Chuck Yates Needs A Job

0:20 Yeah, it's been a big effort. And we've been, Brad and I've been over there a bunch and, you know, we're trying to get really European family offices, but mainly London family offices to invest

0:30 in US. oil and gas. And it's been kind of neat to see that happening. So there's been a lot of money coming over. You know, any of us is probably the most extreme example. I think they've

0:42 invested about three billion or so in the US. oil and gas space. But we've gotten good traction and, you know, we'll keep going over there and see if we can get more families to invest in the US.

0:52 oil and gas space. So what's that conversation like? I'll play like I'm British. I'm getting a British girl. So I can play British. Kind of what's the pitch in terms of, and maybe when you're

1:04 telling me kind of the base of the pitch, differentiate it with a typical US. investor? Yeah, I'll kind of back up to,

1:12 so Brad and I've raised a bunch of money in the past from private equity funds like Kane Anderson and others.

1:21 over the years. And I guess during COVID, you know, we kind of saw the slowdown in private equity, fund investment activity. And we still wanted to be able to provide that type of capital for

1:30 clients. And so we had set up at Stevens, a product group, just a financial sponsors coverage group to cover family offices. 'Cause, you know, we were doing so much with family offices, mainly

1:41 selling family owned businesses. And so we staffed it with a guy named Mickey McFarland And again, John Stevens was reactive with that group. He, Mickey set up a team and they cover, I think

1:50 today, about 400 family offices. These are generally family offices that can invest 20 to about 200 million per deal. So large family offices. And, you know, when we saw the slowdown, we had no

2:04 idea how relevant it was to our space. And we, you know, we got with Mickey and said, Hey, why don't you look at your list, maybe ping 'em, ask 'em a handful of questions, but try to get to

2:16 the bottom line if they were to invest in oil and gas. And over time, they developed a pretty good subset of families that like oil and gas and want to invest in it. And the thesis is oil and gas

2:32 isn't going away. The energy transition is going to take longer than people think. There's a historic low on where cash flow multiples are and AD deals and public equities just kind of where they

2:44 trade. And so that was kind of it And families can hold for longer periods of time and like to be contrarians and invest in space and sectors that have some kind of dislocation. And so we had a lot

3:02 of luck with getting those families to look at our deals. And in some cases, invest in our deals. And then we, to Brad's point, it set up this London Family Office. And we thought, well,

3:13 there's some London Family Office, of European family offices on.

3:19 Miki's list, let's go see if we can have any luck with those groups. Same backdrop, the only thing I'd say is their exposure to, you know, kind of the importance of hydrocarbons is more extreme

3:33 because, you know, you had the, you know, Ukraine, the Russian-Ukraine war, you have parts of Europe getting cut off from Russian gas, and so they can see firsthand the importance of

3:46 hydrocarbons, right? And that was, that was it. So when we would go over there, we had a whole deck on, hey, here's kind of why you should invest in US. oil and gas, and most of them just

3:57 said, let's just, we get it. We want to invest in US. oil and gas, and in most cases, they already had started investing in US. oil and gas. So we were really just kind of carrying it forward

4:07 and trying to develop those relationships to show them, you know, specific opportunities that we're acting as a banker on. Yeah, and kind of to add to that So, uh, As Keith mentioned, you had

4:17 John Stevens and Mickey McFarland, a couple of our other guys, basically formally stand up our family advisory group probably 10, 11 years ago. At that point in time, the families that were under

4:30 that coverage group really wouldn't look at oil and gas deals. So if you think about when they stood it up, that's 14, 15, 16, and oil and gas did in that two-year window. Way too painful to

4:44 even talk about today. But go ahead. Exactly. So you have that

4:49 wealth destruction, if you will, in that two-year period, you have the other verticals that are on fire, whether that's tech or pick your other vertical. And so the families at that point in time

5:00 really wanted to invest in other verticals. I mean, they're reading and hearing everything that we are as well. So at that point in time, when we actually stood up the group, you know, Keith and

5:10 I were showing them opportunities and, frankly, not getting a lot of interest because they're, you know, Every deal's got to compete for capital right in other verticals. So if we'd taken a deal

5:20 and it showed this kind of return dynamic and this risk, et cetera, and having to compare that to what they're already in, energy deals were struggling to some degree. And then piling on to what

5:31 happened in 14, 15, 16, then you had kind of the ESG phenomenon, capital obviously fleeing the space. So it's been a pretty lengthy effort, you know. And it was worse over there ESG is bad as

5:43 bad as we thought of. That's the one thing I've picked up going over there a lot. I mean, the, I mean, they, they truly believed Greta Thortonberg. You know, I mean, I, I think over here we

5:55 paid lip service to it. Over there, they truly believed it. I mean, they like literally staring, they would rather buy natural gas from Putin than frack themselves, you know. I think that still

6:08 someone exists today too. So, but anyway, so it's been a lengthy effort. Now obviously with with higher commodity prices the last you know really four or five years That kind of dying a little bit

6:19 now the families are are you know absolutely wanting to look at a number? You know oil and gas deals mineral deals

6:27 She still exists it. Yeah, it does exist tell tell people what that is in case haven't yeah, I'm well I'll say this it really we typically are targeting Groups that are already invest have already

6:41 have a vehicle set up over here. Okay It's not necessarily in one gas vehicle one family officer close to his you know big real estate investor over here and so There's no I'd say that generally The

6:56 groups were meet with all have that issue figured out. I don't I don't even know if I can speak to it But they they don't have so then become an agent and I'll probably bastardize this up But

7:07 basically FURPT is. you buy a real property interest and 25 of your gain, the US government keeps. Now, if you have investments there that you can get tax credits for, then to your point, it's

7:26 not an issue, but doing a standalone first time investment in the United States, we always found that whacked about 300 basis points off your returns, 'cause there's some games you can play where,

7:39 hey, you invested 100, but 50 of it's really alone, and you got paid at 10 interest rate. Well, that's not subject to the FERPA rules, but the other 50, that is. So we always found it kind of

7:51 cut 300 basis points off. Yeah, and we haven't, no, it's come up in a couple meetings, but for the most part, like I mentioned, these are kind of seat, these groups have vehicles in place,

8:03 and they have tax personnel that have that figured out. So we're trying to target groups like that, where we don't have to explain it. Yeah. To Keith's point, most of these groups have maybe not

8:14 been investing in energy here in the US. for a long time, but they've been investing in other verticals in the US. for a while. So they usually have capital domiciled here in the US. and they

8:24 just basically invest out of that vehicle. So it might be a European family office, but the money's already here. Yeah. I think one thing too, that we've learned to Brad's point,

8:37 there was a period where these families didn't do well or energy didn't do well and it wasn't good timing for us to go after that capital. Really what's evolved in our space is continuation vehicles,

8:48 you know, just recaps of existing portfolio companies or maybe a recap of around a couple assets in the private equity fund. You know, what we've learned is the families really want to write around

9:01 a deal they don't like for the most part kind of blind pool risk or a lot of blind pool risk. They want to underwrite a deal and invest, of course, at attractive terms, you know, for themselves.

9:16 And they also tend to kind of invest through syndicates. And so, you know, if you have call it

9:27 a250 million. We'll do this real quick 'cause mom's watching the podcast, tell mom what a continuation vehicle is. And mom's pretty sharp, but she doesn't know oil and gas. So all a continuation

9:37 vehicle is, it's just a recap of an existing portfolio company. And you're just setting up a really kind of a new entity that's gonna basically buy assets from the existing private equity fund and

9:53 see if new investors that are essentially taken out the old investors in a lot of cases, they're kind of east and west coast and down funds. I'm the private equity firm, so I'm in effect, I don't

10:05 call it 95. management owns the rest of this company.

10:11 But it's really my LPs that own that 95 percent. You're saying they come in and then my GP of the new entity too. Yeah, usually the GP will roll into the new vehicle. So any investment I had if

10:26 I'm getting paid carry or whatever I roll. Yeah, you'll roll it and then the LPs, your LPs will get, for the most part, get cashed out Now, the LPs do have the opportunity to roll as well or

10:39 they can get cashed out so they can go usually either route. Because that's the keep it fair. You're in effect selling this to yourself. Oh, if you think I'm selling it too cheap, why don't you

10:49 just roll? Right. I think I would say to that is in a CV, whomever owns the existing company, pretty much everybody has that option. The point being is that I don't think there's a cookie cutter

11:04 you know, here's what. all CVs look like. So I think in some cases, you may have a GP fully role. In some cases, you may have a GP that says, hey, look, I may want to take 20 off and roll 80.

11:14 So it really just kind of depends on each deal and really each desire of each GP and LP as to what they want to do. So drilling down into those entities, 'cause I think those have been going on for

11:29 a long time. So you kind of have a body of work in effect You're right, each one's individual, but there's some commonalities there that the market has sort of accepted. So, hey LP, you get 10

11:42 bucks. If you don't want the 10 bucks, roll it and you get 10 bucks of credit in the new entity. So that kind of keeps that fair there. The new investors generally, hey GP, we want you to have

11:56 skin in the game and the new one. So roll all of it, roll 80, whatever that gets negotiated And I think the market's bought off. on that. Generally speaking, that's fair to everyone involved. I

12:09 think the only criticism, the slight

12:15 pushback you hear is, Okay, just because you're stopping, just because this private equity fund that owns the company isn't paying management fees anymore or paying lesser management fees and

12:30 you're selling and extending your runway on management fees, are you thinking with your management fees or are you thinking with my,

12:39 you know, with my dollars? But, you know, even there is, Okay, well, then just take your10 a cash or whatever. Look, what I would say is that the CV or the CV process to your point has

12:53 probably evolved over the last, you know, four, five or six years. And what I mean by that is that if you're an entity and you've got your, your shareholder, shareholders that are under the tent,

13:05 and you truly are trying to reshuffle the decks and get new investors who want to think long-term with the GP in management. They're going to scrutinize everything on the buy side. All of those line

13:17 items that you would see in a typical term sheet, those are going to be discussed and thought through and also negotiated. In our opinion, from where we sit, we think the CV process has evolved to

13:31 look almost more like an outright sell side process. So any of the transactions that we've either been working on or are currently working on, if you look at our materials and look at how we're

13:42 presenting the opportunity, it actually looks like a sell side. We're just not selling control. Yeah, and I think I'll let you all in on a little secret back in the day, the private equity fund

13:54 like entity number five would just buy out entity number two and pay entity two would pay carry Yeah. Yeah. LP's got wise to that. Right. Yeah, I think the, I guess there's a couple of other

14:09 variables too that, you know, I think the processes have gotten a little more efficient. You know, they're relatively, they've been around for a long time. I think Crown Quest was a continuation

14:19 vehicle before people called it that. Right. And so they've been around for a long time. There's been a handful in the energy space that have gotten done here in the last, you know, a couple of

14:28 years. There's a number of them that I think a lot of people are aware of that are in the market. And then, you know, just as we, as we've noticed, kind of in our processes, you know, when

14:38 you're putting the, our first investor list together, it was kind of a lot of family offices that didn't really maybe kind of know what this was. And we had to do some educating. Now they've seen

14:51 more deal flow. There's also a number of institutions that have popped up that all they do is focus on CVs. And so, Brad's going to talk about I deal here in a second and it was kind of a. roughly

15:04 5050 split on committed capital between institutions and family offices. And we think on the larger deals, that's gonna probably continue to be how they play out. I mean, you never really know,

15:15 but we do think family offices will be kind of an important piece of the puzzle. And are there

15:23 value? Okay, so I'll say this statement, but it's really a question of pine on this. I always believe in oil and gas, a strategic can pay more than a financial player. I mean, if for no other

15:37 reason, you can just get rid of GA. Do valuations ultimately kind of shake out similarly? Are there constraints around certain companies, ie, we just can't sell to a strategic these days? How

15:54 does the market kind of grapple with those type issues? Yeah, look, it's a good question what i would say to that is Every situation is just completely different, right? I mean, if you're

16:06 talking about core assets that are in a core of a basin that are hard to replicate with a good management team, you're gonna get really good valuation. And if you're in a tier one A or a tier two

16:20 basin and maybe there's a little bit more risk where there's some nuances to the deal that make it a little more complex, obviously valuation's gonna suffer a little bit compared to say either Publix

16:31 or whatever current, MA markets are dictating. So look, we've all been doing this for quite a while. To me, it just kind of year-in-year-out, it really does depend on the asset base, what you

16:43 can do with it, where is the asset base and its lifecycle and what are the next two, three, four years look like as it relates to the asset base and what the company can do with it. Well, and I

16:54 mean, I think if you're John Farber, you're sitting there going, well, I don't want to sell Crown Rock. today, but I know that I have investors that do want out and get it, you know, they did,

17:05 they signed up for a 10 year private equity fund and we're going to hold this 18 years. Yeah. There's always a, in a CV, there's always generally always real tangible upside that you just aren't

17:17 going to get paid for in the AD market. We have, I think part of the answer to your question, most of the CV activity has been in kind of secondary basins So mid-con, Rockies, you

17:31 know, more sell-off certainly, you know, where there's more of a active AD market, and there's maybe just a longer buyer list of really credible, well-financed buyers, like the Permian, you

17:47 have, you've seen fewer deals there. I think that'd be because you'd have too big of a valuation disconnect between a strategic sell and a CV. So you can't What do you see, be? without kind of

17:58 some conflicts coming up. But in the other areas, I think that bid ask is a little narrower. So you can do a CV. And then again, the CV valuation theoretically can probably come in a little lower

18:14 than a strategic valuation because you have a go forward plan. You have identified drilling opportunities that you're not getting any value for, maybe in a cell process, but they're part of the CV

18:26 model And you can kind of, you know, investors that roll can kind of look at the return potential. And they should, you know, maybe be okay with a slightly lower valuation. Again, if it gets

18:38 too big, all of this falls apart and you probably just have to sell. But if it's narrow, the CV option becomes kind of prevalent. Yeah, I mean, I guess at the end of the day, it's going to

18:48 dinner with

18:50 your three brothers and going to your second favorite restaurant. You know, I mean, if

18:56 you think about it, it's kind of like, all right, if you really hate the food there, go ahead and roll, go ahead and take your cash. If you don't hate the food, it's not your favorite. Go

19:05 ahead and roll. Yeah. So I get it. No, that probably makes sense.

19:10 So tell me about this deal. Who was it? Yeah, sure. So it is a mineral and royalty company named Map He's been around for a long time, I would argue, that they're probably one of the first

19:25 aggregators of mineral and royalty assets that took in institutional capital. They basically, the

19:33 former management team who was still involved in the story started raising capital in the late '80s, kept raising more capital. So what city are they out of and who was the CEO? Yeah, so the CEO

19:47 today is a gentleman named Bobby Wagoner who's got a team around him. He's located in Oklahoma City. The founder was Jane Woodward in Palo Alto. And so it was Jane and then she brought in a partner

20:01 pretty soon thereafter named Steve Hall. So it was really the two of them that kind of ran it out of Palo Alto. And then they partnered with a few gentlemen in the Oklahoma City area. So they

20:13 basically raised capital on the coasts, but they really knew that they needed to partner with people that knew the patch, boots on the ground. And so their strategy was to, you know, go partner

20:25 with people that were in specific counties in Oklahoma, Texas, Louisiana, and kind of pick your area and basin. And so they basically kind of grew the portfolio over the last 35, 40 years.

20:40 From where we sit, it's probably one of the biggest, you know, privately held portfolios in the country. Never really sold many assets. You know, I think along the way, they probably monetized

20:49 a few things here and there, most part have a very sizable portfolio in all the active basins that you'd want a portfolio to have. And kind of like what Keith was talking about earlier, you've got

21:01 a company that is kind of at an inflection point. They want to grow. They see some growth avenues. They've got a few partners that are thinking about, should we stay in the deal? Or is it a good

21:16 time for us to exit the deal? Look, the partners that had been in with them had been a part of MAP for, in some cases, 25, 30 years. And really, obviously, taking distributions over that

21:30 period of time, but never had a true monetization or liquidity event. So, after having conversations internally, they felt that it made the most sense to do a continuation vehicle, felt that it

21:44 solved the problem of okay some shareholders want to keep going. Some shareholders are looking to exit for whatever reason, maybe specific to them. Was there a Stephen's pitch book saying

21:58 continuation vehicle versus going public? Did y'all look at that or was that even an option? No, not really. No, I look, the company has been private for the last 35 plus years. They did not

22:12 really have a desire to go public. Just wasn't something that they wanted to do. Oh, I thought they'd be a public They didn't want to sell the company assets in their opinion and our opinion,

22:23 they're impossible to replicate. Probably have done thousands 35 last the over acquisitions of

22:29 , 40 years. And so, and then they also saw, obviously, some good things here on the horizon as it relates to the asset base, particularly kind of in the core three or four basins. So they felt

22:41 the CV route was just a good solution for all shareholders. And as I mentioned earlier, same with Keith. I mean, we treated it as an outright sell side. We just weren't selling control. And so

22:55 anyway, so the family offices were kind of right place, right time in terms of where the when the opportunity kind of came about relative to kind of our view of how family offices are looking at the

23:09 space and showing interest in the space. The other thing I would say too is just if you look at all the asset classes within conventional energy, we think that the mineral royalty space is great for

23:20 family offices. You've got a kind of growing underlying asset base because they have a lot of wells that continue to be drilled on their property, but at the same time, they provide a very nice

23:30 yield, consistent yield, and have been for the last three decades. Yeah, and Chuck, we think, you know, there's not a whole lot of stats out there. It's kind of word of mouth on other CDs that

23:41 have gotten done in the past, but if it's not the biggest one that's been done, it's certainly up there. Is there a number announced? Yeah, but can you say, or? It hasn't been announced, but

23:50 it was, you know, well over a billion dollar deal. Wow. And then it's a lot of change. Half of that, roughly, family office equity. So that's a, you know, we, I think last time we came on,

24:00 you know, we were talking about, you know, we kind of mentioned this deal, no names, but, you know, we kept talking about, hey, family office equity, it's coming from, you know, it's

24:08 coming around and here's half a billion. So, you know, that's pretty substantial One other thing I'd say is there's real close coordination with our family office advisory group. They did a, you

24:25 know, they cover mainly non-only gas family offices and so, several of those participate in this deal, you know, in some very large amounts. So, we got to see that integration and the value

24:37 coming from that group firsthand in this deal. And the other thing that was important on this deal than other CVs that we've either seen that we weren't a part of.

24:46 And then ones that we're working on as well is the growth aspect to it. So this was a situation where they were growing organically, but they saw some kind of low hanging fruit as it relates to

24:59 acquisitions that they could pursue. And with the shareholder base that they had in the previous entity, they learned that just a lot of those shareholders weren't really interested in growth. And

25:10 so by conveying the assets into a new co, changing the structure a little bit as a part of the deal we raised, several hundred million of capital

25:21 over and above, kind of what it took to get the deal done. That's basically gonna be as a part of this transaction. So now map will be able to go after acquisitions that they've kind of been

25:30 warehousing, if you will, or at least thinking about and can pursue those over the next couple of years. So kind of, you know, the way these, my understanding of the continuation vehicles is

25:41 generally you go out and let's say I'm trying to sell. Well, let's go to a secondary offering of a private equity fund. So I'm an LP. My marks are 100. We go out and usually the bidding is

25:59 whatever, 75 of marks, 80 of marks or something. Do you guys go out with a mark when you're saying that or, you know, the term sheet, the price is X or is it traditional bidding type deal of

26:14 give me your indication on interest? How does that work? So again, I think every process is different. But what we did was, and not only in this deal, but all the other ones that we're working

26:26 on is we do the typical work that you would see in a fairness opinion, right? We, you know, build our upstream database, build our nav, have all the various categories kind of modeled out over

26:37 the next 10, 15 years. And then that kind of be the anchor of the valuation And then of course we triangulate that with where our public comps trading today. where they've been trading. We also

26:48 triangulate that with the MA comps. So we kind of come at the market, if you will, with kind of a preloaded fairness opinion as to look, here is where these are. So it's got a sticker price on it.

26:59 It's got a sticker price. Most of them, yeah. Yeah, some have a sticker price. In our case, we talked to what we thought were the appropriate lead investors talked about valuation and other

27:11 terms that were important to the deal and important to the process. But yeah, to Keith's point, a lot of them do come out with a sticker price and then there's some that don't, really depends on

27:21 kind of what ownership and management want to do. Yeah, and we typically, they do breast rot, they all kind of

27:27 vary 'cause there's examples where there's not a price in there for various reasons too, just because of some sensitivities or what have you, but you give them all the information to kind of fill in

27:38 that blank and then you're getting that same indication from other groups and then you kind of, that leads to you picking a horse as an anchor. And so we'll go, in a lot of cases, get an anchor

27:53 that, well, it varies, but it could be an institutional group. Could be a oil and gas family office, just the type of family office that other families will follow because of their experience in

28:07 the space. We've done that, and then we usually, once we have that anchor locked up, we kind of get with Mickey's group and kind of round it out. And it doesn't have to be with all non-oil and

28:20 gas family offices. There can be oil and gas family offices that are part of the syndicate too, but it is kind of nice to see these large non-oil and gas family offices kind of stepping up and

28:31 investing in the space. So does the VDR on this look like a sell side? You got reserve reports, production history, Decline curves, do, do. We kind of talked about this last time y'all came on

28:46 about family offices I mean are they hiring another one school to do reserves do they have in-house engineers? They do so I get everything's gonna be different, but it's all it's usually kind of all

28:57 that Brad jump into But it's usually small investment teams even for large family offices they will outsource Some of the technical work required they usually have kind of a go-to Consultant maybe

29:10 that they use and they'll get them to look at it On their behalf, then they also you know our our our team Which is three petroleum engineers one geologist Is ready to kind of help? Then move their

29:26 evaluations for just like we would in a sell side So obviously in a set in a sell side the buyers game a full team So it's more interaction, you know with kind of two Two two different technical

29:39 people have similar experience in a lot of cases this case you know you have a financial. usually kind of a financial team at the family office. They're kind of leaning a little bit on, you know,

29:49 a consultant relationship or two. And then they'll kind of come to us and say, Hey, we need, you know, kind of do these runsor what have you to move forward. Not that different than how a lot of

30:01 the private equity firms worked. I mean, we at Cane just had the engineers in the house and all, but, you know, a lot of them would say, Hey, we use call it, orWho ever call this guy? We'll

30:12 have them take a look, so. Yeah, I think pretty similar. Yeah, I agree, and go back to what you previously said. Yes, the BDRs for these look exactly like a sell side. Same exact detail, and

30:23 then to your point, look, we would, for a sizable deal, we would recommend the company get a third-party reserve report first, take a look at that, iterate on that, and then typically our

30:35 technical team kind of does the same exercise So you kind of have a second opinion on

30:41 the reserves. That's where you kind of get into the anchor investor. Okay, who are you talking to? What's their background? And typically they will have an opinion on that as well, maybe even

30:51 higher their own consultant. So by the time that we have talked to the syndicate, if you will, whether that's 20, 30, 40 families, you've actually had three separate layers of detailed opinions

31:03 and analyses on the reserves and what those look like before that goes up to the market broadly I got you some big picture, broad strokes, give me kind of a timeline of how this all goes down. So

31:19 it, look, it takes, you know, a normal, if you want to call it normal, sell side is three to four, three to five months, you know, depending on the market. I would say for a CV, especially

31:32 if it's a bigger asset, you maybe have some complexity at the shareholder level, just number of shareholders, opinions, if you will, in the room. I would say you could probably double that.

31:42 plus or minus, I would say they're in the eight to nine months. And they can even go longer. It depends on also kind of the prep work done ahead of time. Okay, do we need a reserve report? What

31:52 exactly does the data look like? What's it telling us? So a lot of that is kind of done. I guess you could call it before the process, but it's a part of the process, at least from the company's

32:03 perspective. So, but once you kind of have your data buttoned up, your information buttoned up, it's probably four or five, six months from there. And what are the chunks of that meeting like,

32:17 I send out a book, I go to 20 that could serve as a lead, and then how do you kind of chunk up that four or five months? Sure. So the first two, three months are getting the data ready, getting

32:31 your marketing materials ready, finalizing your diligence, kind of doing all the things that that you would do in office with your company or client. And then, you know, then you're kind of

32:43 talking about, okay, what is the company's goal? And you kind of back into, okay, how much capital do we need? How much capital do we need now? What do we think the amount's gonna be in terms

32:54 of selling shareholders? Those are gonna roll or you're trying to do the best you can to figure out what that number is gonna look like. And then that dictates, you know, basically kind of who you

33:05 go out to. Look, we've seen everybody kind of do these a little bit differently. Our opinion is, you know, we've basically been recommending, why don't you go find that lead, you know,

33:15 investor first. That way you're not having 30 separate conversations around what's valuation, what's a new waterfall look like, what do all the different terms look like. You're basically trying

33:26 to figure out, okay, who are the right, eight or 10, eight or 15 groups that could serve as a lead candidate? One that knows, you know, energy well, in this case, minerals and royalties.

33:38 Another important factor is, okay, one that other families would know who they are, have a track record, have history, could be influential on the syndicate and, of course, well respected by

33:49 the market. So it takes time to do all that. Yeah, and that's kind of an obvious, extremely important part of the process because the syndication, if it's a larger deal, that can add nine months

34:06 if you get the syndication wrong. You know, if you get a lead that just isn't as strong with it, you know, in terms of experience, kind of means the groups fall on them, maybe aren't going to

34:18 have as much conviction as they should have in terms of moving forward. And it can just fall apart. And then when it falls apart, you know, you got to sub in people that sub in groups that

34:31 replacing groups that left and it, you know, can really add a lot of time to the process. I know on Brad's deal, there's a ton of time, kind of just really interviewing potential anchors and just

34:42 getting a lot of comfort that the anchor was gonna be a group that others fall at. It's real obvious, but we definitely seen situations where you just have a situation where the

34:57 syndication can add nine months to a deal because you just didn't get it right. Yeah, it was interesting We

35:06 just did a fundraise at Digital Wildcatters, Mercury stepped in and led our seed round of five million bucks. And we were blessed to have a lot of great oil and gas, energy types, participate.

35:26 Billy Quinn came in, Dave Alban came in, Dan Pickering came in, but I remember sitting around here with Colin is like, well, we need to send these guys documents. If we send them too early,

35:38 they're going to have opinions on those documents. And we haven't heard everything we need to hear from, from Mercury. So, you know, there was, there was, yeah, you, you kind of want to go

35:49 with the binary offering, but you also can't jam it down in front of them, you know, 48 hours before they got a close, you know, guess what, you know, the, the Billy Quinn family office

35:60 doesn't want to read something in 48 hours, you know? So you kind of got to be respectful of that So yeah, I could imagine all that. Give me something just crazy out of this deal that I never

36:11 would have thought of. Was there anything wild that sort of popped up or a twist or a turn or a lesson learned that maybe you twist? Yeah, there, there were some twists. Uh, look, I would say

36:22 that without getting into too much detail that we, you know, there were appropriate opinions as to how the balance sheet should look, you you know, coming out of the gate as it relates to having

36:34 leverage, not having leverage. which obviously factored into how much equity capital we needed to raise, and so there were certainly some opinions there from everybody involved, whether that's the

36:46 management team, the company, and the new investors coming in. So that was a process trying to figure out what makes the most sense for this company at this point in time. The other thing too, I

36:57 mean, this is no different than any other deal, but I mean, you've got gas going from180

37:02 to5 and back down and oil going from83 to60 and back down. So I mean, just these processes take long enough to where

37:11 you kind of see two or three, you know, sizable shifts and commodity prices throughout the process. And so, you know, like any MA deal, you see the momentum kind of, you know, ebb and flow in

37:23 one direction or another during a process. And so no different here. I mean, it's just everyone that's done any type of transaction work in oil and gas land for the last 50 years understands that

37:33 dynamic and we certainly had it in this one as well.

37:37 So give me a thought, if somebody's out there listening, who do you want a phone call from? What does their company need to look like? And whether that's just flat out raising them family office

37:51 type capital or potentially doing a continuation vehicle. Is there a box? Yeah, I think so, I think - Typical banker, you're gonna say, Everybody needs to call me. But - Well, size-wise for us,

38:05 and this is probably just more for us, we kind of, I'd say, 100 million of equity and up. So that's the raised size? Yeah, that's a raised size, and that's kind of a fit. We certainly have

38:15 done smaller, and would look at smaller if it made sense, but hundreds and up is good just because you can get, given the size investments our family offices are making, you can piece together,

38:29 call it three to five family offices, and put together a nice syndication just around 100. If you get below that, you're talking one or two family offices, and it just becomes kind of less of a

38:42 solid fit for our family office network. Geographically, like I mentioned, I mean, there's definitely interest in some of the secondary areas, if you will, like the mid-con Rockies. So if you

38:58 have a company focused in areas like that, no problem at all Our family offices would have interest. Definitely based on what we could raise for if we needed to. Yeah. Maybe not. But Jim's

39:11 statement is going to call, but they, no,

39:16 you know, just, but definitely needs a set of assets can't be like I want 100 million to go chase these deals that I may or may not get. That doesn't really work We need to underwrite around an

39:30 asset valuation kind of obvious needs to tie together so camp trying to get a premium valuation if it's not justified. The families, the family offices do want to grow. They do want an entity

39:43 that's going to grow. So you need to have upside that has some solid backup to it.

39:50 So that's an important piece of it. The team, this is pretty obvious, but the more substance with the track record on the team, the better. I mean, it's a pretty obvious statement. But if

40:03 they've been PE back before, I think family offices look at that and go, hey, a real smart investor vetted this team, that means something to

40:16 them. I think those are the main things. Again, the other piece of it, longer term holds, for sure. They do like to build distribution vehicles. It

40:27 doesn't have to be big distributions out of gate, could be zero, but they want to see

40:39 in the bank and a coupon to something that you're going to be able to get there and support real cash as opposed to an across the. The only thing I would add to that would be the existing company's

40:45 ownership construct. So if you've got, again, you're trying to solve that problem, if you've got some investors that are wanting to stay on and then maybe some that are trying to get out for

40:55 whatever specific reason, I would say that's the only thing I would add on to what Keith was talking about at the asset level. Yeah. Got it So,

41:04 you called me whatever two years ago, and so we're doing stuff with the family officer called BS. You came on. You actually proved it. Right. Now, you know, you said you can do a big, huge

41:13 continuation vehicle. You came out and proved it. Next year, you're going to call me and tell me explorations back. Are we going to, are we going to, are we going to be able to be that crazy?

41:25 So I'm going to say, I'm going to say probably not, but, but, um. Well, I guess if I had to look out kind of how I think things can evolve and it's just really hard to say, I do think family

41:37 office equity is gonna continue to be important for many years. I mean, last year was a really good year for in the PE fundraising world with, you know, what quantum and NCAP and NGP and Pearl and

41:50 some others did. I think Carneelian raised too. Carneelian, yeah, that's right. So that's a lot of billions of dollars, right? And that's great, you know, you want that, our clients, it's

41:59 good for them to have access to that type of capital, but there's a lot of capital needed, you know, just in this CV space alone. And so we think we're gonna continue to work hard to, you know,

42:11 develop our network. Hopefully when we come back, you know, a year from now we'll have a couple other CV's closed and kind of continue to roll. Can we do the next podcast from Duke's in London?

42:24 Sounds great, yeah. Have you all been to Duke's yet? I haven't either, no I don't even know what this is. Okay, so like if you do finance and you go to London, Dukes is the hotel in the middle

42:37 of Mayfair and it's got Dukes bar and a Dukes martini is how you ultimately seal the deal with somebody from the UK. So they bring out the cart, they pour the, I've actually got a picture, we'll

42:52 throw it into the, they actually pour your martini table side and it's such a big deal You have to get a reservation to go to the bar. We're gonna do that. So we, so Brad and I, you know, we've

43:05 been over there a number of times we're a little bit new to some of the stuff like that, but we did go to

43:13 Annabelle's. Oh, the only restaurant that Queen ate at? Yeah, so we - No, seriously. So we were in there with a colleague of ours that had a membership or has a membership and we were, we

43:24 thought it was really neat.

43:27 They, our colleague was meeting someone else, you know, probably more important than we are. We, we are for a drink. And so we were there for one drink. And then his friend comes up and it was

43:38 time for us to leave. And so we made the mistake of, we went out the wrong way. And then we kind of ambled around for about 10, 15 minutes. We're trying to see if we could get out by just

43:49 continuing to walk around the, the opposite side of how we came in. And we couldn't do it.

43:55 And so Way to circle back in front of our colleague and put our hand up and hope that he didn't see us. And we fell the IQ test getting out there, but it was a really neat place. Yeah, no, I've

44:05 not been to Annabelle's. The. It's amazing there. Yeah. The other thing you guys have to do being oil and gas guys is over in Mayfair in what's called Pickering Place. There's a sign up for the

44:21 old Texas Embassy. Have y'all gone to see that? No I mean, you know what? you'll need, Steven's needs to hire me as a consultant, maybe as Steven's alum. Yeah. And I'll come over and I'll show

44:31 y'all London. I've learned a lot from, from Dayton, Laura. So the, the other issue I have, and potentially the reason Laura and I get along so well is I don't understand half of what she says.

44:44 And half of it's just the accent is so heavy that I just don't pick up on it. The other half is they say stuff that I have no idea what it means. Like that guy's a real onion sandwich I'm like,

44:54 what does that mean? And all their words for stuff. One thing real quick. So Brad, where's another hat runs our AD group? We have had a really good year last year. We're kind of focused on,

45:10 call it 100 million, a billion dollar deals, probably 100 to 300s, a little tighter range. And in market with a few right now, should have another really good year. Obviously oil deals are a

45:20 little tougher right now, but we have a really, really good team. three petroleum engineers, one geologist all came out of industry so they didn't hire them from other AD shops that kind of have

45:34 really deep, you know, industry knowledge coming from their prior experiences. So, that's, think of us for that piece of business too. God too. Yeah, we're probably closing eight to ten deals

45:44 a year there. Oh, nice. In that lane. So it's, yeah, let's keep mentioning we've got a great team and we kind of pick our spots. We're not, we know we're not big enough to be all things to all

45:53 people, but we definitely take kind of a partnership Okay, kind of a partnership approach to cell slides. So, yeah, the, at the end of the day, where do you think valuations are in, in kind of

45:59 the A and D market? And let's maybe peg, I don't know, peg a year past at the height of the show revolution is like the drunken sailor at two in the morning. Yep. Where are we these days in M and

46:20 A? Okay, so, and I will say maybe like. two years ago felt like, you know, one time's cash flow was a win, you know, so this question is coming in an odd time, right? We're right in the

46:33 middle of tariffs. And we've seen what the market's done the last two, three, four weeks. But if you kind of go a month and a half, two months ago,

46:44 you had, you know, basically kind of a increase, both in oily MA transactions and multiples and also gas. But I would say in the last call it four to five months, you've actually seen a little

46:55 bit of separation on gas from oil. So the multiples that we're currently seeing on gas related gas weighted deals are probably a turn to two turns higher than what we're seeing on oil weighted deals.

47:09 And that's with the LNG, the AI, you know, everything that's gone with that over the last call it, you know, year plus or minus And so we've seen some separation there. So yeah, going back to

47:19 the. If you look at kind of rolling cash flow, rolling EBITDA multiples to your point when Shayla was a frenzy, you saw things at 10, 12, 14 times. You're probably seeing assets trade for four

47:31 to six, three to five, kind of depending on where you are and kind of, you know, the construct of oil versus gas. Of course, it's super fluid right now, just given this tariff madness. And

47:41 that's, and then obviously, OPEC's news here a week or so ago is having an impact as well. So, but I'd say things that have closed up to this point have been in that. I know it's broad range,

47:52 but kind of free to six acts. No, interesting. So definitely, definitely better than two years ago. So, interesting. Well, I think most of the sellers, to your point, are saying if I can

48:03 only get two X or two and a half X, I might as well just continue to own the assets.

48:10 Right, of course so. And then just have distributions. We make distributions. We cleared up our balance sheet. Why would we even sell? Yeah, look,

48:17 I would say that anything above three and a half to four, at least get sellers thinking, okay, this is way better than just holding something for a couple of years and taking on that risk. You're

48:30 actually being paid to sell the asset that you're, like I said, moving that risk to the next person. Yeah, I always, you know, I don't think management teams always kind of fully appreciated

48:42 it's for what I do with the money, you know? And so you're right at two times, is that, you know, do I have a project that makes me four times? Probably not that large. So to your point, you

48:55 hold it. Well, and then you get that capital and then you almost have to start over, right? And I think most people realize it's that first year, first couple of years of starting that new

49:05 company is the toughest. Yeah. And so you're already at that point, might as well enjoy that upside. So this was great Scott and

49:14 Kim Sheffield were gracious enough to have me out to the ranch in Santa Fe. a month or two ago, and I was out there on the porch, and sitting there staring at the Pecos River running right through

49:30 it, and we were talking about the oil and gas business, and Scott said, You know what? I think this is kind of cool. You sell a company, and then you go start over, and 40 years you run a

49:40 pioneer. One person made me an offer for all the company it was Exxon, and I gave it to him. He's like, I would have loved to have started over That's funny. Oh, man. Cool, dude, appreciate

49:52 y'all coming on. Yeah, thanks Chuck. Thank you, appreciate it.