Live A&D Panel

March 28, 2024

We hosted Todd Brooker, President of CG&A, Thomas Belsha, CTO of Grenadier Energy, Leslie Armentrout, CEO at Silver Cross Energy Partners, and Tim Pawul, President of Minerals and Royalties Authority for a Panel on technology and how it's affecting A&D. Watch here!



Key Takeaways

  1. Technology as a Catalyst: Advancements in technology, including data analytics and software platforms like ComboCurve, are enabling faster and more efficient evaluation of assets, enhancing the ability to process and analyze data for decision-making in A&D activities.
  2. Market Dynamics and Capital Efficiency: The changing landscape of investor expectations towards capital discipline and free cash flow yield is shaping A&D strategies, emphasizing the need for assets to contribute positively to cash flow and overall business growth.
  3. Environmental Considerations and Regulations: The increasing focus on environmental, social, and governance (ESG) factors is influencing A&D decisions, with a growing need to account for emissions, regulatory compliance, and sustainable practices in evaluating and managing energy assets.
  4. Opportunities in Non-Op and Minerals Space: There is a notable interest in the non-operated and minerals space, offering unique investment opportunities and underscoring the need for creative deal structuring and capital allocation to navigate the competitive landscape.
  5. Educating and Engaging with Broader Audiences: There is a recognized need for the energy industry to better communicate the value and importance of hydrocarbons and energy development to a wider audience, leveraging content creation and direct engagement to counteract misinformation and promote understanding of the industry’s role in modern life.



Alex Brasher (00:03):

Good afternoon everyone. Welcome to our A&D panel, and thank you so much for joining the ComboCurve team today and all of our lovely panelists here. I’m Alex Brazier, our senior marketing manager, and we’ve got a fantastic lineup for you today of obviously all these industry experts that you see here who are ready to share their insights on A&D tech and trends in the energy space. Each of them has something super unique to bring. So I’m super excited to have all of you here and thanks for joining us, y’all. I really appreciate it. Before we dive into the discussion, I wanted to go over how everyone watching can participate, so we have a chat located to the right side of your screen. So while everyone here is going to have their, I guess all the attendees have their microphones and cameras off, we welcome all of you to use the chat feature.


It’ll be available throughout the panel so you guys can interact with our panelists that way and ask any questions. And Kate and our panelists will address them as they can in the session. Kate’s going to go over more of that in a second. I also wanted to let everyone know if you for some reason have to jump off early or can’t stay for the whole event, we have the whole thing available for replay. So you’ll receive a recording of this event immediately after. You can watch it anytime you want, any questions or comments or concerns that kind of come up with that. If you need anything from us, you can obviously email our team and we’ll help you out. We also just side note, are going to be in Denver for an A&D event this upcoming April in two weeks. So if anyone on here is interested in joining us for something like this, for an A&D live deal evaluation event, if you’re in Denver, you can sign up for that. We’d love to have you. I’ll drop the registration link after I finish this and I would I guess love to introduce our moderator, Kate Spate. So Kate leads the account management team here at ComboCurve. She’s been here quite literally since the beginning. If you’re a combo user, you’ve probably spoken to her at some point. She’s really, really passionate about introducing disruptive solutions to the energy industry, her expertise and dedication to this make her the perfect person to guide today’s conversation. So with that, I’ll hand it over to Kate and our panelists.

Kate Speight (02:33):

Classic was muted right when we got started, so thank you Alex for that introduction and thanks for allowing me the opportunity to speak with our panel here today. I’m really excited to be here and want to go ahead and dive in, and I’ll do that by introducing who we’ll be speaking with. First we have Todd Brooker. Todd is president of CGA and has been with the firm since 1992 as a reservoir engineer. His responsibilities include reserves, economic evaluations, fair market valuations, field studies, pipeline resource studies and acquisition and divestiture analysis, which we’ll be covering a lot today. His reserve reports are routinely used for public companies, SEC disclosures. Todd, thank you for being here. Our next expert

Todd Brooker (03:25):

My pleasure. Thanks for asking me.

Kate Speight (03:28):

Next up we have Thomas Belsha. Thomas Belsha from Grenadier Energy serves as CTO and has demonstrated extensive expertise in the energy sector serving in pivotal roles ranging from production reservoir and drilling engineering to business development, production management integrations and investor relations to now where he is at today as Chief Technology officer at Grenadier Energy. His career marked by significant contributions at Lynn Energy and Grenadier Energy Partners showcases his adeptness and business development, reservoir engineering and leading multidisciplinary teams through major acquisitions and integrations. Thomas, thank you. I especially want to talk to you about some of the different challenges around integrations today and looking forward to it.

Thomas Belsha (04:20):

Sure, be happy to.

Kate Speight (04:23):

Our third panelist we have is Leslie Armentrout. Leslie Armentrout is the CEO of Silver Cross Energy Partners, a private operating company that acquires and develops conventional oil and gas wells in the Permian Basin and south and east Texas. Leslie brings over 25 years of experience to the upstream oil and gas sector and is passionate about energy, independence and sustainability. She holds expertise in reserves and economics, reservoir engineering, reservoir modeling, planning, project management, and operational roles. Leslie, we’re really glad you’re here. Thank you again.

Leslie Armentrout (04:59):

I’m glad to be here. Thank you for inviting me.

Kate Speight (05:02):

And last but definitely not least, we have Tim Pawul. Tim serves as a thought leader in the minerals and royalties and non-op asset classes and is the host of the Mineral and Royalties podcast, which I was listening to earlier this morning. Tim, as President of Mineral and Royalties Authority, he specializes in sell-side divestiture services for mineral and non-op assets in the 500,000 to 10 million range while also raising capital for private funds and deals. Tim, really glad you can bring your perspective here to the panel today. Thank you again.

Tim Pawul (05:38):

Yeah, thanks for having me. Love talking about minerals. Surprisingly, my wife doesn’t like it as much as me, so anytime I get to talk to someone else about minerals and give her a break is always good. So on behalf of my wife, thank you for inviting me.

Kate Speight (05:50):

Absolutely happy to help your wife and glad that we’ve got a group here that will gladly talk about A&D and the mineral space today. So just a quick reminder to our audience as well. We’ll be monitoring the chat for questions, and so please feel free to add those throughout. There will also be some opportunities to have different polls, so be sure to answer those and have some fun with that. And then if we don’t get to your questions today, we’ll have a moment to answer some at the end in our audience q and a session, but if we don’t get to them, we’ll be sure to provide some answers and insights to it via email format following this panel. With that, let’s go ahead and get started. I know we’ve had you briefly speak, but I’d love just each panelist to share their role and where they fit when it comes to A&D and then followed by just a brief perspective of what you’re seeing today in the A&D market. Todd, let’s go ahead and start with you if that’s okay.

Todd Brooker (06:52):

Sure thing. Thanks for having me again, Kate. Well, I’ve been doing this for 30 plus years now and I’m a petroleum engineer by background, and I did work in operations early on, but since then I’ve been consulting at Cawley Gillespie for over 30 years, so I’ve been in one spot for a long time. But the cool thing about it is I get to see a lot of basins. I get to see a lot of deals and deal with a lot of different types of customers, maybe like ComboCurve does. I deal with oil and gas companies, banks, all kinds of financial institutions, estates and planners and accountants, and so I get to see quite a bit of things in the A&D transaction market. I’m not a part of the closing of deals, which I wish I was, where getting a deal across the finish line is the hardest part. You can come to terms and you can agree in principle, but to get it across the finish line, it’s tough, as I’m sure Leslie and Thomas can talk about today and Tim as well. But anyway, I’m a patrolling engineer. I do reserve reports and a lot of our work used for financial transactions.

Kate Speight (08:11):

Excellent. Thank you. Todd. Let’s go ahead. Leslie, can you go ahead and share your perspective?

Leslie Armentrout (08:22):

So please ask me the question again. I apologize. I’m trying to switch myself over to my cell phone.

Kate Speight (08:27):

No, no, that’s okay. Yeah, I think that there was a little bit of a lag. Just have where you fit in the A&D market today and your perspective on some of the things that we’re seeing.

Leslie Armentrout (08:36):

Well, the biggest thing I think we’re seeing is that last year early in the year, prices were kind of low, so deals coming into the system were people weren’t paying exorbitant amounts of money for them, especially in the smaller deal world where we operate, which the last two years has been below 50 million towards the middle of last year when oil prices took off a little bit, people just started paying, to be quite honest, ridiculous amounts of money for old assets. You’re talking like $60,000 a flowing barrel for a Permian water flood, and that’s just not something that I or our investors we’re not going to get a good return off of that. So I think that has abated a bit. I think there was a bit of slosh money in the market from the PE firms having to get rid of some stuff invested so that they met their five year windows and hope this year it’s not quite as bad after all the big, what do you call it, mergers late last year and early this year.


I think that come towards the end of this year, there’s going to be quite a bit of stuff come on the market. The question will be how big a packages is it and how do they go off selling it? Do they sell it off in chunks or does the Exxons and the, I doubt Oxy will sell a whole lot, but if Exxons or Chevron sells something off, do they sell off big chunks or do they sell off by business units? So I think there’s going to be some activity towards the end of the year if oil prices will just stay in kind of a reasonable world of, as long as they’re between 70 and about 80, 85, it doesn’t get crazy, but you start getting above 85 and people just start paying crazy amounts of money. It’s like it’ll be $85 for the rest for the next 20 years, which is crazy. That’s never happened. So I think the market’s going to be healthy towards the tail end of this year. It’s been a little slow coming into the year.

Kate Speight (10:34):

Yeah, that’s interesting that you say that, and I have this question for later, but don’t want to miss this moment. What makes the Permian for you specifically as a smaller operator? Still intriguing when you have such competitive entry prices, and

Leslie Armentrout (10:55):

So for us, it’s more about what we’re good at. So in the Permian Basin, I have enough contacts. That’s where I started my career. That’s where most of my decent network is. I do have some international experience as well, but even that, those people that I networked with, there were the people that I worked with in the Permian Basin. So those people from the late nineties have been all over the world between now and then, now we’re all coming back to the Permian Basin. So it’s what we’re good at, it’s what we know, and the people of Midland, Odessa, they’re hard workers. It is a place that there is nothing like it anywhere in this world and is the one place where you can operate for a really, really slung margin. Our field superintendent in the Permian is just, he is spectacular. He can do everything, and if he can’t, he knows somebody who can.


And those kinds of people are just really, really, really hard to find nowadays, and a lot of them learned in the Permian. So our core is the reason why we’re in the Permian is because that’s where we can operate the cheapest. That is where the most opportunities are for Stack Pay, and I can make a well last forever if I’ve got five or six zones in it. It’s a little bit harder to do that if there’s only one or two zones in a well. So we just see the most opportunity for Stack Pay and it’s the place that has the best operating regime in the best people in the us.

Kate Speight (12:31):

Oh, thank you. Well said. Thomas, to you now, where do you fit in this A&D world today, and what is your perspective?

Thomas Belsha (12:41):

Yeah, so I’ve been in the industry a little over 20 years and lots of different companies. About five years ago I joined Grenadier two, we’re on the third iteration now. So Grenadier two was in Midland Basin in Howard County. Very much agree with all the thoughts that Leslie had on the quality of the Permian and the people and all the culture with working there and the multi-Stack pay. So we sold our company about a little over two years ago and started Grenadier three. So we have a small deal team and we are hunting for operated working interests. We want to develop and grow an asset. And the private equity, we’re a private equity backed company. We’re backed by end cap. Like I said, we’re on our third iteration and it’s changed a lot over the last few years since I came over here. It used to be that you find an asset of small size, large size, you build it up over a short period of time, two years, three years, and then you try to monetize it in some form or fashion with developing some of the inventory.


Now it’s changed into you need to plan on either acquiring and exploiting an existing asset or developing a greenfield asset, but grow it into a full cashflowing business that’s sizable enough to be accretive to a public company. And that’s what you’ve seen with a lot of the exits from other end cap companies in the Permian. And so our goal is we’re hunting. We’ve looked a lot in the Midland, a lot in the Delaware, a lot in the Eagleford. We’ve looked in the Haynesville and Appalachia, and so kind of been using the technology stacks and things that have changed here over the past several years to leverage and be able to look at multiple basins, a lot of wells, a lot of analysis from a technical standpoint, I’m a chief technical officer, so handle the business development, reservoir engineering, evaluation, planning, what are things worth part of the model. And so we do that and try to get to, hey, what really from a full cycle cashflow basis works in our model and that can work for our private equity partners in cap. So that’s kind of where in the space we have a small deal team right now hunting for opportunities to continue to grow what we have and find larger opportunities as they are possible. But the market’s changed a lot in the last several years.

Kate Speight (15:04):

Yeah. Thomas, can you elaborate a little more on what caused that transition to explore different approaches to have a longer game or longer holds for these different assets?

Thomas Belsha (15:18):

Yeah, it kind of goes to the expectations. The broad industry shift from production and growth at all costs to a capital discipline to, Hey, we’re looking for free cashflow yield and we’re going to intentionally, all these public companies that used to be the buyers of these private equity assets that were kind of delineated are now looking at free cashflow growth. We’ve talked about that for several years now, and it’s really gotten true. And so as that changed into a longer game, they don’t want to just go bolt on a little bit of inventory. Although any inventory in the Permian is valuable, they want to have a free cash flowing business that’s going to be accretive to their overall model. And so it’s really the investor expectations from a public standpoint that’s driven the massive change and the capital discipline, which frankly is I think really good for the industry in that we are really focused on returning cash to shareholders returning value, and I don’t think that’s going anywhere error in these commodity prices.


And even as we look at commodity price cycles in the future, it’s going to be very much about return of capital, very much about capital discipline and being really efficient with the resources that we have as we continue to maintain and grow. Now, one of the interesting things with all the public companies, permeant and outside is that every year you maintain production or grow it, your base decline stack is going to get a little bit steeper than it did before, and eventually you need more and more efficient wells, you need more and more growth in order just to maintain those volumes. And so that’s going to be interesting to see how that plays out over time. And as we exploit the inventory in the Permian from all these multiple benches, our view is there’s going to be other places in the US from a shale standpoint that are going to see a little more attention from some of the larger buyers, but that’s still many years out.

Kate Speight (17:24):

Well, and I think that you even see in this poll today where we’re expecting to see the most A&D activity other than the Permian, Eagleford, maybe an older development, but the creativity and technology that’s allowing them to go in and extract previous commodities that were unattainable. Moving over to Tim, who brings a unique perspective, where do you fit in this A&D market, but also what opportunities are you seeing in the mineral non-op space because of these kind of mega mergers or consolidation?

Tim Pawul (18:05):

Yeah, no, for sure. I’m in a unique spot. I mean, I decided to go down the road of minerals and non-op only. So I try to speak to almost everyone in the space on a regular basis. And it could be about deals, it could be about cap raising, it could be trading notes, tech that’s on the forefront. Really my business model is just to have touchpoints on a regular basis and add value to that relationship wherever I can. Along the way. That gives me really good insight on people’s businesses, how they manage their portfolios, where they buy, who their investors are, cost of capital available, dry powder. And what’s interesting, the reason I started my firm when I was trying to figure out what the hell to do during covid and just make sense of that time, all I did was talk to minerals executives on all anyone with a fingerprint in the space.


I probably had a thousand conversations in 2020 alone. And what I saw was, oh, wow, just because, so-and-so has this group of investors and typically buys in the Haynesville and typically buys ducks and whips. Three weeks later they might be brokering deals in the dj, and then three weeks after that they might be testing out the Permian and then they go back to the HA zone. So the fluidity of this space is pretty wild, and there’s so much deal flow. I focus on half a million to 10 million as an advisor simply because there’s in a slow down period, there’s still infinite deal flow at that level, and I know more down market than anyone in the industry, full family offices, their criteria and what people like to do. So I think my role is just to play traffic up and connect people for strategic reasons.


And sometimes it’s around deals, sometimes it’s other stuff, but it’s a fun space, it’s active. There’s a lot of action. As Todd mentioned, getting stuff across the line is always fun. I think inevitably mineral space, not on space is filled with a bunch of deal junkies who just like getting stuff done. And so that’s what minerals is. It’s just lots of tiny deals all the time ongoing regardless of market conditions. And depending on the marketing conditions, it’s the types of deals and where I think and how the structure and all that is really driven by kind of the environment.

Kate Speight (20:38):

Great. Thanks Tim. And I think that’s a good transition or way to talk about some of these unique opportunities in other basins with continuing consolidation. I know I called mega mergers earlier, even the latest of Devon and InterPlus and Diamond Back and Endeavor. Following that, I think Leslie, you brought up this kind of determination of core versus non-core acreage and then Thomas the need to be able to deliver the appropriate returns to investors for these larger companies, where are we seeing unique opportunities in other basins and what’s being required to be able to get the financing with the capital constraints? So what opportunities are we seeing in new basins? Let’s start with that. Todd, do you want to begin with that?

Todd Brooker (21:36):

No, let Leslie go first. She had something to say there

Leslie Armentrout (21:40):

As far as getting the financing for things in new basins, I’m assuming,

Kate Speight (21:49):


Tim Pawul (21:51):


Kate Speight (21:52):

We paused again, but we can divert to, oh, are you back, Leslie?

Tim Pawul (22:00):

Nope. I think I

Kate Speight (22:01):

Never get paused on Good smile. I’m usually eating food or something in the middle, but okay, Leslie, are you with us?

Tim Pawul (22:12):

Well, let me jump in. And then when Leslie’s connection comes back, listen, I think where, well, I’ll say something for minerals and then for non-op, I think minerals is interesting. There’s the continued kind of maturing of private equity portfolios and you’re going to continue to see assets come to market for different reasons. I think theoretically you would say it’s going to be, doesn’t make any sense for private equity to sell gas assets right now on a risk adjusted basis, NA gas is at an all time low or not a risk adjusted, sorry, inflation adjusted basis, which is a pretty staggering thing to say. And so you would think if you’re private equity, why would you sell? Now it’s at the bottom. Ridgetop just exited their portfolio assets in Appalachia recently MESA two just exited some stuff to Franklin, Nevada and Haynesville. So sometimes there’s different motives, right?


It could be lifecycle of the fund, waterfalls could be hit at the private equity level. I think there’s drivers of going out and raising the next billion dollar fund for the broader private equity fund, and they want to close out investments to see full cycle returns to show LPs on past performance. And sometimes the nuances of return at the asset level kind of gets swept in with the current, right? So I think you’re going to continue to see stuff. Obviously Permian is where most of the deal flow’s going to happen, chunk your deal flow, especially because most folks are going to put the most amount of capital work ahead of the drill, but there, and so that’s where the most scalable opportunities come from. Buto just bought some stuff in the DJ for 150 million. There’s been a handful of Eagle Ford transactions. So I think you’ll see kind of packages pop up here and there, but the steady a hundred plus million dollar deals will be Permian for sure.


And then quickly on the non-op space, I think what’s interesting with non-op is I think it has a longer runway than minerals going forward. And what I mean by that is at some point the space starts to get more and more held by institutional capital and more consolidated. And so there’s always going to be ground game opportunities and minerals. There’s always going to be secondary market kind of asset trading, but at some point the space starts to shrink a little bit in terms of opportunity set. But with Nana, I don’t see traditional capital coming back anytime soon to fund drilling. I think with ESG pressures and everything, it continues to get harder and harder to get traditional capital. And a lot of institutions just are never going to turn back from saying they can’t do hydrocarbon. So who fills the gap there? Family office, credit funds and non-op groups, there’s, we’re always filling the production profile as wells decline, so there’s always new wells and always new non-op opportunities.


So I think the non-op space will continue to grow and feed the beast. I think more and more folks that are on the sidelines now on these mega mergers are going to find it really difficult to get into the rock they want to get into and they’ll end up going and starting minerals and non-op companies, they could still get into that rock and they’ll bring tech technical expertise. They’ll bring all the things that operator work, but they’ll just do it because the best opportunity. And I think EMP is going to be all about efficiencies and manufacturing, and so it’ll be harder for the smaller folks to play going forward. Just kind of an observation, but over to the rest of the

Todd Brooker (26:13):

Ahead. Sorry, go ahead. Let’s start with Todd. Back up, Tim there on the non-op, if you look back at the last decade, the last 10 years of deals and transactions and counts, whether it’s deal size or number of deals, you’ve seen a nice shift towards non-op and it just continues to grow on a percentage basis. So I’m with you. I think that continues and we’ve got some large clients that just keep getting bigger in that space. But before Thomas goes, it’s like I’m looking at some of your polls here and I just got to shed a tear for the gas players in the Marcellus in Haynesville. It’s got just such a fantastic industry there that’s figured out how to deliver gas almost real time. And you’ve got prices that are low, you’ve got the stop and starts that have been happening lately as prices kind of push back up and they pull away back.


And then you’ve got regulatory issues that just make it more difficult to get that gas overseas and liquified. So really feel for that group. And I am hoping we see transactions in those basins in Appalachians and Haynesville, but there’s so much gas coming out of all the holy basins too. So I hate to see what’s going on there, but it’ll have its time because if the world really does care about emissions, especially the US natural gas and or nuclear are the way to get there, but we’re not talking nuclear today. But anyway, that’s a side spill.

Kate Speight (27:52):

No, I wanted to cover on just how you see evaluating those environmental risks into new deals today. And I mean, Todd, if you could go a little further on what you see happening in those basins, if the continue of the methane tax and emissions being relevant in transactions, I guess how do you predict what needs to happen for transactions to happen in those basins?

Todd Brooker (28:27):

Yeah. Million dollar question that

Kate Speight (28:29):

Wasn’t on the list. I said,

Tim Pawul (28:30):

How is this going to play out? Well, I mean it’s an important question because how are emissions and carbon taxes and credits and the whole industry going to, how is it going to play out and how do you position your company within that game or that structure? And it’s a tough one to answer a lot of things I don’t like about it. I think there’s a whole lot of, it came out very hot. ESG came out of the gates very hot like Usain Bolt running down in the Olympics, but it pulled a hamstring about halfway and it’s going a little slower now. And I think some really good things came out of it and I think it helped our industry improve. And so many ways, I mean capturing all that lost revenue, which are emissions, which you could say is pollution, but it’s also potential revenues that have been captured in a lot of ways and flarings down. There’s a lot of great things that have come out of this which have impacted oil and gas companies tremendously. But then on the other side, when you talk about capital, you’ve got to have a clean ship to play in that capital raising game. And so I know I’m talking generics here, but it’s impacted in so many ways. I don’t even know where to get started here. I might even get frustrated.

Kate Speight (29:59):

No, and I think that that goes into Thomas’ question I wanted to ask you. And just as you’re exploring those different basins for unique opportunities or creative underwriting, is that playing a role in the deals you’re evaluating and then how is that compared to the different technologies for the opportunities you’re exploring?

Thomas Belsha (30:19):

Yeah, so to what Todd was saying, very much we’re going to look at all of the risks, all of the potential on any deal that we look at. And so it depends on the asset type you’re looking at. And so one of the things that we’ve certainly you see in A&D is that while you can talk generics, while you can talk EBITDA metrics, while you can talk flow multiples, every deal is a special snowflake and every single one of those analysis that you walk through is going to have something that’s different about it. And so when you look at buying a gas asset, buying an oil asset with lots of methane that is in it, it’s going to matter what that looks like. So an example is, hey, if you’re looking at a 4,000 well package that’s large shallow decline, PDP, you’ve got the advantages of being able to look at it from a distribution model over a long period of time and you can layer on the growth, but you may have to account for a significant amount of retrofitting from just the emission side of ESG that you necessarily didn’t put in a deal evaluation before.


You might’ve had some risk for it, you might’ve have looked at it, but that can be a real thing now that you need to account for in your valuation. And a lot of those longer life PDP assets on the operated side have changed from, we’ve heard from a couple different parties that, hey, the PDP PV 10 market, that’s no longer the valuation people are pushing on for operated. And I think that’s true, especially as you get to longer life shallow decline assets, maybe that pushes more to PB 15, PB 20. When you layer in some of the other types of work you’re going to have to do from a facility standpoint, now you flip over to another type of asset which is, hey, a leasing or a greenfield asset or a fairly new growth asset that has been done fairly properly from an emission standpoint in the first place.


The Permian is one environment and they’ve made tons of strides there, but still have a lot of work to do, especially on the older wells. A lot of the other basins, whether you’re looking up in Wyoming or you’re looking in Appalachia, those have had pretty tight standards in the first place from emissions. And so that can be a little bit easier to get your hands around what that looks like and the risks associated with that. Not to mention, like Todd probably knows going into the discussion around how do you convert your reserves to your emissions criteria metrics that are required now for some of the sustainability reports. So that’s I think especially when you have older assets, when you’re doing a larger integration or a larger evaluation and you’ve got a lot of facilities that might need retrofitting, you’re going to see discounts that are practically, you’re going to bid lower because of that in those evaluations. And the more and more the regulations push up, the more discount those assets are going to go for.

Tim Pawul (33:23):

Kate, I’ll jump in. I’ll take a little bit of a different spin on ESG, but listen, I think our space is filled with entrepreneurs and capitalists and I think ESG is just going to create new kinds of investment opportunities and new types of companies. And so if you look at everything in a vacuum and you just say the old way of doing it becomes more and more hampered. I just think now you have so many carbon capture companies, you have technologies around that space. You have funds being raised around that. So those are all different types of things behind gay projects with taking associated gas and doing bitcoin mining and solar and whatever, just through associated gas is a new thing. Minerals is very much a land driven business. A lot of folks are lain by trade. I’ve seen folks get in and start to learn the renewables business and they’re basically going and aggregating stuff and they just learn how to de-risk projects and get all the right regulatory boxes ticked and flip it up to an infra developer.


I’ve seen carbon royalty business models pitched. I talked to someone today who’s got, who’s looking to buy minerals in a potash development. I think the folks in this space may have a different hat on, but they’ll continue to reinvent opportunity and ESG as troubling as it is, I think the long live production that gets at risk of with tax credits or taxes and fees and all that, now all of a sudden it doesn’t make sense to operate and you have to shut it in. That’s a real challenge for sure. But then I talked to a guy the other day who has got hundreds of millions of dollars to do a plugin and abandonment company and wrap it up for an ESG fund who wants to say they’re doing X amount of wells offline per year to lower production. So it’s like there’s ways to make money for sure, and the problem with government interference is when you interfere with the free market, smart people find the loopholes and exploit it. And I think that’s just what’s going to happen here and who knows what the future oil and gas company and operator looks like, but the same folks will be around just learning different trades and the ones who don’t adapt, retire or lose, right? And that’s just how the market works.

Kate Speight (36:05):

No, and I think there was a question in the chat and one that I wanted to ask as well. With the increased creativity and the competitiveness as well as the different varying capital constraints, what do new teams need to have as a secret sauce to be able to access that financing and also be successful in such a entrepreneurial type market? Leslie, I’m not sure how much of the conversation that you previously heard, but if you want to start with talking about some of the things needed to be successful in this competitive market.

Leslie Armentrout (36:45):

Well, I’ve heard your entire conversation, but I was frozen for you guys, so we’re good.

Kate Speight (36:50):

Perfect. You’re up to speed then. Oh, no

Leslie Armentrout (36:56):

Deal market. The biggest thing that we see is the private investors and private family offices that we’re going to, those people are looking for, they want distributions in the first year. Preferably they want 20 plus percent rate of returns on PDP wells. If you’re going to be doing some risky drilling, they want something that’s 30% plus we’re funded 60% ourselves and 40% are investors. So we have every incentive to keep our costs down and provide those returns because I can tell you my two partners, they’re actually worse than me on holding me on that return. So your investors in our case are also ourselves. What does it take to get the capital from outside? You have to show people that you can operate the assets and keep your costs down. They have to be confident that you have a great team that you’ve done this before, that you could get a bank loan when you’re ready.


We’re just getting to that point where we’re getting ready to have our first bank loan. We have to have a good LOS for two months before I can go ask a bank to give me money. So getting that outside support, there’s many places you can get money. We could get money for 20 to 25% interest if we wanted it, but that really eats into your return, and you don’t want to do that unless you have to. We would rather take that if we’re going to get debt, we’d rather be below 15 if we can. The debt market right now is between nine and 12 depending on who you go to, but our investors, their incentive is to either give us more equity or that’s their first point. If we had to take on debt, it would be to go to a bank or one of those kind of mid-market firms, which there are actually a ton more of in the last three years. But getting the funding, the most important thing is selling your team and selling the asset and telling them they’re going to see some kind of a return in the first year.

Kate Speight (39:11):

Leslie, what role

Leslie Armentrout (39:14):

Does, at least on the assets that we’re looking at, did everybody hear me?

Kate Speight (39:19):

Yes, we did. Thank you. Very well said. I’m curious, how does technology play into that pitch of your team and your skillset? Thomas, do you want to go ahead and answer that question first and then we can Sure,

Thomas Belsha (39:41):

Yeah, I can do that and then we can pivot back to Leslie. One of the things that’s continued, we’ve always had a high turnover rate as far as you need to evaluate all this information and then get to a decision point so you can either decide to continue to work on something or not. And the technology stacks that have developed over the past 5, 6, 7 years have really helped us to do that and leverage with smaller teams, things that used to take twice the size of a team. So for example, our normal workflow, and I think this probably fits really well with what Tim deals with in the mineral and royalty space too, is you need to be able to process all the information from a public standpoint if you have any private data as fast as you can. We, our workflow, we have both in various IHS, we have different parts that we like of both those data sources.


We roll that into a SQL server through a company called Conduit, and that is kind of a platform for all the horizontal wells in the us. We upload that into the company level of ComboCurve, and we use that for our forecasting and type curve development and then roll that into all those results into Spotfire and other analytical tools to slice and look at things spatially. And so because of those technology changes and ComboCurve being one of them, what we’ve worked on has helped us do that faster and do that better and find data issues and leverage a smaller team to do bigger things. And that’s been really valuable. I know that’s true from our evaluating operated assets from a private equity standpoint and have a really solid technical story. I know that also is true from a reserve evaluation standpoint that Todd works on, and also with Tim from a mineral standpoint, I’m sure, Tim, you have to evaluate that so fast, turn it around and be able to understand completely different areas with fact-based well results.


So that’s really helped accelerate the curve because from an A&D standpoint, it’s all about shots on goal and it’s been very challenging over the past couple years from a small company trying to buy into it. And a lot of the higher competition areas like the Permian, Midland and Delaware, you’ve got a couple things going on. We’ve seen that same thing that you were mentioning earlier, Tim, that the non-op space is still very, very active. We’ve come across a ton of non-op opportunities where operators just are not open. They don’t have a budget for it, they don’t care about it. They’ve got bigger fish to fry, and so the non-op space ends up being one that they don’t have a budget for it, so they’re willing. So I think it’s going to be to be successful in this next phase, any size company, but especially the non-public players are going to need to just be flexible and be able to change to what the market wants.


Maybe that’s doing large scale farms where you would want to purchase the asset before, but now you can go to a public company and accelerate some value for them by doing a carry or some other sort of structure. Exploiting the non-op and royalty market I think makes a ton of sense. Another thing we’ve seen that I was going to kind of follow up on, Tim, is a lot of the deal flow, especially in the Permian, has been companies that have been told by advisors and be told, Hey, you need to ramp up your production. You need to ramp up your ebitda. And then when they get to market, at least from a public market standpoint, you end up with 20 ducks and 50, 60, 70% of your values from brand new wells. And that makes it really challenging to get farther down the PDP valuation curve. And it’s created a lot of buyer seller expectation discrepancies that has made deal flow hard to happen at. When you’re looking at a company that’s at 20,000 barrels a day, but they’re on a 57% decline with a bunch of ducks, they’re going to get a discounted valuation. And that sometimes makes the deals hard to actually transact, but you’ve got to have the technology stack ready to churn on that evaluation and be able to have a strong, strong technical story that your team can tell.

Tim Pawul (44:06):

Thomas, on the back of your comments, I’ll just kind of mention from a minerals perspective. So it is interesting, there’s the majority of the capital that’s out there once about 30 to 40% PDP 20 to 30% permits, ducks and the rest pods. And that’s kind of the magic recipe that pencils the 20% plus that private equity money needs. And so when you go to a market in the Permian or elsewhere with a hundred plus million dollar deal, that’s kind of what people are trying to time Now, it’s interesting if an asset starts to get a little PDP heavy, it’s a little white space heavy. The mineral space is efficient enough to where folks have started to self-identify on leaning in and paying up for those types of scats and down market. When I get a mandate, even a $5 million deal, I might cut it up into three separate things, sell the white space to a long tailed family office, sell the PDP to an income fund and sell the ducks and the whips to someone who wants that, and you can get maybe five and a half or 6 million for it altogether.


I think theoretical theoretically, some people say, oh, too many cooks in the kitchen, too many things going on. But there’s real value creation in doing stuff like that. And then upmarket, just to give you a live example, I mean we’ve seen, I think that’ll continue to be more and more prevalent in bid bid ass spreads where you have or times where there’s big bid s spreads from commodity drops. I think revisionary structures become just a financial structuring way around meeting in the middle on price. There’s 150 billion hedge fund in Switzerland. I helped bring into the NAT gas space a couple years ago, and they have a PDP wellboard Nat gas buying vehicle called novalux. And NOVALUX is looking at coying mineral assets with folks who want white space and they just underwrite the well boards of PV 10. And when you can maximize the right capital for the res cats, I think you’re going to start seeing that in a D.


You’re going to start seeing that in exits. And that’s I think where folks start to pick their lane. When you start blending res cats, you’re going to get dinged on something from a buyer, but when you go up market, there’s just less and less options. So if you want to move your money and get velocity of capital out the door, I think you have to swallow that pill a little bit. And these market processes are very competitive for sure. People are paying up. There’s no steals out there, but it’s the serendipity upside of minerals, which our institutions want to own them for. But I think if there’s ways to bring in the right partners, you’re going to see more and more of that kind of like the Novo Luxes of the world going forward.

Kate Speight (47:16):

Yep. I’m curious, Todd, how that impacts with the combination of technology and the creative underwriting that we’re seeing. How does that impact the dynamic third parties? Are you seeing more, I guess, efficiencies in the way that technology brings or Yeah, of your perspective?

Todd Brooker (47:41):

Yeah. Yeah. Well, I am a third party. We are a service provider, but technology has absolutely helped us. I mean, when I started a colleague, we would print out rate time plots and I would’ve two triangles and slide them to figure out what my decline is and then forecast that out and then hand that out to somebody who had to go enter that. And a thousand wells could take weeks to get it done and iterated and perfect. And now you know what you can do with ComboCurve with a thousand wells in, yeah, see Thomas there, ComboCurve. It can help you do that in hours or less and get it very close. I mean, you can get very close very quickly. So yeah, absolutely. The technology stack, as Thomas referred to, has been a game changer for us as a consultant though we work with so many different types of companies and they’re not all using ComboCurve.


They’re not all using one software. And so we have to be very flexible here. We have to be able to use multiple pieces of software to do reserves and whether they’re using Spotfire or Power BI or some other analytics tool, if it’s ComboCurve and some of your competitors, we’ve got to be flexible to be able to work in that deal that’s going on that’s high speed and they want it yesterday. And so yeah, technology’s been our friend, but also just like people worry, it was AI going to put everybody out of a job. Is AI going to do everything? And no, it’s not. I mean, we didn’t have computers, barely had computers when I started back long ago.


And now the horsepower we have is incredible and we’re doing so much more, but we’re still here. Petroleum engineers are necessary, landmen deal makers, geologists, everyone’s still relevant and somebody has to run that software. Someone has to use those tools and interpret what it’s telling you because the volumes of data we have coming at us these days and what you’re looking at, it takes experience. It takes nuances and to be the winner of a deal to get it across the finish line, but actually have the right bid, you have so much human experience, it has to go into it. So I think I’m going to have a job until I want to not work anymore. And everyone on this panel, everyone listening, will stick with oil and gas business, creative, innovative, and humans want to flourish.

Kate Speight (50:27):

No, and thank you, Todd. That was perfect. And I think that’s a good just segue into kind of the last question I want to hear from everyone with the rise of technology and some of the other things that we’ve talked about and how it’s impacting the market today. I loved what was said at the SV A&D symposium a couple weeks ago from one of their capital panels, and it was about, we’ve got to be figuring out what problem is it that we’re trying to solve. So I guess my question for everyone on the panel today is just what is the next problem that we need to be solving or what is the focus for the next year or two years in five words or less? To wrap up, Tim, let’s go ahead.

Tim Pawul (51:15):

This is a bit further out. I think there’s going to be a point where an individual retail investors sitting at home and just like they can buy shares of Apple, they can buy fractionalized interests on an exchange of Midland Basin Minerals under Pioneer. I think there’s blockchain that’s involved in that, but I think somehow getting the cumbersome, tricky title securitized to where these mineral assets can trade, I think that’s the ultimate owner of these things is the individual retail investor. And I think that becomes really interesting and you remove the drag of public company management teams and fees and all that stuff to get direct ownership. So I’ve gotten pitched a few things that try to attempt that. There was a venture I consulted for a couple years ago called SLU Enterprise. They were looking to securitize undeveloped DSU in the Permian. It was super interesting, very smart financiers out of Europe, London pension backed. They’re still trying to get off the ground. It’s very complex. But I think that for me is kind of like in the future, something like that. Maybe it starts in a certain basin or a certain area where the regulatory framework is easier, but that’s going to be something that’s going to be really a really tough nut to crack. But it will at some point. And I think that’s where the mineral space should go.

Kate Speight (52:58):

There you go, Thomas.

Thomas Belsha (53:01):

The short answer is, I mean, even in these shale wells that we’re bringing on that we’ve increased efficiency considerably. We’re still only pulling out 10, maybe 15%, probably 10 to 12% of the oil out of that. And there’s still a massive amount of resource left. And so as we get farther along and we get into different types of EOR, different types of technology to go extract the other 70 or 80% that’s still there, I think that’s going to be the next wave after we’ve got a lot of the sticks drilled up.

Kate Speight (53:38):

Yeah, absolutely. Todd, what about you? I know you touched on it, but would love to hear your closing thoughts.

Todd Brooker (53:47):

Well, I really hope our industry continues to do a better job of educating the masses on the power of hydrocarbons and what it’s done for your life to this point and what it’s going to continue to do. And there’s some great people in the oil and gas industry that they’re doing that, but we just, the message is hard to get out. It’s hard to get it through the right media. And I’m hoping that that continues to happen and that will allow people around the world underprivileged, because we’re very privileged here in the United States, but the underprivileged want to have a better life as well. So I’m hoping that our industry can continue to put out the right message and also get that technology in other areas of the world where they can see the benefits of natural gas and clean burning oil. And just the technologies now are so good to make sure that we’re doing things as green as we can, but still deliver the high BTUs that we need for modern life. So I know that’s very a big thing there rather than something very narrow. But I think education is just so important for our industry to continue to push.

Tim Pawul (54:56):

Let me jump in there, just a final thought on that. So in this day and age, I’m a big believer, I might be biased, I have a content platform is a big part of my business, but I think that every single business in the free market is a marketing company first, comma, whatever they actually do. I think back in the day it was get an ad in a magazine, try to get a commercial on a TV show on cable. It was get on the local radio station, you can create your own magazine, create your own radio show, create your own TV show, and have your own audience. And so I think the rhetoric of, we got to educate, we got to get the messages out on the industry. What Todd mentioned since I entered the space 15 years ago, that’s been the rhetoric of conferences over and over again.


But it’s time for, look at Toby Rice and what he’s doing. I think there needs to be more. Toby Rice is out there just telling stories. And then you can, through storytelling, have real life stories of the impact that the industry is making philanthropy that companies do all these other things and there’s no one filtering that content. You can go direct to the market, whether it be podcasts or written blogs or whatever. And so I think we need to see more of the space do that. And I could just say it is so easy to create content. There’s zero barriers. You should see my setup. It is such a hack job. It’s funny how you can just set, it’s not thousands and thousands of dollars and a studio and a production company. You don’t need all that anymore. So in terms of the industry helping itself and companies helping themselves, you want to talk about raising money? You want to talk about getting another guy right now is doing something cool. A gentleman by the name of Steven Hatchery, he starts something called The Minerals Guy, and he’s basically using content creation and social media strategy to build credibility with mineral owners. And so now mineral owners are calling him to sell their stuff just because he is educating. So

Kate Speight (57:14):

Oh, that’s

Tim Pawul (57:15):

A version that

Kate Speight (57:16):


Tim Pawul (57:17):

Yeah, a version of that needs to be done by everyone in some extent. And if you don’t, you can still have a good business, but you’ll be at a competitive disadvantage if you don’t. It is just my personal opinion.

Kate Speight (57:29):

Well, I was about to say, it just sounds like Tim, you’re going to have to start creating more content to be able to continue to put that message out there. You do a great job of it and really enjoy it.

Todd Brooker (57:42):

Kate, I want to say Tim is a content creator. I mean, there’s no way anyone I know can keep up with what he does. It is just incredible. And if anyone hasn’t been to one of his conferences or listened to his podcasts, I highly recommend it. He does a great job. And then I’ll also put a plug in for ComboCurve, which you’re hosting this, but I’m so glad that a long time ago we were early adopters of the platform and integrated into our business and it is paid off because there’s a of customers out there that you have that are needing reserve reports. And we were very happy with the product and have prepared lots and lots of certified dozens and dozens of certified reports using ComboCurve. So kudos to ComboCurve and the product you have out there.

Kate Speight (58:28):

No, I appreciate that. Todd, I think you were speaking modestly of saying an early adopter. I really consider you guys a partner in some of the work that you did in validating the economics in the early days, and we’re happy that we’re able to work together so you can handle those reserves in ComboCurve as well as everyone else on this panel. Leslie, I see your comments here and thank you for adding those. We are at time. Really appreciate. Again, Thomas, Tim, Todd, Leslie for joining us today. For the audience, please continue to add any questions in the chat. We’ll be sure to send a recap to you all and answer those. And then until next time, really appreciate it. Again, I thought it was a great beginning of a conversation. I think we still have a lot to cover and hope to have many more of these in the future. So thanks again, everyone, have a wonderful day.

Todd Brooker (59:22):

Great. Thanks everyone.

Kate Speight (59:23):


Tim Pawul (59:25):

Thank you. Thank you.



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