Building an Energy Company from First Principles
We are building an independent, agile, oil & gas company that applies a contrarian approach to asset identification and a curious, engineering led approach to asset exploitation and company building. Targeting Technical Potential drives the philosophy and organization structure of our company, and our team reflects the eclectic skill set to pursue it. We combine deep oil field and financial expertise with a history of public and private company managerial experience in several industries. We mean to apply best practices in petroleum engineering, financial engineering, company development, and team building in order to drive sustainable returns.
Our mission is Targeting Technical Potential (TTP), and we believe it fundamentally changes the way a company does business. It requires:
- Analysis of what is possible, in addition to what has happened.
- Performance management, not expectation management.
- Innovation, which requires occasional failure.
Technical potential is the maximum revenue generating capacity of a company’s assets. In oil & gas, that means the maximum production possible from an existing asset, and is best described by Darcy’s Law, pictured below
Achieving higher percentages of technical potential is the largest source of Alpha in oil & gas. Oil prices and geology are Beta factors that can be hedged or learned, respectively, but never directly managed. TTP requires executives, managers, and shareholders to support a corporate culture of transparent failure. Perfection will not be achieved. Targeting perfection, however, will lead to better technical and operational outcomes, and better, more sustainable, returns on investment.
What we Want
Our asset identification process targets current producing assets with identified enhancement upside and potential unconventional upside in the source rock or other bypassed pay zones. Such a profile gives us the ability to acquire assets with a positive base return, while allowing for multiples of capital allocated through successful enhancement and identification of unconventional drilling locations. Our approach limits downside while targeting ample equity returns without reliance on market changes in commodity prices or cash flow multiples. We welcome partnership with those who know the assets best, hands-on, in the field or in the geo-model.
In practice, this means we seek assets producing up to ~5,000 boepd through multiple well bores penetrating multiple potential pay zones, providing ample and current data. Oil is preferred, but gas will be reviewed opportunistically. We usually require full access to all minerals and Alpha operator-ship, as we would like to apply our engineering and ‘What’s Possible’ approach. Partnering with local operators can be successful if we feel the property is particularly attractive and our engineering analysis is in line with those operators.
Why we believe there is an opportunity:
- Technology has vastly improved extraction efficiency, but the technology has not been evenly applied
- Capital and engineering talent have been heavily concentrated on several core basins
- Conventional fields have been overlooked or ignored in many cases
- Conventional fields are no longer ‘core’ to their owners, often financially immaterial, while representing a large capital opportunity to a specialist such as Alpha.
We witness concentrated capital, technology, and management attention, and believe it creates an opportunity for successful contrarian geographic focus and asset identification.