American Oil and Gas Reporter - September 2020 - 60

pages 51-60_Layout 1 9/18/2020 4:21 PM Page 60

SpecialReport: Permian Powerhouse

Q:

That segues into the new bachelor's degree-level
energy land management program that UTPB
launched this semester. What are the primary challenges
facing the next generation of landmen? How is the profession,
and the skillsets and aptitudes it requires, evolving with
changing business requirements and technological advances
as the "Shale 3.0" era begins in the Permian?
MACDONALD: In no particular order, more time is probably
going to be spent in dealing with surface damages. I also suspect
that we will see more environmentally based suits by third parties
forcing the development of land programs that can demonstrate

how they are protecting habitat at the same time they operate.
Those working in a land program are going to have learn how to
explain what they do in language that is more acceptable to an increasingly urban population that is oblivious to just how dependent
it is on hydrocarbons. In the future, the industry won't be able to
count on much of the good will it had in the past. Obviously,
landmen are going to have to be more technically proficient with
information technology, including GIS systems. Yet at the same
time, many of the same old challenges will be present. At its
heart, the land professional's job has always been about people
and knowing how to work with people, educate them and persuade
them. That won't change in the future.

A Place At The Table
We imagine that would be a preferable approach in Permian situations.

GREG WHITE

Director-Resources
Arena Investors

Q:

Unconventional tight oil plays have been the focus
of Permian Basin investment and activity in recent
years, overshadowing conventional plays and the large
number of smaller operators working conventional reservoirs.
Your firm is an institutional asset manager that specializes
in providing "creative solutions for those seeking capital in
special situations." What might that look like in practice for
a small Permian producer?
WHITE: We typically lend against conventional proved, developed producing reserves as opposed to unconventional
reserves, so it is the smaller operator with conventional assets
that we work with. As an example of creative reserves-based financing structures, we often see situations where a company
wants to borrow, say, $30 million, and we think maybe $10
million is the maximum we could provide initially. What we
may do in that case is structure the deal where the first $10
million has certain metrics. If and when those metrics are
reached, we may give (at our option) the ability to approve
another $5 million. Then another $7 million, followed by
another $8 million.
So, we may eventually get to $30 million, but we stage it so
that we do not assume the "business plan" risk as a lender. At
any given level of incremental advance, if the borrower exhausts
the capital and creates no additional value, we are still covered.
60 THE AMERICAN OIL & GAS REPORTER

Q:

What advantages do nontraditional institutional
credit facilities offer small operators compared
with more traditional reserves-based bank lending, particularly
considering today's restricted capital borrowing environment?
What is a minimum deal size?
WHITE: For the smaller operator, the bottom line is that the
banks are not lending right now, and we seek to not only be
their new "bank," but be a better version of it. We can move
faster than a traditional bank. In fact, we can get a deal done in
30 days or fewer, partly because we have fewer regulatory compliance requirements. Creative financing is far less constrained
and does not force operators and assets to have to fit into a
narrow box. We see all kinds of situations. Furthermore, we are
totally comfortable engaging with entrepreneurial-owned entities
and teams. And we lend small, so the smaller operators that
tend to get overlooked by larger funds have a place at the table.
As a rough guide, any deal with production of 500 bbl/d or
more meets our interest level size-wise.
❒



American Oil and Gas Reporter - September 2020

Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2020

Contents
American Oil and Gas Reporter - September 2020 - Intro
American Oil and Gas Reporter - September 2020 - 1
American Oil and Gas Reporter - September 2020 - 2
American Oil and Gas Reporter - September 2020 - 3
American Oil and Gas Reporter - September 2020 - 4
American Oil and Gas Reporter - September 2020 - Contents
American Oil and Gas Reporter - September 2020 - 6
American Oil and Gas Reporter - September 2020 - 7
American Oil and Gas Reporter - September 2020 - 8
American Oil and Gas Reporter - September 2020 - 9
American Oil and Gas Reporter - September 2020 - 10
American Oil and Gas Reporter - September 2020 - 11
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