Permian Basin oil grows older and older every day—300 million years and counting. But the Texans aiming to pull that liquid gold up out of the ground? Their ages are headed the other way.
Earlier this week, Midland-based Diamondback Energy announced it would acquire rival Endeavor Energy Partners for $26 billion, creating a West Texas colossus. Autry Stephens, age 85, built Endeavor from a single well starting 45 years ago. He told the Wall Street Journal that a recent prostate cancer diagnosis was a “big factor” in his decision to sell.
Diamondback is led by 62-year-old Travis Stice, but waiting in the wings is Kaes Van’t Hof, a 37-year-old former tennis phenom from Southern California. Van’t Hof has been elevated to president, a position that in the oil industry is often held by a CEO’s chosen successor. It’s another indication that, as Paul Sankey, a longtime industry analyst, wrote in a recent research note, “Leadership in the U.S. Oil & Gas industry is rapidly rejuvenating.”
The Permian Basin itself is looking younger too. It’s producing six million barrels a day of Texas tea, up fourfold from a decade ago. So the time seems right for a new cohort at the helm, one unburdened by yesterday’s preconceptions about the best way to exploit the resource.
Around the corner from Diamondback’s headquarters sits another sign of the oil patch’s youth movement: Permian Resources. The Midland outfit is run by James Walter and Will Hickey, two friends who grew up on the same street in Dallas and are now co-CEOs of one of the hottest companies in Texas. Both are in their mid-thirties. Reflecting on its young staff, Permian’s chief operating officer told me, “I’m probably one of the more seasoned people here at the ripe old age of forty-one.”
The natural gas business also seems to be undergoing a transformation. The largest producer in the U.S., Pittsburgh-based EQT Corporation, is led by 42-year-old Toby Rice. Adding to this turnover: legendary Permian wildcatter Jim Henry died last October at 89, not too long after the passing of Tyler’s Curtis Mewbourne, at age 86, another giant in the Texas oil business.
“There is a new generation coming in,” said Kirk Edwards, the 64-year-old president and chief executive of Odessa-based Latigo Petroleum. The up-and-coming talent he has seen, in both the executive suites and at the private equity firms funding companies, “will come up with a new way to drill the Spraberry that makes it even more economical. Just wait and see,” he added, referring to a giant Permian oil field.
Wall Street apparently likes what these youngsters are doing. As of Wednesday, Permian Resources is up 29.5 percent from a year ago, easily outpacing a broad energy index (down 7.7 percent) and Chevron (down 12.4 percent) over the same span. Meanwhile, Diamondback’s share prices surged 12 percent this week, after news of the Endeavor acquisition broke.
Even ExxonMobil has participated in this trend. Last year it struck a $59.5 billion deal to acquire Pioneer Natural Resources, meaning Pioneer’s longtime CEO, 71-year-old Scott Sheffield, will exit the stage. (At least for now; never say never.) The head of Exxon’s Permian operations is 51-year-old Bart Cahir, more Gen X than Millennial, but still a generation younger than Sheffield.
Of course, Autry Stephens and Scott Sheffield were once the young upstarts, bucking conventional wisdom and making risky moves that paid off. Their big paydays testify to their business acumen. A changing of the guard in Midland comes with risk, but it suggests there is much more innovation yet to come in this century-old industry.
