FNC News

The Texas Giant
“Life is a rollercoaster. Eat a light lunch.” - David Schmaltz

[Publishing Note: As further evidence of the roller coaster ride of oil and gas, in the time between drafting this article and preparing to publish it, the U.S. removed Nicolás Maduro from Venezuela to face narcotics charges and redirected sanctioned oil barrels to the U.S. At the end of this article, we have added a supplemental note to address this current event.]

The Texas Giant was billed as a revolutionary thrill ride of its time. At the time of its grand opening in 1990, it was dubbed the world’s biggest wooden roller coaster spanning heights of 143 feet and speeds of nearly 65mph whilst sending its riders on an exhilarating ride of extreme heights, steep drops, with multiple twists and turns. Some would also say that this ride would cause a bit of discomfort due to its sharp turns and maneuvers. But what kind of thrill ride doesn’t have a little discomfort associated with it, right?

Much like the Texas Giant, the price of oil has been on a roller coaster of its own over the last 12 months with a decrease of approximately 20% in 2025. Multiple announcements of increasing production from OPEC+, constant geopolitical turmoil, and an anticipated supply glut due to surging production (primarily from U.S.) have felt like hard bank turns on the Texas Giant driving prices lower. These factors give credence to pundits who predict the price of oil (WTI, Cushing) will hover around an average price of $55 per barrel in 2026.

Natural gas has been a different story, with an average increase in Henry Hub spot prices of 57% in 2025 compared to 2024. The drivers of this increase have been well publicized. One factor is the high demand globally (primarily from Europe and Asia) for U.S. LNG (liquified natural gas). This demand appetite currently outpaces the domestic and international infrastructure to meet the supply requirements. That, coupled with increasingly greedy demand for baseload power from natural gas to support data centers and the AI arms race has resulted in prices consistently between $3.20-$4.20 per MMBtu over the past year.

Having this knowledge, what is the outlook for 2026 and what should you expect regarding your mineral portfolio? In short, buckle up because the ride might be a bit bumpy.

Oil producers are seeing the same things mentioned here and, because of the gloomier outlook, they are reexamining their capital expenditures to better weather the storm. While oil & gas wells drilled today are highly efficient and technologically far more advanced than those drilled just several years ago, they remain extremely expensive, high-risk operations that present geological and operational uncertainties truly unique to the energy space.

New wells must be economically viable to justify the expenditures and producers are examining their true breakeven metrics at reduced prices. This means that producers will prioritize drilling that is required to perpetuate and secure their rights under their existing oil and gas leases and pullback slightly on discretionary development. For those reasons, our mineral owners should expect fewer new wells than we’ve seen in the recent past accompanied by lower revenues from existing, declining production. On a positive note, where new drilling does occur, owners can expect large-scale oil development as the industry has converted to a philosophy of drilling and completing all productive wells and zones simultaneously. Thus, the winners in 2026 who have new development on their mineral positions could win big—even in a lower pricing environment.

As for natural gas, we have been on a steady climb upwards since March of 2024 when prices were $1.49 per MMBtu. So, the question is, is this roller coaster still climbing or are we preparing for a Texas Giant-style drop? The future is muddled and natural gas has historically had a way of surprising even the most experienced prognosticators, usually to the downside.

Some of the logistical obstacles facing these large data center projects are not mere speed bumps but present real threats to, at a minimum, delay some of the build-out and the power demand that comes with it. These speed bumps include land availability and grid access or capacity, access to necessary equipment, and one concern that is seemingly growing—community pushback on the cost versus benefit analysis of these data center projects. It turns out that building a large facility that consumes a tremendous amount of power but doesn’t employ a large staff of people is, perhaps, not presenting the community or economic gains that people had hoped for. This will be a factor to monitor in 2026 to see how companies and communities adjust.

The global demand for LNG has increased due to many factors, but undoubtedly two of those factors have been governmental policy against exploration for oil & gas abroad, and a desire to source natural gas via LNG from the U.S. instead of by pipeline from Russia. While we don’t anticipate a sea change in public policy abroad in 2026, we have seen the global private sector move dramatically with companies such as BP and Shell openly shifting back towards hydrocarbons instead of renewables. Nowhere is this refocusing more visible than BP’s most recent CEO hire of Meg O’Neill, who brings extensive oil and gas experience to bear that includes a 23-year stretch at ExxonMobil.

The Ukraine-Russia war continues and has permanently changed the way countries view sourcing their energy needs from a national security standpoint. However, the dollars and cents ultimately matter as well. Thus, if there were to be a meaningful movement towards peace or a protracted ceasefire in the conflict, such news could signal to markets a dampening of LNG demand as some cheaper supply from Russia may be viewed as more palatable by those in need.

We’ve heard folks calling for $5-6 natural gas in 2026. We’ve also heard some more isolated calls for a drop back to the $2-3 range in 2026. We remain in the middle and believe that 2026 will be a good year for natural gas, but not as good from a pricing perspective as some would hope, likely bounding around in the $3-4 window with a one-off dip or crest out of that zone due to weather or other short-term factors. Ultimately, the AI arms race and the massive appetite for base-load power it demands is real and natural gas will need to be the fuel to power it. This creates, we believe, a decent demand floor for this commodity for years to come.

In the end, owning a mineral portfolio can sometimes feel a bit like having a ticket to ride the Texas Giant. Remember, the most important aspect of any roller coaster ride is its safety features. That’s what Farmers National Company represents for your mineral assets. We are your seatbelt and safety harness. We’re here to help you through the ups and downs and our management service helps transform a volatile, and sometimes burdensome asset into a known quantity in your portfolio that can be held with confidence for years and generations to come.

So, take a deep breath and let us enjoy this ride together.

A Note on the Removal of Nicolás Maduro

The oil markets responded to the dramatic overnight removal of Nicolás Maduro from Venezuela with nothing more than a shrug. Subsequently, we saw a small dip in pricing (less than 1%) with the announcement that 30-50 million barrels of sanctioned oil would be on shored to U.S. for sale. There is good reason for these muted responses from oil markets. While it is well known that Venezuela possesses massive, untapped oil reserves, those reserves consist of heavy, sulfur-rich crude that remains firmly in the ground without any near-term path to extraction. Current oil production in Venezuela is relatively small at less than 1 million barrels per day (compared to more than 13 million barrels per day from the U.S.).

Venezuela once produced 3-4 million barrels of oil per day. The destruction of the Venezuelan oil industry has been dramatic, long-standing, and not easily reversed.

There is a concept called the “Resource Curse,” which describes the phenomenon seen when countries rich in resources, like oil and minerals, experience negative economic growth outcomes when compared to similarly situated countries that lack such natural resources. While various factors explain this curse, one of the most consistent and compelling factors is a lack of foundational confidence in the rule of law. Without that foundation, rich natural resources only serve to exacerbate the country’s issues, leading to (and, at times, incentivizing leaders to pursue or protect) a perpetual cycle of wide-scale corruption.

With this backdrop, it is clear that the revitalization of Venezuela and its oil industry is not a short-term project. It is a long-term endeavor full of uncertainties, perilous risks, and difficult decisions ahead. Success would require building more than just infrastructure or capital plans; it requires building a foundation of confidence in the fairness and justice that underlies all economic pursuits. Such foundations take many years to build. As a result, this incident and its fallout are unlikely to move oil markets materially anytime soon.