Three Ducks in Little Rock (Why They Matter)
Legend has it that one weekend some 80 years ago, Frank Schutt, then the general manager of the famed Peabody Hotel in Memphis, had gone duck-hunting in Arkansas with some good ole' boys. They had been imbibing a bit too much Tennessee sippin' whiskey. And on their return, Frank thought it would be funny to put their live decoy ducks (it was legal back then for hunters to use live decoys) in a beautiful fountain – smack dab in the middle of the hotel's lobby.
Three small English call ducks were chosen for the prank.
But the ducks soon became so famous, they stayed. They're still there.
Every afternoon at 5, the duck master comes out to a crowd of onlookers and marches the three residents from their fountain to their residence, only to return – to much fanfare – the next morning.
In the intervening years, the traditions extended to other Peabodys. Today, it continues at only a few. The gorgeous high-lobbied edifice in Little Rock is one of them.
That's where I was yesterday, giving the annual keynote address to the Arkansas Independent Producers & Royalty Owners Organization.
These are the oil and gas operating companies that work to bring up both conventional and unconventional (mainly shale gas) volume in the state.
With cameras at the ready, a crowd of people swarmed together in the hotel lobby that afternoon.
But not to hear me.
They were gathered around a guy who looked like a cross between a master of fox hunting hounds and a carnival barker. He led three little ducks, in procession, from the fountain to a glass bubble elevator. The ducks are actual residents of the hotel.
All the while, I was really thinking about what to say in a couple of hours.
You see, there was a reception in between, with some of that sippin' whiskey available, so it seemed best to structure my ideas ahead of time.
And then it hit me.
The market I was going to comment on was a lot like those three little ducks…
The audience would be a bunch of fellows who have seen their way of life change quickly and completely, due to matters largely beyond their control.
A New Way of Life
Smaller operators have found themselves stuck in the cross pressures of needing to provide volume at unstable prices, experiencing rising operating costs, while at the same time receiving uncertain demand projections.
In other words, somehow they need to march their own three ducks in the same direction to avoid a drop in profitability.
They need to plan production on a forward curve, or risk introducing accelerating inefficiency in field development and extraction.
These devilish twins – increasing the price of land usage, while also threatening the production flow – lead down a direct path toward closing operations and reducing company revenues.
Yet the producers I will be speaking to are increasingly unable to offset such dual pressure, because the current market is so volatile. As they listen to me over dessert (the part of these meals the speaker usually misses), what is it I tell them?
My answer was this.
The ongoing dynamics of this market are providing mixed signals on how much oil and gas is needed – and when.
But these elements do tell us that overall global demand is continuing to rise.
In other words, we may see restrained consumer figures in North America and Western Europe, but the needs of developing countries are rising even faster.
So if you are a small-time producer, the thing to do is to focus on the regions, fields, distribution systems, and products you know. As the markets elsewhere increase their demand levels, your production will become part of the balance anyway.
Being small is not always undesirable.
It all depends on your ability to use your position to focus activity on those assets that are below the interest of the Big Boys.
I ended with a witticism favored by the late Edmund Muskie, U.S. Senator, Vice Presidential candidate, and Secretary of State.
A Texas land baron and a Maine farmer are discussing their land. The farmer describes how he lays out his 1,200 acres. The Texan laughs and says, “Boy, let me tell you about my spread. At sunrise I get in my car and start driving west, and when the sun sets I am still on my property.”
The Maine famer thinks a bit and then finally says, “Know what you mean. I had a car like that once.”
It is not about size. It is largely about getting your ducks in a row.