Why Energy May Be the Best Investment of the Next Decade with Wil VanLoh

Name: Why Energy May Be the Best Investment of the Next Decade with Wil VanLoh
Uploaded: 2026-02-03T14:00:06.000Z
Duration: 2 h 14 min 58 s

Introduction to the Holy Grail Investing Podcast

Overview of Energy Investment

Tony Robbins introduces the podcast and highlights energy as a key asset class with superior risk-adjusted returns.

Discussion on the imminent peak of the US Shell Revolution, emphasizing its historical impact on production and investment returns.

Insights from Will Vanlow

Will Vanlow, founder of Quantum Capital Group, shares insights on separating fact from fiction in energy investing.

The conversation aims to explore strategic thinking in energy investments that affect global dynamics.

Will Vanlow's Background

Early Life and Entrepreneurial Spirit

Will shares his humble beginnings in a small Texas town and his initial aspirations in football.

After an injury ended his football career, he turned to entrepreneurship, starting various businesses during college.

Education and Career Path

Attended TCU where he took a course in value investing that sparked his interest in finance.

He reflects on shared experiences with Tony Robbins regarding early entrepreneurial ventures.

Transitioning into Energy Investment

Entry into Wall Street

Will discusses how he entered investment banking at Ker Peabody, focusing on the energy sector due to regional relevance.

Founding Quantum Capital Group

His realization of wanting to be a principal investor led him to establish Quantum Capital at a young age.

Influences and Motivations

Reflecting on personal influences, he cites admiration for calculated risk-takers like his mother who attempted entrepreneurship despite challenges.

Exploring the Energy Sector: A Journey into Private Equity

Early Beginnings in Private Equity

The speaker began exploring the private equity space in energy around 1993, noting a lack of capital focused on this sector and recognizing extraordinary entrepreneurs within it.

At age 23, the speaker realized they couldn't raise a private equity fund yet, so they aimed to build a track record by raising money for companies and reinvesting fees into those deals.

The speaker humorously reflects on starting Windrock, an investment banking firm specializing in energy, just before turning 24.

Challenges Faced as a Young Investor

An anecdote is shared about needing someone to rent a car for them due to being underage at 25 while attending meetings with entrepreneurs.

This experience highlights the challenges faced by young investors trying to establish credibility and navigate professional environments.

Attraction to the Energy Sector

The speaker's background in energy investment banking influenced their decision to focus on this sector; they built expertise over several years.

In 1997, they recognized an underserved market after observing that many companies had gone out of business since the mid-'80s oil collapse.

They identified remaining companies as having competitive advantages that could be leveraged for growth and success.

Market Opportunities and Entrepreneurial Spirit

The speaker saw significant opportunities due to a decade-long capital starvation in the energy industry, which created demand for investment.

They expressed passion for solving problems and collaborating with intelligent individuals to build businesses within this context.

Values and Impact of Investment

Investors backing these privately held companies were often large pension funds investing retirement savings for public servants, aligning with values instilled by the speaker's parents about serving others.

The importance of investing hard-earned savings wisely was emphasized, particularly in sectors like energy that are crucial for humanity's functioning.

Reflections on Current Industry Conditions

The speaker draws parallels between today's capital-starved energy industry and conditions from their early career, suggesting cyclical patterns in market dynamics.

They note ongoing technological advancements while emphasizing that access to reliable energy remains as critical today as it was during their initial ventures into the field.

Investment Opportunities in Energy Sector

Risk-Adjusted Returns in Energy Investment

The energy sector offers the best risk-adjusted returns among major global asset classes, making it an attractive investment opportunity.

A significant decline in private equity capital for energy investments occurred over the past five to six years due to poor returns and ESG concerns.

Despite reduced capital inflow, the fundamentals of the energy business are strong, driven by increasing demand from a growing global population moving up the economic ladder.

Impact of AI on Energy Consumption and Production

AI is both a consumer of energy and a tool that can enhance energy production efficiency, presenting dual opportunities within the sector.

The demand for energy is irrefutable as global consumption rises; AI's role in optimizing this process is crucial for future developments.

Machine Learning Transforming Oil and Gas Industry

AI will significantly impact how businesses operate within oil and gas, marking just the beginning of its transformative potential.

Machine learning enhances multivariable analysis capabilities beyond human limitations, allowing for better decision-making based on complex data sets.

Technological Advancements Driving Energy Independence

The shale revolution transformed America from an energy-dependent nation to one of independence through technological innovations like horizontal drilling and hydraulic fracturing.

These technologies have unlocked previously inaccessible reservoirs by addressing challenges related to rock permeability.

Optimizing Hydrocarbon Recovery with Data Science

Numerous variables affect hydrocarbon recovery; machine learning helps optimize these factors to improve efficiency and reduce costs.

The vast amounts of data generated in oil and gas development provide ample opportunities for AI applications, enhancing overall productivity.

Data Management and Analysis in the Energy Sector

Importance of Data Capture and Cleanliness

Capturing clean data is essential for effective analysis, which is more challenging than it seems. The energy industry is still in its early stages of applying data analytics at scale to enhance energy availability and reduce costs.

CORM's Approach to Data Utilization

CORM has been focused on building a robust data reservoir for years, employing individuals with technical backgrounds to inform daily decision-making processes.

Historical Context of CORM's Model

Since its inception in 1988, CORM adopted a unique model by integrating technical professionals alongside investment experts, inspired by successful practices from Silicon Valley.

Evolution of Data Practices

Initially relying on analog data, CORM transitioned to digital formats ahead of many competitors in the private capital space for energy. This early adoption provided a significant competitive advantage.

Scale and Quality of Data Collection

As the largest driller in North America with around 65 rigs operating (12-13% market share), having extensive and clean proprietary data is crucial for effective data science applications. Publicly available data often lacks cleanliness and direct usability.

Proprietary vs. Public Data Challenges

Many public datasets are aggregated or amalgamated, making them less reliable. In contrast, proprietary data allows for cleaner analyses that can significantly enhance operational insights.

Building a Skilled Team for Data Science

To leverage their vast dataset effectively, CORM hired experienced personnel from Chevron’s digital transformation team to lead their own initiatives in data science and engineering.

Measuring Return on Investment (ROI)

It’s critical to measure ROI on investments made in data science projects. Tracking costs associated with developing these applications helps ensure that spending translates into tangible returns rather than being merely exploratory efforts.

The Impact of Data Science on Investment Decisions

Transforming Investment Strategies

The discussion highlights the significant return on investment (ROI) achieved through improved data analytics, emphasizing both cost savings and incremental revenue generation.

Enhanced data accessibility allows the investment team to make more informed decisions, focusing on areas with greater opportunities derived from comprehensive data science analysis.

Targeted business development efforts lead to better risk-adjusted returns and increased upside potential when acquiring assets due to superior data insights.

Asset Valuation and Risk Management

The ability to quickly dismiss unprofitable deals is enhanced by accurate asset valuation, which considers historical performance influenced by operator quality rather than just geological factors.

Data science helps differentiate between poor asset performance caused by human error versus geological issues, allowing for smarter investment choices that reveal hidden value in assets.

Avoiding Costly Mistakes

By analyzing production profiles critically, investors can avoid overpaying for assets that appear more productive than they are due to artificially inflated metrics.

The value of data science extends beyond tangible gains; it also includes preventing substantial financial losses from misguided investments.

Evolving Risk Pricing in Investing

Effective risk pricing is crucial in investing; advancements in information technology have significantly improved how risks are assessed compared to 5–10 years ago.

Unexpected Changes in the Energy Sector

The speaker reflects on unexpected developments within the energy industry, particularly regarding technological advancements and their problem-solving capabilities.

Acknowledging the rapid evolution of technology, especially AI's role in identifying and managing risks effectively within investment strategies.

The Role of Technology and Renewables

Emphasizing the transformative power of technology, particularly AI, which has exceeded initial expectations regarding its impact on business operations and decision-making processes.

There is a growing demand for energy driven by AI advancements that was not anticipated a few years prior. This shift indicates an ongoing need for traditional energy sources alongside renewables.

Long-Term Perspectives on Energy Transition

Contrary to popular belief about a swift transition away from fossil fuels towards renewables, understanding energy systems reveals that such transitions typically take decades rather than years.

Transitioning from Hydrocarbons: A Rapid Shift in Energy Perspectives

The Changing Landscape of Energy Transition

The transition away from hydrocarbons towards net zero is happening rapidly, causing frustration among those in the oil and gas sector who understand the complexities involved.

The shift has been notably influenced by political changes in the U.S. and Europe, particularly following the Russia-Ukraine war, which drastically increased energy costs for Europeans.

This situation has forced Europe to reconsider its energy transition costs while also needing to invest heavily in rearmament.

Nuclear Energy's Resurgence

There is a growing societal acceptance of nuclear energy as a clean and efficient power source, with increasing support from the tech sector.

The rapid changes in the energy landscape present both opportunities for investment and risks that require careful navigation.

Finding Balance Amidst Fluctuating Energy Policies

The pendulum of energy policy has swung dramatically; five years ago, there was a belief that oil would become obsolete, but now there's a renewed interest in traditional energy sources.

Investors are encouraged to adopt an "all of the above" strategy when it comes to energy investments, recognizing that no single form of energy will replace others entirely.

Historical Context and Investment Strategy

Historically, all forms of energy have coexisted rather than replaced one another; current trends suggest this will continue for decades.

Investors should avoid predetermined outcomes and instead focus on mean reversion principles where market corrections occur over time.

Current Investment Focus and Future Outlook

The firm prioritizes finding risk-adjusted returns across various sectors including oil, gas, renewables, and nuclear without adhering strictly to social agendas or ESG mandates.

Despite significant investments in renewables like wind and solar, traditional oil and gas still offer superior risk-adjusted returns at present.

Institutional Investor Sentiment Shifts

In Europe, there was a strong initial rejection of hydrocarbons driven by fear-based narratives about climate change; however, attitudes are beginning to shift back towards recognizing their importance.

In contrast to Europe’s swift rejection of hydrocarbons, U.S. institutional investors have shown more resilience against abandoning traditional energy investments.

Investment Trends in Hydrocarbons: A Shift in Perspective

European vs. US Investor Sentiment

In Europe, there has been a significant stigma against investing in hydrocarbons, leading to the loss of institutional investors during recent fundraising efforts.

Conversely, ultra-high-net-worth families in Europe have increased their investments in hydrocarbons, with many doubling or tripling their stakes despite broader market hesitance.

In the US, institutional investors are adopting a cautious "wait and see" approach but are beginning to reassess opportunities within the oil and gas sector.

The Long-Term Nature of Oil and Gas Investments

Concerns arise about potential over-investment leading to price drops; however, historical patterns show that capital projects take time to develop.

The cycle for oil and gas projects typically spans seven to eight years from exploration to production, indicating that immediate returns may not be realized quickly.

Underinvestment and Its Consequences

There has been a decade-long underinvestment in the oil and gas sector amounting to approximately $350-$400 billion annually, resulting in a global deficit of $3.5-$4 trillion.

Historically, reserve replacement ratios have declined significantly since World War II; currently standing at only 9%, which is alarming compared to previous decades' averages above 100%.

Future Capital Needs

The current low reserve replacement ratio signals an urgent need for more investment; this underinvestment trend began around 2014.

Private companies played a crucial role during the shale boom but now possess only 10%-20% of the necessary capital for continued growth.

Market Dynamics and Innovation

The shift towards share buybacks rather than new equity investments indicates changing priorities among public companies within the energy sector.

Despite concerns about too much capital flooding into hydrocarbons, experts believe we are far from meeting actual investment needs for sustainable growth.

Crude Oil Price Dynamics and Future Projections

The Impact of Investment on Crude Oil Prices

A significant spike in crude oil prices to $140 is attributed to insufficient investment in the sector, which has only seen a 9% increase over the first five years of the decade.

There is a common misconception that increasing production is straightforward; however, project development takes considerable time and effort.

Challenges Facing the Oil Industry

The U.S. has become reliant on shale oil, which allowed for rapid production increases but may have reached its peak output.

Over the past 15 years, the U.S. accounted for nearly all global oil supply growth, tripling its production while OPEC's pricing power diminished.

Shifting Power Dynamics in Global Oil Supply

With America producing about 22% of global oil supply, any decline in this capacity shifts power back to OPEC and Russia.

Countries like Saudi Arabia and UAE depend heavily on oil revenue; their break-even price is around $90-$95 per barrel while current prices hover around $67-$68.

Economic Implications of Oil Pricing

Compared to other major expenditures (housing, food), oil prices have decreased significantly over recent years despite inflationary trends elsewhere.

The potential rise in oil prices could lead to inflationary pressures affecting American consumers and impact valuations across various sectors.

The Intersection of Energy Demand and Market Dynamics

Trends in Power Demand

For over 15 years prior to last year, U.S. power demand was stagnant; projections indicate a potential growth of about 20% over the next five years.

Infrastructure Challenges

The aging transmission system poses challenges as energy loads change rapidly due to increased demand without adequate infrastructure upgrades.

Renewable Energy Considerations

While investments have been made into wind and solar energy sources, their intermittent nature raises concerns about grid stability during periods when these resources are unavailable.

Energy Supply and Demand Challenges

The Impact of Renewable Energy on Grid Stability

The increasing share of renewable energy in the supply stack leads to greater instability in the grid, necessitating solutions like battery storage, which adds significant costs.

Regulatory Bottlenecks Affecting Growth

For the first time in over 15 years, demand is growing meaningfully; however, regulatory bottlenecks are causing delays in building necessary infrastructure. Alan Armstrong from Williams Company noted that they spend $2 on regulatory processes for every $1 spent on pipeline construction.

Manufacturing Capacity and Costs

There is a significant delay (minimum five years) in acquiring turbines for gas-fired plants due to reduced manufacturing capacity—down by 75% since the early 2000s. This has resulted in massive back orders as global demand increases.

Rising Construction Costs

The cost to build natural gas-fired facilities has escalated from approximately $1 million per megawatt to between $1.7 million and $2.5 million today, contributing to inflationary pressures on consumers.

Value of Existing Assets

Existing assets have become incredibly valuable; for instance, a recent acquisition of 11 natural gas-fired power plants was made at less than half their replacement cost. This highlights the disparity between current construction costs and existing asset values.

Inflationary Pressures from Energy Transition

Understanding Inflationary Dynamics

The transition towards more renewables will strain supply chains and create inflationary pressures across various sectors, leading to prolonged higher interest rates.

Importance of Reliability in Energy Sources

As more renewables are integrated into the grid, reliability decreases—a critical factor that must be balanced with efforts to stabilize power supply through base load generation and storage solutions.

Investment Perspectives in Energy Sector

Historical Investor Sentiment

Investors became wary of energy investments due to past misappropriations during the shale boom; however, firms with strong risk management capabilities can still yield exceptional returns despite these challenges.

Skill Sets Required for Success

Successful investment in oil and gas requires a deep bench of technical professionals who can identify, price, and manage risks effectively—this is particularly challenging for generalists entering private markets without specialized knowledge.

Understanding the Risks in Oil and Gas Investments

The Downturn in Oil and Gas

Many investors faced significant losses in oil and gas due to a lack of understanding of the risks involved, leading to abrupt shutdowns of operations.

A few firms have survived this downturn by having a deep knowledge of the industry and effective risk management strategies.

Identifying Talent in Investment

Regardless of the energy sector, successful investing hinges on identifying strong leadership qualities in potential investments.

Key traits sought after include integrity, moral compass, proven capital allocation skills, and a focus on risk management.

Essential Leadership Traits

Integrity is paramount; investors seek individuals who prioritize ethical practices and win-win scenarios over win-lose situations.

Proven capital allocators are essential; they must demonstrate past success in making profitable decisions while managing risks effectively.

Creativity and Lifelong Learning

Investors look for leaders who exhibit creativity and adaptability, recognizing that continuous learning is vital due to rapid changes within the industry.

Individuals should avoid being "know-it-alls" as outdated methods can hinder progress; embracing new ideas is crucial for long-term success.

Grit as a Critical Attribute

Grit encompasses hard work, resilience, and determination. Successful leaders must be able to recover from setbacks without losing motivation.

The ability to adapt plans when faced with challenges is critical; grit allows individuals to navigate failures effectively.

Personal Reflections on Life's Trajectories

Personal experiences such as injuries can significantly alter life paths; these moments often shape responses that define future opportunities.

Sharing personal stories about pivotal moments can provide insights into how adversity influences character development and decision-making.

Grit and Overcoming Adversity

Personal Journey and Financial Struggles

The speaker reflects on their father's financial limitations regarding college tuition, emphasizing the lack of scholarships available for aspiring athletes.

Despite suggestions to attend a state school, the speaker chose to stay at their current institution, driven by determination to find a way to finance their education.

Growth Through Adversity

The speaker believes that personal growth often stems from facing challenges and adversity rather than from easy successes.

They highlight how overcoming tough times can forge character and lead individuals down unexpected paths, including meeting significant people in their lives.

Life's Peaks and Valleys

Life is described as having both high points (mountaintop experiences) and low points (bottom of the ocean experiences), with an emphasis on maintaining composure during difficult times.

Successful individuals are often those who have faced significant defeats, suggesting that resilience is key to achieving success.

Influence of Tony Robbins

The conversation shifts to the influence of motivational speaker Tony Robbins, particularly his idea that life happens either "to you" or "for you," which shapes one's perspective on challenges.

Embracing New Opportunities

After stopping football due to injury, the speaker took up golf as a new challenge, demonstrating adaptability in pursuing passions despite setbacks.

They discuss balancing work while studying and learning valuable lessons through various experiences like waiting tables and trading commodities.

Importance of Grit

Grit is emphasized as a crucial trait for overcoming obstacles; while it may not be easily taught, it can be cultivated through mindset and daily routines.

Key Takeaways from the Conversation

Insights on Energy Sector Challenges

Investors often overlook the physical nature of energy markets; real commodities require tangible engagement with real-life situations affecting prices.

AI's Role in Business Transformation

Discussion includes how AI has evolved from machine learning into broader applications within businesses, highlighting its impact beyond just data centers.

Learning from Failure

The final thoughts reflect on how failure serves as a better teacher than success; understanding this dynamic can shape one’s approach toward personal development.

Energy Production and Technology Insights

The Complexity of Energy Production

Discussion on how technology is integral to energy production, emphasizing that the energy powering devices like tablets and systems comes from complex processes.

Mention of a significant experience for investors at the Houston Museum of Natural Science, which features an entire floor dedicated to various forms of energy.

The museum provides interactive exhibits that educate visitors about the complexities involved in energy production, including hydraulic fracturing.

Understanding Energy Extraction Processes

Explanation of the drilling process: drilling down a mile, then horizontally for another mile, highlighting the technical challenges involved in extracting resources.

Reference to AI's role in quantifying risks associated with energy production; it helps assess potential outcomes and scenarios effectively.

The Impact of AI on Decision-Making

Insight into how AI tools have transformed decision-making processes by providing critical information that was previously unavailable or difficult to obtain.

Emphasis on asking better questions as a means to achieve better answers, illustrating a shift in approach due to technological advancements.

Lifelong Learning and Adaptation

A personal anecdote about lifelong learning through technology; the speaker shares their mother-in-law's excitement about using ChatGPT for information access.

Reflection on how rapidly changing technology can be overwhelming yet beneficial, especially for older generations who remember less accessible methods of information retrieval.

Conclusion and Acknowledgments

Closing remarks thanking participants and summarizing key themes discussed regarding energy production, technology's role, and lifelong learning.