Nissa Darbonne: Hi, thanks for joining us. I'm Nissa Darbonne the executive editor at large for Hart Energy. I'm visiting with Bobby Tudor. Bobby is a veteran energy financier, currently founder and CEO of Artemis Energy Partners based in Houston. But Bobby also is the inaugural chairman of the Houston Energy Transition Initiative, which is a part of the Greater Houston Partnership.

Bobby, let's talk about energy finance and access to capital. Let's focus on upstream oil and gas. Are you seeing capital access grow or decline, or is it kind of flat?

Bobby Tudor, founder and CEO, Artemis Energy Partners: I would describe it as slightly up over the last year or two. The public markets finally reopened for traditional energy businesses, but interestingly, because the industry has been pretty healthy here for the last three or four years, most of those businesses are actually generating cash. They're not focused on top line growth, and so they really haven't had the need to access much external capital. So it's better, it's there. I think the completely closed capital markets that existed for several years are now more open. The flip side of that is that when it comes to private capital for the upstream industry, that remains to be really a trickle. And if you compare it to where we were during the years of the shale revolution where we were adding $30 billion of fresh equity to the upstream business via private equity per year over almost 10 years, that number is down by 90%, and it's been down by 90% for the last three or four years. And I would say there's no real fundamental change there. So what's interesting is the public companies are healthy, they have better access to capital, but we still have very low rates of new company formation driven by private capital.

ND: The low rates of new company formation: I've wondered if part of that is driven for maybe lack of a target idea of where -- in the shale timeline, a lot of the acreage is wrapped up currently. I've heard it be said that, and maybe not unconventional, U.S. E&P private equity may be more likely to back a startup that has an angle in Canada or elsewhere.

BT: Yeah, I think there's a broad perception that the U.S. shale business is sort of badly picked over at this point. There is probably some truth to that. I think the bigger issue, frankly, is that even private equity firms that had good success over a long period of time in the U.S. upstream onshore business have had a hard time raising new funds. So their new fund is half the size of their old fund, and their new fund is mainly being used to fund the capital needs of extent portfolio companies or extent platforms. They tend not to be starting new platforms.

ND: Then in debt capital, just a few years ago with a Fed funds rate of 1%-2%, I think when the pandemic kicked in, the Fed basically went to 0% again maybe. But now we're at 5.5% and I've got to imagine, are you seeing folks out there really struggling with taking on debt at this kind of floor?

BT: What I would call the incumbent energy world, so upstream, midstream, oil services have dramatically deleveraged over the course of the past three or four years. And so debt just isn't as important to them as it was before. Many of the players in that business have completely deleveraged and are effectively carrying debt-free balance sheets. So while you're right, it's become more expensive, it's also become less important, interestingly, to that universe of companies. Commercial bank borrowing lines backed by the properties are still an important component. The number of banks that provide those lines has shrunk, but there appears to be enough capacity in the market to service the needs of the companies. Access to capital is an important issue in the incumbent energy business, and it's definitely tighter than it was pre-2019, but on the margin it's a little better and the industry does appear to be able to fund itself.

I would say the flip side of that is that in the new energy world, energy technology, renewables, et cetera, capital access has become tighter in the last year. A lot of that does have to do with interest rates. A lot of the big renewable projects in particular were funded with very low-rate debt, and it also has to do with venture capital. Many of these new companies truly need venture capital access, and because of the tightness in venture capital markets more broadly, there's just been less of that available to climate tech and energy tech startups. So capital tighter actually for new energy on the margin, looser for old energy. So a tale of two cities, if you will.

ND: With the Houston Energy Transition Initiative, Houston seems to be kind of the most uniquely positioned place in the world for leadership in the energy transition since it is already the oil and gas capital of the world. There are certainly plenty of professionals and technical experts here in Houston. There is this one part of the energy transition that I'm fascinated by and it’s how oil and gas expertise can just so obviously be translated to geothermal. Are you seeing very much excitement amongst oil and gas professionals going geothermal?

BT: I would say an increasing amount of excitement, and I think we now have several companies who are actively working to build business units in geothermal. I'm sure you saw that Devon made quite a large investment into Fervo. Fervo is probably the most developed geothermal company. It's a Houston headquartered company, and the folks at Devon feel that it is just a natural extension of what they do. So in some sense, that's very consistent with what we've seen from our bigger incumbent energy companies like Chevron for example, or ExxonMobil or ConocoPhillips. They're making investments in new energy technologies, but those investments tend to be adjacent to what they feel like they are already good at and where they have a competitive advantage. Devon would say the same thing about geothermal. So I would say there's increasing interest in geothermal and particularly as an adjacency to the upstream oil and gas business.

ND: And then kind of with the Houston Energy Transition Initiative (HETI), what would be maybe your number one mandate right now to check off that box?

BT: Our mandate is to support our companies and our companies are very wide-ranging in size, type, expertise and in balance sheet, you name it. It goes from ExxonMobil, Dow, Shell, BP, Baker Hughes and SLB, all the way down to very small startups and this whole new innovation ecosystem that exists in climate tech in Houston, and everything in between. And so we have a lot of different companies participating in different ways, including a set of companies that are basically just doing what they do in oil and gas. And our view at HETI is "Thank God we have them." They are a really important part of the picture because at the end of the day, we have to provide reliable, secure and afford energy to the world while at the same time we're driving down carbon emissions.

We have companies who are just doing oil and gas. We have companies, in particular our largest companies who are doing new businesses that are adjacent to their old businesses, whether it's CCUS [carbon capture, utilization and storage], hydrogen or biofuels. We have what we would call established new energy companies -- wind and solar businesses, for example. And then we have a whole set of energy tech and climate tech related businesses in this innovation ecosystem who are really doing new groundbreaking things.

We need all four of those companies and what we try to do at HETI is stitch all that together in a way that ultimately works to the advantage of the member companies and to the advantage of Houston as a region. We do feel pretty strongly that while the incumbent energy business is critically important to the world and will be for a really long period of time, and it's very healthy at the moment, it's not likely to be the same engine for new company formation in the next several decades that it was in the past few decades.

That new company formation is more likely to come from a lot of the newer stuff, and we need to be supportive of that. And one of the ways we can be supportive of that is connecting this new company formation to the incumbent world. Because there's a lot of expertise there. They can be customers, they can help them run pilot plants. And at the end of the day, I think we'll be talking about the energy system, not in terms of old versus new or dirty versus clean. It'll just be one big system and that's ultimately what we're headed towards. And if we can get all of that right, we feel like we will look up two decades from now, and Houston will still be the energy capital of the world.

ND: Super. Thank you for your leadership, Bobby, and thank you for joining us.

BT: My pleasure. Thank you.

ND: And thank you for joining us. To find out more about energy industry capital access and the energy transition, visit