#324 - Kaes Van't Hof - President/CFO @ Diamondback Energy ($FANG) - Lessons & Stories From Inside a $30B Oil Company

Chris Powers: Walk me through growing up and how a gentleman like you goes from Newport Beach, the desert, West Texas, Midland, Texas.

Kaes Van't Hof: Yeah, it's not a story that I planned, you know, growing up, I grew up in Newport Beach as a product of, you know, Orange County surf culture, pop culture. You know, my uncle's in the music business.

Many incredible bands were coming out of Orange County at the time. And I was just a, you know, a kid that played tennis. My dad was a pro tennis player. He got up to like 2025 in the world in 1980 and, you know, won the NCAAs. And so I was the oldest kid, and I just played tennis and grew into it and ended up getting a little better and going to USC.

In the early 2000s, from 2004 to 08, I was fortunate enough to win NCAA myself 2008. And that opens up opportunities in that world. So I got to play the U.S. Open and go pro. And, you know, I talked about earlier. There were only a few jobs in, you know, the spring of 08. So I had no choice but to go pro and play some pro tennis and see the world, going around the world for two years.

I saw 30 countries in 50 weeks, lived out of a suitcase, and, you know, barely made any money, but had a blast and, you know, tennis went well. So I got to go, you know, do some cool things like playing the U S open and the U S Open twice. And that's how I got my job at Citigroup.

So, the backstory is I had a buddy who played at Stanford, and I couldn't afford a hotel in New York on a tennis player's salary.

Chris Powers: So what was the tennis players' salary?

Kaes Van't Hof: Well, you know, it's all prize money, right? In 2009, I was 150 in the world in doubles and 600 in the world in singles. And I made 38,000 and had to pay for all my expenses.

So when you play the U.S. Open, 12 of the 38,000 I made that year, you can look it up. It's tough; it's a brutal sport for if you're not in the top 50, it's a difficult sport, but, you know, did a lot of good things for me, but, you know, luckily I wasn't good enough to keep pursuing it because I needed to get a real job.

But in 09, I couldn't afford a hotel or didn't want to. And my buddy was there, and his dad at the time was, you know, one of the top guys in the city group. And so he was going through the financial crisis. It was a crazy time to be in New York, a crazy time to be involved in finance. And I would play during the day and then sit with him at night.

And, you know, on the last day, he said, Hey, whenever you're done playing tennis, call me. I can't guarantee anything, but I can help you get an interview or something like that. So I'll never forget that. He did follow through on that, you know, a couple, about six months later, stop playing tennis.

And, you know, he helped me out get an interview. And I always wanted to move to New York and work in banking because I thought. Living in New York would be a great time in your twenties. And two, banking only closes a few doors. It's excellent training. I was fortunate enough to get a job when jobs were pretty tough and in banking, so I packed up and moved to New York in early 2010.

So I did that for two years and wanted to get out as quickly as I could; as you know, banking is pretty brutal for the analysts. You know, I pity them and all the decks that I see now at DiamondbackDiamondback. I'm like, how did that poor analyst have to work so hard for that deck? And I knew that feeling, but it was excellent training.

I didn't close any doors and got a job at Wexford Capital in Greenwich, Connecticut. And tennis was significant in that. Earning that job, too, the head guy there is a big tennis fan. He's had a couple of other analysts who played pro tennis while still working there.

And they liked that competitive fire and, again, didn't know what exactly my job would be there, but I knew I was the kid who could model everything. And they said, Hey, we have these investments in Midland, Texas. One of them is called Windsor Energy, which is now called Diving Back Energy.

And the other one was called mid-Mars, a midstream plant. So I fly down to Midland. I started learning about oil and gas. I couldn't tell you the price of the oil, but it was funny. It could be our chairman or chairperson drawing on a whiteboard. Here's how a gas plant works. Here's how a good works.

And he said, go model all that. And then, I became the analyst on the diamond back story. And it was a small private equity-backed vertical driller based in Midland with a new CEO, Travis, now our current, you know, still, our current CEO and I just modelled the business.

Luckily, it went public in 2012, and that's how Diamond Back started. So that's how I got down to Midland. And you want to talk about the early days of DiamondbackDiamondback, which were pretty hairy compared to where we are today.

Chris Powers: I want to talk about that. I want to talk about a lot of stuff you just said. Before we get to Diamondback, How it being 600 in the world, like, how would you describe how good Roger Federer or Nadal are, you know, like I play golf, so I can appreciate how good Tiger Woods is, you play tennis, so you can understand how good these guys are.

Kaes Van't Hof: Next level. It could be attainable with the group that they have.

Chris Powers: Did you ever want to game off of them when you were 600 in the world?

Kaes Van't Hof: I think a game. I had a good serve. It wasn't built for tennis; they called me a tennis linebacker in college because I wanted to lift with the football guys.

But you know, if you have a good serve, you can get away with winning a couple of games, but you know, the funny stat I always say about tennis is Roger Federer, arguably the greatest tennis player ever. What percentage of professional points, you know, every point in the game, every game in a match, what percentage of issues do you think he won in his pro career?

Chris Powers: Like more than 50, right? More than 50, 63%.

Kaes Van't Hof: 53, 52 or 53. So he plays the big points. Well, now he misses a ball here. I miss the ball there, but he steps up at four, all 30 all. And that's when he hits the magical shot. So tennis is deceptive. You know, it's like the golf or the zip that are so good inside of eight feet; those guys are so good when they lock down so well. You thought I would wait to interview you today.

Chris Powers: You can interview me. It can go back and forth. Fifty-three percent. So what is it so like? What was your winning percentage, less than fifty or fifty-one per cent? Like is the margin like that tight?

Kaes Van't Hof: The margin's thin, but they do it every time.

If you win a set 6-3 or 6-4 in the men's game, it's usually one break of serve. Well, you won those four of your five games by two points, and they won their games by two points. They beat you by two points in the game and broke you.

Chris Powers: Why is tennis a game where many pros can play, like 15, 16, and 17? But like no other professional sport, do you see somebody show up that young in the sport?

Kaes Van't Hof: It's harder to see outside of genuinely unique talents in the men's game, right? Like Nadal was excellent at 16, 17. But players have developed later, particularly on the men's side recently.

But Nadal, that shows you how big of a freak Nadal was, right? He was 16; he won five low-level pro tournaments in a row. So those low-level pro tournaments that I was playing, scrapping to win. Three hundred bucks to win my first round. He won five in a row and never had to play those tournaments again.

He would exceed and go straight into the challengers and the pros. And so, the true talents are those guys moving up to the top level so quickly.

Chris Powers: All right. I want to make sure to take advantage of this. So, he draws on a whiteboard. It is how a gas plant works. It is how a, like, can you give a little more description? What did he draw, and what? Why could you take that and immediately start figuring it out?

Kaes Van't Hof: I knew how to model, right? I was good at math. I learned how to model and how to build operating models. And, you know, I'm a visual learner.

And so, I didn't realize it, but there's this program that the gas plant was the first deal. And that was self-explanatory yourself. It comes in; this is what happens in the plant. It comes from the drilling, the wells, the type curves, etc. I didn't realize that I was building an Excel, but all of our engineers use this program called Aries.

It's like the standard program for all engineers to use. If I had had some training, I would have saved myself a couple of months on building that model. But I don't know; I was fortunate to be a visual learner. And, you know, I was also lucky to be doing that when the Permian basin became what it is today, right?

It was so early in vertical drilling that horizontal drilling was barely taken off, maybe out here in the Barnett or some of the gas plays, but horizontal drilling and oil plays were not as big of a thing. The Bakken, Eagleford, and the Permian, the sleeping giant, rose last.

But it was the most prolific. The reason why that happened is because the vertical drilling still worked and still made a reasonable rate of return. It pales compared to today's standards, but we didn't have to drill horizontal wells in 2010 or 2011. The vertical wells were working from our returns perspective, but as we tested some horizontal wells in the southern part of the Midland Basin, people started moving north.

Diamondback was one of the first companies to drill horizontal wells in the northern part of the BasinBasin, which is where you have most of the stacked pay and all the zones. And when Pioneer was a big, you know, a big competitor of ours now, but they were the giant 800-pound gorilla back then when they announced, you know, 20 or 30 horizontal tests that all worked well, people started paying attention to the Midland Basin.

And there was this little company called DiamondbackDiamondback that. It also had a position in the Northern Midland basin and was proliferating then.

Chris Powers: Okay. So you land off the plane from New York and probably get in the Midland. You're like, this place is fantastic.

Kaes Van't Hof: You're supposed to land there at night. That's the trick. You have to fly in. If you bring new people to Midland, you bring them in at night.

Chris Powers: Okay. Noted Southwest Airlines in the Midland at nine o'clock at night. Set up the company because you didn't work there initially; you went to BisonBison to your boss. Who said, hey, run this company at 26 years old?

Kaes Van't Hof: Yeah, so at Wexford, you know, I was the analyst in the Diamondback IPO Diamondback goes public, and I was supposed to build a drilling company that would make all the rigs for DiamondbackDiamondback to use. And at the time, we were doing a lot of vertical drilling. And so we built six vertical rigs and two horizontal rigs.

It was a company called Bison, which was also a Wexford. Wexford has a thing where your entity will only get funded if it's named after a ferocious animal. So we went with bison diamondback, you know, the snake made a lot of sense, and Bison, we built some rigs, and we're supposed to have all of our rigs a hundred per cent utilized by Travis and the diamondback team going public.

And that worked for three months, but then horizontal drilling took off, and we didn't have the rigs to drill for these guys. And, you know, that's the first time Travis fired me. He let go of all my rigs, and I was just this 26-year-old kid trying to run a drilling company. He didn't know the first thing about it, but.

We had to pull ourselves up by the bootstraps and find some new customers because our primary customer, you know, just let go of most of our equipment. So, that was a good time. It was a good learning experience. We ended up growing that business. I worked at Bison from 2012 to 2016.

And we went from four rigs at the beginning to 14 rigs at the peak. At the mountain, we were doing, you know, 10 million a month of revenue. And then, in 2014, the Saudis flooded the market. And that was a crazy Thanksgiving experience because here I am now; it's probably 28 or 29 at the time.

And we went over 15 months from 10 million a month of revenue to one. And so that was the most challenging learning experience outside of COVID for me professionally, but those experiences train you for the inevitable. And, you know, we had to let go of many people.

It was a tough time to run that business. We got through it, but that was my considerable learning experience before moving back to DiamondbackDiamondback in the middle of 2016.

Chris Powers: Real quick. What did you like if you said the main takeaway from that experience?

Kaes Van't Hof: You must be decisive and quickly make tough decisions.

Right, and the same thing goes for what we dealt with COVID cutting activity, hedges, you know, what were you trying to do too much, trying to do too little. A massive part of our job, or my job, is self-reflection and understanding where you made mistakes. And you learn more from mistakes than from the winds.

And those two experiences resonate with me and, you know, things that we could do better.

Chris Powers: When you hear the Saudis flood the market, it's more like a depiction of the industry. Is that usually just catching everybody off guard? Or was it like, we saw it coming, and then they just did what they said they would do?

Or is it like one day we were on the beach, and the next day, the tidal wave hit?

Kaes Van't Hof: in 2014, that was a huge shock. I was early in my career, but U.S. shale was taking off. Everyone thought at the time, well, U.S. shale doesn't work below 80 a barrel.

Don't bet against American engineers and ingenuity because we figured it out. We made our break evens a lot lower, you know, as a result of that, but. You know, the U S was growing too much. And a similar situation was happening. In 2020, the U S production growth rate was over a million barrels a day per year for multiple years.

We were taking market share from OPEC, and OPEC didn't like that. And, you know, our shell tried to fight OPEC for a long time. U.S. shale lost, you know, with some improvements along the way, which is why you have today a much more balanced model for U. S. EMPs; we don't outspend cash flow.

We spend within our means. We return cash to shareholders and move decisions from a decision in the field to a conclusion. You know, in my office, where is it? How many shares will we buy back today, or how many? What dividend are we going to pay this month? And it's made a healthier business model for U.S., Shale and oil and gas.

Chris Powers: All right. We're going to table that, and we'll get back to it. Okay, so the original company was called Windsor. And what, like, describes what Windsor was? There were a few leases in North Midland and a couple of people who, how did that get put together?

Kaes Van't Hof: Yeah, Windsor was the original entity before DiamondbackDiamondback, and it was just a few leases, most of them around the airport, in a place called Spanish Trail, which became the asset that we, founded the company on, and we would drill like six or seven wells a year. And you had like 10 or 12 people, you know, in a metal building by the airport, and that little thing ended up becoming, you know, DiamondbackDiamondback. And, you know, we kept acquiring leases and post going public. You see, I was not working there, but Travis and the team did a lot of pretty big deals to, you know, get scale quickly because, you know, they knew that the play was working and wanted to grow it, you know, as soon as possible.

Chris Powers: Okay. We'll talk, so Windsor, you're in a little building, 12 people; the thesis was we could drill—profitable vertical wells in the Permian basin. Then, turning Windsor into Diamondback and going public took much work.

Kaes Van't Hof: It did not happen that easily.

We were preparing the company to go public in early 2012. And in April of 2012, Facebook tried to go public. And if a student of history with IPOs, it was one of the worst IPOs in history. Now, it's done very well as a stock since then. But that deal closed the IPO market because it didn't go well.

And at the time, DiamondbackDiamondback and, you know, was trying to ramp activity into getting a higher multiple to sell that to the street to go public. Well, that works in less. That only works if you can go public, so we couldn't, you know, when an investment banker tells you, I can't take you public.

You have to believe them because they will push any deal they can to get a fee, and they say you can't do it. And so we were running too many rigs. We're trying to grow too much and must slow down. And, you know, we were almost entirely drawn on our bank line back then.

And, you know, the secret is we tried to sell the company, you know, Wexford attempted to sell the company, and we went out to eight people. And got zero bids, there were some whispers of numbers that, Hey, if you tell anybody I'm walking away, but no formal recommendations and you know, those eight people are all companies that have either been bought in the Permian or still exist today.

Some of them you would still know. So it was a significant turning point in our history as a company and the Basin where DiamondbackDiamondback then took off. You know, after a tough summer of, you know, extending payables and working with people to hire people here and fire him here, we were able to go public in October at a 500Million dollar valuation, you know, producing 2000 barrels a day of production and, you know, 40, 000 acres.

So we just barely skirted by, but. I went public at the end of that year in 2012.

Chris Powers:. So that was 2012. You didn't join till 2016.

Kaes Van't Hof: I started working at the drilling company while that was happening in 2012 and then came back to Diamondback Diamondback in 2016. The drilling would get consolidated in other service businesses that Wexford had.

And I, you know, thought I was going to move back home to California and get back to the sunshine and, you know, work in real estate or something like that. I should have called you. But, you know, I thought that because we'd gone through such a destructive down cycle. If you remember, from the end of 14 through the middle of 16, oil goes from 110 and 120 barrels down to 26.

Nobody thought we, Shale, could make money at 80, let alone 26. So, I will start something different. And I had a lunch with Travis Sticer, our CEO. And at the time, DiamondbackDiamondback was a, I don't know, a 3 billion company. It had grown, you know, significantly, but.

You know, times are tough. And he said to me, he goes, I want to be a 10 billion company by the end of the year. And I was hoping you could help me do it. And I'm like, this guy's crazy. There's no way they will be a 10 billion company by the end of the year. So I start in July of 16.

They had just done a deal, and the market was recovering. We did the Brigham deal at the end of 20 and 2016, a two-and-a-half billion dollar deal. If you add that to where we were market cap-wise, we passed 10 billion on December 20, 2016. So I thought he was crazy, but he was right.

And you know, that's when we started hitting the accelerator and growing the business.

Chris Powers: Why did he want to do that? Growth is good, but why 3 to 10?

Kaes Van't Hof: The size and scale of this business have always been rewarded and will continue to be rewarded. You know, we're always in this fight for drilling locations and inventory and inventory depth and access to capital and access to investors.

And it's always more prominent in oil and gas, which is better, right? And that means, you know, get the attention of the significant funds in Boston, you can get to investment grade, you know, credit ratings, where you have access to capital through a down cycle. So it's always been bigger is better.

You can't just blow your brains out trying to get bigger, but there are some significant benefits, right? S and P 500, you have all this index buying. Just many things that size and scale reward in oil and gas.

Chris Powers: Okay. He brings you on in 2016 and says the mandates go from three to 10, and the markets have turned; what was your job?

Kaes Van't Hof: He called me vice president of strategy and corporate development and needed a title. He just made that up because Concho, one of our big competitors across the street, Concho resources that sold a couple of years ago, had a guy named Price Moncrieff, who's now a close friend of mine.

He was the vice president of corporate development and strategy. So Travis flipped those and said, you're the vice president of design and corporate development. But no, I was just a tiny piece of the machine. It had a big B.D. Team and some senior guys who were the company's founders.

We all worked cohesively towards one goal of getting more extensive on the right in the Permian basin. So I was just a tiny part that had a made-up title, and I started with a lot of the investor relations work, some, you know, capital market stuff. At the time, we did all these equity deals to grow the business, and investors were supportive.

It's changed a lot since then, but that was my job. I can't say I understood the business as well as I do today, but those were some fun times.

Chris Powers: Okay. So, if you just took the Brigham deal, it's like you bought it for two and a half billion as a public company; what happened?

So I know how it happens as a private company, but what is the series of events? How quickly does capital form and the deal happen?

Kaes Van't Hof: Yeah. And that's a great story because it was in December. It was the end of the year. You had a big run of deals at the end of 2016 for all the companies getting bigger because investors supported it left and right.

We should start looking at the deal in early November. We agreed on a price, calling it the second week of December. At the time, we were a seven-and-a-half billion dollar company with essentially zero cash on the balance sheet. So we're like, okay, we got to pay for this thing.

And so for that one, we high level, we made 500 million of new debt, new notes publicly raised. So we had to go to the public markets first. You got to get the deal signed. So we were up all night for a couple of days, but in the background, you're working on the equity and debt raise; we're going to raise a billion dollars of equity.

And that's not guaranteed, you know, even today for a company of Dimeback side, that's not guaranteed back then that was daring to go out there and do that. And we gave the seller a billion dollars of equity. So, you know, the seller had to get, we gave the seller a billion five cash and a billion dollars of equity, but we had to raise that cash immediately after announcing the deal.

So you're up all night working on PSAs multiple days in advance, but then you announce the deal and get to sell the value to investors. They need to believe that. Hey, these guys know what they're talking about. It is a good area. It's good rock. What does it mean from a financial perspective?

And so you immediately hit the market and raise the equity after that. It's gotten more accessible for us now with our size. We often issue stock to someone, which can be submitted after some time, and, you know, we have access to capital on the debt side cause we're investment grade and investment grade.

Getting bond deals done is much easier than the high-yield land. So, thinking back now to how crazy it was to do that overnight, it's a fun story we reminisce about.

Chris Powers: How long did it take? Like a couple of days?

Kaes Van't Hof: Yeah, so we probably agreed to terms on a Thursday, and then we announced it the following Wednesday, but you know, thinking about the timeline we are today, right next Monday, December 19, everyone's leaving December 19, like you cannot announce a deal on this December 19th or 20th and try to raise money that day.

So you better get it done before everybody goes home for the holidays.

Chris Powers: All right, real quick. Let's just from here the difference between being a high yield and investment grade, like how that transforms a business. So, describe a high yield or the high yield grade you had. And then what changes when you go to investment grade?

Kaes Van't Hof: Yeah. So, it's all about your credit rating. So you work with Moody's and S and P up in New York and Fitch, and you work to say, Hey, how creditworthy is this business? And so for oil and gas, a lot of that means. How big are you? How much production do you have? Because they think that's a sign of, you know, how you're able to weather inherent down cycles that we have in our business.

So, as you're small, you're high yield. And when you're high yield, it takes a day, it takes two days. You know, if you're doing your first high-yield deal back in those days, you had to go around the country for a whole week to try to raise, you know, four or 500 million to, you know, fund that debt and in high yield land.

Your debt is often due a lot shorter. Your tenor is a lot quicker. It's five-year deals or eight-year deals versus investment-grade land. You can go up to 30 years. So we were high yield. We're trying to get to investment grade. We finally got there in 2018. We did a big merger with a company called Energen out of Alabama, and that got us to the size and scale where we got to investment grade.

Now, investment-grade land is much simpler for the company because you can call up a banker and say, Hey, I need billion dollars of 10-year notes. I'm doing a deal. And that deal will be launched at 8 00 am. You're done at noon. And they have all the contacts for significant mutual and insurance funds nationwide.

And, you know, most of them know, they all know who you are, but they trust that your credit is money, good.

Chris Powers: Yeah. They see you're rating.

Kaes Van't Hof: This is your rating, and they do some credit work on what your yield should be versus your peers that are rated the same, and you know, the beauty of investment grade land is you can go all the way to 30 years.

Some people have tried 40 and 50, but a 30-year. You know, a piece of debt that's interest-only bullet maturity. Do in 2051, you know; that's why I'm worried about many more things than 2051 today. So, being that size and scale that we have today, we have that access and can do those deals.

And you're not as worried about market risk as maybe when you're a smaller company; if crude's down on the day and you try to raise high-yield money, you might lose half a per cent or a per cent, or the deal might not even get done. In I.G. land, you're going to get the deal done, and you might lose a couple of bips, but we're talking about bips, not, you know, percentage points. So, that's the benefit of being investment grade.

Chris Powers: So you call Wall Street and say, I need a billion.

Kaes Van't Hof: You should have some use of proceeds, right?

Chris Powers: You should have some reason to do it.

Kaes Van't Hof: Yeah. Like we did two deals last year. One was the Firebird deal—some guys out of Fort Worth.

They're now members of your country club or whatever their names are, but I know them well. Let's use that deal, for example. So that's a 1.5 billion deal. We gave them 750 million of equity. They just took the equity, and we raised 750 million dollars of new debt. That new debt was raised well after announcing the deal.

You know that you can go if, as long as you pick a good day in the market, you'll get the deal done.

Chris Powers: This is a dumb question. You said you go to investment grade once you hit 300,000 barrels daily. So if you're a company that does like 250,000 barrels a day, every goal at that company should be to get to 300. Nobody stops at 250.

Kaes Van't Hof: Yeah. It would help if you also worked with the rating agencies. You can say, Hey, I'm at two 50. I'm growing 20 or 30 next year. I'm on my way. So it's a cat-and-mouse dance with the rating agencies.

If you have, like, a higher oil percentage, you know, that carries a lot more weight than, you know, gas based on their price decks. And, you know, you have to, you also can't be over-levered. You have to have, you know, one to two times leverage and, you know, keep working the work in the rating agencies to get there.

That was my job for six months after we got to 300; it's like, all right, now, you guys need to do this for us.

Chris Powers: So, you know, somebody at every rating.

Kaes Van't Hof: Yeah, they cover us. And, you know, we talk to them every quarter, and you update them on what the business is doing and your plans.

And, you know, if you're going to do a huge deal, you better call them and let them know that a contract's coming.

Chris Powers: When calling Wall Street for money, are you usually calling the same person every time? Or is there a consortium of gentlemen and women up there that you would call?

Kaes Van't Hof: Many bankers cover a company like Diamondback—from cash management to M&A to debt to our credit facility. So, you know, we try to spread the love. Cause they make a fee off of raising that money, but. You also can only give the same guy a price sometimes because then the other guys aren't going to, you know, work for you next time or provide you with advice or, you know, work together.

Chris Powers: All right. Let's go back to 2016. So now you're a 10 billion company. Then what happens?

Kaes Van't Hof: The world starts getting a little better at coming out of 16 into 17 and 18. And in 18, we did a big merger. We were up to 18 20 billion at the time. And we were, I think, probably 16, 18 billion at the time.

And we bought this company called Energy and Resources out of Birmingham, Alabama. So that was our first public merger, which is stock for stock, their stock trades, your stock trades. Those deals can go awry. Because if the market moves too much one way or the other, the value falls apart. That was big because it got us into large-cap investment grade S and P 500.

But the deal made sense because there was, you know, they're in the same BasinBasin. We had a slightly lower cost structure than they did. So, we sell the market on synergies where we can run the business more cheaply. We can drill their wells cheaply. We still ended up hiring many people from Energent, you know, because at the time, we had 350 employees, and they had 400.

We probably needed a combined 600, but most of the people we acquired through that merger stayed or moved to Midland, and not all moved to Midland. Still, a few distinct superstars moved to Midland and put some trust in us to run the combined entity. So that was a big deal.

Chris Powers: How do you determine whether you will buy somebody or merge with them? What makes that?

Kaes Van't Hof: I call the public to public a merger, right?

Chris Powers: Yeah. It could be considered a sale.

Kaes Van't Hof: Yeah, but if you're a 20 billion company buying a 2 billion company, that's an acquisition.

But at the time, we were 17, Energent was 10 or 12. That's a big combined business. And you're not; you're giving up 35 per cent of your company to buy that company. That's how I call it a merger.

Chris Powers: How does that happen? You're like, okay, big company, same size, same BasinBasin. A lot of synergies here.

If you're buying a $2 billion company, there should be more control. There are more things to figure out if you're merging.

Kaes Van't Hof: Governance. Right, what does the board look like? Who's the CEO? Do you have an exec chair? Do you have who?

Which management team members move over?

Chris Powers: Does that happen before you sign the deal, or is it like, here's the price? We'll figure that out.

Kaes Van't Hof: Most of it gets solved before the deal. Suppose it's a big merger, a public-to-public merger. And you'd be shocked how often that prevents a deal from getting done.

Chris Powers: Really?

Kaes Van't Hof: Yeah. As you go, I didn't hold up those things, but yeah, it's a lot of, Hey, I'm in this seat. I want to grow this business but want to wait to sell. I'll sell it later. I'll talk, let's talk in two years. That's a big piece of the song and dance on the public-to-public deals.

Chris Powers: All right. We're just going to keep moving through the timeline. So, in 2018, you're now 20 billion. You've merged with Energent, your investment grade, then what happened? Then COVID hits.

Kaes Van't Hof: Yes, we get through 2019. Things are going well.

Chris Powers: This is another considerable learning experience for you.

Kaes Van't Hof: Yeah. Then we have 2020, which, for us, you can't even describe how crazy those couple of months were, right? You're going to a party one day, and we're travelling, and we don't come home. So we shut the office over a weekend and, you know, it has to move everything remotely. I've got an iPad, an iPhone, and some Air Pods in California.

And we go to the desert Palm Springs. And that was my home base for COVID. And we were trying to do too much in 2020. We were trying to grow 10 to 15%. We were running 23 rigs. We were trying to return cash to shareholders and increase our dividend. And we had to go from 23 rigs in March to five rigs in June.

And what was even crazier is that on April 20, oil went negative. Right. So we were running math instead of running the math on; hey, should we complete this well? Or should we stop drilling? Should we not produce it at all? Should we shut down our production? And at the time, we had money to earn on hedges.

So let's just shut in our production, take the money on the hedges, and live to fight another day. And so that that was math. I never thought we would be running because your oil price was very near, on average, your operating costs. And so we shut in 10 to 15 per cent of our production.

Many peers did the same thing, but it was funny. Cause I had, you know, would talk to some of my friends and peers that worked at other companies, and they're like, are you doing the same math I'm doing? And I said, yes, it's pretty scary.

Chris Powers: So when oil prices rise. Oil companies are greedy, but when oil goes negative, are you not greedy?

Kaes Van't Hof: Yeah, we're not greedy.

Chris Powers: Okay. So you're in not greedy territory at that point.

Kaes Van't Hof: Yeah, we're giving it away. It could go positive, but there's one day right before expiration, so if there's no storage, People will pay you to take the oil away and not store it.

Chris Powers: So, are there stories of people who were paying? Did anybody get hurt that day?

Kaes Van't Hof: Yeah, people get hurt, but you know, one of our mutual friends, you know, that we know very well, ended up buying one of those unfavourable contracts. He saved it in his office but sold it for a favourable price. That was one of the only times I was from California. Only some of my friends know what goes on in Midland. They know I live there, but I was like, Hey, man, are you okay? Texts from all over the place that guys I hadn't heard from girls hadn't heard from in years.

Right. Yeah. Like, Hey man, hang in there. It was a tough time.

Chris Powers: Okay. So, in 2020, we made it through COVID. The worst of it was in the first three or four months. And then the market started normalizing it.

Kaes Van't Hof: Yeah. You know, you look back and say, okay, 2020 was the worst year in the industry's history, or indeed, from my career, oil averaged 38 bucks daily the whole year. So, if you look at the average oil price for all of 2020, it is 38. That's not great, but it wasn't the world's end. You had a period in April, May, and June where you were, you know, an average sub-30 average. And that's a tough price for this business, but we're coming out of it.

You come out of it, you know. We start to complete some wells again and bring production back. And then you had a massive wave of M and a coming out of that in the fall of 2020, you know, partially sold the Pioneer WPX and Devon merged. These were mega-mergers at the time. We're all small market caps, but significant production amounts change hands.

And we finally got our act together at the end of 2020. And we did two deals on the same day, one of our more remarkable things. It was a private deal company called Guide On and a public deal buying a company called QEP. And we bought them at the same time.

They only knew about the other deal the weekend before the announcement, and we announced it on December 20. So it was announced on the day when no one was in the office, and everyone was perplexed about what was going on, but it was the right thing to do. And that's the diamondback culture.

When we can get something done, we will get it done. And we pushed, really; that was the busiest 20 days of my career. And I'm glad we got it done. Those were two excellent deals that have worked out well for us.

Chris Powers: Okay, sidebar for a second. In real estate, buildings are available for sale daily sale every day.

It's probably not; there are many companies, but it's not like you can buy a building at your scale. You're just looking; there are only so many companies. How does a company, a public company, you, or anybody think about deals? Is it constantly seeing who's waiting for bankers to call?

I'm assuming you all are looking at a deal right now. How do sales start happening at your scale?

Kaes Van't Hof: It depends, right? If it's a private deal, it's usually private equity backed, and they have a timeline and want to sell. Right. So those are more, those are marketed processes.

They call me, and they call everybody. Some banker runs a process and calls everybody, and you know, it's an auction, but public to public's different because there's a nuance to it, right? Because they might not be for sale, it must be run as a process. So, that's a CEO-to-CEO relationship.

Hey, here's what I think. Here's what we can pay. Here's what's going to happen to the people. You know, here's how we're going to sell this thing. So, you know, public to public is more art than science. And you know, the private deals usually, you know, are marketed and well known and out there. And we did one of each at the same time.

Chris Powers: And those were just to you like to be liked.

Kaes Van't Hof: But that's inherent in our culture. And what we do is not dissimilar from a real estate play in the Permian Basin. We know where the excellent rock is. We know where Park Ave is. We know where, you know, Madison Ave is.

You know, we also know where the equivalent of Midland, Texas is in terms of, you know, oil production. And, you know, the scientists are so good at their jobs now, and they can see everything below the surface and know precisely what, you know, maybe not perfectly how things will perform, but we know where the good stuff is.

Chris Powers: And, when you're doing M and A, is it like in real estate, if I buy a building like it's nicer to have all my facilities close because of economies of scale, but it's not necessarily, it's not like oil and gas was. You're trying to drill two-mile laterals, and you want everything touching and homogenous, but does it make what acquisition targets are out there more apparent?

Look, here's Diamondback's footprint. It is their market advisor.

Kaes Van't Hof: Yeah, it makes it more logical. And if you did something out of that area, you probably have to answer more questions. I'll go back to that bigger is better economies of scale longer.

We're drilling longer laterals. Some people are drilling three-mile laterals and four-mile laterals. It's just a more efficient way of producing the oil. But at the end of the day, it must also be in a good area. Cause you can drill a four-mile lateral in lousy rock, and it is going to be a bad project, but you know, a three or four-mile lateral and good rock is, you know, as good as it gets.

So, physical adjacencies help with midstream to the right. You're moving a lot of fluid. You're moving oil. You're moving gas. You're carrying a lot of water. It would help if you had those physical adjacencies to play in your business and keep your neighbours, you know, on the fence line.

Chris Powers: Okay, we're going to get to the timeline of today. Then, I have a different series of things. We'll talk about 2021. There was a bunch of M and A, so we would only be doing good service if I asked you why you, the whole market, wanted to know why you did not buy double points in 2021.

Kaes Van't Hof: We tried, you know, your good friends from Fort Worth, John and Cody, built that business through COVID, and you know, they drilled through the down cycle and came out looking pretty good, and we had just done those two deals in December of 2020. So the competitor that bought that deal knew we were on the sidelines, but we still tried to get it. It's just that, you know, we got outbid. And I always like to say, I'm happy for my friends that you know, at the double point that they did a good deal there.

And I'm so happy they made a, you know, a good outcome, but I'm pissed that they didn't sell to me. We're not that good of friends, you know?

Chris Powers:  Yeah, I know. Well, you know what? There might be another bite at the apple one day. You never know. All right. So, in 2020, you buy these two companies and then what do the last couple of years look like heading into today?

Kaes Van't Hof: The business changed, right? Investors have been pushing us to stop growing like idiots.

Chris Powers: That was the industry.

Kaes Van't Hof: Yep. That's an industry thing, and we got religion quickly. COVID will do that to you, but we've come out of that. There's still some growth out of the U S productions, which recovered slightly. Still, Diamondback is growing less than 10, 15, or 20 per cent a year organically, you know. We will grow through M and A and keep production flattish, maybe grow a couple of percent here or there.

Because we're in a global business where the demand for our product is growing one or 2 per cent a year, we shouldn't grow 15 per cent yearly. So we've come out of this, you know, COVID malaise, more vital than ever. The businesses are stronger than ever, not just ours.

It's an industry thing. And, you know, we've moved from growing at all costs to returning at all prices. There may be a balance, but investors have demanded their money back. Just like, you know, any investor would. They gave us a lot of money to grow our business from 2012 to 2020, and 2020 was a shock.

So pay us back. We've moved to this, you know, cash return model. We like to call it where production's not growing, but we're giving a lot of money back to investors every year. But that also means there's a lot of room between the current oil price and the oil price where we start to freak out about activity levels, balance sheets, or debt issues.

And so, oil and gas will never be a safe business, but it's certainly made it safer and makes some of these price wounds. Like we've had right now. We've had 10 of the oil prices go out of the market, and I don't know if it will be 12 days, but it's okay. We're fine.

We're still paying our dividend. We're still returning cash to shareholders. We're still making good returns on the wells we're drilling. And you know, you sleep a little bit better at night. And in this new business model.

Chris Powers: And then I asked you, I said, do you guys hedge everything? And you said, no, we don't waffle.

Kaes Van't Hof: We moved to a model where we buy puts. So it's like insurance. That's our insurance product. We buy puts that are 55 crudes. Hopefully, you never have to call on that. But at 55 crude, we still, you know, pay our dividend. We still have a good balance sheet.

We still make free cash flow, and we're not, you know, we're not burning the furniture to stay alive. So that's why we've gone to that model. And if you look at the oil market, it's so reactive, right? It's a big trade, and the price is so reactive if there's oversupply.

It will get fixed high prices, cure high and low prices, and cure low prices. You know, even COVID explained that to us in a more exaggerated way than I'd like to, but you know, you see, if you see a million barrel swing a day in a hundred million barrel a day market, what price is going to move 20 bucks based on that.

And that's what we've seen here the last couple of weeks: our supply is too high. Some of the OPEC guys are. It was overproducing relative to quota. Well, you've had a washout and are well-priced, and that's just how this business works.

Chris Powers: If you talk to people about the Permian, they'll sometimes say, well, all the good stuff is almost done being drilled up, and then it will move out to the peripherals.

What do you say when you hear that? Is that like accurate? Is that more talk?

Kaes Van't Hof: the Permian has been left for dead 15 times over the last hundred years, right? And it keeps reinventing itself. Again, I need to find out how clever some people we work with are.

Diamondback is a tech company that produces oil. What they've learned is fantastic. Now, no one will have infinite inventory, right? Cause you're going to end up drilling all the locations, but look at what we're shooting today versus what we hit. Seven, eight, nine years ago, right?

We were drawing vertical wells ten years ago. The first horizontal wells made, you know, 500, 600 barrels a day. If you're lucky, now we're drilling, you know, whole sections, top to bottom row and column producing 25, 30, 000 barrels a day at the peak. So the efficiency is just so high. And, also, from a cost perspective, correct?

We used to drill those vertical wells. I told you zero to 10,000 feet would take 20 days. Now we prepare zero to 10,000 feet, then 10,000 feet out lateral in seven days. It's incredible what they, what, you know, efficiencies we've gained over the last couple of years.

Chris Powers: And is there anything? On the horizon, even close to what fracking did, some new technology is coming. That's going to be the new jam.

Kaes Van't Hof: Not that level. You know, it's not going to be an entirely new form of development, but, you know, we're still only recovering about 10 per cent of the oil in place that we're trying to frack into in these zones. Right? So, even if we got recoveries to 12 or 13 or 14%, 1 per cent more would do a lot and open up a lot.

And that's the technology piece and the efficiency piece that, you know, is, it's understood, but you can't model that five years from now. So you got to make sure you have your inventory that competes for capital today, but you know, that some things are going to get better, you know, as we move to the.

Lower return areas or to the periphery is, as you call it, where we need to ensure that our cost structure and ability to execute are at the low end of the cost curve because then we will be a long-term winner.

Chris Powers: Okay, you mentioned cost, and then we'll tie it back to culture.

You all are considered low-cost producers. How are you able to achieve it? And then, in comparison to what?

Kaes Van't Hof: Yeah, so we get that question a lot. We greatly pride ourselves on low-cost operations, best-in-class execution and transparency. And the cost piece is a product of those early days when we had to cut costs.

So, the business was going to fail. And that survival culture resonates throughout the industry. We still have a lot of new people that have joined Diamondback in the last, you know. Seven or eight years weren't there in the early days, or even the previous three years weren't there in the early days.

But our culture is such that we push decisions down very decentralizedly. We have a shallow corporate type, corporate floor corporate group. My finance and investor relations group is made up of five people. And so, you know, we push money to the wellhead, the engineers, and the intelligent people to produce oil cheaper and more efficiently.

So that's just cultural, you know, and we didn't get this big because we had a bunch of buddies that wanted to sell deals to us. Unfortunately, we did it because we can execute more cheaply than the other guy, and in a commodity-based business, the low-cost operator wins. So, as long as our cost structure is best in class, think about it like a factory.

If we build cheaper shoes than our competitors, we should own more factories. And that's how we think about, you know, operating in the Permian base.

Chris Powers: Well, you said in some interviews that when something works, we implement it very, very quickly. And then you think of a big conglomerate or Exxon Chevron shell. You all are just more entrepreneurial.

Kaes Van't Hof: Yeah, listen, they're good at what they do, right? I need help to do what Exxon does in Guyana to, you know, build FPSOs that are offshore and drilling in 7,000 feet of water. But the Permian came back to life because the majors left the Permian, and the independents like Diamondback got started and brought that entrepreneurial low-cost culture to a new type of rock.

It was only sometimes considered the best way to develop a resource, and we've taken that and run with it. As I said in that quote, I don't come up with the ideas, but our job is to provide a safety net for the engineers to choose to make that decision on a risk-adjusted basis.

And if it works, we're not waiting. Till 2026, implement it because it's part of the plan. The plan can change at a moment's notice. Oil might be down another six bucks since we started this interview. The method may change this afternoon. But yeah, you know, that's the agile nature of our business.

And that's why we, you know, we're 30, 35 billion dollar company with a thousand employees. There's a lot of trust amongst those employees, and culture is a massive part of that.

Chris Powers: When you started, you didn't manage; how many people did you manage?

Kaes Van't Hof: I was employee number one, 50; probably, we were at 150 employees. I only had two direct reports when I started.

Chris Powers: How have you learned, like what, who has somebody taught you or is this self-taught, like how have you learned to manage people?

Kaes Van't Hof: It's a big responsibility and a constant learning process. Like, I don't say I'm the best at managing people.

It's a constant, you know, push to do better, right? I was president and CFO well, but I was more controlling or, you know, early and tried to do too much and tried to control too much. And now I've learned. As you know, as you move up, you should empower others to do a better job for the enterprise.

And if you trust them to do that, they will do a great job. So I've tried to get rid of responsibilities. I'm certainly not involved in everything. Hey, are we hedging this day? Are we not hedging this day? Should we complete this well or not achieve this? Well, those go, they're the experts that, that particular spot, my job is to continue to push them when things are going well, right?

When things are going well, you will motivate them and ensure they're pushing and pushing to improve. Because in our business, when oil goes up, cost in the creep and life's good, and we're going to buy this, we're going to believe that. And then, when things go down, you need to instil confidence that the business will be around.

And so my role has changed as I've gotten older.

Chris Powers: In your old age. It wouldn't be dumb to not at least get your opinion on pie in the air that just got bought for 60 billion. How big was Pioneer when you all went public at 500 million?

Kaes Van't Hof: They're about 20 billion. They were always big, 20 or 30 billion.

Chris Powers: So you all grew at the same pace from then on; they got to 60, and you all are at 30.

Kaes Van't Hof: On a multiple basis. We went from 500 to 30

Chris Powers: No, you grew 20, and they grew 20, except you started from a few.

Kaes Van't Hof: We did a little differently. Pioneer was a big competitor of ours. I got to find a new competitor to get motivated about. But you know, it is like a pioneer selling to Exxon or a, you know, Hess sold to Chevron. That was a $50 billion deal, too. It means that those guys have a lot of confidence.

The majors in our business and what we do are valid. A validation of the shale business model, you know, that it fits into a major's portfolio. It means a slightly different type of competitor, right? I spent little time thinking about what Exxon does, but now, I do right there.

They're one of our biggest competitors in the BasinBasin but also have a loud voice on a global stage. So it's sad to see Pioneer go, but there's still a lot of consolidation left to happen in this BasinBasin.

Chris Powers: Okay, I'll eat my word for a second. You guys grew 60 X, and they doubled.

You both went up 20 or 30 billion. You went up six. And my point was you went up 60 X at that time.

Kaes Van't Hof: That's right. Not because of me.

Chris Powers: I understand, but it's an incredible story.

Kaes Van't Hof: We're the poster child for shell growth. Yeah, you know, 2000 barrels a day, 3000 net Boe's, now we're at 450 net Boe's.

Chris Powers: Will the world love oil and gas again? Is there a way to change this narrative?

Kaes Van't Hof: I don't think there's a way for the whole world to love oil and gas. Again, you know, I grapple with this a lot. Like, what's our problem? Our industry has a communication problem.

The reason is that every barrel and molecule we produce are bought sight unseen daily. I don't have to market our business. I don't have to say, Hey, buy down and back barrels versus X, Y, Z's barrels, but versus shells barrels that they're just bought.

So, you know, we're run by engineers. Good marketers do not run us. So I think that hurts, you know, but you had some outstanding marketers in history, like the Aubrey McClendon's of the, of the industry that, that did a good job promoting us natural gas or promoting, you know, he wasn't as big on the oil side, but I think there's room for that.

There's room for it to be done. Different from what has been done in the past. We shouldn't be apologetic for what we do. You know, the U S oil worker is one of the country's most underrated and underappreciated workers, especially in the field. You see, they're well paid, but those guys work their asses off.

It is a tricky business. You go on a rig; it's a tricky business. And part of my job is to try to motivate people to come to work for a company like Diamondback or this business because we're not going anywhere. I don't care what model you want to run unless we invent nuclear fission or nuclear fusion, you know, we're not going anywhere, and that's going to take a while to build anyways, you know, so if something that we've never heard of gets invented or never thought of gets created, then then we'll go away.

But until then, shame on us. We're among the billion people in the world who are lucky to have what we have, and the other 7 billion people. We need to move from burning wood to windmills and solar panels. That works for the rich world.

That's okay. We can pay for higher energy costs if we want to in the rich world, but in the developing world, the most energy-efficient way is through oil and gas, so why not promote the guys who care about the environment? You know, keeping it in the ground doesn't make any sense.

Cause we need human development. We need the 7 billion people in the world that are underserved to come out of that. And feel good about their futures, and oil and gas do that. That needs to be understood by Washington, even on both sides of the aisle. That's my rant.

Chris Powers: And for most people, there's no oil in their countries.

Kaes Van't Hof: So I, you know, listen, if U.S. demand, let's say U.S. demand today is 19 million barrels a day. If we start buying more electric cars or fuel efficiency, fuel efficiency in the U.S. will reduce U.S. gasoline demand. Why not promote our barrels, going to other countries to help those people at a fair price?

It's a tremendous geopolitical weapon. Look at our reliance on foreign oil. It's gone to, you know, it's minimal now. So why not promote the guys that care about not flaring, not putting methane in the air, and ask Putin what his scope on emissions is? Do you think he cares what his content on emissions is?

We are trying to improve this business, and that's not just Diamondback. That's all. U.S. companies have done a great job trying to clean up our act on how we produce these barrels.

Chris Powers: I can only imagine how clean the coal plants China puts up every week are.

Kaes Van't Hof: Man, have you seen, well, have you seen the gates of hell?

There is a gas field in Azerbaijan that has been flaring for 30 years like there was a drilling accident. The rig caved in. It's a gas deposit that has been on fire for 30 years. And you can see it from space, yet here we are, you know, yelling at Diamondback for, you know, flaring a couple of MCF a day, you know, in certain areas.

I'm not saying flaring is good, but it's all relative. You know, why does California import more Iraqi oil than U. S. oil?

Chris Powers: Why, why is that? Do you know?

Kaes Van't Hof: Well, you can't get it there. So you have to go all the way around the Panama Canal to get our oil to California in most situations.

Chris Powers: Oh, there's no pipeline.

Kaes Van't Hof: They want to avoid building a pipeline. So they take it from Iraq. They buy a lot of Iraqi and Ecuadorian oil.

Chris Powers: One of my favourite photos during COVID was the oil tankers sitting off the coast of California, just sitting in the ocean.

Kaes Van't Hof: That's not one of my favourites. That was a tough time there, brother.

Chris Powers: Well, it was a funny meme. It was a funny meme.

Kaes Van't Hof: It's true, it was. We can laugh about it now in retrospect.

Chris Powers: That's 2020, and we're heading into 2024.

Kaes Van't Hof: One of our peers at Hess bought three tankers worth of oil and filled them with their production. It was a genius move by them. They said I'm not going to sell it.

I'm just going to put it 6 million barrels into these three tankers, and I'm going to sell it when oil is higher. And they made a fortune in that trade.

Chris Powers: Okay. You said this at lunch but said this business is a trade.

Kaes Van't Hof: Yeah. It's you who needs to understand the trade aspect of it and the cyclical nature of this business.

Chris Powers: What is somebody not good at oil and gas doing if they're not thinking about it that way? They're just. What's the opposite side of that?

Kaes Van't Hof: Part of my job is to understand that. On the technical team, it's not, Hey, what's oil doing? What's the geopolitical landscape?

What's the macro? I think part of it. My job in a senior position is to understand the macro and, you know, four or five years ago, I wouldn't have said that, but, you know, we have so many people that are focused on, Hey, how can I get that recovery from 10 per cent to 11 per cent or how can I drill this well in six days versus seven. Still, you know, we allocate capital, and how will we give money to a very volatile business?

Well, you need to know when things are good and not when things are not good. Things could be better right now, but they're pretty good relative to where we are. So, allocating capital in the field, but also allocating capital on how we have this free cash flow. What should we do with it?

Should we buy something? Should we return it to shareholders? How do we return it to shareholders? Should we pay a dividend? Should we repurchase shares? Should we hedge today? Should we not hedge today? And, you know, in this business, you have to understand that it is always going to be volatile, and it's always going to change.

Chris Powers: And there is no way to predict what oil prices are doing tomorrow.

Kaes Van't Hof: No. Anybody that tells you that don't only listen to them if they're in, like, the Saudi oil office. Cause they have control of, if they have a million, 2 million barrels a day, that dramatically affects the global market.

Chris Powers: If you drive a gold Bugatti Veyron in Saudi Arabia, you're probably on the team.

Kaes Van't Hof: Yeah, you're on the inside.

Chris Powers: That's how you get a golden baguette.

Kaes Van't Hof: Among other ways, probably. But that goes back to how we set up our business. We've set up our business to be resilient when things go south, right?

Suitable balance sheet maturities pushed out, not do during the next potential down cycle, low-cost resource, it's just, you know, you got to set up for that potential downside.

Chris Powers: Are you seeing more investors return to oil and gas? You've even seen headlines like black rock and some of these oversized pushers of non-oil and gas changing their narrative. Are there any more flows into the business?

Kaes Van't Hof: Yeah, it's more rational, you know, I believe in 2020. Half of our call was about environmental performance with an investor. You have an hour call, and 30 minutes are on; what are you doing for ESG? Now, it's a question, but it's at the end of the call.

So it's more about, you know, the market is based on greed and fear. We're more in a greed phase for oil and gas. But not to be a cynic; we've done a decent job. We've done a decent job on environmental performance. Things are improving, and, you know, it's less of a concern for an investor to put money into the business.

The fundamentals are becoming more critical.

Chris Powers: Really, this is the last thing I was going to ask you, which I probably should have asked earlier, but it seems like Travis has had a pretty significant impact on your life. He's 25 years older. He's kept the team pretty young. Yeah, he's a great leader.

That's put together a team. You're probably one of Travis's superstars, but why is he good at what he does? What's there to learn from Travis?

Kaes Van't Hof: Sitting next to Travis and watching his development and what he's done for not just Diamondback but for the industry, he is, you know, we have; we have a motto at Diamondback: stay humble, stay hungry.

And I think he lives by that. He's stayed humble. He's worked so hard, you know, for many years at other companies and worked his way up but never had a shot at the helm of the company. And you know, what he did for Diamondback, going from $500 million of market cap to 30 billion. I'd like to see if we'll be replicated in this business again.

So it's a fun guy to watch. As he's gotten more prominent and the company's contacted bigger, he's the same guy. And there's a lot to be said for that. You have a lot of, you know, bombastic characters in this business one way or the other throughout the years.

Right? So, the quintessential image of the oil man from the Dallas days those are behind us. And Travis exemplifies what the new business Should be about, which is, you know, we protect our people. We work for the shareholders. We don't think we run; we don't think we own the company, right?

The shareholders own the company. I own some shares, but the shareholders own the company. He exemplifies that to a T, and he's been brilliant with us and, you know, puts a lot of faith in some younger guys like myself, like our COO, like our G.C., we're all pretty young guys and girls. He's moved us up quickly and has been confident enough to give us more autonomy.

So, you know, the decentralized culture is essential.

Chris Powers: If we were sitting here a year from now, over and under on 80-dollar oil.

Kaes Van't Hof: Under.

Chris Powers: All right, that's it.

Kaes Van't Hof: All right, buddy.

Chris Powers: Thank you.

Kaes Van't Hof: Thanks.