:04 Lena: Should investors be thinking about the service sector too?
36:06 Miles: That's a great question. The service sector has been through its own consolidation, and the survivors tend to be companies that can provide high-tech, efficient services. But it's a more cyclical business, and margins can be squeezed when drilling activity moderates.
36:19 Lena: What about pipeline and infrastructure companies?
36:21 Miles: These can be attractive because they provide the essential services that enable production, and they often have more predictable cash flows. Companies like Kinder Morgan or Energy Transfer that own key Permian pipeline assets could benefit from stable utilization rates.
36:34 Lena: Are there any red flags investors should watch out for?
21:42 Miles: Definitely. Be wary of companies still chasing growth at any cost, those with high debt levels, or operators focused on lower-tier acreage. Also watch out for companies that haven't adapted their capital allocation strategies to the new environment.
36:49 Lena: What about timing? Is this a good time to invest in Permian operators, or should people wait?
36:54 Miles: That depends on your investment horizon and risk tolerance. If you believe in the long-term value of disciplined, cash-generating operators, current valuations might be attractive. But if you're looking for explosive growth, you might be disappointed.
37:05 Lena: How should investors think about oil price risk?
37:08 Miles: It's always going to be a factor, but focus on companies that can generate attractive returns at moderate oil prices—say, $55-65 per barrel. Companies that need $75+ oil to be profitable are taking on more price risk.
37:20 Lena: Are there any diversification considerations?
37:23 Miles: Don't put all your eggs in the Permian basket, even if you're bullish on the region. Consider exposure to other basins, international operations, or different parts of the energy value chain. The Permian is important, but it's not the only game in town.
37:34 Lena: What about ESG considerations? How important are environmental and governance factors?
37:39 Miles: They're becoming increasingly important. Companies with strong environmental performance and good governance practices are likely to have better access to capital and may face fewer regulatory headwinds. This can translate to better long-term performance.
37:51 Lena: Any thoughts on how to evaluate management teams?
37:53 Miles: Look for management teams that have successfully navigated previous downturns and have adapted their strategies to the new environment. Teams that talk about capital discipline, operational excellence, and shareholder returns are generally better aligned with the current market reality.
38:05 Lena: What's your overall investment thesis for the Permian going forward?
38:05 Miles: I think the Permian remains a world-class oil province, but it's transitioning from a growth story to a value and income story. The best opportunities will be with companies that can consistently generate strong cash flows and return money to shareholders while maintaining operational excellence.
38:06 Lena: So it's about picking the right operators rather than just betting on the basin as a whole?
3:19 Miles: Exactly. The rising tide that lifted all boats during the boom years is over. Now it's about identifying the companies that can thrive in a more mature, competitive environment. The winners will be those that combine operational excellence with financial discipline.