FOOD & BEVERAGE

HANDS ON

Chef Michael Lane often visits the ranch, less than an hour from DFW.

GREEN-MINDED

Rosewood Ranches works with area distilleries to upsycle spent grain.

RAISED RIGHT

Kenneth Braddock shows off Rosewood’s premium Texas Wagyu.

FOOD & BEVERAGE

From Pasture to Table

Kenneth Braddock is perfecting Texas Wagyu at the Hunt family’s Rosewood Ranches south of Dallas.

story by BIANCA R. MONTES

walking into one of dallas’ newest barbecue joints, I knew what I wanted as soon as I laid my eyes on the menu. “Wagyu brisket,” I tell a man behind the counter at Oak’d Handcrafted BBQ, which recently opened on Greenville Avenue with an impressive group of backers behind it. As I watched my meal being prepared, I had no idea that the process of getting the meat to my plate had been several decades in the making. But with a tour of the Hunt family’s Rosewood Ranches on the schedule, I was soon to learn more.

A LIFE OF RANCHING

Kenneth Braddock is exactly what you’d imagine when picturing a Texan rancher—thick white mustache, Stetson hat, and all. He grew up in the Panhandle with his dairy-farmer father. Following in his father’s footsteps, he went to Texas Christian University to study ranch management and had a short-lived career with a dairy farm before venturing into embryo transplants in cattle. His innovative work in calving led to John Bunker Sands calling him in the early 1980s. Sands, the son of Caroline Rose Hunt, was executive director of The Rosewood Corp. at the time and responsible for developing wetlands on the family’s ranches. The two men had never met but bonded over that two-hour phone call and went on to work together at the ranch for nearly two decades. “I learned a lot from him—from stewardship to environment,” Braddock says about Sands, who passed away in 2003 after a year-long battle with pancreatic cancer. “One of the biggest things I learned from him was how to really duck hunt— not just shoot ducks,” he recalls with a raspy laugh.

BEEF PROS

Chef Michael Lane is flanked by Forum Meat’s Walter Wilkerson and Tod Winn.

continued from page 033

This year marks Braddock’s 36th year with Rosewood. The morning of our conversation began with a report card on the quality of the ranch’s Texas Wagyu cattle.

A TEXAS SPIN ON WAGYU

Few realize the time and effort it takes to deliver a piece of beef to the table. For Rosewood, the process of getting beef to the table takes about 29 months. Braddock says he first came up with the idea of starting a meat business at the ranch about 20 years ago. With the demand for high-quality meat beginning to grow, he wanted to create a hybrid Texas Angus version of the popular Wagyu beef. “I didn’t want to reinvent the pasture-to-plate wheel. I just wanted to see if I can be the best spoke in it,” Braddock says. Lucky for him, Rosewood is the type of company that will give you a lot of room to run with ideas—as long as they work. Collaborating with a “middle-man,” high-end meat processor and cutter Forum Meat Co., the ranch’s Wagyu is now on the menu at coveted restaurants, including several by José Andrés, such as his famous Las Vegas eatery The Bazaar, Oak’d, and Billy Can Can, to name a few.

A GROWING MOVEMENT

And as the demand for premium beef product continues to rise, Rosewood anticipates going from processing about 3,000 head of cattle a year to more than 5,000 over the next two years. Much of the demand comes from a growing awareness of people wanting to know where their food comes from, especially the younger generation. “They want a narrative,” says Todd Winn, co-founder of Forum Meat Co. “The local movement has gotten a lot bigger. Chefs and consumers are looking for Texas product with no hormones, no antibodies, and that is less processed. Rosewood is about as pure as you can buy.”

FAT STREAKS

The Rolls-Royce of beef, Wagyu, is rated based on marbling and other factors. RANCHING

Getting Wagyu on the menu

It took nine months for Michael Lane to secure a deal with Rosewood Ranches to use its Prime and Wagyu beef at Oak’d—a first restaurant for the seasoned chef who has worked with everyone from Robert Del Grande at The Annie Café & Bar in Houston to Dean Fearing at Rosewood Mansion on Turtle Creek. “They aren’t just going to let anyone pick them up,” Lane says. “It has to be a restaurant that will service their brand well.” In Rosewood, Lane was looking for a premium producer that also had the wherewithal to grow. A lot of ranchers, he says, lack the ability to produce enough animals and “don’t have the relationships or the knowledge to scale,” Lane says. “Kenneth [Braddock] has all of that. He can anticipate what I’ll need in two years and is working on that now.”

ENERGY AWARDS 2021

The Lone Star State is becoming an epicenter of energy innovation, both in traditional sources and renewables.

2•0•2•1 ENERGY

AWARDS

The new Energy Landscape

Once siloed, renewable energy and fossil fuel companies and leaders are collaborating to build a reliable and sustainable future.

it’s hard to overstate the impact the oil

and gas industry has had on North Texas. Beyond global companies and game-changing innovations, it has created scores of millionaires—and a few billionaires—who have helped fund the region’s growth and arts and education infrastructure. From the black gold of the gusher age to the natural gas boom and fracking in the Barnett Shale, the industry has seen big shifts during the last century or so. And now, another big evolution is underway: a movement away from strict reliance on fossil-based forms of energy and consumption to include renewable sources such as solar and wind. What we’re seeing is a sector fueled by interdisciplinary camaraderie and disruptive innovation. In recognition of this shift, D CEO revamped its former Oil & Gas Awards to include renewables in our new Energy Awards. In this special report, read about some of the key players leading the way—and a profile of Legacy Award winner Scott Sheffield of Pioneer Natural Resources by industry journalist Jennifer Warren.

2•0•2•1 ENERGY

AWARDS

The next energy mavericks

A different breed of risk-takers and innovators are propelling the sector into a new era. One thing is clear: This ain’t your daddy’s energy industry.

story by KELSEY J. VANDERSCHOOT

W

wall street and consumers are demanding

that companies across the country own up to their impact by providing environmental, social, and governance transparency. Closer to home, winter storm Uri in February 2021 revealed surprising weaknesses in Texas’ energy grid, spotlighting the need for new and more reliable sources. In response, fossil fuel players are stepping up to create the energy sector of the future—an industry marked by interdisciplinary camaraderie and disruptive innovation. North Texas’ leading role in the shift is underscored by the seven finalists in the Excellence in Innovation and Sustainability category in D CEO’s 2021 Energy Awards. Highlighted in this feature, they’re focusing on everything from bacteria microbes and hemp crops to carbon capture and clean backup power generation.

A NEW SPIN ON RECYCLING

Engineer Mark Bouldin moved to the United States from Hamburg in 1988, beginning a more than 30-year career in the energy sector centered around lubricants and asphalt and winding through major players, including Shell, Sunoco, and Koch Industries. At Safety Kleen, Bouldin led the largest collector and re-refiner of used motor oil as president of performance products. He then built liquid waste collection company GFL Environmental’s U.S. operations through acquisitions, eventually taking the company public.

This past March, Bouldin took his expertise in the recycled motor oil niche to TopSail Energy as CEO. “I saw a nice opportunity to see how we could build something that was unique for Texas,” says Bouldin, who has since rebranded the company to Blue Tide Environmental. “We don’t see ourselves as an energy company. We see ourselves as a recycler,” he says. He also re-

vamped a marine fuel refinery in the Cedar Bayou to work with used motor oil and created a vision of becoming the first major re-refinery in Texas to process used motor oil and turn it into high-quality engine oil. “Our goal was to see if we could even further reduce the carbon intensity of what we were doing with this recycling,” Bouldin says.

When refinery construction is complete in Cedar Bayou, Blue Tide will purchase used motor oil from collection trucks, refine it, then sell it to distributors as a base for engine oil. When the plant is fully up and running, it will move 4,000 barrels per day—roughly 168,000 gallons. Within three years, Bouldin hopes to expand to the East Coast, and North Texas will play a big role in his company’s future. “Dallas is right now, probably the No. 1 or No. 2 generator of used motor oil in the state, and will likely become the No. 1 generator,” Bouldin says.

EMBRACING CARBON CAPTURE

In 2013, after nine years in the oil and gas industry, former attorney Jonathan Grammer began toying with carbon capture when a client approached him about using captured CO2 for tertiary recovery in a Texas Panhandle reservoir. Grammer spent two years amassing knowledge and data before oil prices dropped, and the project was shelved. “But the science was all there,” Grammer says. After winter storm Uri hit Texas in February 2021, legislative priorities shifted from harnessing clean energy to ensuring reliable power. Grammer knew the sector needed a way to make coal and natural gas viable—which meant capturing CO2. “I knew carbon capture was going to be the next big thing,” he says.

By the spring of 2021, Grammer had pulled together a team of five experts in oil and gas, law, technology, and reservoir engineering to form U.S. Carbon Capture Solutions, a consulting firm that works with emitters to capture CO2 and pipe it to oil reservoirs for tertiary recovery. Where leaders such as “WE CAN’T JUST PUT COAL AND OIL AND NATURAL GAS AND FOSSIL FUELS UP ON THE CHOPPING BLOCK AND MAKE

THEM THE SCAPEGOAT .”

JONATHAN GRAMMER, U.S. Carbon Capture Solutions

Denbury Resources and Kinder Morgan had harnessed naturally occurring CO2 for enhanced oil recovery, Grammer is pivoting the process to industrial CO2. “Previously, it was too expensive,” he says. “We now have incredible investment credits and tax credits that have changed the financial landscape.” These credits have compelled some of Grammer’s clients from his original research to change their position, and new players to jump on board.

With costs becoming less of a barrier, Grammer aims to use amine solvents to scrub the low-purity industrial CO2 produced by emitters such as power plants. “In some instances, there’s almost going to be a CO2 impact process,” he says, “where we’re going to have to not only strip out the carbon dioxide, but almost re-enrich it—increase the purity level— before we can pipe it into a transmission pipeline.”

He hopes to have shovel-ready projects in the panhandle and the Midwest next year. “We’re looking at four to five million metric tons of carbon dioxide probably in mid-2022 that we’re assisting with capturing,” he says. The biggest challenge? Education. “This is not just a myth or a theory; we can actually do this: You can actually keep using coal and natural gas as a fuel source, and you can bring down that climate change number,” Grammer says.

Collaboration between fossil fuel and renewable energy companies has flourished in the aftermath of Texas’ winter storm Uri.

ENERGY AWARDS 2021

“IN THE NEXT YEAR OR TWO, THERE WILL BE MORE ACRES OF HEMP GROWN IN WEST TEXAS THAN ANYWHERE ELSE

IN THE WORLD .”

JOHN PAUL MERRITT, Delta Agriculture

ENERGY AWARDS 2021 A 4-BILLION-YEAR-OLD SOLUTION

Bill Lantz began his career as a mud engineer before joining his father’s small company, which applied naturally occurring microbes in several settings, including oil fields. When his dad passed away, Lantz formed Prosper-based JGL Solutions, focusing largely on using microbe bacteria in the energy sector as an alternative to chemical scale and corrosion inhibitors, emulsifiers, and biocides. It’s an ancient solution; research indicates that microbial organisms have been around for more than 3.7 billion years. “Wherever the microbes are applied, even if you spill them accidentally, they do good for the environment, not harm— the complete opposite of chemicals,” Lantz says. He assesses chemical levels in wells, waterfloods, and salt-water disposal systems, clearing out caustic compounds. Then, his team injects naturally occurring microbe bacteria into the system, creating unique colonies for each site. “We blend [microbe strands] together, depending on what the situation calls for,” Lantz says. Because microbes reproduce on their own, no pumps or drums are needed to control concentration, so maintenance costs are lower, and the risk of chemical leaks is eliminated. JGL is set to open a lab in DFW soon, hoping to reach new companies fracking near the Barnett Shale. “It’s just big companies getting past this fear of trying [microbes] in a frac,” Lantz says.

He is also branching into soil remediation, using microbes to clean up chemical and oil spills in lieu of compounds such as hydrogen peroxide. “We find that we are way better than anything else [oil companies] do speed-wise,” says Lantz, adding that, unlike chemicals, microbes will continue to clean soil until contaminants are completely gone—well beyond state-required levels. He recently launched a soil remediation pilot program with a major oil industry player in West Texas and hopes that the program’s five sites will provide exposure and credibility, an effort Lantz also undertakes through his company podcast. “It’s just another way to educate people, and that’s what needs to happen,” Lantz says.

STAYING ON THE CUTTING EDGE

Matt Vining launched Navigator Solutions in 2012 as a midstream crude oil pipeline in West Texas. He sold the company in 2017 and acquired another crude oil pipeline business; then, in 2021, he formed a carbon capture company, Navigator CO2 Ventures. “When we look at how is this industry going to evolve and where we want to be when it does, it is with the objective of staying at the cutting edge,” Vining says of his latest venture, which focuses on sequestering high-purity carbon dioxide gas. Vining plans to build an industrial carbon capture pipeline system spanning 1,200 miles across five Midwestern states. The system will capture CO2 emitted from 20 to 30 ethanol and fertilizer plants, pressurize the gas into a gel, and pipe it to the Mount Simon sandstone formation in northern Illinois, where it will be injected into the ground to reduce emissions. Initially, Vining says the system will move 10 million metric tons of CO2 per year. “From a domestic perspective, this will be the largest system like this,” Vining says.

Construction will begin in 2023, and the pipeline is estimated to be up and running by 2025. Vining is currently in talks with several parties looking at ways to use pure CO2 as a refrigerant or coolant, such as data center companies, meat processing plants, and bottling plants. “It’s going to take us a few years to refine out like how wide that spectrum of opportunities really is,” Vining says. “This is the first time in history when it’s been readily accessible at the scale that would be necessary to be relevant.”

A SUSTAINABLE SUPPLY CHAIN

Pony Oil CEO John Paul Merritt did a lot of soul-searching after hitting it big in the oil and gas industry at a young age. “I’m always trying to figure out ‘What’s my why?’” he says. Seeing parallels between energy and an emerging hemp commodity, he leveraged his team’s expertise in oil and gas to build a business centered around opportunities in hemp. When he learned of a company that was using Big Ag equipment and practices from corn and cotton farming for hemp crops—which are usually picked by hand—he bought it. He has since focused that company, Delta Agriculture, on building a sustainable supply chain using hemp grain and fiber as paper, plastic, and soy replacements in consumer products and animal feed. The business is now growing and processing 10,000 acres of hemp at farms and facilities in Colorado, Kentucky, and West Texas.

Merritt is in talks with a pet food maker to use hemp as a soy alternative in the company’s products. “The nutritional components of [hemp] currently exceed any ingredient they have,” Merritt says. He says Fortune 500 companies are warming up

to a crop that was legalized in 2018 and has only recently become an option when building sustainable supply chains. “It’s a fairly new crop, but it’s a miracle crop,” he says. Delta Agriculture also supplies 70 percent of biomass needed for every CBD product on the market and aspires to become a big player in the bioplastics market—a niche that is estimated to make up 40 percent of the overall plastics market by 2040.

But perhaps the area that most excites Merritt is what hemp plants do before harvest. “Most people don’t know that our crops sequester about 10 tons of CO2 out of the air per acre,” he says. Merritt is building a CO2 sequestration coalition, leveraging his connections in the oil and gas sector—as well as Fortune 500 businesses in other industries. Together, they aim to plant the largest CO2 sequestration project in the nation in West Texas, enabling a million acres of hemp growth by 2026. “It’s going to create thousands of jobs that are not affected by the commodity swings of oil and gas politics,” Merritt says. He says he has met with Gov. Greg Abbott twice in the hope of making West Texas the epicenter of the hemp industry and to fuel the coalition and sequestration project. “We’re already almost there on a per-acre basis, but here in the next year or two, there will be more acres of hemp grown in West Texas than anywhere else in the world,” he says.

CLEANER BACK-UP GENERATION

When Erich Sanchak was recruited to join Austin-based data center company Digital Realty in 2004, he knew sustainability was a big priority for founder and CEO William Stein. For each of the company’s 291 data centers worldwide, including 22 in North Texas, Digital Realty works to ensure cooling is efficient—eliminating water use in new facilities and directing outside cool air more immediately toward machines. The company also uses renewable energy to power centers wherever possible. “We are not trying to restrict our vision on any of this,” Sanchack says.

Last year, Digital Realty signed a 7.5-year renewable energy credit agreement with Citi to provide 30 percent of the power needed to run its Dallas facilities through renewable energy. Now, the company is striving to continue to improve efficiency in cooling, power usage, and back-up power supply. “We are working with our supply chain on how to, on a global scale, develop something that’s either using natural gas, or a fuel cell, or those type of activities, to give a cleaner back-up generation,” Sanchack says. He is also in the process of moving his sustainability, supply chain, and cybersecurity teams to Dallas—roughly 200 employees. “Our environmental stewardship group is going to be highly concentrated here,” he says.

A TRANSPARENCY TRANSFORMATION

Scott Rolseth joined oil and gas giant Hunt Energy at the start of the millennium. In 2004, he helped pioneered its liquid natural gas pipeline in South America, cooling natural gas into a liquid and shipping it to markets in Europe, Asia, and Mexico to use in heating, cooking, transportation, and more. “About 700 million cubic feet a day are sold there,” Rolseth says. In 2005, he began leading the company’s sustainability efforts; 14 years later, he was named vice president of facilities, engineering, sustainability, and supply chain.

Being private has long given Hunt flexibility to focus on environmental concerns that the pressures of shareholders often force public entities to forego. The Dallas-based company was the first to implement International Finance Corp.’s performance standards and still approaches each project with a unique plan to understand and protect an area’s native society, history, and species. It has modified past pipeline development and construction to accommodate archaeological research, documented ethnobotany in Arctic Canada, and used satellite technology to track no-contact indigenous tribes, so as not to disturb their protected existence. Rolseth’s team also partners with the National Geographic Society and the Smithsonian Institute to prioritize biodiversity, protection, and conservation around Hunt’s Peruvian projects. “We’ve even found rare species that were never before known,” he says.

Now, Rolseth’s team is leading the private company through a massive transformation toward transparency—even though it is not bound by shareholder or Wall Street demands. Hunt published its first ESG report in September, and has been inventorying its CO2 assets, reducing its carbon footprint, improving efficiencies, and more. “We’re also looking at creating zero-emission facilities—modular facilities that reduce not just carbon footprint, but the physical footprint, and can be reused and redeployed in a lot more efficient manner,” Rolseth says.

Additionally, the company has, where possible, opted out of gas flaring, a process in which unwanted byproduct gas is combusted in the open air. “Anything that is venting naturally, we will tie in and seal,” Rolseth says. Hunt then sells the captured natural gas to gas-gathering companies, even if it is at a net loss. Hunt has even begun diversifying its portfolio, hoping to shift to become an energy provider rather than an oil company. “We’re not just an oil company anymore,” Rolseth says. “We’re shifting into cleaner fuels, recognizing that the energy matrix is changing, and that it’s not necessarily up to us to decide who wants energy and from what source—it’s up to the consumer.”

For a complete list of D CEO 2021 Energy Awards winners and finalists, please see page 47.

2•0•2•1 ENERGY

AWARDS

2•0•2•1 ENERGY

AWARDS

The Conscience of the Permian

LE G A CY AWARD W I N N E R

story by

JENNIFER WARREN

portrait by

SEAN BERRY

With his Pioneer Natural Resources sitting atop the world’s largest basin, Scott Sheffield leads in the monumental energy transition.

eight years ago, the permian was just being recognized as a powerhouse of oil-producing basins, as the shale gas revolution morphed into the U.S. shale oil revolution. Pioneer Natural Resources CEO Scott Sheffield was a leading, prescient voice among independent exploration and production companies in revealing its potential. Since then, the Permian has become the largest contributor to total U.S. oil production, nearly 5 million barrels per day (bd) of 11 million. As a result, the U.S. imports less oil from OPEC and exports its highly prized sweet crude. Pioneer is now the largest oil producer in the Permian Basin—and their fortunes are inextricably linked. ¶ U.S. oil and gas firms were so successful at extracting oil that global prices collapsed from $115 to $35 in the 2014–16 oil bust, when Saudi Arabia, the leader of OPEC, decided to retake its lost market share. Russia and other major producers have since joined forces with OPEC as the extended cartel called “OPEC+” to maintain more stability. ¶ The coronavirus pandemic, however, left independents of all sizes exposed, with challenged balance sheets, debt overhang, and business models that may be unsuited to the changes occurring in the industry—a massive energy transition. Fortunately, Pioneer, under Sheffield’s stewardship, has one of the best financial and carbon-metric positions in the industry. Too many shale players chased production growth at the expense of the investor, and the days of reckoning have been happening. The period of rapid oil demand destruction during the pandemic, even negative-$37 oil at one point, was a supercharged catalyst for industry consolidation.

ENERGY AWARDS 2021

ENERGY AWARDS 2021 SIZE AND SCALE

In his more than three decades as CEO, Sheffield has positioned Pioneer for success in a changing energy world, one in which oil demand faces many unknown scenarios. Recently, Pioneer acquired two exploration and production companies in fairly quick succession. “Really, the pandemic set us up, with the crash in oil prices,” Sheffield says. “The pandemic exposed companies in the sector that had mediocre balance sheets. It’s the first time in 40 years the industry is acting differently [with restraint in pushing growth].” During a crisis, Pioneer has learned to quickly cut rigs, frac crews, and other measures to protect cash flow.

The company’s $4.5 billion acquisition of Parsley Exploration was announced in October 2020, a time when COVID cases were heading toward a peak, and Parsley’s stock price was low. “Because of our balance sheet, which was the best one in the industry during the downturn, we could pick up $3 billion of their debt,” Sheffield notes. (The CEO was kept at arm’s length during negotiations, as Parsley was founded by his son, Bryan.)

The second buy, Double Point Energy, with its Pioneer-adjacent acreage, for $6.4 billion, was announced in April. Both acquisitions are cash-flow accretive and fit like a glove, Sheffield says. “We went from $20 billion market capitalization to $30 billion with Parsley, and then with Double Point to over $40 billion market cap [as of late June].” Had the pandemic not happened, companies and assets such as these would not have been for sale, Sheffield says.

Paradoxically, COVID was like a booster shot for an already consolidating industry, with its immunity waning from former boom-bust cycles and an investor demanding capital discipline. “In the first quarter of 2021, by many measures, whether free cash flow or net income, it was one of the best quarters from a financial perspective in the history of tight oil,” says corporate analyst Alex Beeker of Wood Mackenzie (known as WoodMac). “Investors have been rewarding companies that are more capital-disciplined and punishing those that grow too aggressively.”

“Size and scale” was becoming the mantra chanted from the lips of executives, institutional investors, analysts, and company boards. “The investor mindset has changed,” notes Sheffield. “They want more returns in terms of free cash flow.” And Pioneer plans to oblige through a base dividend, plus a variable one, expecting to return about 80 percent of their free cash flow over the next few years. This amounts to $23 billion to shareholders between 2021 and 2026 and a hefty mid-teens dividend yield.

Shale producers were notoriously guilty of burning through cash and plowing it back into production growth rather than to investors. Those days are long gone. The global energy transition to a lower-carbon energy system in its current thought process won’t allow a return to the heady growth of shale.

TAKING THE INDUSTRY TO TASK

How does an oil and gas firm navigate this new world of likely reduced oil demand and an investor heavily focused on ESG (environmental, social, and governance) factors? If you’re Pioneer, you keep adapting and leading. Veteran Sheffield has taken the industry to task over the last several years on environmental issues, most notably over flaring and venting gas, which considerably raises greenhouse gas emissions—and warming. He now has the dual mandate of proving his product is needed for the long-term, given peak oil demand scenarios, and that it is produced in an environmentally friendly way.

In an unexpected way, the pandemic, a black swan event, accelerated the energy transition toward a lower-carbon future. Awareness about shared societal woes grew. At a clip, busi-

(Far left) Sheffield with his son, Bryan, founder of Parsley Energy, which Pioneer acquired in a $7 billion deal.

(Left) A Pioneer rig in Midland. The company has the largest stake in the Permian, with more than 1 million acres.

nesses started making sustainability and ESG factors more of a marquee issue than before. In late May, the tempo picked up for oil and gas firms to change. Activist Engine No. 1 forced ExxonMobil, being timid about the energy transition, to add two climate change-oriented board members. Most notably, Dutch-based Shell was ruled against in a legal battle at The Hague to reduce its greenhouse gas emissions 45 percent by 2030 compared to 2019 levels, much deeper than the 20 percent previously pledged. Chevron shareholders also demanded greater climate action.

Owing to shareholder pressure, globally diversified European Majors are divesting some portion of their oil and gas assets to reduce their carbon emissions profiles and raise capital to invest in greener energy solutions. Sheffield believes U.S. independents will buy many of the assets shed by the large firms. According to Robert Clarke of WoodMac, “Even with an energy transition, there is oil demand growth over the coming decades. It shifts from transport to petrochemical feedstocks. Our base view is that it is certainly up for the next couple of decades, albeit a shallower growth rate.”

Alongside other influential groups, WoodMac has a “2-degree scenario” in which the energy transition becomes more accelerated by government policy. Two-degree scenarios are designed

Parker & Parsley’s leadership team (from left): Cofounder Joe Parsley, Don Dodson, Sheffield (then vice president of engineering), Bob Castor, Co-founder Howard Parker, Gary Little, Frank Kubica, and James Moring.

to limit average global temperature increases by no more than 2-degrees Celsius (or 3.6 in Fahrenheit) and potentially avert the worst effects of climate change through stringent decarbonization efforts. In that case, they predict gas potentially becomes preferred to oil decades down the road. It’s complicated, and a lot would have to change. “How will that ripple through US E&P?” asks Beeker. “In 10 years, it could flip, and gas is where folks want to be, not oil.” If this happens, Clarke adds, “How are the right portfolios being built today?” He observes that some M&A activity has been focused on one basin for scale, for example, while other deals are set up for a diverse portfolio of assets in different basins, for whatever the future holds.

PERMIAN’S UNIQUE ROLE

The Permian Basin has been the driver of Pioneer’s success for decades. It actually contains three basins, the Midland, Delaware, and Central, spanning the majority of West Texas and parts of New Mexico. Top Texas oil producer Pioneer dominates the Midland Basin. With more than 1 million acres, the company expects to produce up to 366,000 bd of oil, or 631,000 barrels of oil equivalent (boe) per day in 2021. Pioneer sees production of more than 700,000 boe per day The Birth of an Energy Giant The largest player in the Permian had an unpretentious start. According to a company write-up on its history, Pioneer’s predecessor was formed in 1962 by two West Texas oilmen “with a dream, beat-up car, and plenty of guts” who set out to form a venture that would “set itself apart from the scores of wildcatters who were looking to swoop in on the latest fly-by-night play. Howard Parker and Joe Parsley shook hands and flipped a coin to determine whose name would come first in the fledgling company’s moniker. Parker won the toss, and Parker & Parsley was born.” The company became known for shrewd deals as it assembled acreage and drilling plays. continued on page 046

2•0•2•1 ENERGY

AWARDS

2•0•2•1 ENERGY

AWARDS

in 2022. Sheffield says the company currently produces about 10 percent of the oil in the Permian; he expects to grow oil production there up to 5 percent annually over the next few years.

The Permian has a unique role in the global supply chain. “It’s still the largest producing basin in the world today,” Sheffield offers. It’s also the second-largest gas producer in the U.S., behind the Marcellus Shale of the Northeast. Even with peak oil demand, “The Permian will have a major place because its breakeven costs are the lowest in the U.S. of any shale basin and some of the lowest in the world,” Sheffield says. “It’s all about having the lowest carbon-intensity oil, which it does, because it’s sweet crude, not the heavy type from Venezuela, Canada, or the Gulf of Mexico.”

Peak oil demand has been predicted over timelines of 2025 to 2035 and even later by companies and authoritative bodies. Even if peak oil demand hits in the next 10 years, Sheffield says, the basin will still be needed. “The Permian will still be a major portion of the world’s oil supply for the next 20 to 30 years; it can easily grow 5 percent per year for the next 10 years and then level out maybe to 6 to 6.5 million bd.” Previously, Sheffield thought the Permian could produce 8 million bd, but with the growth model out and peak oil demand, it’s less likely. A number of independents are credited with getting ahead of climate change and ESG issues. Private firms are not under the same scrutiny about reducing carbon and methane emissions. “This is why I jumped on the bandwagon about stopping the flaring and venting of gas,” Sheffield explains. “It gives the Permian a black eye.” Flaring natural gas, the byproduct of oil production, results in substantial volumes of methane (also releasing black carbon and nitrous oxide), all potent greenhouse gases. Globally, governments and industry leaders have voluntarily pledged to eliminate flaring by 2030. Sheffield says the Permian still has the largest reserve potential and [drilling] locations. Since 2013, pipelines and infrastructure have grown to support the increased volumes of oil and gas. Permian oil is circling the globe, making its way to Europe, Latin America, and Asia; liquefied natural gas (LNG), too. The Permian plays a central role in U.S. oil and gas—and equally so for Sheffield’s Pioneer, the conscience of the Permian.

The Birth of an Energy Giant A BULLISH SCENARIO continued from page 045 The pandemic fast-forwarded the movement to a lower carbon Along the way, it never future, intersecting with an investor that wants cash-back reabandoned its legacy wards, dividends—not production growth per se—from oil and wells in the Permian—a gas stocks. Sheffield is pragmatically and rationally approachstrategy that continues ing the energy transition and investor sentiment. Pioneer also today. As Parker & Parsley was building its holdings, aims to appeal to the retail investor and dividend-oriented Scott Sheffield, the son of funds—a stability and longevity play. an ARCO executive, was Most publicly traded oil and gas firms are now sensitive to attending high school in their ESG ratings, which can easily be tracked by SustainalytTehran. After graduating ics, MSCI, and Bloomberg. Pioneer has been leading in susfrom The University of Texas, he began his career tainability initiatives for years, beginning with its efforts to as a reservoir engineer reduce and reuse water, given the large volumes needed for with Amoco Production hydraulic fracturing. Now, Sheffield says, the industry has to Co. In 1979, he became the invest in reducing the carbon intensity of producing oil and fifth employee at Parker & gas. Pioneer recently joined four gas-focused producers with Parsley in Midland. He was named CEO in 1985. He Cheniere Energy in an R&D collaboration to monitor, quantiguided the company to a fy, and verify emissions via cargo tags to maximize the climate merger with MESA in 1997 benefits of LNG exported from Cheniere’s Gulf Coast facility. In to form Pioneer Natural 2020, France rejected U.S. LNG cargo produced from shale gas Resources and was named as not being environmentally friendly.its founding CEO. Sheffield retired in 2016 but came A new phase has begun for the oil and gas industry. To clean back to helm Pioneer in up emissions, Pioneer is testing e-rig drilling and other alter2019. —Christine Perez native energy initiatives. By the company’s calculations, based

2.5

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0

-1.5 U.S. Liquids Production

(year-by-year change)

L48* ONSHORE OIL AND CONDENSATES ALASKA GULF OF MEXICO NATURAL GAS LIQUIDS

2017 2018 2019 2020 2021 2022

on Rystad data, it has the lowest carbon and methane emission-intensity barrels among its peers. Four ranches on Pioneer acreage may host wind and solar farms in the future.

Carbon-capture technologies are being studied for enhanced oil recovery, with all eyes on the Texas projects led by Occidental Petroleum and ExxonMobil. Meantime, Pioneer will be utilizing the wet gas it produces to inject back into wells to recover more oil, possibly doubling the amounts out of the ground. Cleaner barrels of oil could conceivably trade at a premium in the future.

Pioneer has adopted a net-zero ambition by 2050 for scope 1 and scope 2 emissions. According to the Paris-based International Energy Agency, to achieve a net-zero energy system by 2050, only 24 million bd of oil would need to be produced. “In that scenario, the Permian wouldn’t be needed; it would mostly be Middle East crude,” Sheffield notes. “I don’t see it happening that way in that scenario unless you have $200 oil prices to get there.” The IEA’s base case is that global oil consumption is projected to reach 104.1 million bd by 2026, a 4.4 million bd increase from 2019 levels.

In the nearer term, underinvestment in oil supply globally sets up a bullish scenario for the next five years for Sheffield. The pressure for Majors to not invest and U.S. shale’s lower growth, coupled with Saudi Arabia’s underinvestment, creates a tight market. “Prices could easily be in the $80 range (currently lows $70s),” Sheffield suggests. “In 2013 to 2014, we had $80 to 100 oil. If it wasn’t for shale growing too fast, prices would have stayed there.” When gasoline reaches $4 per gallon, people start to complain, he adds.

Ominous consequences of underinvestment in oil and gas and activist and policy attempts to cripple the industry too fast are beginning to surface. The Majors—BP, Exxon, Shell, Chevron, Total—produce 15 percent of oil and gas supply globally. If they divest assets for an accelerated energy transition, that means OPEC and Russia pick up the slack. A tighter market increases prices considerably, as Sheffield notes, and geopolitical leverage shifts to OPEC and Russia, even China, as the new sources of capital to fund projects.

So, who will produce oil and gas assets most responsibly? If public firms divest assets and private firms purchase them, the emissions’ reductions of the public firms such as Pioneer and others are muted. Sheffield says that private firms are still flaring and venting a good deal, which Pioneer is addressing through the Texas Railroad Commission and lenders. Always living up to his company’s name, Sheffield continues the internal work of culture-building to execute in the new sustainability paradigm—and external efforts to place oil and gas resources in better hands as the global energy system evolves. 2021 Energy Award

Winners and Finalists

LEGACY AWARD

Scott Sheffield, Pioneer Natural Resources

MIDSTREAM EXECUTIVES OF THE YEAR

Tom Long and Mackie McCrea, Energy Transfer (W) J. Patrick Barley, Silver Creek Midstream (F) Alaina Brooks, EnLink Midstream (F)

UPSTREAM EXECUTIVE OF THE YEAR

Jordan Jayson, U.S. Energy Development Corp. (W) Chris Carter, NGP Energy Capital (F) Travis Stice, Diamondback Energy (F)

RENEWABLE ENERGY EXECUTIVE OF THE YEAR

John Billingsley Jr., Tri Global Energy (W) Jason Allen, Leeward Renewable Energy (F) Melissa Miller, Able Grid Energy Solutions (F) Clark Smith, Buckeye Partners (F)

EXCELLENCE IN INNOVATION AND SUSTAINABILITY

Scott Rolseth, Hunt Oil Co. (W) Mark Bouldin, Blue Tide Environmental (F) Jonathan Grammer, U.S. Carbon Capture Solutions (F) Bill Lantz, JGL Solutions (F) John Paul Merritt, Delta Agriculture (F) Erich Sanchack, Digital Realty (F) Matt Vining, Navigator CO2 Ventures (F)

ENERGY SERVICES AND TECHNOLOGY EXECUTIVE OF THE YEAR

Joseph DeWoody, Valor Mineral Management (W) Le’Ann Callihan, NAPE Expo (F) Joe McKie, Alamo Pressure Pumping (F)

ENERGY FINANCE LEADER OF THE YEAR

Matt Attaway, Align Midstream Partners (W) Kyle Miller, Silver Hill Energy Partners (F)

FINANCING CAPITAL DEAL OF THE YEAR

Tailwater Capital acquires NorTex Midstream Partners (W) Hunt Perovskite Technologies merges with 1366 Technologies (F) Metamaterial merges with Torchlight Energy Resources (F) Pioneer Natural Resources acquires DoublePoint Energy (F)

PRIVATE EQUITY FIRM OF THE YEAR

Pearl Energy Investments, led by Billy Quinn (W) Istick Capital Management, led by Chad Willis (F) Tailwater Capital, led by Jason Downie and Edward Herring (F)

RISING STAR/ FUTURE LEADER AWARD

Will McDonald, TenOaks Energy Advisors (W) Drew Winston, Tailwater Capital (F)

ENERGY AWARDS 2021

Meet the force behind Con-Real, Texas’ largest Black-owned construction and real estate company.

Life.

TODAY, THE 69-YEAR-OLD ENTREPRENEUR IS LOW-KEY, MILD IN MANNER.

But when Gerald Alley was a graduating finance major at the University of Arkansas at Fayetteville with no employment prospects in sight, he publicly challenged the visiting head of a leading Dallas department store over its White-biased hiring practices. ¶ Students hoping for a job interview squirmed as their Afro-coiffed classmate skewered the retail executive, using the Texan’s own words to note that more than 30 percent of Sanger-Harris customers were Black, but not even one of its 200 merchandise buyers was. ¶ For much of his life, Alley has been challenging the status quo, relying on less disruptive, more effective means after he and his older brother, Troy C. Alley Jr., founded what is now the largest Black-owned construction and real estate company in Texas. With $150 million in projects under contract and about 50 employees, it’s among the largest in the country. ¶ Long gone are the days when Alley would cold call on the Miller brewery in Fort Worth to win his first contract, building a tiny guard shack. Today, he reels off completing significant projects for Fortune 100 firms such as JPMorgan Chase, Kroger, and PepsiCo.’s Frito-Lay division. He is equally open about existential crises that seemingly crop up every decade or so—a DART project that went off the rails, a snake-bit VA hospital renovation in Waco, and a suddenly pulled, multiyear hospital deal in California, somehow salvaged by a lucky encounter. Then there was the non-malignant but aggressive brain tumor that required two rounds of risky surgery and considerable post-operative care. (Recovered, Alley now bicycles 20 to 45 miles most Fridays.)

Leadership. portrait by JILL BROUSSARD story by BARRY SHLACHTER Legacy. y.

Being a minority chief executive in the hyper-competitive construction industry and unwilling to accept token contracts as a minority subcontractor only heightened the hurdles. Dallas businessman Don Mitchell was present when Alley rejected part of a big Cotton Bowl renovation project. “What they wanted to do was put Gerald’s company down as a minority subcontractor, but without responsibilities. Just get a check. He was struggling at the time but turned down [the job],” Mitchell says. “Gerald would never agree to be ‘window dressing.’ I was at the table, so it’s not hearsay.”

EARLY BUSINESS CRISIS

After the classroom confrontation in Fayetteville in 1973, then-Sanger-Harris president Jack Miller asked Alley if he had interviewed with the store’s recruiter. Alley said he was too busy working 40 hours a week as the Student Union night manager. Impressed, Miller asked him to consider working for him. A job offer brought Alley to Dallas as a management trainee.

Alley was no ordinary recruit. His schoolteacher mother had put him in the first grade at age 4, saying that his older siblings would explain things. He started college at 16 and finished at 20. He grew up in a predominantly African American area of Pine Bluff, Arkansas, which in some ways resembled Tulsa’s Greenwood district, otherwise known as “Black Wall Street,” says Gerald McCoy, a childhood friend. “It was a dynamic neighborhood,” he recalls. “There were African-American lawyers, doctors, and owners of restaurants, grocery stores, a liquor store, a shoe store.”

In the days of Jim Crow when Blacks were made to buy refreshments from an outside window at the movie theater and sit in the balcony (“We tossed popcorn on the White kids below,” McCoy says.), there was also a separate entrance at the local department store. Alley’s father, Troy Sr., opened an Esso station and garage across from what is now The University of Arkansas at Pine Bluff, a historically Black, land-grant college. Both Alley and McCoy attended the school’s Blacks-only laboratory school with small classes or one-on-one instruction. “All our textbooks were hand-me-downs from White schools,” Alley says. “If you didn’t read two years ahead of your grade, you were shunned.”

When Alley was 15, he was entrusted to manage the filling station so his parents could embark on a rare out-of-town vacation. A few days later, the phone rang off the hook from angry customers, presenting him with his first business crisis. Water had leaked into the low-octane tank, and cars were stuck all over Pine Bluff because of bad gasoline. Calling his father would spell failure—and the end of parent-free partying at his house. Instead, the teen explained the situation to Esso, which dispatched fresh fuel. Alley had vehicles towed, their tanks drained and refilled with clean gas. Remembering the business had insurance, he contacted the carrier, which covered repairs—all of it completed before his parents returned. “Esso said you really did right,” his father told him, brushing off a neighbor’s complaint of loud music every night in his absence.

‘LOVE, SWEAT, AND TEARS’

Although sent to the University of Arkansas with his father’s admonition, “Don’t mess with my money,” ringing in his ears, Alley’s first semester grades were dismal. Family financial support was cut. To get by, the younger Alley took a string of campus jobs, including restacking books at the school library, a gig he detested because there were always more carts of books to shelve. (Decades later, he made shifting books easier. Con-Real built a library storage building on the Fayetteville campus using a state-of-the-art storage system—a concept modeled on a Frito-Lay project his firm had handled in Houston.)

Alley’s time at Sanger-Harris was short-lived. White co-workers assigned him stock room duties while they lunched together. And retail wasn’t a good fit. After his mother advised him to get a master’s degree, Alley secured a scholarship to attend Southern Methodist University’s accelerated MBA program. After breaking the news to Miller, his final month was not spent in the stock room but on special assignment, advising the progressive executive on how to nurture a diverse middle-management culture.

At SMU’s Cox School of Business, Alley marveled at Ray Hunt’s downtown Reunion Tower project and how he turned an old railroad yard into an iconic complex with a restaurant overlooking the city. The filling station owner’s son from Pine Bluff asked himself why he couldn’t become a builder and developer himself. There was a brief detour doing consulting work for minority startups in Fort Worth, then in 1979, he started Construction Services, which became Con-Real the following year when he partnered with his brother Troy, a Razorback engineer who had been doing real estate appraisals.

It was no easy launch. Contracts seemed beyond reach. Losing a Taco Bell bid, Alley asked if he could see a store

(Top left) Con-Real expanded beyond restaurants to do education projects and more. (Left) A 1950s shot of the Alley family service station in Pine Bluff, Arkansas.

“He was struggling at the time, but turned down [the job]. Gerald would never agree to be ‘window dressing.’”

DON MITCHELL| D&B Mitchell

under construction. He traveled to Wichita Falls with a Southwestern Baptist Seminary student who had handled projects for Boeing. Mistaken for city code inspectors, a site manager handed over a clipboard that listed subcontractors, all experienced in erecting Taco Bells. As the pair left, the manager called out, “Hey, wait! What about my green tag?” Alley replied, “The next guy will give it.” Lining up subcontractors and figuring expenses, Con-Real won the next bid.

When the store was completed, a chain executive walked it and said dryly, “Well, looks like a Taco Bell to me.” Alley was crushed. “I’ve put love, sweat, and tears into this project. My feelings were hurt—for maybe 15 seconds. Then I realized, ‘Wait a second, that means it’s acceptable.’” One Taco Bell project followed another, then Jack in the Boxes, Burger Kings, and McDonald’s. A regional Burger King official who had been working with Alley on a day-to-day basis told him the corporation was looking to work with a Black-owned general contractor on a national level. “What? You’re the owner of the company?” the man exclaimed when Alley clued him in. Alley had never made clear it was his company, preferring to be “discreet and act like a manager.”

A CHANCE ENCOUNTER

Fast food restaurants became Con-Real’s bread and butter during its early years and led to Alley meeting his future wife. The regional manager of a large McDonald’s franchisee heard Alley arguing with a subordinate who was refusing to pay a mason for a dumpster wall because of wrongly filed paperwork. “If you don’t pay him, I’m going to pay him the same amount to pull down the wall,” Alley said. The manager ordered a check issued and, to placate Alley, treated him to dinner at a fancy restaurant. While dining, a former Pine Bluff classmate who worked for IBM walked in with a trainee from New Jersey named Candace Primas. There was a spark, and one day Primas called from the East Coast to say she was being transferred to Las Colinas. The couple ultimately married, and two of their adult children now work full time at Con-Real; the third works part-time for the company while attending graduate school. Alley’s brother’s son and daughter also work at the family real estate and construction business.

TOP CONTRACTOR ON CAMPUS

Believing the fast-food market was saturated, Con-Real looked for larger projects— supermarkets and distribution centers with H-E-B, Home Depot, and Frito-Lay. It also won a bid to renovate a historic Veterans Administration facility in Waco. To abide by the VA’s strict requirements, Con-Real had to make the ceilings an inch lower. Payment was refused until the off-site welded ductwork was removed and remade because of that extra inch. Subcontractors refused, demanded payment—and sued.

Alley was running out of time and had no funds for work already performed, let alone a redo. He appealed to then-Rep. Pete Geren of Fort Worth, noting that 75 percent of Con-Real’s staff lived in his district and would lose their jobs if his company had to close. The VA official in charge was away, but Geren arranged for Alley to argue his case before a higher agency official. Alley proved convincing. Con-Real was fasttracked $1 million and was given more time to finish the project. The subs agreed to drop the lawsuits and accept partial payment. Con-Real lost money on the deal but didn’t go out of business as feared.

Kaiser Permanente, a nonprofit healthcare consortium, had reached out to Alley numerous times, wanting to work with a Black-owned construction manager. But he found the projects too large and too far away. When the company offered him a multiyear deal on a more comfortable scale, Alley hired a team and established a branch in Oakland, California, where Kaiser is based. But after the exec who engaged him left Kaiser, the company used a quick-exit clause to cancel the contract, a distraught Alley told his friend Mitchell over drinks in Dallas. Mitchell had an idea—and a connection with San Francisco lawyer Willie Brown, then the powerful speaker of the California House. Brown agreed to take the case, and leveraged all his charisma and theatricality in court. Kaiser’s position already seemed to have softened when the powerful California politician adjourned a State House session to personally handle the case. In the end, Kaiser extended a project management deal that allowed Alley to retain his newly hired staff and establish Con-Real on the West Coast.

Over the years, Alley has convinced many to give a chance to an unknown, Blackrun contractor who didn’t fit the stereotype of a large U.S. construction company. “Sometimes they believe their ice is colder,” Alley says. He likens it to legendary coaches such as Darrel Royal, who waited seven years after The University of Texas OK’d Black players to recruit any—only after seeing his team beaten by integrated squads. Alley’s own alma mater, the University of Arkansas, waited years before giving the former student activist a chance. “Now, we’re one of the top contractors on campus,” Alley says.

Noting that many Black-owned enterprises falter during their second generation, the crisis-tested CEO said his current mission is to ensure that Con-Real thrives long after its founders are no longer around. Although his children and niece and nephew work for the company, all are aware that blood ties are no guarantee of eventual leadership roles, he says. The hope is that the Alley brothers will have built a strong enough foundation “on which new leaders could build upon for years to come … as game-changers,” Alley says, working to help achieve equality for all.