How This Investor Found Bigger Returns in Oil & Gas | Alex Ottewell | EP 38

Speaker 1 But what I realized was 2012, you know, I was watching interest rates, and I was like, you know what, I think they're going to spike.

Speaker 1 So that was kind of the time frame where I was like, okay, I need to identify a new revenue stream.

Speaker 1 And initially, I thought of it as a secondary revenue stream, not necessarily a complete new venture like I did.

Speaker 1 But once kind of looking into the metrics of oil and gas, what a lot of people don't realize is outside of the geology and engineering portions, a lot of it really relates to real estate in the sense of property management.

Speaker 2 What is up, the entrepreneur DNA family? The guest today is a powerhouse real estate investor who has now transitioned into oil and gas.

Speaker 2 This guy is someone you need to pay attention to because he's making big moves in the oil and gas space. Alex Otterwell is here.
What's up, Duro?

Speaker 1 What's up, buddy? Me

Speaker 2 excited about this because you know I'm all real estate all the time and I run multiple businesses, but I am very curious about your transition from being a badass in the real estate space, 1,000-plus deals, crushing it, and saying, you know what?

Speaker 2 There's a better trap. There's a better mousetrap and it's oil and gas.

Speaker 1 What took shape there? So, you know, over 10 years in the real estate space, fix and flip, whatnot, I had my call center, accrue that to 200 employees in the Philippines. That was another one.

Speaker 1 But what I realized was 2012, you know, I was watching interest rates and I was like, you know what? I think they're going to spike.

Speaker 1 So that was kind of the timeframe where I was like, okay, I need to identify a new revenue stream.

Speaker 1 And initially, I thought of it as a secondary revenue stream, not necessarily a complete new venture like I did.

Speaker 1 But once kind of looking into the metrics of oil and gas, what a lot of people don't realize is outside of the geology and engineering portions, a lot of it really relates to real estate in the sense of property management.

Speaker 1 You know, if you have a bunch of rentals, you have maintenance to do, you have, you know, staff to monitor, things like that, a lot of it transfers over. Now the widget changes.

Speaker 1 You're no longer dealing with a home.

Speaker 1 You're dealing with an oil well, but you still have a lot of mechanical components that fail that require that ongoing maintenance and strategies to keep things online and optimized.

Speaker 1 There's a lot of stuff that's really correlating there.

Speaker 2 Yeah, I think, you know, we were talking offline prior to the podcast episode. Like

Speaker 2 I was digging in the trenches. Like I want to know way more.
And, you know, I want to maybe kind of keep this a little surface level.

Speaker 2 And by the way, if you do want to know way more, make sure you're reaching out to Alex. Find Alex.
Where's the best place that everyone can kind of find you? Instagram, Alex.

Speaker 1 It's my name, Alex.Ottowell.

Speaker 1 IG, I'm on there. I respond to everybody.
Perfect.

Speaker 2 So the thing that I found so fascinating is the synergy or the relatability to what you've done and what I do in real estate and kind of how that really does translate to the point of raising capital, funds, uses of capital, terms,

Speaker 2 you know, going in and stabilizing an asset that already exists that you got to basically stabilize. Very similar to all the things that we do in real estate.

Speaker 1 Correct. I mean, I think a lot of businesses have verticals that, you know, do relate.

Speaker 1 The kicker with oil and gas is it's kind of like how I was treating my real estate business. I was identifying distressed properties, bad shape, low-income housing, right?

Speaker 1 That was kind of my area of expertise. And in oil and gas, I'm not trying to go in and compete with the the majors, go after the biggest plays, things like that.

Speaker 1 That's why my model is all built around acquiring existing oil fields that have already had 20, 30, 40 years worth of production.

Speaker 1 So I have a track record to check out just like you would a rental property.

Speaker 1 And once we've identified that asset, we really try to see how that owner has maintained it. Because the upside in the field doesn't necessarily have to be drilling a new well or recompleting a well.

Speaker 1 I mean, oil and gas terms. A lot of it's just based on pure maintenance.
Yeah. Guys don't have the money or they're just spending all the money they're making on the field.
They don't put it back in.

Speaker 1 You know, they're unwilling to do the maintenance. And especially towards the end of their lives, you know, if you've got an operator that's late 60s, about to retire,

Speaker 1 they stop putting the money in. Yeah.
So you have a few-year window where they're not doing anything. Yeah.
And that's the best time for us to come in.

Speaker 2 Well, so you have a current project right now. We were just talking about this.
I'm excited for you. You have a current project.

Speaker 2 Is this the one that will be all in 100 million or is this a

Speaker 2 upcoming current project, Jeff?

Speaker 1 So, as of now, we bought two initial assets. They were kind of test assets, right? Just smaller stuff, just so I can figure out the space.
I mean, bear in mind, I don't have an oil and gas background.

Speaker 1 I'm just really good at hiring the right people. I have a reservoir engineer, I have a really good legal team, geologists as subcontractors, things like that.

Speaker 1 What we kind of want to do is when we're diving into each field,

Speaker 1 we really want to see kind of a diversity amongst them.

Speaker 1 How do I want to put it? So risk mitigation is a super important part with oil and gas. So we're looking for fields that are larger, 100 plus wells.
That's one way of diversifying, right?

Speaker 1 If you have 100 wells, they're all producing two, three barrels of the bottom. You protect your downside.
Exactly. One goes down.
It's not a big deal. That's right.

Speaker 1 To go deeper than that, we're doing a $25 million fund on this first one, which in turn will translate to $100 million worth of assets because we're going to leverage that $25 million.

Speaker 1 The reason we're doing that is because my target buy box is between 10, 15, 20 million dollars per deal. So now I can put four, five, six deals into one fund.

Speaker 1 So not only are we diversifying for each field, we're also diversifying by having multiple different fields in one fund.

Speaker 2 This is the class. This is why I'm so intrigued by what you're doing, bro.
I mean, you really got me.

Speaker 2 And I think people really, if you're like real estate, love real estate in real estate, you got to get with Alex because Everything you're saying, literally you could draw a direct comparison to real estate.

Speaker 2 Yeah. Right.
Everything from raising a fund, leveraging that fund with other leverage, right? Banks or whatever. I mean, that's exactly how I've built my portfolio.

Speaker 2 I don't go out and just spend all my cash and build it that way. I use other people's money through investments.
They get a return.

Speaker 2 There's a lot of people in the real estate space that don't want to be in real estate. They just like the idea of real estate.

Speaker 1 Or the money. Right.

Speaker 2 They don't want to deal with the tenants in the toilets, right?

Speaker 2 Same thing for you. Like, you know, myself and so many people probably watching this and listening, you're like, bro, I would love to be a part of the gas play.
I don't know a thing about gas. Yeah.

Speaker 2 And that's the point. That's why they would reach out to you is because they don't do.
Yeah. You're going to be able to go out there and you're going to be able to diversify where the cash is going.

Speaker 2 You're going to protect your downside. I want to buy as much real estate as possible because, as we all know, if you have one rental property and the tenant vacates, you're screwed.
You're bleeding.

Speaker 2 Yeah. So you take that same philosophy in gas.
Right. Yeah.

Speaker 1 And we're definitely oil focused. Yeah.
So natural gas was one of our test fields, right? So I bought eight natural gas wells. They were drilled by Marathon Oil like 15 years ago.

Speaker 1 They were 15,000 feet deep. So a lot of people don't realize how deep some of these wells go.
15,000. Yeah, so three miles into the ground.
That's how deep they are.

Speaker 1 And then they go one mile laterally, too.

Speaker 1 So that's kind of a newer thing. In the last 20, 30 years, it's become way more popular to do

Speaker 1 horizontal drilling because if you kind of think of

Speaker 1 Earth as layers of a cake, right? You have different formations. I'm getting a little technical, but you got different layers in the cake.

Speaker 1 And when you drill down, you can kind of sip on the oil or the gas vertically in one spot.

Speaker 1 But what they do is they drill down and then they go horizontal because now you're not only capturing one area, you're capturing right through the middle of that formation.

Speaker 1 And that allows you to draw up more oil, gas, whatever.

Speaker 1 Oddly enough, though, I went the complete opposite realm with how I built my buy box. You know, just like real estate, you know, hey, I buy single family homes, 2004 or older, blah, blah, blah.

Speaker 1 Those are the same metrics I put in place when it comes to buying an oil deal. I want to see certain things there

Speaker 1 before I jump in. For example, with risk mitigation, the deeper your well, the bigger the rig you need to work on it, right? You have workover rigs to do the maintenance activities on them.

Speaker 1 And the bigger the rig, the more, the higher the cost. So part of my buy box is we only buy wells that are 7,500 feet or less because the shallower wells, smaller work of a rig.

Speaker 1 And on top of that, we only go after vertical wells, the conventional style, because we don't want to deal with

Speaker 1 with the horizontal wells, you have a very fast depleting well. So traditionally, the first 15 years of a horizontal well, it's going to deplete really fast.

Speaker 1 And then you're going to kind of hit a steady decline. With vertical wells, you're only going to have maybe five years of rapid decline, and then it's going to stabilize.
Yeah.

Speaker 1 So, I want to buy after it's stabilized. It's almost like a lot of depreciating assets, right? You go by a Ferrari or whatever it may be, Lamborghini, you have that initial hit.

Speaker 1 Just like oil and gas, you have an initial hit, then it's going to kind of go down, and then you're going to hit that kind of price point where it's not really going to drop much faster.

Speaker 1 That's kind of the same with oil production. You can see a rapid decline, and then after that five-year mark, it kind of stabilizes a little bit more.

Speaker 2 So, was your jump from real estate into oil and gas purely interest like where did that spark because i i think um

Speaker 2 a lot of people do new things start new things but they don't really have a plan place right they just say okay well i just want to try this new thing it's hot it's sexy it's whatever what what made you say all right real estate was great did really really well yeah but it's time to go into a different venture i was already looking for a new venture before i stumbled on oil and gas and you know it was actually at nick perry's uh a figure cartel you know a couple of people there were discussing oil and gas and you know, it created some buzz, some interest.

Speaker 1 And then I kind of decided there's no courses on oil and gas, right? There's no,

Speaker 1 we're so used to the guru world of real estate where everybody's got a course. This is a case where I hired a mixture of experts to teach me literally on a whiteboard.

Speaker 1 First three months of the business, and I had shut down all of my real estate operations. I was completely out.
We had 25 ongoing flips when I said, hey, I'm done fixing flipping.

Speaker 1 We still had a JV business. We were doing some wholesaling dispos, stuff like that.
But

Speaker 1 yeah, I just, I said, hey, you know what? I got to go to 100% in if I'm going to do it. And real estate afforded me a good amount of capital.

Speaker 1 So I wasn't like nervous about running out of money tomorrow. It was just more the fact that I knew it was such a big business.

Speaker 1 You know, the infrastructure of oil and gas as a company, it's just massive.

Speaker 1 I mean, to give the viewers a little reference point, if you're under a $100 million company in upstream oil and gas, you're deemed mom and pop. Of course.

Speaker 1 100 100 million is the breaking point where you start deemed like a company, right?

Speaker 1 So

Speaker 1 it fascinated me because as a fix and flipper, you know, GV wholesale stuff, there's a cap to that income.

Speaker 1 You know, I don't really think there's many guys, you know, maybe a handful here and there, but doing, you know, eight figures a year net profit. It's just not really occurring that much.

Speaker 1 There's a few, don't get me wrong, but you have to be a really scaled, scaled operation,

Speaker 1 you know, 10 million a year or more. Whereas oil and gas, a handful of assets will take you to 10 million a year or more in net profit.

Speaker 1 So it's almost like I'm doing the same work I would be doing at real estate, obviously a different area, you know, different knowledge base, but it's the same effort with a bigger number and a higher yield.

Speaker 1 Less is more. Yeah, correct.

Speaker 2 I mean, not, I don't want to totally compare it, but it's kind of the same thing Grant was telling me because I've been single-family homes my entire career.

Speaker 2 He's like, bro, you could do one thousand-door deal.

Speaker 1 Yeah.

Speaker 2 One deal, not a thousand deals. Yeah.
One roof, right? Like you just focus on the one versus going to scale. Same type of concept.

Speaker 1 Correct. And oddly enough, you know, just like we were discussing earlier, in real estate, you get a bunch of people that really aren't knowledgeable fully on a subject matter, right?

Speaker 1 So they'll kind of poke at you when you say something or, hey, you're wrong, you're wrong. The same thing occurs in oil and gas.

Speaker 1 I mean, we're advertising, you know, for our fund right now, and we get a lot of people that bash us and say, well, EV is going to destroy the the oil industry.

Speaker 1 But what a lot of people don't realize, only about 40% of an oil barrel actually goes to make gasoline.

Speaker 1 Maybe even less, depending on the refinery. A lot of it goes to plastics and general

Speaker 1 components of life, right? You have 6,000 products being made from petroleum, like makeups. I mean, they're petroleum-based.
All these things derive from a barrel of oil.

Speaker 1 So one of the difficulties with the general public and something I'm working on personally is understanding why we need oil.

Speaker 1 And I'm not doing it just because I'm the guy that just got into oil, right? Like, I've never been one to hold my words. Even if I was against my own industry, I'd probably speak about it.

Speaker 1 But I realized the deeper I dived that if we don't have oil, we are in trouble. Yeah.
As an entire nation, I mean, there's just so many things that run off of petroleum-based products. Totally.

Speaker 2 And even myself, I don't even know. all those things, right? Like as a common human right now in this space, I'm sitting here thinking

Speaker 2 every drop of that barrel goes to gas yeah most people do right because i'm not educated i did i've been taking the time i just say okay well you're digging for oil that oil turns into gas etc correct and you could be the next or the first guru in our space and and i would i would back you and support you but i think people need to understand the opportunity that's out there right because it's not going away to your whole point you're mom and pop when you break a hundred million i literally just told you this i made a post about this you know kamala proposal about a hundred million and people think like not many people are going to get affected.

Speaker 2 It's a trickle-down effect. 100%.
But 100 million, respectfully, right? I'm not quite there yet, although I own big apartments and all that kind of stuff. Like, if you're playing the game right,

Speaker 2 you can get there. Yeah.
You know, and for you, you don't even have to play the game on a big, big level.

Speaker 1 Yeah.

Speaker 2 That's the craziest part, right?

Speaker 1 I love that.

Speaker 2 So, so talk to me about your big mission, kind of this fund. Is the fund totally full? Are you still raising for for the funding?

Speaker 1 No, no,

Speaker 1 it's a newer thing. So when I went into the space, one of the early things I realized was just like real estate, it's a very community-based thing, right? Everybody kind of knows each other.

Speaker 1 Well, the downfall is with oil and gas. These people have known each other for 50 years.
Oh, yeah.

Speaker 1 Very tight-knit old boys club community. And early on, I was calling up different operators and offering them offers for their fields.

Speaker 1 And they'd be like, well, that's a really good offer, but I don't know you. Have a good one.

Speaker 1 And one of my favorites, we offered offered a company $15 million for their field. And, you know, it's a good amount of money.
It was a fair price.

Speaker 1 And he's like, yeah, it's a good deal, but I don't know you.

Speaker 1 And it occurred to me, I was like, well, maybe I need to brand not only to the general public for capital, I need to brand myself in the oil industry.

Speaker 1 So we reached out to NAPE, which is the largest upstream oil and gas convention in the country, arguably the world too, because they have such a big event.

Speaker 1 And we said, hey, you know, do you have some sponsorships available? Well, they ended up up having one that was Dead Center. It was the main sponsorship.
So there's four premier sponsors each year.

Speaker 1 You know, and this event has ExxonMobil, Marathon, Chevron, every big player is there as a giant booth. Right.
I said, I'll take it. So I bought the biggest space dead center in the event.

Speaker 1 10,000 people attend it.

Speaker 1 And I did this massive spread, which put us on the map.

Speaker 1 No doubt.

Speaker 2 Now, do you mind sharing how much that investment was?

Speaker 1 So oddly enough. You don't have to.
It's not as bad as you think. So, because I'm pretty good at isolating things, right? I'm like, okay, well, we're going to need some marketing materials.

Speaker 1 We're going to need some banners. We need this and that.
We kind of pieced it out. Between me and my executive assistant, we basically found a booth.
It was two-story.

Speaker 1 It looks like a Thunderdome, right? Yeah.

Speaker 1 We got that for $15,000. That's not bad at all.
No, it was $150,000 new. The company had used it three times.
They were getting a new one. And I offered them them $15,000.

Speaker 1 And they said, hey, let's do it.

Speaker 1 All in, I would say we're between $150,000, $175,000.

Speaker 2 What did they actually, just because I run events and you, I both know a lot of people, what was the actual, just a straight-up sponsorship spot?

Speaker 1 50. 50.
Yeah. That's reasonable.

Speaker 2 Yeah. And if you're the main, but if you're the main guy, that's really reasonable.

Speaker 1 It is. It is.
So oddly enough, the event has a lot of other verticals they make money with. We did have other expenses on top of that that did occur.

Speaker 1 It was more of the fact that that premiere spot was used by somebody else the prior year. They happened to step down out of it.
So the spot became available.

Speaker 1 All the other spots have been filled for years.

Speaker 1 So we were fortunate. Timing.
You're correct.

Speaker 2 Now, you know, timing and preparation equals luck, right? Yeah. How much of that do you feel like is on your side right now with everything that's going on with the interest rates, to your point?

Speaker 2 You kind of saw the writing on the wall about a decade ago

Speaker 2 with the real estate market, the lack of

Speaker 2 availability. So for you to make the exit from real estate and go into oil and gas, how much of this is going to play into what you think, you know?

Speaker 1 Well, fortunately, it's kind of, it's ironic. A lot of people don't realize this, but if you look at history of oil and gas prices, when the Democrat's in office, oil and gas prices are higher.

Speaker 1 The reason for that, they're restricting the amount of drilling going on. So each year, governments give different amounts of leases out to create new drills, new participation,

Speaker 1 millions of acres a year.

Speaker 1 The Biden administration recently only issued 200,000 or 300,000 acres. So they were a tenth of what usually gets issued.

Speaker 1 That's why we've been supporting higher oil prices right now because the production isn't there to support the demand. We use about 14 million barrels a day of oil.

Speaker 1 So if the production is not there due to the fact we're not drilling new stuff. Because a lot of people aren't aware oil wells decline over time.

Speaker 1 And the rapidness of the decline is initially the first year, but it's also the highest producing year. That's right.
So in order to keep that production up, up, we have to keep drilling more and more

Speaker 1 based on the fact that half our production is from Wells Drill the last two, three years. Yeah.
So a lot of it's new.

Speaker 2 So is there a way for people to get into your world right now? I want to circle back to the question. Sure.
The fund, the $25 million fund.

Speaker 1 Yeah. Is that full? Is that for $20 million? Sorry, I kind of went off in a rainwater.

Speaker 1 No, it's still available. It's accredited investors, 506C, Reg D,

Speaker 1 100 grand minimum.

Speaker 1 You know, we're leveraging it too. So the cool part is you're taking $25 million and getting $100 million worth of cash flow value.
Of course. So it's a better structure.

Speaker 2 Again, I'll just make sure, follow him, comment, ask questions.

Speaker 2 We only have a certain amount of time for the podcast, but you're a wealth of knowledge.

Speaker 1 So

Speaker 2 do you have any concern about,

Speaker 2 and this is a very naive question, but like...

Speaker 2 The United States going dry of oil relative to the rest of the world?

Speaker 1 No, because

Speaker 1 imagine this. There's about 5 million wells in the United States.

Speaker 2 20%. A lot more than I would have thought.

Speaker 1 20% of them are online right now. The reason for the other 80% being offline is a lot of major companies will go drill wells.
And then when they get down to like 20, 30 barrels a day,

Speaker 1 they don't care. So they plug them.
So it's not always necessarily the fact that our production is not there anymore and the reservoirs will run dry. It could be a mechanical failure.

Speaker 1 And this is part of our business model of going in and doing the maintenance.

Speaker 1 Because if you can imagine, when you have an oil well well in the ground, you have a piece of production tubing that runs down.

Speaker 1 It's only two and a quarter inch, two and a half inch in diameter. You have paraffins coming up.
All this material coming out of the ground is warm and whatnot.

Speaker 1 That starts closing off that pipe over time. It's like your arteries clogging with cholesterol.

Speaker 1 So as it closes, your production is decreasing.

Speaker 1 Not necessarily the reservoirs depleting. It's the fact that your production tubing isn't able to

Speaker 1 get it through. Correct.
So that's one maintenance exercise.

Speaker 1 But overall, I mean, production in the United States is here, and we're discovering new oil all over the place. I mean, Florida hasn't even been touched yet.

Speaker 1 I mean, there's only seven wells in Florida that are active, seven or eight. And they're all owned by the Collier Group down in,

Speaker 1 what's it called? The Everglades.

Speaker 2 You know, it's funny. I guess, again, because I'm so naive to oiling that, you just don't really think about these things.

Speaker 2 Again, I would have thought

Speaker 2 most states or areas that have oil, they've been tapped. They've been found.

Speaker 1 There's companies there but you're even saying that's not even the fact yet like there's there's still a blue ocean if you will right of just opportunity they've been talking about it for 30 40 years that we were running low on oil it's been a narrative for a long time but bear in mind too a lot of the narrative comes from people wanting to get away from oil so if you talk about the fact we're depleting all the time well that's going to create a narrative for electric cars

Speaker 1 everything and like my original statement i mean ev isn't going to take a real dent into oil and gas because of the other need for it.

Speaker 1 I mean, and people don't really look into like lithium mine, right?

Speaker 2 Totally. That's huge in North Carolina.
Yeah.

Speaker 1 And well, in other countries, though, like Chile and stuff, they usually child labor comes in and they're handling that stuff. And it's been reported.
This isn't hearsay.

Speaker 1 The thing is, it's not in front of people, so they don't see it, right? Sure. So you have electric car companies talking about bettering the environment.

Speaker 1 But you're digging these massive miles and miles of craters in order to extract this lithium to put that battery in,

Speaker 1 which the car is wrapped in petroleum-based plastics and everything else. We don't talk about that, but that's the only way to make that EV work.

Speaker 1 Unless we have a better battery source than using lithium, it's forever going to be environmentally damaging to drive EV.

Speaker 2 Interesting. I like it.
And I don't play too much in this.

Speaker 2 I'm a normal kind of gas car guy, so I don't know a whole lot.

Speaker 2 I know there's massive lithium plants that are, you know, I was going to buy a package of real estate deals up in this area, North Carolina.

Speaker 2 And the big thing is they have this lithium dig that they're doing there, right? So it employs a lot of people.

Speaker 1 Yeah.

Speaker 2 So tell me what people need to know more about like the oil and gas opportunity out there, right? I think

Speaker 1 I talked about this before. The biggest with you outside of Google.
Yeah, yeah. The biggest differentiator between me and all the other companies is the majority of oil companies drill.

Speaker 1 So they raise capital to go drill wells. Now, drilling is very beneficial, as I spoke about.
And you get a high tax credit. You know, you get 70, 80%

Speaker 1 deduction for your taxes and whatnot.

Speaker 1 But what I do is I'm buying stabilized assets already to an extent, and I'm making them better, making them run smoother, increasing production slightly with just maintenance-based activities.

Speaker 1 So it's a very easy performer to look at, right?

Speaker 1 We're not the highest-yield fund. Like, you're not going to come in and make a 10x return, right?

Speaker 1 You could do that with a drill sometimes, but they don't talk about the fact you could have a 50-50 shot of that new drill working.

Speaker 1 So what's worse, going with a fund that has stabilized assets, that you know what that cash flow is each month, even before we buy it, or going into a field and drilling stuff and potentially losing half your money.

Speaker 1 So we're a conservative, non-correlating asset. I mean, we don't correlate to the stock market.
Yeah. We don't correlate to the real estate market.
Yeah. We're correlated based on.
economic usage.

Speaker 1 I mean, if we use old domains, exactly. Yeah.
So, and there's ways of hedging it. I can go to the detail.

Speaker 2 Well, Well, I think a lot of people are just on, I mean, even myself, right? I'm sitting here. I'm asking questions because I just don't even know, right? I'm just getting informed by you.

Speaker 2 I just think people, you know, they want diversity in what they invest in. Exactly.
They want to know, like, and trust the people they're investing in. Right.

Speaker 2 And so my thought is if you are educated enough to say, hey, we're protecting our downside, we're diversifying. A lot of those economic foundations are what keep people in business a really long time.

Speaker 2 Correct. They may not be the boom of Dogecoin type numbers, right?

Speaker 1 Yeah.

Speaker 2 But they might be around for the next 300 years because they run a business model that is sustainable for the things. They're knowledgeable.
They're looking around the corner.

Speaker 2 They're diversifying and they're protecting their downside. But again, to your point, right? Like, again, they're not going to have that extreme 10x return annually, but it's a safe bet.

Speaker 2 It's in a new, it's not a new industry, but maybe for investors like myself or people that don't know, you're diversifying instead of buying stock in real estate.

Speaker 2 Now you jump into a little bit of oil, right?

Speaker 1 And the thing with me, coming from a real estate world, right?

Speaker 1 Though I've gained all this knowledge, we try and do a really good job of breaking it down for real estate-based people because a lot of people have had a rental or something like that. Totally.

Speaker 1 But they may not have been in oil. So when we have our presentations on what we do and stuff, we always kind of compare those two because it gives a better understanding to the oil and gas space.

Speaker 1 I mean, I can't teach the average Joe geology and petrophysics and all this other fun stuff I had to learn.

Speaker 1 But I can show them how it relates to what they're doing so they have a better understanding in order to make an investment or be a part of something, right?

Speaker 1 I mean, we're a hundred grand is a drop of the bucket in the oil world, but if I compile that with a bunch of people, I can take regular people that are in real estate or whatever it may be and bring them into the oil space so they get a chunk of

Speaker 1 that profit.

Speaker 2 So, who's who's the best avatar that you'd be looking for?

Speaker 1 I mean, you have to be accredited, so you got to have $2 billion now worth at least. Yeah, or $200,000, $300,000 is a couple, you know, annual income.

Speaker 1 But

Speaker 1 I would say it's kind of for the guy that

Speaker 1 is is intrigued by the space, believes in American energy, things like that, but they also want to get a bit of knowledge.

Speaker 1 Cause one of the fun parts about working with us is throughout the time I'm educating people on what we do.

Speaker 1 It gives them an understanding because the better you understand things, the more comfortable you are with investing. So it's a win-win.

Speaker 1 I mean, for me, I want to educate so people know and they can come in.

Speaker 1 But realize, coming from a real estate background,

Speaker 1 I don't want to roll the dice.

Speaker 1 I was a fix and flipper and sure, there's a level of risk there, but it's a calculated risk.

Speaker 1 I did the same approach going to oil and gas because I don't want to go lose $100 million like some of these drilling companies.

Speaker 1 I mean, I personally know a handful of guys have lost over 50 million on just one drill. So one drill, one day, or well, 30 days, but yeah, disappointing.

Speaker 2 I mean, again, how, so. Let's even talk through that.
How would someone, were they just going for the big boomer bust, one drill, one rig, one huge in a bust?

Speaker 1 Yeah, so,

Speaker 1 you know, the average conventional wells, shallow oil, is probably $3 to $8 million to drill a new one. When you get into the horizontal wells, you're probably low side $9 million up to 20 plus.

Speaker 1 What ends up occurring is, if you can imagine, we have a lot of environmental regulation on us.

Speaker 1 There's regulatory every month, even though people think we're just destroying the planet.

Speaker 1 Like, even if I have a small amount of oil spill, I have to report it and it gets cleaned up or remediated or whatever it may be.

Speaker 1 But

Speaker 1 a lot of it comes to if you have an issue when you're drilling.

Speaker 1 So if you're drilling down and you miss a zone, you miss the area, because you think you're going three miles down, you could only be off a foot up top and you're half a mile off down. Oh, yeah.

Speaker 1 So a lot of it comes to either drilling the wrong area or they could run into an issue where you hit fresh water. So fresh water is a problem because we want to keep that cased in and sealed.

Speaker 1 So sometimes drills go bad. based on the fact that people are not expecting to see something down there, right? We can have 3D seismic seismic and studies and all that stuff, but it's still operator.

Speaker 1 You know, you still have a manual person controlling things. So you could run into issues where you get those massive dilemmas, delays.

Speaker 1 If you're paying for a rig that costs, I don't know, 25 grand a day, 50 grand a day, if you're keeping on site too long, then you're going to have further issues.

Speaker 1 There's a lot of things that come into play.

Speaker 2 Is there a lot of cost in the actual

Speaker 2 rigs and materials?

Speaker 2 100%. That's all.
Could that be the L that people take because it breaks or something, you know?

Speaker 2 It won't be a $50 million L, but.

Speaker 1 No, so this one was, he kept trying to, I can't remember why. He couldn't get the casing to seal or something like that.
He couldn't cement in. And he kept trying, trying, trying.

Speaker 1 And I don't know the exact, I can't remember the metrics, but it basically just kept amounting to more money.

Speaker 1 Whereas if you can imagine like the field we're buying right now, you know, it's going to be over 500 wells.

Speaker 1 The production is diversified. Every well does a barrel, two barrels, three barrels a day.
Though that doesn't sound amazing, but when you put 500 wells out there, 1500 barrels. Is that yeah, a day.

Speaker 1 Yeah.

Speaker 2 I mean, but that's what I love about what you're saying is because it relates to me in the real estate space, right?

Speaker 2 Like you understand when you protect your downside, it's being able to scale the portfolio. I'll tell most people in the real estate space getting in, don't go out buying rentals right away.

Speaker 2 Create income, create the opportunity to buy a lot of rentals because Buying single-family homes and having three is more of a nuisance than it is. There's not as much upside.

Speaker 2 But having 30, now there's a little bit of economies of scale. Four or five of those homes go vacant at the very same time.
You have 25 to hold up the operation. Correct.

Speaker 2 So what you're doing is you're focusing on lots of lands that are already existing, that are already performing. And you're saying, I want volume.
I want scale of digs.

Speaker 2 And that is why that's so appealing to me, right? And again, this is coming from the layman. I don't even know the opposite.

Speaker 2 I would just say, if I were to be an investor, if I was looking into this, I would want to know know you because

Speaker 2 if you're just going for one grand slam home run, one swing of the bat, one time, hit it big, have 10, 15 time return. Like, bro, yeah, but what if you missed the ball?

Speaker 1 Yeah. Right? That's the downside.
Yeah. And our structure too,

Speaker 1 oil and gas debt, as far as going to a private lender and stuff, I mean, we leverage our fund, as you said.

Speaker 1 But when we go for that debt, it's typically a five-year debt plan because the cash flow is so strong on oil and gas deals that they structure it five years.

Speaker 1 So so our goal is while we're repaying that debt over the five-year span we're giving a preferred return and we're giving you additional cash flow if it's higher but at the end of it we're left with an asset that's now paid off with only the the funds capital into it let's say it's 25

Speaker 1 well the asset is a very slow depleting asset anyway because i'm targeting mature assets yeah so if it's depleting four percent a year and we've increased the production 20 25 percent yeah you know realistically we could be at 80 or 90 percent of the asset value at the end after paying off all the debt.

Speaker 1 And then we return the investor's capital and split it. Now, conservatively, I built the model around getting 60 or 70% of the initial value because I didn't want to overpay under deliver.

Speaker 1 So I've definitely not done that. And when we sell the asset, let's say we're splitting 40% at the end.
I mean,

Speaker 1 it's a really good multiply. You get 2.2, 2.3 eggs.
But you've got cash flow the whole time. Yeah, yeah.
You have an asset that's already been stabilized.

Speaker 1 It's a really good play the way I structured it, I think.

Speaker 2 Now, when you're going into a fund in real estate specifically, so I don't know if there would be any difference. There's no like real great tax write-off, right? Okay, yeah.

Speaker 2 Is there anything here in this play that?

Speaker 1 Yeah, so we actually, I changed my PPM structure probably

Speaker 1 about two, three weeks after we started, and we went back and rehashed it and reset it back up because we wanted to pass through. There's a depletion allowance of 15% per year.

Speaker 1 So what that means is, let's say say they have a million dollars of this, right?

Speaker 1 And it's 10% preferred return. So let's say that year they already got the prep.
Well, that's 100 grand.

Speaker 1 Well, out of that 100 grand, 15% of that profits to them, the realized profits is tax deductible.

Speaker 1 So it's not a major thing like drilling where 80%, but bear in mind, you're a lower risk profile asset and you're also getting 15% of that deducted a year, which is nice.

Speaker 2 Yeah. And the way I kind of look at it is if you're going to be cutting a check to anything,

Speaker 2 all those things play on to the decisions at least I make, right? If you're a high-net worth individual and you have a million net worth and you're making a quarter million a year,

Speaker 2 you know, something like 15% is 15%. Right.
You know,

Speaker 1 I don't want to pay it to the IRS. Yeah.
And on top of that, if we do any workovers,

Speaker 1 you know, downhole projects, whatnot, a lot of that is to tax deductible at the 80%, 70%

Speaker 1 tangible, intangible drilling costs. So when we're doing maintenance activities, a lot of that is tax deductible to almost the fullest amount.
So you get that also. That's great, dude.
Yeah.

Speaker 2 I'm going to pause for a second.

Speaker 2 So I usually keep these 40 minutes-ish.

Speaker 2 I don't know where else you want me to go. I've tried to hit the things that I would have probably wanted to say if I were you, but I'm happy to take it wherever you want.

Speaker 1 Maybe

Speaker 1 where they find out about the fund. Because I got two domain names.
I got OWP Capital Group and I got investinpetroleum.com. Which one would you plug?

Speaker 2 Are they both for the 25 million raise?

Speaker 1 Yeah, they go to the same place by OWP Capital Group

Speaker 1 OWP Capital Group or investinpetroleum.com.

Speaker 2 I like investinpetroleum.com.

Speaker 1 I just feel like it's a pretty strong domain name. Yeah.
So it, yeah. So if you want to bring that up, like, where would they find out more information about the fun part?

Speaker 2 I will end it that way no matter what. Okay.
But that's also why, I don't know, 10 minutes ago, I was like, hey, is there still availability?

Speaker 2 Like, I want them to realize, okay, I could reach out to this guy. But is there anything else? And by the way, if you're like, dude, I knocked, I said what I want to say, that's fine too.

Speaker 2 Maybe. I don't want you to miss anything, though.

Speaker 1 Maybe go back to the commodity price part, like what's going to happen with the election year and stuff. Oh, yes, roll with that for sure.

Speaker 2 All right, dude, I'm going to change subject a little bit, right?

Speaker 2 It's an election year.

Speaker 1 We're all aware of it.

Speaker 2 Everyone's talking about it. I just made a ridiculous post that is getting crazy comments.

Speaker 2 What happens to this industry during election years?

Speaker 1 So I kind of touched on it earlier with the Democratic Party typically pushing higher oil prices, right? Because they're not drilling.

Speaker 1 So if we do go Republican, which is kind of what we're, you know, aiming for as far as an industry, you know, I prefer to see.

Speaker 2 I feel like the whole oil and gas world is Republican. But that's the outside looking in.

Speaker 1 Yeah.

Speaker 1 If they, if it goes back to Republican, we'll see a drop in in oil prices. So right now we're fluctuating between $72 and $80 a barrel.
If

Speaker 1 Republican Party comes in, opens up drilling, we'll see about a $60 barrel. Now, if you can imagine, the assets we're buying are traded on decline, production amount, and commodity price.

Speaker 1 So for us being in an acquisition phase for the next year, with the fact that we're raising the capital, we bring that in, we go deploy it, it's a very good time for us to buy if it becomes a Republican Party.

Speaker 1 Yeah, for sure.

Speaker 1 Now, the counterpart, because they clearly have to be accepting of both parties just in case it does happen, if it does go Democrat, prices get pushed up, but they get held for four years anyway.

Speaker 1 If anything, they'll keep increasing. So it'll go to maybe $90 or $100 a barrel.
And then after a couple more years, it might be 120.

Speaker 1 so though we'll be a higher price we'll still be able to alleviate those assets in a way that we're going to have four years of consistent pricing why do you

Speaker 1 so again from the layman point of view why would you want a cheaper cost a barrel for you on the acquisition front it means less capital out of pocket to get a higher production volume yep and if you can imagine my fund is five years so if Republicans are in office, sometimes they flip-flops.

Speaker 1 I mean, if Trump does get elected, he wouldn't be back in the next year.

Speaker 2 So we're talking about acquiring the actual...

Speaker 1 Buy the fields. The fields.
Yep.

Speaker 2 So you'll keep the field cost low in terms of acquisition because of the cost a barrel being cheaper.

Speaker 1 Correct. And on our exit being five years,

Speaker 1 that would be potentially switching to a Democratic Party oil goes back up.

Speaker 2 So you want to buy in Republican. You want to sell in Democrat.
Yeah. Interesting how that plays into that.

Speaker 1 If you think about it, if I'm at $60 a barrel with Republican Party and then Democrats come in, it goes to $120. That's a 2x just on my commodity price.

Speaker 1 So my asset value actually goes up just on the commodity price. Just based on commodity price.

Speaker 1 And if I can keep that production stable, I could literally buy today at $60 a barrel and double my money at a $120 barrel.

Speaker 2 And in five years, you're going to pay it off all the debt.

Speaker 1 Right.

Speaker 2 I mean, the upside is massive.

Speaker 1 You have a free and clear asset. The only money that's in it is the fund, which is 25%.
That's right.

Speaker 2 And you have a multiple just on the commodity price. Right.
Phenomenal, bro. I'm geeked up about this.

Speaker 1 This is pretty cool.

Speaker 2 Yeah, there's no doubt.

Speaker 2 Listen, where can people find more about the fund?

Speaker 1 Okay, yeah. So OWP Capital Group is the name of the fund.
But if you go to investinpetroleum.com, that's our domain. It takes you right to our landing page with all the information.

Speaker 2 InvestinPetroleum.com.

Speaker 2 You'll learn way more about the fund. Alex himself, follow Alex for sure.
This guy's a wealth of knowledge, obviously. I'm sitting here just picking his brain.

Speaker 2 He can go way deeper than we're going right now.

Speaker 2 But make sure to go follow you on Instagram, Facebook, TikTok, all the things.

Speaker 2 Anything you maybe want to leave the audience with about gas, petroleum, commodities, you know, time of year, interest rate, anything else that might play into.

Speaker 1 Yeah.

Speaker 1 I mean, I think interest rates are going to come down a little bit because they're trying to, you know.

Speaker 2 I just got something in the real estate world that now they're at 6.4. I just got notified, which

Speaker 2 they came down a little bit. Now, the Fed didn't cut the rate, though, by the way.
They just came. I think the banks are inclusively saying, hey, we need to.
Yeah.

Speaker 1 What we were seeing with vehicles too, right? Tesla's buying down the rate and things like that.

Speaker 1 I just would say, when you're looking into oil and gas, try not to be biased on a lot of the narrative in most people is, oh, yeah, I invested in a drilling project.

Speaker 1 It went bad, blah, blah, blah, blah, blah. Realize that I'm coming from the real estate world and we're trying to buy cash-flowing assets just like out of the gate.
So it's a different model.

Speaker 1 So even if you're not going to invest or partake, at least read about what I'm doing. Yeah.
Because it'll give you a different insight into how it really works.

Speaker 1 You know, a lot of oil and gas guys don't want to share this knowledge. I'm I'm actually a forefront.
I mean, I got featured in Nate magazine as CEO recently because

Speaker 1 the massive organization was like, hey, you're a frontrunner into the new generation of oil. I mean, I'm 33 years old.
The average oil operator is in his 70s.

Speaker 1 So I'm coming into a new industry really aggressively, big booth, a lot of attention.

Speaker 1 I got the featuring because of the fact I'm disrupting. And now I'm saying I'm changing the whole industry, right? I'm too small for that.

Speaker 1 But as far as an educational point, my goal is to educate the general public on what really occurs with oil and gas because I think that's the preventative to stop oil and gas being canceled.

Speaker 1 I mean, that's the truth of it. You know, if people try to cancel it, though we need it, it still could be a case where legislative passes that restricts the, you know, the smaller companies.

Speaker 1 I mean, independents and oil and gas are huge. They're a massive portion of the production.
But the majors right now are swallowing each other up.

Speaker 1 You know, marathons being swallowed by ConocoPhillips has been other major exits. They're consolidating, which in essence turns into a bit of a monopoly.
I was going to say that. Right.

Speaker 1 So independent operators need to still exist. But in order to exist, they have to have realistic legislative.
If you put these crazy fines and crazy rules on the smaller operator, they'll be gone.

Speaker 1 The majors will be the only ones left. And now we have a real problem, in my opinion.

Speaker 2 Man, there's just so much into this. This is...

Speaker 2 I can see why you got attracted to this. You know, it's exciting.
Correct. Dude, I want the best for you.
I want you to disrupt it. I know there's a whole old school,

Speaker 2 good old boy network. And I think you fit in as a person, but I also think you can kind of change the narrative, change and

Speaker 2 disrupt it in the best way possible, dude.

Speaker 1 So

Speaker 2 name the website one more time. So everyone.

Speaker 1 Investinpetroleum.com.

Speaker 2 Investinpetroleum.com. Go see Alex all over.
Otterwell, all over Instagram, Facebook. LinkedIn, TikTok, you name it.
Brother, I appreciate you being on. Appreciate it.
Right on. All right.

Speaker 2 If you guys liked one or two of these things and you think it's worth sharing, if you know someone looking to invest in gas or whatever, make sure you share with at least three of your friends.

Speaker 2 I'll see you on the next episode with another incredible guest.

Speaker 1 Peace.