Speaker 1:
From the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, welcome Inside the ICE House. Our podcast from Intercontinental Exchange is your go-to for the latest on markets, leadership, vision, and business. For over 230 years, the NYSE has been the beating heart of global growth. Each week we bring you inspiring stories of innovators, job creators, and the movers and shakers of capitalism here at the NYSE and ICEs exchanges around the world.
Now let's go Inside the ICE House. Here's your host, Lance Glinn.
Lance Glinn:
Starting today, we're introducing a new feature, a Best Of recap episode. Dropping at the end of each month, we will highlight the standout moments from recent conversations.
In September, we aired six new episodes featuring seven dynamic guests. We kicked off with episode 434, where Tyler Glover, President and CEO of Texas Pacific Land, that's NYSE ticker symbol TPL, joined us. As one of the largest landowners in the Lone Star state, Texas Pacific operates through two segments, land and resource management, and water services and operations. Tyler shared insights into how water impacts oil drilling in the Permian Basin, and how Texas Pacific Water Resources is driving the company's growth to new heights.
Tyler Glover:
We formed Texas Pacific Water Resources in June of 2017. And if you look at the growth trajectory of the company, you can see it up and to the right from that point on. So it's definitely been a catalyst for overall growth of the enterprise.
The water volumes used today are so much higher than what we saw in 2017. And with simul-frac and trimul-frac and co-completions coming on as frac technology and strategy evolves, the sheer volume of water needed on a daily basis delivered to a well pad is just enormous. And we've gone from I think $25 million worth of revenue in 2017 to about 200 last year, just in the water business. And that doesn't include the ancillary development on the mineral and royalty acreage because we've been able to supply those completions with water.
So it's been huge for the business, it's been great for the industry. Like I said earlier, I think we've opened up acreage that wouldn't have otherwise been developed because of the water company, but it's been a pretty wild ride. And going from a passive mailbox structure really where you're just collecting royalty checks to an actual operation where you're extracting that resource, moving it across the Basin and delivering it to customers, has been pretty interesting. I think it's been a good value-add for our shareholders.
Lance Glinn:
Take us then behind the technology. You have an operator who wants to drill in the middle of the Basin, it's dry, there's really no water anywhere around. How do you then get water to where they want to drill so that they can obviously use it for the process?
Tyler Glover:
Yeah. Groundwater is pretty spotty in the Permian, and so sometimes that water has to be moved 70, 80 miles from its source. And so with the surface acreage that we own, in some areas we own every other square mile for maybe 50, 60, 100 miles, we were able to go in '17, '18, '19, buy additional right-of-way across those offset landowners. And so now we have the ability to move water essentially across the entire northern Delaware, especially on the Texas side.
So we produce about 600,000 barrels a day of water. We've got roughly 24 million barrels of above-ground storage and almost 400 miles of pipeline laid. And so every day we're moving water all across the Basin, delivering it to clients or customers.
Lance Glinn:
And I know you mentioned two different segments of water. You had produced water and source water. How do these two categories differ and what are their different functions within the drilling process?
Tyler Glover:
Yeah, so source water is where it's actually operated by us. We drilled those wells, we pumped that water, we moved that water. On the produced water side, what we've done is just partner with water midstream companies and operators to allow infrastructure and disposal wells to be built out on our land. And for providing access to that pore space, we've reserved a royalty on those wells and that infrastructure.
And so as produced water that comes up out of those formations as a waste product is moved across our lands or disposed of on our lands, we charge a royalty for that. So we don't actually own or operate any of that infrastructure. And then we've got the treatment arm as well, which is operated by us, where we're actually taking that produced water, treating it, and giving it back to operators to use in future completions.
And so I think when you look at water evolution in the Permian Basin, for the industry to be sustainable it really takes all three of those. We want to make sure that we're involved in the entire water cycle out there and make sure that we're extracting as much value as we can for our shareholders, but also providing those services and doing it in a more sustainable way than others might.
Lance Glinn:
Episode 435 continued the focus on water, featuring Scott Barbour, President and CEO of Advanced Drainage Systems, that's NYSE ticker symbol WMS, who joined me Inside the ICE House.
ADS leads the industry with a comprehensive and sustainable portfolio of water management solutions. In this episode, Scott explains how ADS is transforming rainwater and stormwater by reusing it and recycling it, playing a vital role in safeguarding the world's most precious resource.
Scott Barbour:
Our reason is water. We manage stormwater. Water is the world's most precious resource. We do this in communities around North America primarily. And we think it's a big mission to help manage that stormwater and on-site septic through our infiltrator business.
So what we do is, it rains, something has to be done with that stormwater or runoff. It comes off of impervious surfaces like a roof, a road, a parking lot, and it's our job, our products take that water and then get it to the right place, store it in many cases, clean it up, and then reintroduce it into the watershed, a lake, a river, or a stream. And we do that across thousands of projects every day, many, many job sites and applications, and at scale, really at scale. I mean, for what we do, we're highly, highly relevant in these various local markets. And it's an intensely local business, by the way. So that's how I describe our company and what we do.
Our other business, Infiltrator, which is on-site septic, if you're not connected to a municipal centralized system, you have a septic system on your property. And we manufacture all of the components of that. The tank, the various ways to do the leach field. And we do that in, again, a very scaled manner.
And by doing all that, these things are necessary things to be done. I like to tell people there's lots of different ways to make money. We do that in a pretty good model. We have good growth rate. Long-term average I think we've been growing almost 10%. We do it in a way of increasing our profitability faster than our sales and then converting that to cash. And that's the model we've been working pretty hard for the last seven years that I've been there, and that's led to a lot of success in terms of our growth, our profitability, and our ability to reinvest in our organization, both organically think of capital, new equipment, capacity, safety, automation, but then also a few acquisitions. And then a pretty healthy return to shareholders.
We were totally net up I think about a billion-four return to shareholders over the last really four years. And that's made us a pretty good profile and driven some pretty good economic value.
Lance Glinn:
So of the now 10 years that ADS has been listed on the New York Stock Exchange, you've been president and CEO for seven of them, as I said before, starting your tenure in 2017. Over your time just leading the company, how have you seen ADS grow and evolve from both the initial listing day back in 2014 as well as day one for you a few years later?
Scott Barbour:
Yeah. I think one way we've really grown is this thematic of water. We did a lot of work and strategic planning and thinking about what we wanted to be when we grew up, and we really focused on that thematic of water.
And why do we do that? There's a lot of really nice tailwinds to the water industry. There's various studies that show 600-plus billion dollars need to be invested over the next 20 years in water management. That's not all just in our place, but that's in water infrastructure in general. The IIJA money that's flowing into roads and highways, repairs, new capacity in roads and highways, airports, rail. I think we are participating in something like 33 airport projects right now. If you've been to LaGuardia, big airport project for us.
So all those kinds of things. But it's that singular focus on water over the last seven years really. And then a focus on certain geographies where more money is being spent. Think of the majority of construction being spent in the Sunbelt or the Southwest or California, we've really focused on that. And then I think the capital investments that we have focused on, both at Infiltrator.
We made a big acquisition five years ago. We followed that up with really significant capital investments in machinery, automation. It's paid off wonderfully as that business has grown. Within the ADS core business, again, investments in machinery, capacity in the right places, lots of investment in safety. We also have a big trucking fleet, so we're very big in distribution and logistics of our products. We've invested a lot in that fleet with new trailers and new tractors and all that kind of stuff.
So I think over these last seven years, it's that focus, the performance that allowed us to invest at a pretty good clip over the last couple of years, which then, it builds that scale. It builds that scale, and I think that makes you a tough competitor.
Lance Glinn:
On episode 436, Pete Asch welcomed Mark Lashier, Chairman and CEO of Phillips 66, that's NYSE ticket symbol PSX, to the podcast. Guided by the core values of safety, honor, and commitment, Mark is steering Phillips 66 to meet the evolving energy needs of today and tomorrow. He and Pete delve into the energy sector's transformation and the company's ongoing mission to provide energy while improving lives.
Pete Asch:
Providing energy, improving lives, those four words prominently displayed on the Phillips 66 website encapsulates a brand deeply familiar to many of our listeners, mostly because of its iconic gas stations that dot the landscape across the country.
However, with over a century of history, Phillips 66 represents more than just a place to refuel. What is the core mission of Phillips 66 beyond the surface of its well-known consumer-facing identity?
Mark Lashier:
Well, you nailed it. It's providing energy and improving lives, and it's a mission we take very seriously. When I came back to Phillips 66 from Chevron Phillips, I thought that had a nice ring to it, but as I got to know the people and got to know what that mission really meant, it really became part of the core of who I am.
You think about it, providing energy does improve lives. Your life gets pretty miserable pretty fast if the lights go out. If you can't get the fuel you need to get from point A to point B. Groceries don't show up on the shelves. You can't get your kids to school. It's a tough life without energy. And so our mission is to make sure that people have access to the energy and the materials they need to have a great lifestyle, to have a sustainable lifestyle.
And over the years we know that it's going to evolve. The kind of energy we may be providing to improve people's lives may evolve from what we do today, but we're committed to ensure that people have access to low-cost, affordable, sustainable, abundant energy, just like we've done for the last 125-plus years.
Pete Asch:
Yeah, we were talking before we started recording about Labor Day weekend, traveling, and I did my family what families have done since the advent of the automobile, we piled into the car and drove to a warmer, nicer climate. And as you're driving by, you think about how we've done things that have happened for decades, but also something completely different. I'm in a hybrid vehicle. I'm not in an old Model T.
When you think about even just in the much shorter timeframe that you've been in the industry, how has the sector changed? How has the dynamics changed? And how have you, as a company began to deal with some of the problems of transforming how we get that energy that lights our lights and drives our vehicles?
Mark Lashier:
Well, for the entire 125 years, I think the industry has been improving. In fact, one of our oldest facilities that we recently converted to renewable feedstocks from crude oil was originally built in the late 1800s to produce kerosene from crude oil to replace whale oil.
And so we've been transforming and changing what we do and how we do it for 125 years. And every engineer, every operator, every accountant that we have in the company is committed to figuring out better ways to what we do every day. To be more efficient with what we do, to be kinder to the environment, to mitigate the CO₂ that we might produce for those that consume our fuels might produce. It's a journey of continuous improvement throughout our history.
Lance Glinn:
Episode 437 took a break from the boardrooms of NYSE listed companies to spotlight the New York Football Giants, as Giants legends Victor Cruz and David Tyree went Inside the ICE House.
Their careers were marked by iconic moments and Super Bowl victories, whether it was David's unforgettable helmet catch that led the Giants to the victory over the then undefeated Patriots in Super Bowl XLII, or Victor's thrilling 99-yard touchdown against the New York Jets during the 2011 season.
Jerry Foley:
You were recently named for the Giants' Top 100 players in franchise history. What's that honor mean to you to be recognized among the greats of the New York Football Giants?
Victor Cruz:
Man, I still get goosebumps when someone brings it up or tells me or any of that. I mean, I grew up, like you said, in Paterson, New Jersey, in a town that it isn't the safest and you got to be occupied with sports and occupied with different things to just ensure that you're staying out of trouble. And my mother made sure she did that. And to couple that with the discipline and to make it through high school, to get to college, to make it through college, and to have an opportunity in NFL.
And then you fast-forward and now I'm Super Bowl champion and I've done some good things on the football field, to now I'm part of the 100 best players in New York Giants history. I mean, there are no words to really explain how I feel about that. And there will be none forever. And I hope my daughter, who likes to ridicule me day in and day out for whatever she sees fit, I'm sure when she gets older and sees that one, that if she's proud of anything that Dad has done, that that's high up there on the list.
Jerry Foley:
So you go un-drafted out of UMass, but were signed by the Giants in 2010. Sure there was some disappointment about not being selected, but were you expecting to be chosen? And when it didn't happen and the Giants came calling, was it a no-brainer to sign with them?
Victor Cruz:
Yeah, so I was a realist. I knew that I wasn't 6'5" and 4-3 and some anomaly that was going to get picked up. I knew I went to a small school. I knew I had an outside chance to get drafted late, had a couple calls from some teams throughout the course of the draft. But when my name wasn't called, I wasn't necessarily shocked. But I knew I'd at least have a chance, in free agency I'd have an opportunity to go to a football team and prove myself to them.
And a couple teams called right after the draft, but when the Giants called there was just something about it that I was like, "Okay, I got to try my hand at home. I got to try my hand at my hometown team. And if it doesn't work out here, then we'll see what happens." But I had to give it a shot here at home.
Jerry Foley:
How long was it until you earned Coach Coughlin's trust? I'm just saying, as an un-drafted free agent, that had to be difficult and it couldn't have been easy.
Victor Cruz:
Yeah, there were levels to it. Obviously, coming in my rookie year, I was doing some great things. I was improving every day on the football field, improving every day during these preseason games. But it wasn't until ... I distinctly remember I was getting my start in week three, and it was even after that. I played week three, I played great. It was kind of my coming out game against the Eagles in the regular season.
And then I remember I still wasn't named a starter yet until the following week where I was sitting there and the next game came through and we were a little bit of a rut. There was not much going on for us offensively. And I was staying on the sideline, just waiting for a three receiver, four receiver set to be called so I can run in there. And prior to that, he looked at me right before one of the offensive series and pointed at me and just pointed into the field like, "Get in." And I was like, "Okay."
Jerry Foley:
Nice.
Victor Cruz:
And I ran in there. And I think that was when he was like, "Okay, I trust you enough now. I've seen what you've done in the weeks prior to lead up to this, to prepare for this moment. I trust you. Go in there and get it done."
Jerry Foley:
So before Coughlin was head coach, he was a wide receivers coach on the 1990 Giants. Did his experience coaching receivers help you?
Victor Cruz:
Big time. I mean, whether it's him yelling at us after making a one-hand catch in practice, to yelling at us to say, "Put two hands on the ball." Or just understanding the route tree and understanding the concepts and understanding what we were trying to achieve. And he would just sit in our receiver room or sit in our offensive room while we were going over film at times and just give us little tidbits and give us tricks of the trade.
And I think those small things to just have in our minds while we're out there practicing or out there during the games really helped us really just get in on the nuances of the receiver position, because he's seen it all up until this point.
Lance Glinn:
As the month draws to a close, Mike Olosky, President and CEO of Simpson Manufacturing, that's NYSE ticker symbol SSD, joined us for episode 438. Simpson Manufacturing's story began 70 years ago, when founder Barc Simpson started producing joist hangers and structural connectors. Seven decades later, Mike is carrying forward that legacy, while charting a path for the company's continued growth and success.
The company, a rich history, a legacy obviously to uphold. As you approach this milestone 70 years in the next year and a half, two years, how are you and your team honoring the company's past, while also obviously working to build its future and innovate its future?
Mike Olosky:
Yeah, good question. One of the things that we've talked about as we look forward is what got us here will get us there, which is usually the opposite of what a lot of people said. So the culture that's helped us build this great company, the business model that we've continued to develop over decades of operation, this strong customer focus, this people-first mentality where everybody matters, which is one of our core values, all that stuff we want to continue on, we want to build on, and we want to make that culture even stronger as we move forward.
Lance Glinn:
So in your view, from a 35,000-foot view, what sets Simpson apart from competitors in the building solutions and manufacturing industry? What key advantages give a competitive edge?
Mike Olosky:
I really think, Lance, it's our business model. And let me take two minutes to just go through the business model. We've got a very talented group of people and we've been working with building code officials and building code agencies for decades. We know them very well. We are helping them design and build safer, stronger structures. We're also working with engineers and architects, training them, again, on how to use our solutions to help them design and build safer, stronger structures.
And then we work with the builders and we're working with the builders to help them do the same thing. We're also working with the builders to help them build the most efficient houses. And we've got people that are calling in all the national builders, as well as all the local builders. And then we do a very good job of covering all of the lumberyards, pro-dealers, contractor distributors in between, and we make sure that we're providing great service to them. One of the things that we try to do is if they place an order today, we ship it out that afternoon, they get it the next day.
So we are touching all aspects of the building and construction space. We're bringing in what we think is a super innovative product line. It's the broadest and deepest product line in the building and construction industry. That makes us a one-stop shop for structural solutions and it makes us the partner of choice.
Lance Glinn:
Mike, growing up in Michigan, and we just talked about your childhood before recording, you grew up with parents, and correct me if I'm wrong, that were teachers. You had grandparents who worked on assembly lines. You understand the challenges and aspirations of working-class families. How have the experiences of your youth and the lessons from your upbringing shaped your leadership style and how you work at Simpson?
Mike Olosky:
Yeah, I think it very much links to the everybody matters part of our values. Growing up with Mom and Dad, who were teachers, that were also union members. My grandparents were also union members. Growing up in a blue-collar town just outside of Flint, Michigan, just had that approach of everybody can contribute. And we've taken that over at Simpson.
So from the person that picks the product that ends up going to our customer, the fact that they need to pick the right product, we need to do it efficiently. The person that makes our engineered stamp steel solutions, that the quality of those has got to be perfect, to the salesperson that's out there helping train our customers. I mean, everybody really makes a difference, and that's what I picked up when I was growing up in very much a blue-collar town.
Lance Glinn:
Wrapping up September, episode 439 featured Mark Costa, Chairman and CEO of Eastman, that's NYSE ticker symbol EMN. Mark joined us at the New York Stock Exchange to celebrate the opening of the world's largest molecular recycling facility in Tennessee, with plans for another facility in Texas and one set for construction in Normandy, France, as well. Mark delves into the advantages of molecular recycling and its potential to drive the circular economy forward. The facility transforms landfill-bound plastic waste into molecular building blocks that can be reassembled into virgin quality materials.
So, Mark, take us behind the scenes and behind the science really of the facility. How does it repurpose waste and create these new materials to ultimately fulfill the goals that you've laid out?
Mark Costa:
Yeah. So molecular recycling, or in our case the specific technology is called methanolysis, and we were doing it for a long time for Kodak, as I mentioned, for x-ray films, and then put it on a shelf and then finally got around to taking it off the shelf.
The technology is pretty straightforward in the sense that you start with polyester plastic, whether it's a PET bottle or polyester clothing or a clamshell. And the bonds on polyester are particularly easy to break. You take some methanol and some heat and you can break those bonds back to what we call monomers, which is like the building blocks of making a polymer chain. We get those monomers separated and then we purify it, so we remove all the garbage that's come in from the garbage heap with the plastic so that at the back end it comes out as pure monomer that's identical to what we make from oil today. And those monomers we then just put in the same polymer plant and rebuild that polymer chain and make plastic.
What's remarkable about it is we just go back one step. There's a lot of technologies that melt plastic back into oil that is pretty intense on carbon emissions and starting all over again. There are 10 steps to go from oil discovery to making these monomers that make a polymer. We replace 10 steps with one step of this recycling facility. So it's very carbon efficient compared to the other prior steps that were involved. And if we use green energy, we can be 90% lower carbon footprint.
So it's a very powerful technology to take a plastic that is very easy to recycle compared to some others and create a circular loop. And that's sort of how the chemistry works. There's a lot of complexity in the purification part of the process, not just the unzipping part, that is a lot of where the IP and the art and trade secrets come from and how we're doing it compared to anyone else. And we're by far the largest scale plant in the world doing it at this point.
Lance Glinn:
And how does molecular recycling ... You think of recycling, growing up as kids, we put it in the blue bin, the water bottle could get reused for a pencil holder. What are the advantages of molecular recycling compared to the more traditional recycling techniques that were taught growing up?
Mark Costa:
Yeah. Traditional mechanical recycling, which is what is done today, is waste is collected at the garbage can or the recycling bin, and then it goes to a recycling facility. And they have a number of mechanical steps. Washing steps, optical separation steps, but a bunch of steps to identify different types of plastics. So PET versus polyethylene, whatever. Those recycle codes one through seven on the bottom of your bottle connect to different types of plastic and you have to recycle each differently. So they separate out the plastic, they then chop it up, and then they wash it typically like caustic soda, baking soda, and then they melt it.
And so the challenge in that process, it's very energy efficient, but the issue is if you want to get back to food grade, which is the biggest source of single-use waste in the environment, mechanical recycling can only isolate maybe 25% of that waste that's clean enough to be mechanically recycled back to a clear bottle. The rest of it gets downcycled either into strappings, a little bit of textiles, or landfill or incineration. So you're losing 75% of the plastic into these lower value applications, which means oil has to continue being the source of plastic for the linear economy if you can't make it truly circular.
Lance Glinn:
You can listen to these episodes along with all past and future Inside the ICE House episodes wherever you get your podcasts. Full video episodes are also now available on tv.nyse.com. Be sure to join us every Monday for inspiring conversations with leaders, entrepreneurs, and visionaries.
Speaker 1:
That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen and follow us on X at ICEHousePodcast. From the New York Stock Exchange we'll talk to you again next week Inside the ICE House.
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