Capital flows to upstream operators have reached a much healthier balance after several turbulent years, three finance leaders said at Hart Energy’s SUPER DUG Conference & Expo in Fort Worth.

The turbulence started in the 2010s because too much money was coming in, prompting an influx of barrels to the market. The subsequent combination of ESG investing and the COVID-19 epidemic sent investors elsewhere, forcing cutbacks. Now, five years after COVID and investors re-evaluating their ESG commitments, there’s been a return to the middle.

“The business is disciplined now, and that’s a good thing,” said Billy Quinn, founder and managing partner at Pearl Energy Investments. The turmoil “forced our business to behave in the right way, and that’s a healthy incentive for the long-term viability of the business. I also think it reduces some of that extreme volatility that we’ve seen in the past.”

The investing pullback of 2021 and 2022 was partly a response to ESG and partly something more basic, Quinn said. Investors of all stripes eventually want to see money for their money, and the oil and gas industry wasn’t delivering.

“Our business hadn’t generated returns sufficient to attract enough attention,” he said. “It hadn’t done so and sent back capital for a number of years, which was impacting decisions.”

The industry’s financial housecleaning has brought new interest, said Claire Harvey, CEO of EIV Resources in Houston.

“It’s not a flood back to the space, and I think some folks just won’t come back,” she said. “Now we’ve got a lot of people who feel that FOMO effect, that fear of missing out, that they’ve missed out on really good vintage years of really good investments. This is a much healthier space than it once was.”

That discipline makes it easier to handle short-term noise like the drop in crude that happened after President Donald Trump’s first tariff announcements in early April, Quinn said.

“We’re going to have day-to-day media noise and volatility,” he said. The real worry is “the bigger swings where you have prices going from $110 to $30—it’s really hard to manage your business with wild swings like that.

“If we’re in the $55 to $80 range, some assets are better than others, but you can manage your business,” he said. “And if you can’t, you probably shouldn’t be in business.”

Family offices are starting to return to energy as well, said Keith Behrens, managing director at the Stephens investment firm. He said Stephens covers about 400 family offices, and about one-fourth of them are in energy.

“We started focusing more on raising that type of capital for clients,” he said. “We just had a really large deal close where we brought in a lot of equity capital from family offices. These groups can cut $20 million to $200 million checks per deal.”

The Trump administration’s emphasis on increasing production wasn’t likely to have the intended effect, Quinn said.

“The whole ‘drill baby drill’ concept just doesn’t work, right?” Quinn said. “Companies will behave in a way that’s economically rational, and we all know the general economics of our business. If we throw a bunch of rigs out there to ramp up production, we’re going to be looking at much lower prices, which then destroys the economics of what we just did.”

Harvey agreed: “It just feels very different this time with the amount of discipline we have and the real focus on generating real returns.”

She said a more promising federal tactic would be an indirect approach, focusing on “things like permitting, making things easier for us to do business, things like permitting pipelines to where our netbacks can increase over time.”

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