Conventional, Producing Oil & Gas Investments in 2023

Almost two years ago (February 2021), I wrote an article about how 2021 might be the best time to invest in oil and gas. Turns out, it might have been. The low price environment of 2020 created an opportunity to buy reserves for low valuations in 2021 before oil prices hit over $100 in 2022. Luckily, we were well positioned and acted on our own advice, making some great acquisitions in late 2021 and early 2022. Throughout 2022, with climbing commodity prices, the market saw asset valuations rise and acquisition prices rise considerably; although well below pre-covid highs.

With high inflation and high interest rates likely to stick around, the stock market might be in for a rough 2023. So where is the best place to invest? Bond returns are still low, but rising. Alternative investments should remain a higher return investment for the next several years. But with so many options, where do you invest?

Traditional private equity in oil and gas might also show below average returns due to companies now drilling Tier 2 and Tier 3 acreage (best acreage already drilled) and higher service and material costs due to inflation. New wells drilled on average are costing more and producing less.  I may be partial, but Lucky Lad Energy has a differentiated approach to oil and gas investing: operated, producing, conventional, Gulf Coast assets. Why?

1. Operated assets allow our team to dive deep across our entire asset base and rank our projects against each other. Rather than being at the whim of other operators that may move quickly or slowly, we can decide which projects to execute and when to execute them to maximize value and minimize cash calls from our investors.
2. Producing assets reduce reservoir risk. The wells are producing or have recently produced which can allow for increased accuracy in forecasting future production and allow for better valuations of reserves. We know the reservoir exists and contains hydrocarbons based on the previous production.
3. Conventional assets are neglected by many operators. As shale development and drilling continues to dominate capital spending, many conventional assets are being neglected, producing far below their optimal rates. Additionally, much of the workforce developed in the past 15 years has little to no experience optimizing conventional wells.
4. Proven Gulf Coast Basin. Over 10,000 wells have been drilled and completed across the Gulf Coast over the past 70 years. With so many wells and so many years of development, geologists and engineers (and other professionals) have a strong understanding of the basin allowing us to find and work with those that have a strong knowledge of the area.

If you are interested in hearing more about Lucky Lad Energy’s approach to oil and gas investing and share our belief of Investing in American Energy, please reach out today. We believe 2023 will remain a great time to invest in oil and gas, especially with our team.

In the next several weeks we will dig into each of these more: Operated vs Non-Operated, Producing asset acquisitions vs Drilling deals, Conventional assets vs Unconventionals, and why we love the Gulf Coast basin. Each of these will expand on why Lucky Lad Energy’s investment philosophy allows us to maximize returns and minimize risk for our investors.

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