What-if
McLean: Without shale technology, oil prices would be $50 higher today
“In the absence of shales, I'm very confident that the oil price would be 50 dollars higher than it is today.”
Assertion Supported
McLean: Natural gas emissions reductions beat solar and wind combined by 2x
“When you account for natural gas emissions, the total emissions reduction that has been allowed by the increase of natural gas Because of shale development is two X that of solar and wind.”
Insight
McLean: Direct raw acreage leasing yielded 100%+ returns vs 10-15% on producing assets
“If you were to go buy producing assets, you would effectively get a large base of producing properties that would be earning a 10%, call it 15%, rate of return on something. And as a sideline of investing the capital to get access there, you would get some und…”
Assertion Supported
McLean: Permian Shift to Horizontal Drilling Yielded 3x Capital Productivity Uplift
“And it also prompted an acceleration of a big industry shift in the Permian Basin from the vertical drilling, which we had been doing since our founding in 2007 to horizontal drilling, which proved to be effectively a three X uplift in the productivity of the …”
Insight
McLean: Most PE exits happen because management wants to sell
“The vast majority of the deals that we're in when we actually exit is because the management team wants to sell more so than us.”
Opinion
McLean: CrownRock's management had greater respect for capital than any team Lime Rock ever met
“I think their biggest differentiator relative to every other management team that we've ever dealt with is Tim Dunn and his lieutenants and partners had a greater respect for capital than any other management team I've ever met.”
Assertion Contradicted
McLean: US Is One of Few Countries Meeting Paris Per Capita Targets
“The United States is really one of only a very small handful of countries that has actually lived up to Paris commitments in terms of per capita CO₂ emissions reductions.”
Disclosure
McLean: CrownRock lost half its Gothic Shale capital, carried by Wolfberry
“The gothic shale was a complete bust. We lost half of our capital. Then we invested in that part of the play, but the wolfberry was so profitable so early that it carried those other stumbles.”
Assertion Partly supported
McLean: CrownRock required only $100M of primary equity in total
“We committed seventy-five million dollars. The management team contributed twenty-five million dollars in properties, so the only primary equity that was ever invested in the business was a hundred million dollars.”
Assertion Not checkable as stated
McLean: CrownRock investment created well over 200 millionaires
“Well, ultimately every employee of Crown Rock was an equity holder. I mean, that was a big part of the overall compensation scheme that we had there. Well over 200 millionaires were kind of birthed from the Crown Rock investment.”
Insight
McLean: Offering liquidity makes employees value equity and hold it
“What you find when you do that is almost no one wants to sell. As soon as you offer the ability to sell it back, They can see that it has real tangible value. They could make the election to sell it and realize some cash, but it's very rarely that they would e…”
Assertion Supported
McLean: CrownRock grew from under 40k to over 160k barrels per day
“And at that point in time, we were producing a little under 40,000 barrels a day, and we had projections to get well over 150,000 barrels a day if we held it for another five years. We briefly got over 160,000 barrels a day right before we sold the investment.”
Insight
McLean: Most management teams make poor decisions by prioritizing growth over cost of capital
“Most of the time, management teams are so focused on growth and so uninterested in the cost of capital it takes to achieve that growth.
They end up making really poor decisions along the way”
Assertion Not checkable as stated
McLean: CrownRock returned 79x while the public XOP index returned 0.9x
“If you looked at the E&P oil and gas index, the XOP of independent producers over the ownership period of Crown Rock, where we realized on that one specific investment, a 79 X ROI, The return on that index was .9 X. You lost 10% of your money.”
Assertion Not checkable as stated
McLean: Early Midland wells recycled CrownRock's capital in 3 to 6 months
“The oil wells that we were drilling right around Midland, Texas were insanely profitable. I mean, we were essentially able to recycle capital With the use of leverage in a three to six month period of time, which really carried those early losses.”
Assertion Supported
McLean: US active drilling rigs dropped from 1,800 to under 600
“I mean, there were 1800 rigs running in the United States at that point in time. Last week, there was less than 600 rigs running in the US.”
Disclosure
McLean: CrownRock sold forward 90% of crude production entering 2008 crisis
“We had already sold forward in the financial markets, 90% of our next year's crude oil production, so we had a lot of ballast and resiliency through that period.”
Assertion Supported
McLean: 2015 OPEC War Dropped U.S. Rig Count to 300-400
“The rig count went from 2000 rigs to get as low as 304 hundred rigs. More bankruptcies than you had ever seen in the oil and gas business since the 19 eighties.”
Assertion Supported
McLean: U.S. oil production share reached 70-year low in 2007 before rebounding
“2007 U.S. Oil production as a share of global production hit its absolute minimum that we've seen over a 70 year time span. And at the moment that we sold it hit a local maxima that spanned 30, 40 years.”
