Invest in Durable Utility, Not Peak-Cycle Optimism
Oil and gas markets can make an ordinary industrial building look irreplaceable—and then make the same building look unnecessary.
The lesson is not to avoid energy-linked markets. It is to distinguish operating utility from cycle-driven scarcity.
The Permian Basin produced about half of U.S. crude oil in 2025. Yet the U.S. Energy Information Administration's early-2026 outlook also projected softer prices, reduced rig activity, and essentially flat Permian production before a modest decline. Record output and restrained forward expectations can exist at the same time.
That is the environment in which real estate discipline matters most.
We want properties that are useful to energy activity but do not require peak commodity prices to remain occupied.
Production volume is not the same as property demand
Oil production can remain high while drilling activity, hiring, capital spending, or service demand slows. Productivity improvements allow operators to produce more with fewer rigs and fewer field movements.
An investor who underwrites only the production chart can therefore miss what drives a tenant's building requirement.
The relevant questions are more specific:
- Does the tenant support drilling, completion, production, maintenance, processing, or transportation?
- Is its work recurring or tied to a short construction campaign?
- Does the facility hold specialized equipment that is difficult to relocate?
- Can the yard and building serve infrastructure, construction, utilities, or transportation users outside energy?
- How concentrated is revenue among customers and basins?
The same rent roll can carry very different risk depending on the answers.
The most durable demand often follows maintenance
New drilling attracts attention. Existing production creates recurring work.
Wells, gathering systems, pipelines, compressors, electrical equipment, water systems, vehicles, and processing facilities require inspection, parts, repair, and field service. Those functions can support shops, fenced yards, warehouses, wash areas, equipment storage, and workforce housing.
We prefer properties tied to the installed operating base and several customer types. A fabrication or repair shop that also serves utilities, agriculture, construction, and manufacturing has more resilience than a single-purpose facility designed around one completion technique.
Peak-cycle rent can disguise weak real estate
During an expansion, users may accept remote locations, poor layouts, temporary structures, and above-normal rents because they need capacity immediately. An offering memorandum can then present that rent as durable income.
We test the opposite case:
- What is the property's value at mid-cycle rent?
- Can the tenant afford the lease if activity falls?
- What capital work would be required for a replacement user?
- Is environmental risk understood and allocated?
- Are yard improvements permitted and transferable?
- Does the property have functional access, utilities, security, and circulation independent of its current tenant?
- Can debt service be covered without assuming continual rent increases?
If the deal works only while everyone believes the cycle will continue, it does not meet our standard.
Where energy and broader industry overlap
Texas offers several forms of diversification. Houston connects energy with ports, petrochemicals, manufacturing, aerospace, and logistics. Dallas–Fort Worth provides a deep service and distribution base. San Antonio sits between major population centers, border trade, defense, and South Texas energy activity. West Texas and southeastern New Mexico offer direct Permian exposure, but require more explicit cycle protection.
The Mountain West presents a different mix: energy, aerospace, defense, construction, agriculture, and regional distribution. A small-bay property serving several of these sectors can provide indirect energy exposure without becoming a binary bet on drilling.
Workforce housing belongs in the same analysis
Industrial operations need labor, and labor needs practical housing.
In markets where project activity creates sudden population pressure, workforce multifamily can benefit—but it can also suffer when temporary crews leave. We look for housing supported by a permanent employment base, schools, healthcare, government, logistics, and diverse local services, not only by per-diem workers.
The same rule applies: current utility first, optional upside second.
Our underwriting response to a cyclical market
We favor:
- Conservative in-place rent assumptions
- Minimum 1.25 debt-service coverage
- Fixed-rate, long-term debt or appropriately structured seller financing
- Tenants serving several customers or industries
- Buildings and yards that can be reused without heroic capital expenditure
- Environmental diligence proportionate to historic site use
- A basis that does not capitalize peak-cycle income as permanent
Energy demand can create compelling opportunities. Our job is to own real estate that survives the forecast being wrong.
Bring us the useful property after the excitement fades
Draymoor Ventures is seeking small-bay industrial, flex, shop, warehouse, fenced-yard, storage, adaptive-reuse, and select workforce-housing properties across Texas and the Mountain West.
If the property serves energy but can outlive an energy cycle, we want to understand its tenants, operating role, and replacement uses.
Share an opportunity: Steven@DraymoorVentures.com
Sources
- U.S. Energy Information Administration, EIA Forecasts Near-Term U.S. Crude Oil Production Will Remain Near 2025 Record. https://www.eia.gov/todayinenergy/detail.php?id=67045
- U.S. Energy Information Administration, EIA Refines Estimates for Permian Tight Oil and Shale Gas Production. https://www.eia.gov/todayinenergy/detail.php?id=67364
- U.S. Energy Information Administration, Permian Production Forecast Growth Driven by Well Productivity, Pipeline Capacity. https://www.eia.gov/todayinenergy/detail.php?id=62884