Hi, this is Chris Mathews, senior editor of shale and A&D for Hart Energy and Oil and Gas Investor, and I'm joined by Beau Egert. He's chief commercial officer for Conduit Power. Conduit, and Riley Permian  have teamed up on a couple of joint ventures aimed at turning Riley's natural gas into power for various needs. Can you tell us a bit about the joint ventures you've set up?

Beau Egert: Yeah, absolutely. And thanks for having me here. Yeah, we began a partnership with Riley. We started discussions about a year ago, over a year ago, and there were some strong relationships in place and Riley honestly was very forward thinking about their own power needs and also what can be done with what we would argue as undervalued gas in the Permian and a massive arbitrage between gas and power. So the first thing we did was provide a behind the meter solution for them. They're sending in an ESP, struggling with issues of reliability and the implications for their operations. When an ESP goes down, that can be quite detrimental for their operations and for their production. So they took control of their own destiny worked with us to provide power for their own consumption. That was critical. And as we did that and got some momentum and began to think more broadly, and we started looking at the dynamics of the power market in load zone west, which is most of the ERCOT zone in the Permian Basin.

And there's major issues with what we would argue is an overbuild out of intermittent wind and solar without commensurate natural gas fire generation. So it doesn't take sort of a rocket scientist to say, 'Hey, can we put these pieces together?' We've got to undervalued commodity. We've got something in power that's in high demand and need. Can we make it work and start simple at first? But the pieces you need to do that actually are quite complex from a both development, regulatory, the data analytics platform in terms of scheduling when you're scheduling into the grid, et cetera. But Riley was willing to take the journey with us and we're very excited about the two things we're doing and we're looking to expand.

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CM: So power need in the Permian Basin has only grown in importance as we talked about previously. And you're expecting just demand to keep going up into the right from here right now. Talk about the economics of doing this right now and kind of what you expect demand to look like in the Permian in the future.

BE: Yeah, I don't think we're alone and thinking that demand is increasing substantially. ERCOT's latest projections for LZ [load zone] West had a substantial demand increase going into 2030, and then you have two different things going on. On the demand side, you have a few factors pushing up demand. So that is our industry in oil and gas and more and more electrification of the oil field and also just continued development of the Permian Basin. Then you also have population growth, and then you have this whole data center phenomenon that is coming and that is moving towards cheap power centers. But all of those increase the demand for power for load in our grid. On the supply side, I already mentioned the intermittent and how much their LZ West has. Roughly about 85% of its supply stack is wind and solar. And when the wind is blowing and the sun is shining, that's fantastic, but we all know that's not always the case.

And you have to have that supply, that dispatchable natural gas fired generation supply. So you have the intermittent build out, you also have the retirement of older natural gas fired and coal. And so you have a supply stack that is dwindling with too much on intermittent combined with growing demand. And we think it's a real issue. I think Riley was one of the first to recognize, from an operator standpoint, that operators can no longer afford to sit still, but they have to jump on this because what it means for their operations and also from a beneficial standpoint, what it can mean to take their gas and use it for power to sell it into the grid.

CM: And we've only seen more operators indicate interest in doing this. I know Diamondback talked about not being willing to sell its gas for zero in the basin anymore. So it seems to be something that's expanding in interest across the Permian by other operators.

BE: Absolutely. We're getting from the things that we've been doing with Riley and others getting a lot more interest. And I think more and more groups like Diamondback, like the bigger operators, they're standing up power teams, full power teams within their entities, within their companies, because I think people are realizing the way that we've handled power problems in the past. We're in a different world now and it needs a different approach.

CM: What are some of the barriers, regulatory, equipment, lead times, otherwise maybe standing in the way of scaling this?

BE: Yeah, no, great question. I mean, I think you always have to manage supply chain and when if you are looking at something like turbines, they're going to be a very long lead time item. There's other technologies that have gotten more efficient RESIPS and others, they can have more reasonable timeframes. But one of the biggest and longest lead is interconnection. What does the interconnection queue look like? And for large scale projects, it is very long to get a big plant or something like that. Interconnected is going to be three to five years. And certain regions of the state, many of the utilities aren't even accepting requests for interconnections at this point. So I would argue that's the biggest barrier. And with supply chain being not far behind, and then the reason why there's one of the reasons why there's slowness in terms of the interconnections is the transmission lines. I mean, they are overloaded, and we think much of the answer can lie at the distribution level, like things that we're doing with Riley. But if you're doing anything very large scale, the transmission level, it's going to take a long time.

CM: Yeah. Well, that's all the time we have today, but thanks so much for helping us learn a bit more about powering up the Permian Basin.

BE: Great. Thank you.

CM: For more head to HartEnergy.com.

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