[00:00:00] Speaker A: You're listening to the Preferred Way, a retirement podcast brought to you by Preferred Trust Company, the preferred custodian for all alternative investments.
[00:00:09] Speaker B: Welcome back to the Preferred Way with John Jordan from Petro Peak. If you missed the first episode, click on the video below. Now, let's get back to the show.
So I'm going to switch gears on you for just a second.
We're going to talk about politics a little bit.
[00:00:24] Speaker C: Okay.
[00:00:25] Speaker B: You know, how has the industry been impacted as we've transitioned from, from one president to the other?
Have you seen a drastic shift and is it a benefit or, or not?
Give us an idea of what's going on out there from the landscape perspective. Yeah, that's trying to be fair to all.
[00:00:46] Speaker C: You know, I understand, you know, it's a great, it's a great question.
And I think what we're really seeing within industry in terms of day to day activity and future planning is really going counter to the new administration.
You know, as Trump was out, you know, looking to, to get elected, he was preaching, you know, to everybody, all kinds of rallies. It's like drill baby drill, you heard that continuously.
And on the one hand it will not stop in the US and we can kind of get into that.
But in terms of rapidly accelerating the current level of activity, operators are not taking the bait.
And it really has to do with overall finances, corporate finances and longer term expectations on oil price.
Because the whole, I think the whole idea with the current administration and the drill baby drill is to lower oil and oil prices.
[00:01:56] Speaker D: Yeah.
[00:01:57] Speaker C: Well, that comes at a, at a negative to operators that are out there trying to actually sustain corporations, a business.
[00:02:04] Speaker D: Yeah.
[00:02:07] Speaker C: Yeah. And when you look at, you know, when you look at a lot of the US Shale plays, you know, a lot of different organizations will run their economics associated with a break even cost.
What is the oil price required for somebody to come in, drill a well and break even, not make a profit, but just break even.
[00:02:28] Speaker D: Yeah.
[00:02:28] Speaker C: And those numbers for a lot of plays are, are being, it's being squeezed right now. I mean, there are a lot of places in the country where, you know, 50, 55, I mean, there's plenty of plays that are already out of, out of the ability to be developed because they, they will not make money.
[00:02:48] Speaker D: Yeah.
[00:02:48] Speaker C: So right now there's this fine balancing act between I think what the current administration is trying to push in terms of activity levels, you know, free things up, create, you know, create more opportunity, add more production to the, to the, and what the impacts on oil price would be. And the ultimate Ramifications for companies.
We are. I've been in the industry long enough that we have been essentially our own worst enemy over the course of my career.
We first did it to. To natural gas.
[00:03:28] Speaker D: Yeah.
[00:03:29] Speaker C: Back in like 2000. Between, like 2000. It kind of goes with the housing crisis with that time frame, but it was basically leveraging the technologies and starting to go horizontal. Drill wells horizontally in gas and hydraulic, stimulate them and make immense volumes. And what we did ourselves was completely flood the market and everybody was trying to outrace everyone else.
[00:03:56] Speaker D: Yeah.
[00:03:56] Speaker C: You look at historic gas prices back then, we were in the $7, $10 per MCF range and it cratered and basically did it to ourselves. And then secondary event happened on the oil side where we essentially said, okay, look, we've got this. We've got these gas resources. We know where they are. We can go and tap them when the timing is right.
From that initial kind of letdown in gas price, it stayed relatively flat, so there was no urgency to go after it.
All these companies are still around and saying, okay, well, what next? Well, we applied the same technology to oil plays and we started to do the same thing. And in 2014, 15, we oversupplied the market and as an industry and had another price shock.
[00:04:43] Speaker D: So.
[00:04:45] Speaker C: And it, you know.
Yeah, it's like those couple of things. The technological advancement companies wanting to obviously leverage that technology and make money.
[00:04:55] Speaker D: Yeah.
[00:04:55] Speaker C: Of course, in addition to. There was another time frame where it was essentially kind of driven by Wall street funding. A lot of smaller companies, cost. Right. Show us. Show. You know, and.
[00:05:11] Speaker D: Yeah.
[00:05:12] Speaker C: All of those things compounded together that have not given us the best financial history.
[00:05:20] Speaker B: It's just.
[00:05:21] Speaker C: Just been a little bit too up and down. And I think that there are far too many companies that are out there today that have lived through a lot of that.
[00:05:29] Speaker D: Yeah.
[00:05:30] Speaker C: Want to provide back to the company, back to shareholders, maintainability, maintain a strong balance sheet, you know, and that becomes the major driver. Well, if industry operators are like, wait a minute, I need to stabilize my balance sheet. If we do drill baby drill, we'll flood the market again, greater the oil price, create another shock event. We're going the wrong way all over again.
[00:05:57] Speaker D: Yeah.
[00:05:58] Speaker C: There's this whole balancing act currently in the US in terms of what makes the most sense in terms of activity levels.
Yeah, we are.
[00:06:07] Speaker B: Absolutely.
So are you saying maybe we've learned our lesson in the past and the whole drill baby drill is, you know, it was. It's great to campaign with.
[00:06:18] Speaker D: Right. But if.
[00:06:20] Speaker B: If it's not Realistic and sustainable for businesses because they need to make money too. This isn't about just flooding the market. This is about, you know, sustainable businesses and maintaining that sustainability over longer periods of time and not just a wave.
[00:06:39] Speaker C: And so administra, you know, as an industry, we, we, we have learned our lesson, so to speak.
It, it really is a.
Now I think that the primary focus is around financial strength as opposed to grow production, be able to report, you know, these astronomical initial rates on wells. You know, there are all these different nuances in the business that you can get caught up into various headline driven, you know, stuff like that. The reality is, is all these companies are really honed in on, on their balance sheet, their bottom line and what's best for their company and shareholders.
[00:07:22] Speaker B: Well, that's great.
[00:07:23] Speaker C: Yeah. And we've seen, you know, we've seen announcements of a variety of people or companies that are, I wouldn't say ceasing, but they are scaling back activity levels this year a little bit just due to the commodity price crunch as well as the uncertainty around tariffs.
[00:07:42] Speaker B: Yeah, 100%.
Okay. Well, I like when companies have solid balance sheets because as an investor doing your due diligence on something you know, nothing, and I mean nothing about from an oil and gas perspective, it took me 10 years, 10 years to really kind of navigate and figure it all out. Investing in different companies in different classes of oil and gas to really try to figure out where was the best use, risk and reward. Right. All those things we're trying to balance. And you know, the one thing that you have very little access to is their balance sheets to know are they sustainable to even potentially pay out anything in the future. Right. Because some of these plays are, it takes a long time, let's just put it that way.
[00:08:40] Speaker D: Right.
[00:08:41] Speaker B: They have to report to their state in regards to, you know, what they're actually pulling out of the ground. That's great. But it's months behind.
[00:08:50] Speaker D: Right.
[00:08:51] Speaker B: So there's, it's very difficult for investors to figure out the, the lay of the land.
So what are, what are three pieces of advice you would give anybody that's brand new that wants to invest in oil and gas?
Let's say they want to invest half a million dollars in cash, half a million dollars in their retirement account.
What would you say to them? Three things that you would say to them to watch out for and where would you put that money?
[00:09:25] Speaker C: Yeah, that's. Boy, that's a great question. I don't know if I can limit it to three.
[00:09:29] Speaker B: Okay, you can go five.
[00:09:31] Speaker C: You can go five with a, with basically a 5050 split in terms of cash versus say a self directed Iraq. I would really, you know, kind of direct the individual. Can you allocate on the cash side? Can you find a non operating working interest? Essentially that's the branding of direct participation in a well. You're not the operator but you're contributing to the capital cost of the well.
[00:09:58] Speaker B: Yes.
[00:09:59] Speaker C: On the cash side I would direct them to, to try and pursue that for cash. The IRA piece, it's really best suited for minerals in the minerals there. While, while there is a, you know, the tax benefit. The 15 on. On revenue.
[00:10:19] Speaker D: Yeah.
[00:10:19] Speaker C: Not immense but you're in a sheltered thing already. It. So if you are interested in oil and gas with that ira, you know, going, going into. To minerals will be a fantastic job in opportunity.
In terms of other advice.
[00:10:37] Speaker D: Yeah.
[00:10:38] Speaker C: P. Patience, communication.
[00:10:41] Speaker B: Ten years.
[00:10:42] Speaker C: Yeah, yeah. No the, the reality is, you know, and I, I spent 25 years with operators. Right. So they're trying to do the right thing. They're, they're.
[00:10:54] Speaker D: Yeah.
[00:10:54] Speaker C: Living their daily business. They're trying to drill. Well, you know, everybody's, everybody's in this to do what they think is right.
[00:11:01] Speaker D: Correct.
[00:11:02] Speaker C: You're going to find bad apples.
[00:11:04] Speaker D: Sure. Yeah.
[00:11:05] Speaker C: But the reality is all these companies are trying to do the right thing. So 1. Patience.
But you also hit on something in terms of.
You're always so behind and that's really where the patients come. It is play.
[00:11:20] Speaker D: Yeah.
[00:11:21] Speaker C: You know, with oil and gas revenues it's, it's a little bit tricky because it does end up going through so many different hands prior to ultimate payouts. And all of those things take, take time and, and you really do have to be a little patient. So if you, let's say you're associated with the well today and it produced. Just call it 10 barrels.
[00:11:45] Speaker D: Yeah.
[00:11:47] Speaker C: Well, the barrels might have left the, the location but you're likely not going to see revenue from that for two or three months.
[00:11:55] Speaker B: Yes.
[00:11:55] Speaker C: Reality. And it just seems to do with the fact that the oil and gas companies do have to report to regulatory agencies. They have to be very accurate and precise with that reporting.
So there has to be, you know, plenty of checks and balances and, and QA certainties associated with the volumes. And they get reported monthly, they don't get reported daily.
[00:12:19] Speaker D: Yeah.
[00:12:19] Speaker C: So, you know, it does take a while to get all those sums. Check them, triple check them, you know.
[00:12:26] Speaker B: Yes.
[00:12:27] Speaker C: Correct. Report it to the state. That then creates a trigger. Then it starts going through their own internal Systems. It's got to go land to make sure. Well who the heck owns all this stuff and has changed since the last time we paid royalties.
[00:12:42] Speaker D: Yeah.
[00:12:43] Speaker C: And then once, you know, once that's done, it goes to the legal. It goes through accounting and then ultimately you get, you get the, you get the check. But the reality is because this is kind of deeded true ownership that was produced three months ago, you are legally required. They are legally required to pay you for that barrel.
[00:13:05] Speaker B: Yes.
[00:13:06] Speaker C: It's the lack. So again it gets back to the whole patience comment and knowing that hey your, your first, your first check from a. A produce a producing well could take a while if it's a brand new well.
Oh there, you know, it could take six, nine months.
[00:13:24] Speaker B: Yes.
[00:13:25] Speaker C: To actually been there.
[00:13:27] Speaker B: I've been there.
[00:13:27] Speaker C: Right.
[00:13:28] Speaker B: Yeah.
[00:13:28] Speaker C: You know, so, so there's definitely, there's definitely a patience piece. And then back to my comment around everybody that's in this. They're all trying to do the right thing, but everybody's not always right.
[00:13:41] Speaker D: Yeah.
[00:13:42] Speaker C: That's really where the communication comes into play. And establishing a connection wherever your ownership might be with an oil and gas company through, through this mineral type thing, understanding who you need to talk to when you see something in a statement or report that you don't quite either understand or don't agree with.
[00:14:03] Speaker D: Yeah. Yeah.
[00:14:04] Speaker C: Because you know, the mistakes get made.
But everybody, you know, then you have to go through the process of correcting and updating whatnot and everybody wants to do that and do the right thing because on the back end the legal ramifications could be significant and nobody wants to go there. No know.
[00:14:25] Speaker D: Yeah.
[00:14:25] Speaker C: Everybody wants to solve it and get it right.
[00:14:28] Speaker D: Yeah.
[00:14:29] Speaker B: How do you determine which is the right company?
There's. I hate to say this and I, I don't mean any disrespect.
[00:14:38] Speaker C: Yeah.
[00:14:38] Speaker B: There are so many of you guys out there that is very difficult to determine who you should invest with.
You know, there's a lot of comfort. You just said it. Communication.
[00:14:51] Speaker C: Yeah.
[00:14:51] Speaker B: That's huge for me. I made an investment in oil and gas from the drilling perspective two years ago in with one company. Not going to name names. There's a variety of them that I have invested with and I like to vary it. You know, I think spreading it out in different locations with, you know, different, different companies is a good strategy. I've. I've learned that some of them, some of them hit and some of them are great and some of them are financially stable and others will continue to struggle just to Raise enough capital to get off the ground.
I've been involved from one spectrum to the other, from mineral rights to royalties to, to the drilling to, you know, I'm sitting alongside of major banking corporations that, you know, I'm one of the investors that, you know, first capitalized to get them to the stage where they could go after that bigger financing.
I've run the gamut when it comes to oil and gas, and I have always struggled with figuring out who is the right company. But the communication between the company and the investor has always been a key component for me. Because if they are not consistently communicating with you, because there is a huge patience pants factor here. Like, you really have to be patient and understand the industry and get to know how the industry ticks and operates. In the regulatory aspect, you've got to take the time to figure that out. But I still struggle with finding those right companies.
What would you say is a good indicator of that? Now you're doing this right.
So why is Petro Peak investments better than the next?
How's that competitive nature within the organization or the industry work?
And what should we be watching out for?
[00:16:52] Speaker C: You know, that like you said, there is plenty of competition.
A lot of people will hone in on one of two things, scale, so the size of your investment or location.
[00:17:09] Speaker D: Okay.
[00:17:10] Speaker C: And so a lot of like with other, other companies that are doing similar things to what we are offering, they will have an area where they consider themselves the absolute expert. They might have 20 years of experience in a couple of counties in one state. Right. And they are by and large a huge expert in that very localized area, have connections, be able to own and operate their business very well, but they probably are not very good. If you go halfway across the country and say, how are you going to. Do you want to look at this deal here? You know.
[00:17:50] Speaker D: Yeah.
[00:17:51] Speaker C: And, and for us at petropeak, that's. That's kind of where our expertise comes into play. We've been involved in unconventional shale plays across the entire United States for decades. My entire career has been built around it. All the people that I have associated currently with the business, they're all unconventional folks.
We've run the gamut in terms of just technical evaluations, in terms of, hey, let's go look in Montana and go assess. And what is the possibility? Where's the activity? What's the future possibility?
To, okay, how are we going to drill 200 wells in the Permian this year? Yeah, so we've got this widespread of, of kind of technological knowledge, expertise, interactions with A lot of different companies, evaluations of where people are, what they're doing. Back to your point of who's kind of the good operator, you know, to do the right thing. If I've got an opportunity to buy on a dollar for dollar basis an equivalent mineral deal that is sitting under an ExxonMobil with some near term development versus, you know, Bob's Oil.
[00:19:06] Speaker D: Yeah, yeah.
[00:19:08] Speaker C: You know, I mean that's kind of an extreme example, but we really trying to evaluate in the deals that we pursue that level of kind of knowledge and scrutiny associated with the deals that we get into. It's like who is it? Who are the offset operators? Because is that going to create an impact?
Can, can we view this as a one and done type of deal? Are they going to come in, is the oil and gas company going to come in, fully develop the acreage or are they going to drill a couple of wells and then want to come back in three years? Right. And it just, it just creates different opportunities and different evaluation techniques and entry points into what we, what we pursue from, from an acquisition standpoint.
[00:19:52] Speaker B: So what I hear from you is hone on the individuals that are running these companies. Hone on the individuals that they hire underneath them to help them run the companies. Hone in on location. Is there specific basins that you're like really honed in on that you focus on? Because I have found that kind of having a variety around the United States because everybody specializes in something different. And what you said I really hope people take to heart is they need to know their, their area in and out. They need to know all the players, they need to know, you know, have all the relationships established. Because if they're just trying to go in and you know, I have a nice terminology to say be that swing.
[00:20:39] Speaker C: And you know what, starting, starting from scratch, right?
[00:20:43] Speaker B: Yeah.
[00:20:43] Speaker C: Like you're basically a tiny fish and in a scenic ocean and.
[00:20:48] Speaker D: Yeah.
Yeah.
[00:20:51] Speaker C: So I, you know, for us in terms of areas that were, were probably better that I would kind of put it in two tiers.
[00:20:59] Speaker D: Okay.
[00:21:00] Speaker C: Permian, Eagle, Ford, DJ in Colorado, Haynesville, probably that, that's kind of the upper echelon of, of expertise. We also evaluate things in, in the Uinta out in Utah, Bakken, Montana, Marcellus over in, on the Eastern.
[00:21:20] Speaker D: Yeah.
[00:21:21] Speaker C: East coast in Pennsylvania, Scoop Stack in Oklahoma. You know, so those are all the things where we're very well equipped with, have a lot of knowledge. Maybe those last few that I mentioned, I wouldn't consider us, you know, a top expert compared to the experts of Those plays.
Yeah, but we're right. Right there in the mix the first few, though.
We've got a history, you know, and it's like we've drilled a lot of wells. We know who the players are. We know where the rock is. Good.
[00:21:52] Speaker D: Yeah.
[00:21:53] Speaker C: We know really what to target and what the future holds. Yeah, I was talking, actually, kind of a funny story. I was talking to a potential investor a couple of weeks ago, and he actually owns.
He owns minerals in Midlands, so the eastern half of the Permian Basin.
They've been in his family for. I think he said great, great grandfather owned him or bought him.
[00:22:17] Speaker D: Yeah.
[00:22:18] Speaker C: And he was kind of joking. He's like, well, if you look at the total rate of return on this thing, it's probably not worth anything. But today's cash flow is.
[00:22:25] Speaker D: Yeah.
[00:22:25] Speaker C: Pretty nice, right?
[00:22:27] Speaker B: Yeah.
[00:22:28] Speaker C: But, you know, he. He's of the mindset of, like, well, how. How can I leverage this somewhere else? Because the Permian is as good as it is. It's not the only thing that's out there. And so we were talking about, hey, where else, in my experience, where else could I potentially deploy some of this capital?
And, and tried to explain to him some of the other opportunities that are. That are out there.
Interesting. It makes for interesting conversations. Because the thing is, I think majority that are even modestly familiar with oil and gas will have heard of the Permian.
Yeah, but if you're, if you're talking about a producing asset up in Will county in Colorado, most people aren't aware. Yeah, we know what they're going to.
[00:23:18] Speaker B: Yeah, yeah, yeah, absolutely.
[00:23:21] Speaker C: We've got a good idea of what they are now. Future development in Colorado. That's a different. That. That's back to our political conversation.
[00:23:29] Speaker D: Yeah.
[00:23:30] Speaker C: But, yeah, lots of opportunities all. All over.
[00:23:35] Speaker B: Give me three fun facts about oil and gas that most people don't know.
[00:23:41] Speaker C: Most people don't know.
[00:23:43] Speaker B: Yes.
[00:23:46] Speaker C: There are 10,000 wells drilled every single year, horizontal wells drilled in every single year. And that is to keep production flat in this country at 13 million barrels a day.
So the replenishment rate, you can think about it. It's like, well, you know, I'm a little suspect of your future opportunities. There are 10,000 wells that are being drilled every single year horizontally, and we have not significantly grown production since 2019.
[00:24:20] Speaker B: Fact number two.
[00:24:21] Speaker C: Yeah, there's one fact, I guess one of the other facts, and this, this was really new to me, is I even started investigating this.
Really, the business that I'm in today, the common investor can get into Oil and gas for a very relatively low cost entry point.
Something that most people don't think about. They think about millions and hundreds of millions of dollars when they think oil and gas. The reality is business are very, very low.
[00:24:54] Speaker D: Yeah. Agree.
[00:24:56] Speaker B: Fact number three.
[00:24:58] Speaker C: Fact number three.
[00:24:59] Speaker B: Oh, what has he got?
[00:25:00] Speaker C: What has he got?
[00:25:01] Speaker B: What do you got for us, John?
[00:25:03] Speaker D: I don't know.
[00:25:04] Speaker C: I think we get fact.
[00:25:06] Speaker B: We want something juicy. We need to know something that nobody else is going to tell us.
[00:25:14] Speaker C: Nobody else is going to tell you.
This is kind of a personal bias of mine.
[00:25:23] Speaker B: Okay, we'll take it.
[00:25:25] Speaker C: I truly believe that the, the Uinta basin is the, is going to be the unsung hero of development in the US There's a lot of information here. It's got some very unique marketing considerations. People have been trying to crack that for years.
It's seen some significant acquisitions over the course of the last year with some pretty big players involved. And I think that's something that is really gonna, really gonna take off here.
It will not scale to the level of the Permian ever.
Yeah, but just in terms of what that, what that play could be, what the activity levels could be, I think it's going to surprise a lot of people in the years to come.
[00:26:10] Speaker B: Okay, I'll take it.
Is there anything I didn't ask you that I should have.
[00:26:20] Speaker C: Jeez, that's a good one.
[00:26:25] Speaker B: How about. How about I ask you about that object to the.
Would be to the right or the left of your, your head there?
[00:26:34] Speaker C: This one.
[00:26:35] Speaker B: What one is that?
[00:26:36] Speaker C: Yes.
[00:26:36] Speaker B: Can we see that? Can we see that up close?
[00:26:39] Speaker C: Sure. It's a, it's a painted drill bit. It's called the tricone drill bit that somebody used to work for. They actually painted these for people's colleges. And so I am a tried and true Georgia boy. And the tri. Where the tricone comes from is these three pieces here. These rotate and spin and that's actually what breaks up the rock as the drill bit is rotating at from the surface.
[00:27:08] Speaker B: How heavy is that thing?
[00:27:10] Speaker C: This. And this is pretty small. I mean, it fits in my hand. This is probably 10, 15 pounds somewhere in that ballpark.
[00:27:22] Speaker B: I kind of felt it when you picked it up. I was like, whoa, it is heavy.
[00:27:25] Speaker C: It wasn't.
[00:27:26] Speaker D: It is.
[00:27:27] Speaker C: It is a little heavy. It's something you do not want to drop.
[00:27:31] Speaker B: Yeah. First I saw like, I like the solo cup at the top. So I've been, I've been staring at it here for a while. I saw the solo cup and I'M like, that's not a solo cup. And then I thought, yeah, I thought it was a Cool Whip can. Right. Kind of resembles a Cool Whip can. So we, we just have to know sometimes, you know, you have those, those objects that are sitting out there, so you have to ask about them, but.
[00:27:53] Speaker C: Good one. Yeah, that's a good one.
[00:27:55] Speaker B: Well, John Jordan with Petro Peak Investments, this has been a pleasure. Thank you so much for spending some time with us and just talking the basics, from politics and oil and gas to, you know, mineral rights to royalty rights to drilling to how you should invest to what you should do with cash or what you should do with a self directed. Ira, we truly appreciate you taking the time to chat with us.
I'll leave you with this. How do people get a hold of you because you are a communicator and like I said, always say to investors, do your due diligence before you invest with anybody. So how would we get in touch with you?
[00:28:33] Speaker C: Yeah, a great starting point would be our website. So that's petro peakinvest.com from there we've got phone numbers that contact me, but you can book time with me on the website.
So that's, that's a great place to start. Another way you can email me directly, john jordanjordanep.com would be a secondary way for folks to, for folks to get in touch.
[00:28:59] Speaker D: All right.
[00:29:00] Speaker B: I can't thank you enough. Thank you so much for spending some time with us here today. We hope to have you on again. We really appreciate the time.
[00:29:08] Speaker C: I love it. Yep. There's like you had mentioned early on in the conversation, it's like that there's so much from an education standpoint that people just aren't aware of when it comes to oil and gas. And I am happy to share at any time in the future.
[00:29:24] Speaker B: We appreciate it.
[00:29:25] Speaker C: Thank you.
[00:29:25] Speaker B: And we're going to conclude that today on the Preferred Way podcast here at Preferred Trust Company if you have any questions, you know how to get ahold of us. Until next time, we'll see ya.
[00:29:38] Speaker A: Thanks for joining us for another episode where retirement savers meet alternative investment.
Can't wait for the next episode. To learn more, visit our
[email protected].
