Chuck Yates Needs A Job

0:20 It was really funny. I had a buddy that was in a band and coming out of college named Toy Subs. And about three years later, they changed their name to

0:30 something else. And I asked Jamie the lead singer, what happened? Because we've evolved as artists. We've come so much better and all that. Talked to the drummer, he went, yeah, we went to

0:39 every record company, his Toy Subs. And they told us off. So we, we had to change names. So that may be what we're doing today on the, on the cross strategic promotion. But welcome to Chuck

0:49 Yates needs a job. The podcast as well. We've got Chris Atherton here, CEO of EnergyNet. Everybody knows you guys. Everybody uses you guys. Hey, thanks for having me. But does anybody know

0:59 this? Does anybody know the story? I don't know. That's what we're here to find out. Yeah. Yeah. Who is Chris Atherton? And what is the actual story behind EnergyNet? You guys have seen some

1:09 shit. You've been doing this for 20 years now, right? Yeah, yeah, Definitely, no, it's been a wild ride. So I was actually, Chuck and I had lunch earlier this week and I was telling him next

1:19 month in October, 2022, I will be personally 20 years at energy now, which has pretty wild rides. Seen a lot, seen shale, booms and busts and all kinds of companies come and go and people come

1:31 and go. So my background, a little bit grew up in Houston, grew up down in Clear Lake, went to Clear Lake High School. And then I worked at Enron out of college that didn't, that career path

1:43 didn't work out for me, blew up a little bit and then - Which group? Enron energy. Enron energy services. So it was in Lupai's group - Yeah, Lupai's group - Oh wow - He likes the gasoline on his

1:53 clothing. But so

1:58 I worked there, that blew up. I joined EnergyNet in October of 2002 as a business development manager here. Bill Britton started EnergyNet really as a way

2:11 liquidity in the oil and gas asset market. What's Bill's background? He is a West Point grad, born and raised in Amarillo, Texas, an officer in the Army, then he worked for a large ranching

2:22 family and oil and gas family out in the Texas Pan handle, and then started an EMP company with his partner Jim J. Brewer called J. Brex, and they operated in the Mocaine, Laverne area of

2:33 Oklahoma, Texas Panhandle, probably at their peak maybe operated 300 wells or so, but they were real active in the AD markets at that time. So he has kind of the internet, internet 10,

2:47 yahoocom and all that. So he decided to start EnergyNet to

2:52 create this liquidity for oil and gas assets instead of maybe just kind of for sale by owner type things. Even at that time, even

3:01 energy investment banks were relatively a new thing. I mean, Randall and Dewey were at two guys, I mean, were at five man shop at the time. But really, so I started in a couple of years after

3:12 the company started, you know, when I started, I think we've sold, you know, 25

3:17 million in assets around that time. Now we've sold about 9 billion in assets -

3:23 Was it always internet based when it started - Always - Okay, 'cause and technically I am Gen X, I am not a beginner - I'm a beginner - But, you know, you're absolutely right. Randall and Dewey

3:35 had started up. You kind of had the small shops actually doing property sales. You also had oil and gas clearing house doing the let's rent a ballroom holiday in and let's sell properties in a live

3:49 auction. And they were, I think, transitioning online, probably back at that point - Yeah, and I mean, oil and gas clearing house still exists today, but back then, I mean, part of our like

3:59 really kind of DNA and story is that we were getting our masses kicked and head kicked in by kind of the 800 pound gorilla in the room. They'd been in business, you know, seven, eight years We're

4:09 holding these auctions at the hotel ballroom, no internet at that time, but it was a, there was 50 million sold in an auction, and they held one every month, and every time their brochure came

4:21 out, it was like a kick in the gut to me, like, Oh man, I was talking - Did they pioneer that, or they just became the best at that kind of format - Well, all right, so a little, a brief

4:30 history of time. So back in, this is '86, the oil bust happens, all, you know, a financial crisis really, but there was also savings and loans, thrifts. So like 600 and 600 to 700 banks,

4:45 savings and loan banks failed. And similar to 2008 when they created TARP, the federal, US. federal government created the RTC, the Resolution Trust Corporation. And the RTC, you know, was

4:56 this big federal organization, but they took over all these failed assets, foreclosed on assets. And they found that a lot of these banks were, and oil and gas producing states. and they found

5:07 themselves with all these oil and gas at these conveyances. So they approached this company called EBCO and they were actually equipment brokers. That's what the EBSO, like oil field salvage

5:17 equipment brokers. And they, the federal government approached them and they said, Hey, we got these conveyances. You think you can sell those in an auction? And they said, Cheeching, jeeching,

5:27 yeah, sure we can. And so they did, but these were essentially auctioneers, no oil and gas experience. They were, you know, Bill, my boss and mentor and his partners, they're still active in

5:37 the industry. We're, you know, essentially maxing out their credit cards at these live EBCO auctions. Just like, no due diligence. They drive out to the field to see what the actual well was

5:45 producing, you know, give the pumper up, you know, case of beer and get all the information, you know, and go buy the deal, you know, a 10, 000 deal that was worth 100, 000 or, you know,

5:55 things like that - That's a lot less - Yeah, definitely. And then, and then the, so the, my version of the history, I'm sure other people have different version, but you know, EBCO, clearing

6:02 house kind of came and ran Ebco out of business.

6:06 Ron Barnes and all those guys were like, you know, we're rural and gas guys, we're landmen, we're engineers, integrity, customer service, we know how to run businesses. So they kind of ran

6:15 them out of business. And then we started, you know, in 1999, they started in 1993. And

6:22 we were doing it all online. So it was again, like, you know, Chuck wasn't, uh, is Gen X not a boomer, but I was selling, I was selling, you know, our service, we can go in and, um, you

6:32 know, through a, you know, a competitive structured process, you know, maximize value for your asset, your rolling gas assets. And we'll, we'll reach more people, you know, you don't have to

6:41 be at the event. You can do due diligence online. It's all there as a level playing field. But I was selling to people that were my father's age. And they were like, that's not how we do it. So

6:49 I'm the store so you can see the door, see yourself out, you know, yeah. So it was an uphill battle, but we kind of grinded away. But really in our DNA was, you know, how long was it? How

6:58 long was it like that? That it can't be done? Uh, I would say, I mean, seven, eight. 10 years. I mean, it felt like from I started till maybe 2010, we kind of took over market share, just

7:10 kind of by begging and pleading and grinding away. But it was always kind of a, that's not how we do it or, you know, things like that. And then, you know, over time, the decision makers at

7:20 the EP companies, the private equity sponsors or just owners, where, you know, had Amazon accounts and online banking and everything else. And it made perfect sense to the, you know, the people

7:30 that kind of grew up in that era So one of the things I kind of saw from that, let's call it perfect storm is you had brokers starting investment banks starting the online selling. And then you

7:46 actually had private equity starting then too. You had natural gas partners that started up in cap had started up quantum and raise their, their first fund. And what happened is somewhere, some

8:01 somehow. a manager at, let's just pick on Exxon, 'cause they're

8:06 the big guy sold his buddy a property for 40 million, and he worked it for two years, sold it for 200 million and got like a Lamborghini, and the guy at Exxon got pissed - Yeah, yeah, yeah - Like

8:20 this. And so I think you had all those forces come together where Exxon on down said, You have to sell something at an auction. We can't just sell to buddies anymore - And it's really not just an

8:32 option, but just broad market exposure - Broad, yeah - It has to be fully exposed to the market competition from all sources, and that's really kind of how we, you know, got our, I mean, made a

8:41 lot of traction with the Chevron's and Exxon's and BP's and you know, marathons of the world, because, you know, it checked all those boxes. For those guys, they had lots of assets to sell. You

8:53 know, they were under scrutiny from situations like that to make it, you know, everything on the up and up, no, no funny business, no selling it to your college roommate type stuff and then go

9:02 in and start getting. PPE money and starting a business. So it was broadly marketed, level playing field. Everybody has the same opportunity to buy it if they qualify if they're operator in good

9:15 standing, if they have the funds. So we verify all the funds, we verify they're an operator in good standing, bonding requirements, all those things - So the call it 10 years, the struggle of

9:25 building this. Did you develop a sales pitch that you figured out finally worked? Did old people just retire at these companies and younger people that use Google and Amazon decide, hey, this

9:40 makes sense? All of the above, or was there an aha moment? Was it gradual - No, I guess I would say it's kind of like scoreboard, point to the scoreboard. So there became a situation where among

9:55 people doing it, it was like we built a track record, we had success stories with companies that we're having repeat consistent success. you know, exceeding their expectations. And then with

10:05 competitors, it kind of got to a point where there's a live auction and there's an online auction. And when it got to a point that it was, you know, most of the transactions were occurring on our

10:14 platform, it kind of switched really quick. But up until then, it was, you know, we had a good sales pitch, we had, you know, thought we checked all our boxes, then it was like, I'm good

10:23 buddies with this. I'll play golf with this guy over here, saying, sorry, Chris, but maybe next time. But we just kept grinding away and kind of, you know, never say die attitude and just

10:33 probably, I mean, really at the time, and when I started with EnergyNet, I was just, you know, too dumb to pour it or realized it wasn't, I mean, it wasn't gonna work. I just like figured

10:41 like, I need the money and, you know, I'm gonna figure this out. Like, yeah, you know, maybe I just don't like me, maybe I can change my suck -

10:49 So I've been listening to Mark Zuckerberg on Joe Rogan's podcast. And I just got done with it. And one of the things he said that I found really interesting was. 'Cause Rogan basically asks the

11:02 question, Hey, when you started Facebook, did you know you were gonna take over the whole world? And he said, Well, I started it for one college. I thought I might do another college or two,

11:12 but literally when I launched the website, I

11:17 went out to pizza with some buddies, and we were talking about, it's so obvious, somebody's gonna do this for the world. It's not just gonna be a college thing. Because no idea it would be us.

11:28 We're sitting there going, Google, Apple, Microsoft, I have all these resources to do. And so his point was sometimes something's just so obvious to us that we think everybody else is gonna do it,

11:40 and we look up 10 years later and nobody else did. It almost sounds like that was - And there's really no other entrance in the space, right - They come and go, I mean, there are, and they do

11:50 similar things, but they've come and go, and it's a really hard business to start, like because it does become, am I going to go to the platform that has you? 45, 000 users, or am I gonna go to

12:02 the platform that just started out and has stubbed their toe and figuring things out on processes and procedures. So it's kind of a two-sided marketplace and it's hard, the marketplace problem is

12:16 that you either have to get inventory to sell or you have to get buyers. So there's stories on two-sided marketplaces like when DoorDash started, believe in San Francisco, usually start similar,

12:26 Mark Zuckerberg started Harvard went out to another school, DoorDash started in San Francisco or that Silicon Valley area, but they didn't have any restaurants. So they would actually go, add a

12:37 team of people go and get menus, scan the menus, and then you'd order Buffalo Wild Wings and they weren't part of the network. You would just order it and they're like, all right, I will go order

12:48 it now from them and go figure it out. And they would go, the DoorDash people would actually go pick it up. There's a conundrum If we starting a business like ours, you either - The critical

12:58 marketplace is hard, 'cause you need buyers and sellers, and you think they still have to get them at the same time - Exactly - You get a whole bunch of buyers, but you don't have any inventory,

13:04 then they fade away. If you have sellers, but you don't have any buyers, they have poor results. So it's hard to get going. Like the idea that was there, so John Lars, our chief technology

13:15 officer, he's actually been, he was employee number one at Energy Net Bill, Britain hired him first. He's a genius, brandiac, created the platform itself, but he was so frustrating just in the

13:25 early days. He's like, Chris, this is the idea This is how it's gonna work. It's like, you don't understand what the people are telling me - You know, I'm there, you know. They're telling me

13:32 it's not gonna work. It'll work, it'll work. But just the IT kind of - Just a little early, you know - That's all it is, yeah - Actually in reality, we probably work, you know - But I mean,

13:40 yeah, I think it worked out. I

13:44 mean, so let's dive into, you know, NAEP has traditionally been marketed as the place where deals happen. I think over the last few years, I know you've probably been for 20 years. I've probably

13:54 been for the last, I don't know, seven or eight.

13:58 Yeah, is there really still a market for that? And I think the question always is from everybody that I talk to and every time that I go is do deals actually happen at nape or do they happen at the

14:08 Hilton and the America's bar or the Four Seasons bar? And is it just a reason to get away from the wife and the kids for the weekend because all your friends essentially just to send upon juice in

14:19 and you just get to kind of hang out. The thesis there is you've got buyers, you've got sellers, but it is very much an old school kind of like, here's kind of our prospect and maybe it is kind of

14:29 earlier in the journey to where it's not necessarily 'cause I don't think you guys are necessarily listening prospects, are you - We're mostly assets - Mostly assets, yeah - Producing assets,

14:37 non-percising assets, but it's not drilling deals - Yeah, so I guess it is kind of like maybe apples and oranges then. I don't know, I'm just kind of curious like your take is to like where that

14:44 kind of plays 'cause we've seen, I'm just gonna say, I mean, we've just seen declining attendance and declining engagement with nape over the past couple of years - And this will be actually, this

14:53 winter nape will be the first year in 20 years that we haven't had a big, you know. an exhibition and what not exhibit. Over time it's changed. I think there's always, there needs to be a place

15:04 where we can all congregate like the entire upstream willing out, you know, North America. It's fun. I look forward to it. It's fun. I mean, I think it just evolved over the years. And for us,

15:13 we're kind of taking a seat back, I think with, you know, at some point there were, you know, actual, you know, conventional prospects that were for sale and people would walk up, you know,

15:25 either rich companies, rich people. Like I'll take, you know, I'll take a 15 of that deal. I mean, it was kind of a cool way to do it. But with private equity, I mean, private equity guys

15:34 aren't walking up to somebody's booth and making a deal with them. You know, it's a little bit more. Did you guys ever go to name? Or was it more just like on the speaking circuit? So what we

15:43 found, this was kind of funny, is we would get a booth at nape. And I would see Chris over at his booth, and I need to go talk to Chris, but somebody's got a man our booth. And then the person

15:54 that has the offshore prospect. off South Africa that you can't even license the prospect. We come into your booth and not leave - Right, yeah - And it's like, no, I need to go talk to Chris. So

16:07 it's like almost like you need like a bouncer with like a rope - You know the rope, like, yeah, you got to get prospects - My team would always, you know, just be doing it so long and that would

16:16 exactly happen. And like, really, I just kind of wouldn't stand for it. Like I was, it's like, I'm talking to somebody and I would just like walk away -

16:25 So that, so what was funny is we morphed to not getting a booth, but we'd show up and we'd walk around - Yeah, nice to see people - I mean, it's an effect that's a cocktail party. And I used to

16:34 do almost the same thing as, I just wouldn't stop walking - Right - 'Cause you could talk to people and they could kind of walk with you, but just don't stop. 'Cause the second your feet stopped,

16:44 you were trapped - No, I think NAIP and the AAPL and all that goes into it has a lot of value. I don't know if it's, you know, where deals happen. I think the conversations there lead to. the

16:54 deals happen, the relationships and trust built and all those things. So yeah, I've always had a good time. Yeah. So in

17:03 the building of energy net, kind of two questions on it. One, you talked about struggle for 10 years. Did it wind up having a traditional S curve adoption?

17:16 Yeah. Very early adopters, you know, laggards, all that. Yeah. Very much so Explosion. Okay. So that's interesting to me. And give me a story from that that we haven't heard that will be

17:27 surprising to people. Give me your classic entrepreneur, something happened, whatever it is. I'm putting you on the spot. No, I mean, for us and maybe not a completely news story, but

17:42 basically is. But we, you know, in our early days, we, Chevron and Texaco merged, and then they had like a two year freeze period on that merger. And then we. went in and competed to sell and

17:56 make the mineral bros salivate, but we competed and won a divestment mandate to sell 130, 000 net mineral acres in 33 different states that Chevron and Texco now owned. But instead of doing it as

18:11 one package where nowadays, Shiseo or Blackstone minerals or Kimball or somebody would buy, just like, all right, I'll take that Chevron to understand what they had before they sold it and to make

18:24 sure their geologists blessed it and operations blessed it and everything, we sold it county by county and sometimes tracked by track. So it was 2000 transactions. So winning that divestment

18:34 mandate put us on the map because everybody was

18:38 like, what's Chevron sell? They got stuff in Martin County, they got stuff in East Texas, they got stuff in Wyoming, and it was minerals, non-producing minerals for the most part. So people

18:47 were buying it up, competing for it It was working, it was like moss, the flame. or our platform because people sign up, have a username

18:56 and password, and then they're hooked for the next deal. And it builds on itself. This is like a 2003 through

19:04 2005. But in selling it kind of parcel by parcel, I think we two X or three X, their estimated value from what they would have received. And then with the success of that, even the people like

19:18 our champions at Chevron at the time, mostly retired now, but we're, well, you gotta producing properties have to be sold at different Avenue. We're like, oh, come on, man, let us see. Let

19:28 us sell these nonops, let us all these royalties, these overrides, so they'd give us a chance and we executed on that. And it was, well, when it operated properties, you can't do operated

19:36 properties in an online auction format. And we're like, it was just shot on something small. And then we executed on that. And then before along, we were, we exited Chevron out of Wyoming, sold

19:44 at the Hill Corp, or I wanna say 100 million We did a big 100 million deal on the So, um, Velma Waterflood in Central Oklahoma. Now we've done multiple 100 million individual transactions for them,

19:57 but it was like a graduation level and every step along the way, it was like, you can't do that. What's the biggest of you guys done so far? About 225 million. Jeez. What kind of deal was it?

20:07 This was all of a non-op transaction.

20:10 So, for always jokes, my mom is the only person that listens to my podcast. And Dear Sweet Mom is one very naive tune. There's nothing about energy. For mom, walk through what the process is

20:24 like. Sure. It's mom, oil and gas company wants to sell something and says, Hey, Chris, what do I do? Sure. And what's interesting about our platform is that we really have a reason to call on

20:33 or to interact with any person that owns oil and gas assets, whether that's ExxonMobil or BP or Granny Yates. I don't know what you call your mom. Mom. Mimi. Mimi. Mimi Yates. But we have

20:45 conversations like this with mineral owners, you know, they inherited things all the time. So. We call them, they call us, a lot of times it's for those types of sellers, it's a referral from

20:54 their bank or from their lawyer, from someone else that's more engaged in the industry. We don't necessarily target those customers, but we sell for them all the time. And so we talk to them and

21:05 we say, what we're going to do for your asset is that we're going to create a comprehensive data room with production, with cash flows, with mapping, with how you own it, how you're going to

21:14 convey it

21:16 There's upside, all those things, and then you're going to be able to review the data room, make sure everything is accurately portrayed. Then we're going to expose that property and market it to

21:29 a large universe of prospective buyers.

21:33 We're going to personally contact the area operators surrounding it. We're going to personally contact the buyers that have bought similar properties in the past. One of the cool things about our

21:42 platform is from an administrative level. Big brothers while watching, like so when you're logged on, we see, we can see and there's a record of everything you've ever looked at from instance you

21:52 had a, had a account. So we know what you bought, what you paid, all the, how much money you have as a, as a bit allowance. So we can target the next asset based on previous transactions, kind

22:03 of like a recommender engine type situation. But with that, so it's about a 21 day to say 35 day sale process where we give everybody time to evaluate it, you know,

22:19 make sure, you know, everything looks right, get management approval, determine a value. And then there's either a bid window through a, like a transparent bid option or there's a seal, it's a

22:28 sealed bid. So both, both, both processes work exactly the same. Either you see, you see other people's bids or you don't. What's the, what's the sealed bid? So the sealed bid, it's, it's

22:38 very much the, like so if today's September 9th. So if Mimi Yates had the property, it would take us about seven to 10 days to build the data room. Mimi Yates approves it, I hope she's listening.

22:53 And then roughly about a month later, so say October 9th or 10 bids would be due. So if bids, if it's an auction, then there's a seven day window you can bid. And if it's a sealed bid, it's just

23:05 at 4 pm. on October 9th - So there's no actually auction component to the sealed bid. It's just, hey, I'm just gonna submit kind of just, it's more like a blind auction, right - Well, I mean,

23:14 it's a form of auction, but it's just you don't see what the other, you're not bidding, you have your best offer - It's not the eBay model - Not the eBay model - What is, which way is preferred

23:23 for, give me some data on what's the - Yeah, certainly, certainly. So really it kind of comes down to value, or in our estimation. So currently we do about 2000 or so transactions a year

23:35 annually through the transparent bid auction format and those are typically sub 10 million in value. We sold one for

23:46 QEP resources back when they were kind of monetizing things. And in the auction process, it sold for 35 million and two companies ran it up. The beauty of the auction format is that everything is

23:59 defined. Imagine if in the

24:03 oil and gas industry everybody agreed on a PSA That's essentially what we've created for this structure. Everybody agrees on the same PSA. The seller's outgoing conveyance is the controlling

24:17 document of the sale. So when you bid, the process really boils everything down to the price. So everything is predetermined except the price. The effective date is known. Environmental

24:27 liabilities, my watch, your watch, all those things are done. Taxes are done So when the

24:36 auction ends and the seller's minimum reserve price has been met or exceeded, we They have two business days to pay our escrow account, and then we act as closing agent and close the deal. So

24:47 that's how the auction works. But there's a sale trigger price that you have, you as the seller have

24:53 the ability to set a minimum reserve price. The buyers don't know what that minimum reserve price is. They just know there is one, or there's not one, or it's been exceeded. But once it's been

25:04 exceeded and the auction ends, it's a done deal. We invoice the buyer, they have two business days to pay We file that there's no negotiation from that point on. If it doesn't meet the minimum

25:14 reserve, then we step in and say, you know, Mimi Yates wanted a million dollars for that asset. It only got up to 850, 000. Mimi, can we go back to the top one, top two, top three bidders and

25:25 see if we can get a deal done? Yeah, if you can do that. So we go back and get the best offers we can. Sometimes we exceed it. Sometimes we get closer to the minimum reserve price, and then we

25:34 close it at the same fashion. The sealed bid, similar to a typical energy investment bank, You know beds are due at a certain time submit an offer letter with maybe a markup of a PSA or term sheet

25:46 or red lines, things like that, and then there's a negotiation back and forth. So we present all that to the seller. They huddle up and say, All right, let's go back to the top three or four. I

25:55 have a pencil sharpening exercise to see if they can increase their offer potentially or just how fast can you close, what needs to happen before you close. So it's a little bit, the sealed bid

26:06 provides a little more flexibility for the seller and for the buyers really just to conduct additional Those are the larger deals usually? Typically. Yeah. There's a lot of just, I guess, their

26:15 own interpretation of the value, particularly say like PUDs. Yeah, mainly, and that's another reason. So the auction works really well for PDP assets, roll T assets, kind of straightforward

26:26 assets where if everybody can agree that the PDP, PV10 is 5 million, then it's just who's going to bid 53 or 54 or 55 kind of around that but if it's really subjective, it's better to do a sealed

26:42 bit of approach because you want to capture the outlier bidders. So,

26:47 you know, this company may see a lot more value in the upside or what they can do with it than somebody else. So you want to kind of, you're hoping for, and it is really a bell card. And we see

26:56 that again and again, where, you know, there's, you know, we did one deal and it was a 80 million deal. We had, I think, 25 offers and 15 of the offers were between 35 million and 45 million,

27:09 but three were, you know, 75 to 80 million So it's like the consensus is here, but the consensus doesn't win the deal. Yeah. I mean, you can say that now that assets work X, but that's, I mean,

27:19 it's like, it's like if I had a jar of pennies here, a jar of coins and you play the game, how much is in there, like, it's one thing to guess how many coins are in there, but whoever just pays

27:28 the most and wins in a competitive sale process. Well, you know, the thing I think that's the best pitch for you guys is at Caine when we would go out and sell a property for the longest time we'd

27:42 say. Okay, everybody, write down who's gonna buy it and how much somebody's gonna pay, put it in sealed envelope, and we'd open it at the end of the deal. And we were never right. I mean, the

27:52 only time we got right was James Broach said that Lynn would wind up buying Stallion. He was way off on the number, and we were like, no way, they just bought black sands from us, there's no way

28:05 they don't have the capability of doing that, that's the exact - Yeah, I remember that deal. Paul King and Stallion, I remember - Paul King and George Sam Follipop But the key was, and that's why

28:13 we were always like, you gotta make sure everybody sees it, 'cause you just don't know. You don't know what happens in the boardroom two weeks before the information goes out. So everybody needs

28:23 to see it - Yeah, I mean, there's different schools of thought, and it's, I mean, like we are ingrained in the

28:31 competitive sale process, consistently work, consistently deliver the best outcome. I mean, we occasionally do private sales, targeted sales. But when sellers ask us to do that, it's kind of

28:42 like, all right, handcuff me, handcuff my feet to my hands and now let me try to do this deal for you. I mean, we wanna just - Trust me, I sat down with sellers all the time. Man, if you give

28:51 me a little excuse, I can work it hard and

28:55 get you a higher number. I'd buy the drinks all the time, and it was never true - Right - It's awesome - Just stop, I wanna put something in front of you that you're gonna have to say no to - But

29:04 there is a spectrum, it's where you sit on the spectrum of a buyer or seller. A seller wants to get the best deal possible and that usually means submitting an offer, an unsolicited offer, and the

29:18 seller accepts that for whatever reason. That's what a lot of companies do. That's the mineral ground game. Companies do that all the time, lobbying an offer on your adjacent fields and whatnot.

29:27 But the reason that they're submitting an unsolicited offer to you is probably because they know something you don't or they think they can, I mean, it's not because they wanna pay you the most,

29:35 but then from a seller's perspective, you wanna get the most value, you wanna see. If you can get Oxeed a bit or if you can get Diamondback to Bib, then if you can get a private equity company

29:45 that just got new money or they're running out, the commitment's running out, you want them to bid. It just gives you options as a seller.

29:54 I always joke,

29:57 one the unsolicited offers, if I can go into a bar, my club, and I'm the only guy there and it's just filled with beautiful women. Yeah, I love that, but that's not how the world works. I could

30:06 screw that up I

30:12 mean, has there ever been that temptation of like, hey, we have access to the best deals that we start accumulating our own assets? Maybe it starts off in the early days of like, we're just

30:21 trying to get this thing going, we're just going to take some overrides and that kind of bloons and you're like, oh, shit, we've got a pretty good thing going here. It was definitely discussed

30:29 and to Bill Britain's credit and the leaders at the time, we just said, we're never going to compete with our buyers or our sellers we're never gonna be perceived that way. So we don't, we have

30:39 never bought. any deal that's been listed or even brought to us. And sometimes we see it, it is part of our pitch and like our friends, just at Atherton, hooked me up on a deal that is coming to

30:51 market and sell it to me instead. Kind of the same situation. I've tried that with you.

30:58 But even in my, Chuck was asking what our pitch is, but our pitch is usually the first words out of my mouth is that we're going to create a competitive process. We're going to put this asset in

31:08 its best light. We're going to get a lot of people to bid on it and exposure and competition.

31:14 And we're going to run through walls to make sure the right people are looking at it and the right people are bidding the most. But then after I save that, they can't say, well, now I want half

31:21 the value. I really want it. So I mean, there's not many, I guess just in our conversations with potential sellers, there's not many deals to be had, I guess, that are steals Yeah. So do this.

31:33 Two or three trends today in the market. What are you seeing out there? kind of in deal land. I wanna talk that for just second. And I'm gonna go ahead and say this just so you'll have some time

31:49 to think while you're talking that is, then I'm gonna ask you what are two or three trends we're gonna see over the next five years - Okay - So what's going on today and then we'll talk tomorrow -

31:58 You know, it's interesting and you experienced this in private equity world that, you know, there was a time where it was a traffic jam of, you know, kind of 2018, 2019, 2020 where private

32:10 equity companies were essentially built to sell, you're building a product to sell hopefully to a publicly traded company. But there was a traffic jam where the publics weren't buying. Like it was,

32:18 it was, you know, solid days when they were, but when they stopped, you know, people were like, I have to drill my returns now. Like what's, you know, my three to five year exit gonna be

32:28 eight to 10 years. So that occurred and we went through that and got through that But now, you know, I think a lot of the large publicly traded companies are just publicly traded companies in

32:38 general, EMP companies. are seriously looking at their inventory and seeing how much they have left. And that trend starting to begin again. So we're seeing that in terms of publicly traded

32:48 companies significantly paying for upside, for acreage, or maybe they weren't a while ago. So that's kind of one trend that we're seeing and we think that we'll continue where the eventives and the

33:00 pioneers of the world are gonna be on the hunt. More macro to our world is just that you need to get big, quick and we see companies like Silverbow, companies like Earthstone doing that,

33:13 Continental's on a run, Devon's on a run.

33:17 I think we'll continue to see bigger companies get even bigger. I would say that another trend that we see that we interact 'cause there's acreage deals that are more exploratory development, shale

33:29 deals, there's PDP deals, there's a different buyer segment for just heavy PDP deals. A typical publicly traded company does not want for the most part to buy just a PDP deal. doesn't help them.

33:41 They need to buy inventory that they can use their expertise to exploit and extract value from. There are buyers that have different investment parameters.

33:51 I consider the Diamondbacks and the pioneers of the world, the Game of Thrones, and then there's the merit energies and scout energy and foundation that are more of law and order, CSI, it's very

34:03 formulaic. We're gonna get this asset, we're gonna give it some TLC, we're gonna do some workovers, we're gonna reduce OpEx, we're gonna increase production, but we're not gonna turn zero into

34:14 10, 000,

34:16 30, 000 barrels over a couple of years, they're gonna incrementally grow that. So there's the PDP side of the operations, development drilling, but then also over here, there's the royalty side

34:26 and the non-operated working side. So the royalty business, and you guys know with carbon-seki and Kimbo and all these mineral and royalty companies, a very dynamic market, a very large market,

34:39 it's very. fragmented, but the royalty and mineral market, I mean, you have to, you know, each, each, there are a lot of small deals. And it's like, I equate it to, you know, you know, if

34:51 you can do a, roll team mineral deals, you usually have to make a deal with the owner of the asset. And it's like trying to cut your front you line with a pair of scissors. And we have to do like

34:60 one deal at a time, one deal at a time, one deal at a time, because you have to, you have to have an agreement. But then the non-op side, I think partly because the mineral and royalty side has

35:09 gotten so institutionalized and so, you know, developed and, you know, it used to be on the minerals and royalty side that it was, you know, I'll pay a 90 months cash flow for that or 60 months

35:18 cash flow for that. But now it's basically operating teams that are looking at the development plan. So they're treating all these assets like they're, you know, like they operate them and how

35:26 they would value them. Because that's gotten so mature and institutionalized finance, it's kind of spread over into the non-operated working on your side. So that's kind of an interesting dynamic

35:38 as of late. for the past two or three years where there's a huge market for buying outside operated non-op AFEs. So a company like Devon, for example,

35:51 all of their vast holdings and operations and acreage all over the place, they get outside operated AFEs coming in like the mail. It never stops. I mean, there's 20, 40, 50 a week and they have

36:03 to decide are they going to participate or not. So there's a vast market right now of people saying, I'll step in your shoes. You don't want to drill that well and Wyoming and the Powder River

36:11 Basin or you don't want to drill this well. I'll step in your shoes. I'll pay you a premium on top of what the AFE costs to do that. That's been a fascinating development. Well-born Wednesday.

36:22 Because your oxy, and it's like you have this amount of budget, well, of course you're going to spend the budget on what you operate. The stuff you don't want to operate, even if it's operated by

36:32 Shell or EOG, some other good operator, you don't want to do it. So they're literally giving I mean, it's developed into a market. We're actually starting, you know, like this, I'm saying it

36:43 out loud, but we have a portal on energy net that's specifically for that. Oh, cool. So just to create more liquidity for those non-op AFEs, you know, some companies like Conoco, Conchio, with

36:53 Wellbore Wednesdays, it's very streamlined, very, but still a lot of time and effort. You're going back and forth on all these negotiations. So we're going to work to do a lot of heavy lifting

37:00 for maybe some of the companies that don't have a process in place or it's kind of your hair's on fire. You have to consent by, you know, today at five o'clock to get the deal done, or it just

37:08 goes away. So we have our energy net, non-op AFE, divestment portal that's live and we're doing deals like we've done 100 or so transactions thus far, but it's kind of in beta right now. It's

37:19 just really launching. But you know, when I first saw that happening, you know, a couple of years ago, I was, who's going to buy like on the other end, like the people that are doing that,

37:30 that are buying Wellbore only non-operated working interests, but then they have a portfolio of a hundred non-op, you know, well-worn. There's no upside to it. anymore. It's just a cash flow

37:40 stream for cash flow. But now we did a transaction October of last year for 154 million that was all 434,

37:54 36, 000 and the Bakken, multiple operators, but well-warming. And lots of buyers for it. A dozen or so, 14 different bidders and it was sold to Northern oil and gas. But there's an end case for

38:03 that. And now with Northern being a public or Northern has always been a non-op publicly traded company. But now you have

38:10 the gray rock team, they're publicly traded non-op. Riza Energy is secure is buying these and securitizing them on the other end. So it's becoming a very dynamic market. That's it. Okay. So now

38:24 we're doing this podcast in, let's say four years and we're talking about the big trends. What are those things we're talking about that we're going to be talking about in three or four years.

38:36 Where's the fuck going? Exactly.

38:41 In that, I think there is like a, like a, some of it has to do with these asset transactions, but I think there's a push towards making oil and gas as an investment, you know, as an investment

38:53 class into more of a security, like being able to, like right now you have, you know, you buy a 200, 000 asset, you have the conveyance that's filed in the county, you know, you own it, you

39:04 can sell it And it is asset class, like real estate, you know, stocks, bonds, mutual funds, ETFs, things like that. I wouldn't be surprised if in five years somebody kind of cracks the code in

39:16 terms of how you could turn that into, you know, more of a, you know, your, you know, Edwards Jones broker calls you and says you want to buy some, you know, salesforcecom stock today, or do

39:27 you want to buy like 100, 000 of West Texas minerals? And it's just very, very similar to that I could see that and that opens up a lot of different things just in. capital to the market, things

39:39 like that - Yeah. What about any chance, 'cause this makes so much sense, which is why it won't happen. All title in America done on blockchain. No more going to the courthouse, trying to figure

39:52 out what you were talking about - Yeah, a lot of people are trying to figure that out - Yeah, we killed a lot of brain cells about that a few years ago. I don't know if you know that. Like a lot

39:58 of brain cells, probably like eight or nine months deep, deep into it. Here's, I'll just, I'm just gonna tell people how to do it. 'Cause if somebody does it, it's a massive undertaking The way

40:06 you do it is you literally, you take the Uber model and you use the gig economy and you use existing land men to go out there and you use bounties, right? Use bounties for a certain amount of data.

40:18 They go out there with the apps, be able to go out and structure all of this information, put it all in the blockchain. Once it's on there, it's on there. Because if you, as a private company,

40:27 imagine, you try to go out there and go to every single fucking courthouse and structure this entire thing and do all the title yourself, I'll never fucking work - Right - If you use the gig economy,

40:37 And there are companies, especially in the Permian Basin that I won't name names, but I know, I think I know of like three or four that have just been doing buying roll tees and minerals in the

40:46 Permian Basin for so long that they themselves basically have title run, from the beginning of time till today on just about every county, just because they've been doing it for 30 or 40 years - I

40:57 think the biggest barrier there is the brokers - Yeah, yeah - 'Cause you're essentially, but there was a company, I don't know if they, well, it was a company called Run Title, but I remember

41:08 the way they explained it to me, it was like if you have the book Moby Dick, it would be like, I hand out copies to all three of us and we just write the whole book again in another sheet of paper.

41:17 And then when something else happens, we just add another little perin, but that's how you run, I mean, that's how title is run - That's blockchain - Yeah - But you have chain in, it's title -

41:25 Yeah, yeah - It's just crazy to think that you run title every single time there's a new transaction. It's just so much, it's so redundant and it's so wasteful - I haven't spent enough time

41:33 thinking about the economics for the. county and when you think economics of the county, you got to think social good of jobs, of people working in the county, in the title offices too. 'Cause it

41:46 just, it would make sense to me if I'm the county judge of someplace, it's like, man, we're just gonna, we're gonna in effect, give all our title information to blockchain and that way we never

41:57 have to mess with it again. Some company that would do in effect outsourced it. And the company might even pay you - Oh yeah, for the opportunity, yeah - To do that, but I guess you wind up

42:06 putting people out of work in the county - The question is like, is that, would that blockchain be owned by a company or would that be something that would be totally just open source and utilized

42:17 by everybody? And I think, I don't know what the right answer is, but I think that that answer would dictate whether you get mass adoption or not - Right, yeah, right. You don't eat, yeah -

42:25 Close systems have a tendency to look really good on financial forecasts, but never seemed to work out that well - Right, but in the kind of gig economy,

42:35 person adding their own piece to

42:38 it and it being a collective open source that they can all benefit from. That makes a lot of sense if you could convince them all to do it. I think it worked. So what's the. So we've gone macro,

42:50 what's gone on now? We've gone macro in a few years, five years from now, what's energy net done? So what do you look like? We've had a. With the S curve, we've had continued growth. So our

43:03 area is a focus We spent the last couple of minutes talking about our auction business. That was our primary business and it kind of provided a foundation. With that, we've created Energy Net

43:15 Indigo, which is our version of energy investment bank or boutique advisory firm. So we've done, in the past five years, maybe 150, 160 deals between, say, 15 million in value and 225 million

43:30 dollars in value. More traditional, you know, here's a, you know, six week data room, here's an executive presentation, technical presentation. So we have Keith Rees, who leads our technical

43:41 team, Jonathan Calk and Riley Blight and Cameron Cooper and Kat DeSynhah that are running our technical team and building the upside story in the narrative. So we're winning and closing on higher

43:54 value deals. So that's one area that we're focused and it kind of, I mean, we're not an investment bank and never will be, but it marries kind of the transaction experience, all this knowledge of

44:05 all these, all the soldas that's created from all these transactions who bid, who didn't bid, who's gonna bid on the next one. What did this guy bid? All that kind of user data, buyer data and

44:15 then data on assets, it marries all that transaction data and user data with the horsepower of a really strong technical team that can explain, the upside explain the narrative, the story. When I

44:26 throw you the keys, here's how you're gonna drill these,

44:33 different benches and in what order and how you're going to unlock value and what the value is of that of doing that. And then that's why you pay the highest price for it. That's kind of a

44:40 no-brainer because think about like all the data that you guys have is such a major asset from all the experience which gives you a significant amount of horsepower to be able to pull off those deals.

44:50 I just think if you like if if I was in somebody's shoes and I was looking at that comparing it to say a traditional investment bank, I mean you guys have been doing this for 20 years. You have so

44:59 much information about how to be successful in this space. And it's like within just the investment bank model it works. There are great banks out there and great people that work at those and very

45:11 intelligent skilled experts in that realm. But there are times where it's like this particular group hasn't done a deal in the Eagleford or the gassy part of the Alston Chalk or whatever in a year or

45:23 two years where we may have done 50 transactions. They've been all been billion dollar transactions but they were sizable and we talked to buyers, interacted with or reasons they were buying or

45:35 things like that. So I think that gives us an advantage. And just, you know, we're continuing to get better and better. It's kind of like the graduation story with Chevron, we're, you know,

45:44 just applying that to a more broad, you know, EMP companies and - Well, do you - I'm thinking about this. Do you marry

45:53 the two of them? Meaning, my frustration as a seller through the years was the allocation schedule where you look down and there's zero for like 25 of the properties and you go back to the buyer and

46:07 you're like, Well, we'll keep this, we'll keep this, and it blows up the whole deal. So you were always just like, Ah, screw it. That was the high bid, take it, and let's move on. I mean,

46:17 is there a world where me as the seller walks in and you go, Hey, Indigo's gonna do this. We're gonna run this through Inter - Yeah, we do

46:26 that. And it's not, I mean, they're kind of side by side, so we'll say, I guess a lot of times if it's a geographically scattered package, we may have like the, you know, the 90 million

46:36 portion over here. And then there may be a 10 million portion that we run as, you know, 25 auction transactions, just to maximize value for each component piece. Uh, we like, like for us at

46:47 least we think that the sum of the parts is typically greater than the whole. And if we can allow the seller to do that and we can say, here's, you know, 25, you know, 20, uh, 500, 000

46:59 individual deals And then here's the 90 million package over here. And we can run. Here's my operated by others. Operated by others. Here's my wellboard straight. Okay. That's cool. And it just

47:09 allows, you know, some buyers, you know, don't have the pocket book to do a 100 million deal. Some buyers, you know, want to buy the assets in their backyard or that they've been having an eye

47:18 on for a while, uh, but they don't, you know, that they don't have the capability or they don't want to take on all this stuff. So, uh, we do it, we do it both ways. So sometimes it'll be,

47:27 you know, we'll break it up. say this is the best way to maximize value and to get everything sold. Sometimes it's the other way and the seller just says get rid of it, I want it all gone. But

47:36 then we talk to the buyer and we say, hey, all right, this deal and this deal and this deal after you buy it could potentially be worth, say if you buy it at X, you could potentially come back to

47:44 the market in a year or six months and sell these assets for these values. So we have all that data at our fingertips. Is there ever like the, I don't think as I've thought about this or if it's

47:53 not possible, I'm just kind of just shoot from the hip here. But imagine as a buyer comes in and is looking for whatever assets

48:03 say it's million dollars, what? Have you guys thought about like baking in kind of like financing options? I'm thinking like from the personal finance side, right? If you want to go get like a

48:10 personal loan and you put in all of your information to get spigged back a bunch of quotes, right? And that can be based on, yeah. No, no, I think it's a great idea. We haven't cracked the code

48:20 on how to do that. We're trying to think about it Right now, a lot of individual buyers will use their, you know, their personal wealth, or you know, it's called private wealth, private wealth

48:30 accounts that they'll have, you know, if they have come on against public stock.

48:35 Yeah. So they have a, they have an account cheap loans. They are. And they have, so what they'll do is just, you know, they have an account with Amigee or JP Morgan or whoever is their private

48:43 wealth manager. And they maybe have, you know, 3 million in stock or whatever, but they can get a loan based off that. But we are trying to move towards kind of a staple financing, micro

48:53 financing that's just like here are a term sheet And if you would like to like to use that, you can. But we haven't, we haven't cracked the code yet. Interesting. It'd be interesting. I imagine

49:02 if somebody, I'm just thinking about like bootstrapped entrepreneurs that don't come from money, that don't have assets because I've been that person for 10 years, essentially, right? And we went

49:13 on bought some, bought some wells and just did them off market. You know, ended up paying cash for those. But yeah, I mean, if you were able to essentially say, especially if you're going out

49:20 and buy in PDP and it's, you know, shooting off cash flow, right I? mean, could you essentially say, having to buy this and then I'm Secure tie the asset that you're essentially buying and then

49:30 have that cash flow come off and pay the note, right? Yeah, definitely. Definitely. We're trying to figure that out. So I may tap you to help with that. I think it's a huge opportunity. Genius.

49:40 And the other area for EnergyNet now and so I haven't mentioned it thus far, but we have this user base. Are we breaking news? No, no, no, no. Okay Yeah, we have this

49:53 platform, user base, 45, 000 registered buyers with EnergyNet user IDs and passwords, all these oil and gas transactions that have been done. And then EnergyNet Indigo for the higher value deals,

50:05 more complex deals with upside. We have the technical team that showcases that. But we also have the third leg over the company is our government resources business So we EnergyNet, the platform

50:15 facilitates the lease sales for Texas University lands, Texas GLO, the Federal Bureau of Land Management and blah blah blah. I think we're at 16 or 17 different agencies. We run their oil and gas

50:28 lease sales. So

50:30 we augment, it's a legal description. It's here's 640 acres. Here's the terms. There's no negotiation because it's done by the state or the federal government. And then we run a competitive

50:39 process to see who's gonna pay the most. But with that, and that's been very successful. So in September of 2018, the solid days of the oil and gas business, we ran the Bureau of Land Management,

50:53 New Mexico, lease sale in the state line area of Lee and Eddie. And it sold for a billion two in a day. And people were paying 90, 000, 80, 000, 60, 000 per acre. Two sections were going for

51:08 12, 1, 280 acres. We're going for 100 million - Yeah, you guys crushed that - But it was getting all of the chevrons to compete with the Ameradevas, to compete with the WPXs at the time and

51:20 Franklin Mountain and Matador.

51:23 But it just shows that it can be done. So that was a big win for us, big win for US federal government. And the companies, the companies have done really, I mean, that's still probably the

51:35 hottest area in the country with the success we've had with these government agencies. And they're very difficult to get into. It's bureaucratic, things start and stop. Lots of rules and

51:49 regulations involved. But because we've had success, we've said, Hey, you got this real estate over here, your own. And instead of running your own process or putting out a feeler, let us run a

51:59 process for the real estate. So yes, live is last year, no, or earlier this year.

52:08 So in the western states, the United States, most of, there's a huge swath, I think 43 of the land is federally owned. So the city of Las Vegas, Henderson County, was

52:20 the county of Las Vegas, I can't remember but uh uh um Henderson's is like a I'm blacking to it. The city of the city of Las Vegas is essentially surrounded by Clark County Clark County Clark County

52:31 about it. But it's a play like I didn't know that for a plug this wall. Clark that's right. But but surrounding the city and the county is basically this federal land is desert. But as the city

52:43 has expanded or Reno or Las Vegas has expanded, you know, that that surface acreage becomes valuable for developers So we ran a competitive sale process for the surface land and had all these

52:54 homeowners bidding on tracks of land and sold 180 million of real estate. Oh wow. So these all these government agencies that we're working for have solar rights, wind rights, lithium, carbon

53:06 capture type stuff that we're trying to help, you know, they don't necessarily know what it's worth, but they know that they need to run a competitive process to to get the most value for it. So

53:14 we're helping them do that. So that's kind of the tip of the spear for us Oh that's really cool, dude. University lands, you know, the University of Texas owns 23 of it and AM. And

53:25 PorteX is tech. Yeah, PorteX. But AM owns 13. What does that tell us? AM got to choose first.

53:33 That's like my favorite joke. Right. So,

53:37 Chris, who do you want phone calls from and of those people you want reaching out to you, how do they reach you? Oh, yeah. Website. I'm assuming you want anyone that ever wants to buy, you want

53:51 them registering, anyone that wants to sell. Certainly. Walk us through how people get in touch. Certainly. I'm pretty accessible. I mean, phone numbers on the web. My phone, my cell phones

54:01 on the website, email address is

54:05 chrisenergynetcom. One link down on Twitter. But we have our team of professionals at EnergyNet We're real connected. Everybody's really involved in the industry and a participant kind of in the

54:16 community of it. I'm involved in the Houston producers forum involved in IPAA, Ethan Howells is involved in the petroleum alliance, petroleum alliance in Oklahoma. But we're involved in all these,

54:28 SPE, things like that, that we just try to stay active and involved. So Dean of Area is Cody Felton, Lindsey Ballard. We have offices in Midland, Oklahoma City, Denver, Houston, Dallas Fort

54:40 Worth, and Amarillo as well, obviously. Yeah, very cool. I

54:46 actually stopped in at the ranch and tried to eat the steak. Oh yeah. It did not end well. It was a lot of fun to do. I think I

54:58 remember. Next time you go to the home office in Amarillo, let me go because I want to try again. Yeah, no, I think the key, because I've had friends, I've never done it, but I've had friends

55:07 like livestream it. But I think the key is that you just, you video it, but then you don't post anything if you don't, if you don't, you know. actually do it. Not me. I announced that I was

55:17 going to go do it. Of course, that didn't end well. Before I wrap up, I got one cool story. I think I mentioned to you, but I just want to just talk about it on the air. We had for our zero

55:25 event, we had Marcella Burke come in, and she was one of our panelists on the one of the content. We were sitting down before, and she was like, I've got to tell you, I've been listening to the

55:33 podcast since day one.

55:36 I heard guys like David Ramsey in the wood in the early days, and Seth Blackwell, and the early EP guys that came on, I would tell her a story. She's just so inspired. She's like, I got on an

55:45 internet, made an account. Her and her husband started just piecing togetherop position. I think position's in 40, 50 different wells. Oh, wow. That was a really, really cool success story

55:56 that just from hearing the stories of the community and then using a powerful platform that you guys have done, and they've built up essentially a really strong annuity. Yeah, no. That's a lot of

56:07 people do So that's great, I need to get her name and address and send her some swag. Yeah, absolutely. Marcel, this is me calling. Yeah, come on the podcast. I want to know the deep story,

56:17 but Chris, man, this was absolutely fantastic. Yeah, thanks for having me. I enjoyed the podcast. What you guys are doing is fantastic. I like how the energy that you guys are bringing to the

56:25 industry. It's fantastic. Just making oil and gas fun again, man. Yeah, definitely. I'm here in my short. Yeah. I love it. Chris, thanks for coming on. This is cool. Yeah, thank you,

56:34 Chuck. Appreciate it. Thank you, Jack.