Ep. #47 - Mineral Rights, Royalties, and AI in Oil & Gas with Jace Graham

In this episode of The Crude Cast, Travis McCaughey talks with Jace Graham about mineral rights, royalty interests, and how mineral deals work in the oil and gas industry.

Jace explains the difference between mineral rights, royalty interests, non-participating royalty interests, overriding royalties, and working interests in clear terms. He also discusses how title, ownership history, landwork, and relationships affect mineral transactions, along with why trust and transparency still matter in a relationship-driven business.

The conversation also covers how modern tools like AI, CRM systems, data workflows, and digital outreach are beginning to shape mineral acquisition and investor communication in oil and gas.

This episode is a useful listen for:

•  oil and gas professionals 
•  mineral owners 
•  royalty owners 
•  landmen 
•  energy investors 
•  anyone who wants to better understand the business side of oil and gas 

That description is better for discoverability because it repeats the right keywords naturally without sounding stuffed.

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Transcript

0:02

So yeah, Jace Graham, thanks for being on the podcast. You're with Rising Phoenix Resources. And where are you guys based out of? Travis excited to be on the show. Appreciate you having me based out of Dallas, Texas. So I was born and raised here and got a good little headquarters here. Cool. How did you get into, today we're gonna talk about royalties and we're gonna talk about a little bit of AI and how that's kind of affected uh your business and get into some of the details around these investments, I guess, ultimately. How did you get into, ah royalties and that type of thing. Yeah, I you know, I, in fact, I was born and raised in it. Quite frankly, uh, I'm a fourth generation oil and gas guy. So, uh, got to, uh, learn on the shoulder of a giant, my father, um, with me and my brother. And so my father was a independent operator doing drilling deals, raising money, lease hold out in the Permian basin out in the four corners of Colorado, Wyoming. different areas. I literally got to see everything from the capital raising side to the leasing to the actual drilling and developing to building up a portfolio and then selling to a major. And I saw him do that multiple times. so, you know, as a kid growing up, you know, going out to West Texas, I remember going out to big Lake Texas and with him and being on a rig and seeing all that and how exciting it was and And so it was kind of a natural transition for me. I did a little stint in the hospitality industry out of college and, uh, but ended up, uh, hooking up with, with my father and my brother. we worked together for the better part of about 12 years before I started rising Phoenix. So, you know, it's in, it's in the blood. and again, just having a mentor like that really kind of helped kind of shape my viewpoint on oil and gas and capital raise and how to do it. do it right, how to have a good handshake deal and do what you say you're going to do. Is that pretty typical to have kind of these handshake deals? mean, maybe back then it was. Is it still similar to that today? Maybe not as prevalent. There still are, and we still do good handshake deals. We call it the good guys club. There's I'd say six or seven groups that are mineral buyers as well that we know very well, very close to. And we will transact together sometimes. literally off a handshake, move a million dollars over to somebody's account and we don't even have a PSA assigned. So it still happens. It's not normal, but you know, when you've worked with a group and you've done, you know, 20, 30 transactions with them, just kind of know how they operate. And um it's always, it's kind of fun, you know, going that, going that approach. I suppose it probably only takes one bad deal or you to not come through your word and everything's just blown apart anyway. So everybody's motivated to keep everything fair, I guess. Yeah, when I mean, listen, not every deal goes according to plan. I mean, that's that's almost the norm. You can plan for perfection and all hell breaks loose. And so I think what you end up seeing is groups working together, having more of an abundance mindset versus scarcity and knowing that ultimately we're trying to get a deal done. I've done deals where we had we didn't make any money, but we got a deal done. And so that's that to me is more important. You said I guess off air you have a couple different uh parts to your company. So what are the different parts to that Rising Phoenix? Yeah, so Rising Phoenix Resources is comprised of three main verticals. We've got a real estate acquisition company. We go after single family residences in the Dallas Fort Worth market. We do a lot of fix and flip, wholesale flipping, um seller financing, hard money lending with that vertical on the real estate side. ah We've got our oil and gas and mineral acquisition company, which we're definitely going to talk more about on this podcast where I've got a team that's actively picking up oil and gas mineral opportunities, as well as working interest for either our funds that we have or sometimes we just flip those two to larger private equity-backed shops and sometimes we keep them in-house as well. And then the third vertical is Rising Phoenix Capital, which is where we kind of do the capital raising for our funds. The general partner kind of sits over on that vertical. uh Fund management, mineral management kind of sits over there as well. Those are the three key legs to, rising Phoenix. We're, we're starting to look at an AI data center um strategy in 2026. We're pretty excited about natural gas directly converting to electricity on location to fuel AI data center. So that kind of brings in all three of those real estate, you know, what's going on under the ground as well as the capital raising side. So pretty excited to see where that goes. Is there any crypto? mean, you can't talk about kind of AI and all that without talking about crypto. Is that something that kind of runs in that vein or not so much? Not so much for this strategy. That definitely is something that's talked about quite a bit as far as, know, trapped natural gas that typically gets flared is now being converted into electricity and to Bitcoin and crypto and whatnot. ah No, we're talking about a pure uh data center play ah that's not affiliated with crypto. So a little different, a little bigger in scale. ah And so kind of working through that as we speak. Cool. So when we talk about these uh oil and gas assets, as I was thinking about this podcast, I wonder if people know or have an idea of when we talk about royalties, we have the royalty, is kind of the, I guess to me, the cash flow portion. And then we have the underlying asset, um the resource. how do you, which one do you focus on and both and then. um Yeah, which one, guess, are you, you're more focused on the royalty side or the asset or how do you kind of work those two things? it is, it is a bit confusing. ah I've been in this industry for the better part of two decades and yeah, it definitely uh needs explanation ah to understand the differences between a mineral interest, a royalty interest, a non-participating royalty interest, an overriding royalty interest, a working interest, all those types of types of interest, if you will. But I guess let's just take it back to the beginning. ah you know, when the first president patented the first piece of land to, let's just say a settler in West Texas, okay, way back, change that title all the way back to that patent, they conveyed all right title and interest in that land. They say from the center of the earth to the zenith in the sky, all right title and interest, okay? So that surface owner owns all the minerals down to the center of the earth, air rights, everything, ingress, egress, you name it. What's interesting about minerals in the United States is the only country in the world where uh a uh citizen of that country can actually own the mineral interest as well underneath the ground. In most other, every other country, it's the government that owns those minerals. There are some situations in Canada that there is some feed minerals, uh not predominantly. And so what's interesting about minerals is that you can sever the mineral estate from the surface estate. So I can sell my farm, 100 acres, all the surface, everything on the surface, and I can retain all the minerals underneath it. oh And so imagine that's occurring in an area like the Permian Basin that's been active for over 100 years, and people have been reserving this over and over and then cutting and reserving and cutting and reserving and errors and all these things that just continue to just fractionalize these interests. So that's the mineral interest. And when an operator comes in to, let's just say that farm, or let's use a ranch, because that's better. We're down in Texas. So they come into a ranch, uh and they say, hey, uh we want to lease your minerals. We think that there's oil there. And so the typical trade, at least today, not back then, it was a lot less, but let's just talk about today, could be something like, we'll pay you 10,000 a net royalty acre and we'll pay you 25 % of anything that comes out of the ground. You don't have to put up any of the cost to drill, develop, none of that, any of the ongoing operations. You just get a nice little free royalty payment, okay? So owning those mineral interests, right? You get to benefit with that bonus on the front end, that $10,000 an acre, right, on the front end. And you also, at that time, you get the benefit from that royalty stream as well, that 25%. Okay. So you own the minerals, but you get the royalty income. So you get that royalty interest as well. So we like focusing on buying minerals because you get everything. You get the minerals, you can lease. Let's say that lease is terminated or there's lack of production. An operator can come back uh and release you. So you get another bonus. So the mineral owner gets to benefit from the bonuses and the royalty payments. There's what's also called a non-participating royalty interest. So what uh a mineral owner can do is, or a surface owner can do is they can sell their minerals and just retain the, know, and sell down and just be able to negotiate the lease. The surface owner can negotiate the lease on behalf of the mineral owner. So the mineral owner is only getting the royalty payments, okay? The surface owner would be getting that bonus payment. And that's a non-participating royalty interest. An overriding royalty interest is a lease carve out typically. Okay. What I mean by that is if an operator or a land man is leasing at a 20 % royalty rate to a mineral owner, and then they sell that lease to say Exxon Mobil for a 25 % royalty rate, they've effectively carved out a 5 % overriding royalty interest in that lease. Now it's attached to the lease. So if that lease goes away because of non-production or the wells go away, that override goes away too. So that's why we kind of look at these, the most valuable is the mineral interest, because you get everything. Next would be a non-participating royalty interest. And next would be an overriding royalty interest. Okay, as far as like what we'd like to prefer, we can buy, we buy all three. And then the fourth one is a working interest. And that is actually where you're actually have an interest in the drilling of a well or wells in an area. And. you that's more like a JV partnership with an operator and so on and so forth. So you're putting up the costs to drill and develop, and then you get to benefit from the royalty income that you receive. Hopefully that offsets the cost. So I know that was a little long winded, but I think it's important to explain. ah It sounds like there's a lot of moving parts. So how much... ah I mean, how do you keep all of that straight from the person who maybe originally had it and you, you know, now this person sold this part to now this person has this extra part and you got all these parts and pieces and carve outs. How do you kind of keep that all straight? it the same piece of paper that the same lawyer or county or how's that? Okay. This is what land men do. Okay, this is what field land men do is they go in and they chain the title from patent from that first president that deeded it or patented to that first owner of that land. They will chain the title one person at a time grantor grantee and this is how I used to do this. This is how I started my career pulling these big grantor grantee indexes and looking for John Smith, which is not a good name to find because there's a lot of John Smiths. And this is even before typewriters were around and they were writing the county clerks were writing with feathers. And so it was all handwritten. But you have to go back and change that title yourself. There's no title policy for this kind of stuff like you would with real estate. You don't go to a title company and transact minerals. The transaction is similar to a real estate transaction like you would sell your house. That's a warranty deed or general warranty deed or whatnot. that we convey minerals through a mineral deed or a mineral and royalty deed. So we have teams that specialize in that. Again, I started my career in that. So I understand the nature of how that's done. And so they chained the title. They put together what's called a run sheet. It starts all this ins and outs where they are going to find the people who we're talking to ultimately trying to buy their interest. They also can determine whether or not it's an MPRI non-participating royalty interest, a mineral interest, an override. We're able to see all that in the chain of title. There's documents filed at record at the County courthouse. So you can always go back to the County courthouse and find the answer. You just have to kind of know how to chain that title. ah know, landmen are not going anywhere anytime soon. You know, it just keeps getting more cut up and more complex ah as we speak, as you know, as people continue to sell down assets and whatnot. So. Do you have to physically go to that county courthouse or is this something that is more online now? Uh, it's becoming more online. Definitely for sure. Um, there are times when you'll have to go back on some of these older, um, you know, deeds and, try to chain back, but it's, it's becoming more prevalent to be online to where you can kind of do that type of stuff and utilize the technology today to kind of chain the title in your office. The other thing I'll add is, we also have a title attorney who's licensed. He'll look at that chain of title and basically give his overview. kind of like his title opinion from a title company and say, based on my opinion, I think everything lines up. And that's when we say, all right, let's go buy it. We believe this is what it is and that's what we're gonna go buy based on the purchase price. How long does that whole process take and is some of this provided by the seller? And if it is, is that something you can take at face value or are you always retracing your steps? Great question. ah So it can happen always, all the ways you just described. So yes, ah we'd like if a seller has some sort of a chain of title run sheet that we could work off of. So they're just basically giving you a lot of the heavy lifting. We'll go back in and verify all that, right? But it kind of gives us, okay, this book and page is here. This is where the conveyance is versus us searching for that book and page to the grantor grantee indexes. So gives us kind of, and so we can go in, but we've got to make our own opinion on it. uh So it just kind of depends. um Groups like us, right, when we go to sell, we've got the full chain of title. We've got the title opinion from our attorney. And so we furnish that to our buyers because we want them to have everything they need to close as quickly as possible. But when you're dealing with direct owners, which we do at... I'd say 75 % of our deal flow is direct to seller, non-marketed deal flow. And we're going to talk about that in ground game 2.0. they typically don't. It could be in a shoe box. I inherited this from my grandfather. I'm getting check stubs. I really don't know what I own. And so we've to go in and verify that. And if we verify, we look at it and say, we believe you own this many acres of minerals. And if it's more than that, then obviously we pay you more. And if it's less, we pay you less. And so we look at the chain of title and so it can go either direction. So with that whole, like say you're interested in a mineral and you have all the documents, you do all the checks, is that, you know, you think of a house maybe like 30 days, 90 days, is that this similar timeline? Or what's kind of your ideal scenario, I guess, as far as closing times? Yeah, we typically will do two weeks to 30 days. We try to move pretty quick. Yeah, we try to move pretty quick. um know, something, you know, we're smaller, we're a little more nimble. You know, we've got excellent title teams in each respective basin that we're going after. And so if we need to push and do a two week close, we can, you know, for the most part. There's times when the title is a little more complicated where there's just... more complexity to the asset just because the basin has been producing longer and there's just more things that are involved in it. mean, think about it's one thing to just look at it from, you know, top down, but now in the Permian basin, they're even doing like depth severances where I'm going to reserve at this depth, but you get everything down below. So it's not only now just up and down. Now it's this way. So it's, it makes it fun. Exactly. And so all of you look like, Whoa, wait, so you mean I It's debt severed. And so the debt that we were wanting to buy in is severed. They don't own them. And so that's come back and happened before. How long are these, just in what you've seen, how long are these minerals kind of staying in the family or are these new owners or are they kind of family legacy minerals? Just in what you've seen. a mixed bag, meaning we see some people that are maybe 65 and older wanting to just clean up and not wanting this to kind of be passed down to their five or six children, because now it just becomes more complex and complicated. And so they want to just roll it up and exit. We see people that have inherited it. And they just want to, they don't want to hold it. They just want to, uh you know, some cash now and, you know, want to want to exit. So we see, I'd say both sides. And then we also see people that just for a reason, the timing is right. And, you know, they want to go do something else with the money and they want to transact and sell. So I can say it's a mixed bag. Um, it's a timing thing. It's, it's, you know, staying in front of your audience and your potential sellers and trying to provide as much value as you can. And then when they do decide it's a time to exit, then you're there um with an offer form. What potential complication you said were were segmented on the minerals as far as the surface uh even subsurface What kind of issues do? run into Windows like I guess you mean you've used like the ranch or the farm is the example and I'm assuming that's something that's pretty common is that you now you have The ranch is in play is like a surface uh business, but you're wanting access to the minerals in development. What other kind of issues do you see cropping up with, you know, purchasing these minerals? Well, first and foremost, the mineral owner, the mineral ownership takes precedent over the surface estate. uh Meaning a surface owner cannot restrict a mineral owner from having his minerals developed. Now, there are restrictions. They can't just go put an oil well where a house is. They have to say a certain amount of feet. from a existing structure and so, and there's surface damages paid by the operator to the land owner if they don't own the minerals. But they can't just straight up just say you can't drill, all right? And so, you know, they've got to work that out with the operator. So the mineral owner is not really dealing with that surface owner, because remember they're just the passive owner of those mineral interests. The operator is the one that's trying to work with those surface owners to try to figure out. you know, the best way forward. Hey, can we put the pad over here? Can we pay this much in surface damages? You you name it. And so they try to work that out. Obviously not every, not if I'm on, if I got surface and not minerals, I don't want to rig on my, on my property, but sometimes it just, it just, it is what it is. So it's, you know, I don't see it from a mineral owner perspective. We know the operators are going to figure out a way to develop those minerals. But most of the time, uh these areas where there are hydrocarbons, there are oil and natural gas reserves, are not in areas that have a lot of urban activity. The only one really that is known is the Barnett Shell, which cuts right through Fort Worth, Texas. lot owners own minerals underneath their subdivision. uh Yeah, my early, early in my career, we bought 16,000 of those quarter acre lots. I was a young man. I was single. I was hungry. And that was kind of my first deal I was dealing with my dad is I was like, we can go buy these quarter acre lots for next to nothing. And also now we pulled it together and had, you know, a 4,000 net mineral acre position, um, that we still actually manage today and own. So, um, but I would not, I would not recommend that. Um, This is non-investment advice. a great, I mean, no, but I mean, it really taught, you know, I'm all about systems and process. And I came from a well-known restaurant, Houston's restaurant here in Dallas, where it was all systems and process. And so I took that approach and I applied it to what we were doing when we were doing that much volume. It's just like a conveyor belt, conveyor belt, stamp it, you see it, you know what mean? We'd have to run a little bit of title, get it in the folder, get it up, put it up in... you know, get all the information that we needed. And so we did, I mean, we were processing 40 to 50 transactions a week. And so you learn from that. And so my whole business is built around that. So now it's just, they're larger chunkier deals, but that's good to get those reps in for sure. So how? Does, so you've never ran into a situation where someone's wanting to do some mining or other natural resource in kind of a similar uh play that you're in as far as the minerals are concerned, or it's pretty fairly cut and dry. Fairly cut and dry. mean, that type of mining, that's more on the surface, surface ownership. Minerals and royalties, I mean, we're talking, you know, you know, over a thousand feet deep is what we're looking at. never really, I'm thinking about it. I remember we were leasing land in Parker County, Texas for the Barnett shows, me and my dad kind of early on 2005 era. And I remember we came across, one of the heirs to Wrigley, uh the gum. uh And she had a big horse ranch out there and she was definitely uh telling us, don't you even think about drilling on my land. So in order to get that lease with her, she also owned the minerals too, so it helped. But um we kind of had to negotiate that there was no surface use on her pristine acreage, where she had all her cutters. cutting horses running around. Right? Yeah, I'm sure some of that, like you said, is state law where you have to provide access. You can't restrict people's development of minerals, et cetera. But I'm sure the better. You know, your rapport, the relationships that you build, you know, I'm sure you know better than I do that oil and gas is, you know, very much still a relationship kind of business, you know, especially for, well, probably small and large, but yeah, on the smaller, you know, small and medium side. oh absolutely. mean, there's no doubt about it. I mean, when it comes down to you know, negotiating and working through a transaction, whether that's an oil and gas lease or even the sale of your minerals, it's definitely very personal. And, you know, people do deals with what they like and with who they like and they trust. so, um you know, you definitely have the people that are looking for the highest and the best. But we've, we've um gotten deals done that we may not have been the highest offer, but because of our process, because we provide full transparency on our underwriting and how we get to our offers, um you know, we think it's important to kind of educate our sellers on here's our number and here's how we got there, you know, instead of just here's a number. So they appreciate that. um And if we can provide value, I always tell my team, you know, if you provide value, then people will pay you for that at some point, right? um And so, you know, if we're just trying to be transactional all the time, then that doesn't work in the long game. But if we provide, just go at it with providing value, then that usually converts into opportunities. You talked about that um interest that you had in Fort Worth and the conveyor belt of deals. Well, transition into how is AI um revolutionizing what you're doing? Is that playing a part in this process, or what part is it playing for you? Absolutely. I mean, there's, there's a few ways, right? We, I've kind of, I've coined it ground game 2.0. I'm going to be doing a talk on it down at NAEP in the mineral and non-op hub. Uh, so, but I'm going to go really deep in on it, um, there, but yeah, I mean, it starts with kind of, starts with just the data, you know, how you're utilizing data, big data, how are you sourcing data? How are you pulling data together? How are you making it all interconnect? because there's a lot of different data sets out there. And pulling all that together and utilizing some AI components to that just kind of scrubs it, cleans it, know, merges it kind of together so that you can utilize it to, you know, put a strategy together. The other thing is like just some of the automations that we're utilizing. Um, you know, just give you an example, you know, we've got, um, We've got a, um, an AI bot we call Ashley Erwin AI. she is on our, one of our capital websites. She can answer questions about any of our offerings and opportunities. And she's ultimately trying to book a intro call with somebody on our team. Okay. That's getting rolled out in our mineral royalty team as well. Okay. So we, and we don't hide the fact that it's a bot, you know? Um, and so can kick out emails. that sound, you know, can answer questions and go back and forth. uh utilizing some of that technology is pretty interesting to us. We've always been kind of tech driven. I think we, punch above our weight, um you know, given that we're not a private equity back shop with millions and millions of dollars in R and D, but we've always been kind of paying attention to the tech, utilizing, you know, large data sets, figuring out ways to kind of, you know, build algorithms within them to streamline those types of operations. but yeah, it's, um, it's, it's getting, it's getting kind of interesting with, with even like bringing in that, technology into forecasting and what, you know, you know, reservoir engineering looks like. Cause as you know, I mean, the, um, the patch is a matrix. I mean, it's always ever changing. So rig shows up here. Wells are drilled here. IPs are higher over here. when they were originally this. And so that's what we're really kind of looking to tap into is that matrix, not just is there a rig on location and are there permits? That's great. Anybody can find that, right? But what's happening underneath the ground, okay, with the source rock, with that, ah you know, and then also then layering in who owns these assets, what other, maybe there could be some interesting tidbits that are filed of record. that also bring in maybe more likelihood to sell their mineral interest due to filings with the county. When you think about it, if there's mechanics lanes, if there's divorce decrees, if there's uh different types of probate filings, uh and you also own minerals, uh it may just be more of an interest in case that you may be more interested in entertaining an all cash offer. So layering all that in and then looking back on what's transacted and who transacted over the last call it 12 to 18 months, and then looking at ways to identify what were their patterns. And then maybe taking that type of data set and applying it to everybody that owns minerals to figure out maybe who based on those indicators of prior sales could be more likely to sell in the future. So again, it's just, listen, I'm taking some stuff that I've learned on the real estate side. I'm in a few real estate masterminds and these guys are like, five years ahead of us oil and gas guys. And so they're utilizing this type of tech and we're just kind of taking that and just kind of applying it to the oil and gas mineral space, which has been fun. Is all this data that you're going to be gathering, is this stuff that you're third party, or would this be stuff that you're compiling yourself? We're pulling from third party sources and compiling it in a manner that we can utilize so that it's not just standalone data sets. Okay, so that would be kind of our unique um opportunity in what we're doing is being able to pull this together and be able to see these types of indicators. That's a large um swath of information. what's your... Well, I didn't even go to the acquisition side. So then there's that. So we talk about the data, the automations, the AI piece, but then the sales approach, right? I mean, you can have great data, you can have automations, and you just can't buy anything. Like why? You know what mean? And so what we tend to see is, you know, a lot of times these shops that they don't understand What a sale cycle is with sales. People are just, you know, picking up their cell phone and making calls. Like we use technology and software. mean, I've got, I've got, we run a setter closer model. I've got setters out of South Africa. Okay. Making three to 500 outbound calls a day through technology and software that we use in order to make those that much call those that many calls. And they're just trying to see if people are interested in entertaining. At that point, it goes into our closers in-house. Okay. They really know how to work, walk through that whole sales process, ask the right questions, get the right answers, provide the right feedback and ultimately provide an offer. But even managing that, I mean, like we're looking at how many dials a day, how much, what was the contact ratio of the contact ratio? How many leads did you push into the CRM? What's that percentage of the leads that you push into the CRM? How many intro calls did you have? of those intro calls, how many discovery calls did you set up? Of those discovery calls, how many offers did you make? Of those offers, how many contracts did you sign? Contracts signed, how many deals closed, how much revenue made? So literally like managing that whole process from top of funnel all the way down, we're looking at those types of metrics to see are we on or are off? ah What our targets are. And so I think you got to pay attention to that kind of stuff. know, lot of groups just like. We do it on a spreadsheet. Also, we're deep into a CRM where we can see opportunities. We can see the deals. A lot of people just work a deal and then it goes and then they work the next deal and it goes and next year and they don't get it and it goes. We actually have a way to where we're taking those deals. We've got kind of, call the bone pile where we can catalog them. But then we can also add kind of these alert systems on if there's anything going on in and around those type that that that shape file, if you will. that we're alerted. So maybe they wanted a million bucks for this asset a year ago, we couldn't get there on a price, but all of a brick shows up and 10 permits, we may be able to get to a million too now. And so we'll pick up the phone and call and say, Hey, do you still own those assets out in Reeves County? Oh, you do? Listen, I know you want a million. What is it if we got to a million too? You know, again, we provide all this back to our, to our sellers so that, you know, they understand what's going on. And it's at that point, it's a decision they can make. So I know it's a lot, but. um Last thing I'll add is the exit, the versatility on the exit that we have. So when I talk about ground game 2.0, know, obviously we're non-marketed deal flow is what we pride ourselves on going after deals, direct to seller, not auction, not heavily marketed, not brokered. Listen, there's nothing against all that. We do deals with brokers. There's no doubt about it. Okay. But what we really try to do is try to go direct to seller. And that's what our teams do really well. But I think it's having an exit flexibility. How do you exit? I get a deal. Everybody's a flipper. I don't care what they say. Everybody's a seller at some point in time, whether it's the private equity shops that are a 10-year hold, they flip in 10 years, okay? Or it could be me that I flip same day, or hate on some deals. having that optionality where we can fund it um with our funds, we can take it down internal, we can flip it, we can 1031 exchange it. So having some of that flexibility. you know, being kind of a private boutique shop that can kind of move around and kind of be more nimble is definitely something that's a value add. Yeah, can understand, like you said early on, know, kind of the minerals and the real estate, you know, I guess there might be people out there that don't take into account that side of it, how kind of real estate minded and transactionally it can be. it, you know, just like you would be a real estate agent, you're going to all those prior customers that you've dealt with are going to be in your collective of people you're looking at again. Hey, do they own other stuff? Are they in the market again? So that CRM in that workflow, I mean, I think it makes a lot of sense. And then that's kind of probably also your networking piece as well. Absolutely, without a I I remember back in the day working off spreadsheets and that goes only so far, but when you're managing teams and multiple people, mean, everybody's got to be on the same page. having that data in front of you where you can look at it, make educated decisions from a strategy standpoint is key to being successful. So we said that's these sections of what you're doing with AI. What is kind of your timeline for that? And then what is your most important? Like, what are you focusing on now? Or are we doing it all kind of at the same time? I mean, it's all kind of, it's, know, we're always sharpening the blade, right? So, um, as far as like the AI, like bot can be, can do an outbound call, can field an inbound call, send an outbound email, text that's happening now. Like we're doing that now. Um, but where this goes, mean, like, you know, we're starting to, to start to pull down data sets that are I'm going to say probably two or three weeks before anybody can kind of put them together to start to figure out who owns what. What I mean by that, let's imagine that maybe in New Mexico, there's there's a pre-filing that goes out with just the name of the mineral owners and the name of a working interest owner, just the name, right? Most people will look at that data set and say, too hard. I need an address. so I know who they are and where they are. Just like you see in Oklahoma when these filings are made and they've got everybody listed and their address and their name. And once that's done, you you can mail to them, you can sometimes call them if you can skip trace that number. But I mean, we're now pulling over that data set to where we now have, we have those names and databases with addresses. So now we can cross coordinate that data to then be able to populate that, to then be able to have be having to call out before anybody else is trying to have a conversation with. And even two weeks is, you know, in this competitive landscape and it's, it just continues to get more competitive with more private equity coming into this space. You've got to have that, that advantage. And, you know, two weeks is a long time. If you're the first one there having that conversation, leading with value, talking about ownership and ways that maybe if you're interested in device divesting, you know, consider us as an option. What's kind of your return on investment or how do you like, what kind of percentage would you put on how much more effective this is, is currently making you and what would make you in the future and kind of what would, what's that timeline look like? Well, let's look at it from two different ways. Number one, I would say deals that we literally flip immediately. All right? We can mark those up anywhere from 10 to 25 % of what we're getting them under contract for. Okay? So there's that spread there. That's, you know, straight out of the box. If we are taking our say our mineral funds to market and we're putting them on auctions and selling them there. You know, the return profiles that we see on our mineral funds, you you're going to be at probably a 1.6 to 1.75 equity multiple on those types of investments based on prior performance. And this is just a boring ass PDP, you know, cash flow, not a lot of white space upside type investment strategy. Now, if we want to go white space ahead of the bit, you know, where a lot of the private equity shops are buying, then they're looking for that two to three X equity multiple. You're getting zero cashflow day one. Um, and maybe for the next three or four years. And then when the rig show up, that's when you exit, but we like to go cashflow first. Nice monthly distributions and then like to exit as safely as possible. So, you know, I think with the, with the ground game, we're picking up, we're picking up assets. 10 to 25 % below market value that you would see transacting on either public auctions or what we're seeing in the market when you go to sell. So this um is kind of a, you said you're already doing the inbound calls, outbound calls, but how much more effective is this making your employees in that space as far as you said you have a name shows up as somebody who's selling uh a mineral and you can immediately, you're two weeks faster than them. You're saying that that two weeks is... ah kind of cash in your pocket, guess, for lack of a better term, because you're able to make a better offer, a different offer. Am I getting that right or? First offer, we're the first to make an offer, right? And we don't have the AI, we don't have Ashley Irwin making outbound calls to mineral owners. That just doesn't work, all right? We do have Ashley Irwin making outbound calls or at least making calls to people that are interested in learning more about one of our offerings that may have clicked an ad to learn more. We do have that and we don't hide. anything, I'm Ash Aaron, I'm an AI agent with Rising Phoenix Capital. I'm here to assist you. And ultimately her goal is to set an intro call with a human. So that whole thing is like, you know, you're able, you know, people that you would have in house doing that is to ultimately we were trying to get things to just talk to a human. So if that's happening on the mental side, it could be an email, it could be a text, but ultimately we're trying to get them to interface with somebody human on our team. So. It just allows you, I when you've got thousands and thousands of leads inside your CRM, it just allows you just to kind of just stay on top of them without a human having to manually do that. And then all of somebody's, there's some level of interest, boom, human engages at that point. I see, okay. You talked about when you. Well, let me back up. When we talk about your um rising phoenix, people that you're open to investors, I'm guessing. And all those investors have to be accredited investors or not? OK. are 506C, accredited master only, correct. Okay. What is your... We said we buy these assets and at some point we are going to get out of them. Is that a? Do we have a consistent strategy with that or is it kind of just as we find we need the capital or kind of maybe a little bit kind of help people understand kind of why you would buy something and then conversely when you would want to get out of it. Kind of what's your exit strategy? Is it like taxes? Is it declining production? Is it kind of what's your thoughts? Great question. So at Rising Phoenix, we've got two strategies. We have our income strategy, which is the oil and gas mineral funds. You're investing in a fund that's going to go on producing minerals and some of the major basins here, the Permian Basin, the DJ Basin in Colorado, the Hainesville, the Eagleford, potentially the Bakken. And so you're in a blended pool there, right? And so um there's no drilling risk. There's no dry hole risk because you're buying where the wells have already been drilled and are producing. Okay. Um, that's a high yield play. You know, we've averaged about a 17 % cash on cash yield over the last five years. Okay. Um, we can point to that track record, that type of opportunity. There's not a big tax write off. All right. You get a 15 % depletion allowance, uh, in perpetuity on that. Meaning if you got, let's just say $10,000 in royalty income from fund. you're paying taxes on 8,500 of that. So you can apply that, it shows up on your K1. So for people that just like yield and with upside potential, that's a good strategy, right? And we do monthly distributions and it just shows up every month. It's quiet. On the real estate side, we call it tenants and toilets. None of that. It just shows up. That pump jack is going 365, 24 seven. So we also have our growth strategy, which is investing in the drilling of oil wells. All right. And we've got a fund right now that is gaining quite a bit of momentum because of 2025 winding down and people are looking for tax write-off for 2025 while also wanting to look into something that actually has a good return. And so we've got a fund that we're partnered in with that provides that type of uh investment criteria. And that's upwards of 90 % tax write-off in 2025. could go against W2 ordinary income. So you see that really kind of gaining momentum towards the end of the year when people are trying to figure out ways to like save on taxes, but still have some upside. our income strategy, our mineral funds, we're looking at a 1.5 to two to one equity multiple in those within a three to four year period. Cash flowing every month, okay? The growth strategy, the drilling fund, 90 % write-off. I'd say 80 to 90 the first year. And then we're looking at a two and a half to three to one equity multiple on that. So higher return profile, a little bit more risk, not going to lie, right? Cause you're involved in the drilling of wells and operational expenses in wells and wells can go over in costs and there's, there's, so we've got, you know, manage those a little differently, but, but we provide both strategies. Because not everybody just wants it. Some people just, especially right now, want that, that tax write off. So. Okay. Let see, what else did I, let me scroll down here. there's one question in here. What do you? What is maybe something that people misunderstand about mineral rights, whether that's the actual land owner or maybe somebody who's gonna invest with you? What's kind of the common thing you find yourself repeating over and over again? It goes kind of both ways. So people interested, people are concerned, you know, they hear oil and gas and they think I'm investing in the drilling of a well and there's dry hole risk. So you kind of have to overcome that with our income strategy. No, you're not investing in the drilling of a well. You own the real estate under where wells have been drilled and are already producing. So, you know, we have to kind of talk through that. And then you also have a lot of people that are interested in the drilling deal that you got the minute and they want the tax write off. oh I just want the tax write off. you hear a lot of people just looking, mean, literally looking for tax write off. I'm like, you can make sure if you're investing in something good first, tax write off second. But I think that people think that investing in oil and gas can be very risky. You do have commodity. price, uh pricing that you have to be aware of. We try to look at that, uh meaning that let's just say that one of my funds is generating a 15 % cash on cash yield at 80 bucks a barrel oil and oil goes to 40. That effectively cut that yield in half. So now you're at seven and a half percent on a cash on cash. That can happen. Unlike real estate, you're not going to see a house go from$500,000 in value to $250,000 in value in one year. You can see oil go from 80 to 40 in a year. So you just have to see that and realize that that's a moment in time. ah It always comes back up and it goes back down and it comes back up. And so what we really try to do is time that upward momentum in pricing on when we'd like to try to exit. um It doesn't always work out. And you know, you can connect the dots looking backwards. We had it, we took a lot of our portfolio to market in 2022. uh Oil was a hundred bucks a barrel. That gas was eight bucks in them. uh We went to market September one, bids were due October 31st of 2022. And within that timeframe, oil went down to like 60 to 70. That gas went from eight to four and everybody went to the sideline. So I missed it. ah The lesson learned on that was like we were not prepared with our assets and our portfolio to go to market quickly. Um, we had to like underwrite everything and get everything organized, make sure everything was in the right setup and folders and naming conventions and all this stuff so that we could have a data room. And that took several months. And so now we are, you know, as soon as we buy an asset, she can be sold, she gone the next day. So, um, so I think that's important. Absolutely. I mean, I got a lot of scars, buddy. Trust me. So. Talking about your your fund and like you said your verticals how much of your time is kind of spent on? Investor relations because that sounds like something you were kind of hinting at a little bit Yeah, so I've got a great investor relations team led by Allison Burton here who's been with me since we started Rising Phoenix. ah But yeah, I interface as much as I can with investors. We always can call in and have a conversation with me. do right now I'm in the middle of uh my quarterly newsletters and distributions for the funds that are on quarterlies. We've since moved to monthlies on the newer funds. But some of the older funds that were Browning out and selling out this year on a quarterly. So they get a newsletter for me with an update and everything. And then I kind of do a state of the union. Um, so, you know, investor relations is big. You got it. You know, people want to know what's going on. And so we try to provide as much information as possible during the acquisition phase of a fund. It's important because people are like, wait a minute, I invested my money and like, how long does this take before I get my first check? You explaining and demystify, okay, here's how it works. We raise the money, we close the fund, we go find the assets, we identify, we underwrite, then we go buy. And then even when we buy, then we have to get them transferred over to our name. So we can start receiving the royalty income from an operator. And that whole thing can take anywhere from the shortest three months, the longest a year, depending on some of these operators that just will take their sweet time um for whatever reason. But there's a, monitor that too. It's not like they're not going to pay us the ones income. just, it's sometimes they're delayed. So that first check tends to be quite a bit larger. yeah, investor relations is important. Absolutely. And so we value that. to be more pointed, was thinking that somebody who is maybe not somebody you're going to engage with to find another investor, but the people that are already here, how often they have questions and that type of thing. Yeah. they pick up the phone, give me a call if you've got a question, but I always talk. mean, if, if, if they've got questions, then everybody else probably has the same question. There's not asking it. So, so we try to anticipate, um, you know, just little things like, you know, if K ones aren't, distributed by the end of March heads are rolling over here, man. Um, you know, just little things like that, that just, you know, doing right, putting a good opportunity out there, communicating. ah know, investors need touch points along the way. um And so, you know, reaching out, talking to people, you know, the updates on every quarter, getting a monthly distribution notice. We have an online investor portal where people can log in and see all that information, pull down, you know, at their leisure. um We've got all that going for us here. When you talk about these mineral deals, what would be, maybe have a story of like a red flag or something that kind of. you know, when do you walk away from a deal if something's not lining up or you're getting some red flags about it. Well, I you know, a lot of times if a, know, a broker deal always got to be, you know, what's going on, what's really going on. Um, what I mean by that is, know, there's always a story. There's always rigs are coming, developments imminent. Okay. Show me, show me, show me the proof. Like where do I see this in the public fire links? How do I understand that? But, um, you know, I think you just got to stick to the fundamentals. You know, we've got an in-house petroleum engineer who knows how to underwrite these opportunities down to the gnat's eyelash. uh And so just kind of looking at, we in good rock? Where are we? Is the formation funky or are there fault lines? You know, really kind of understanding some of that geology. uh You know, there's no Zillow or MLS for this stuff, Travis, as you know. I mean, it's, and that's probably why there's... a pretty high barrier of entry because you really have to know how to underwrite these decline analysis, look around, see what's going on, what could the forecast look like, factoring in commodity price futures, all that stuff. um But yeah, think just really just taking what people say as a grain of salt, but really doing your own due diligence and underwriting to really get to the truth of a number that you're ultimately going to present. This is probably something that I could understand a little bit better. ah When we talk about these, you talked about the commodities swing. What role in valuation do the banks play or do they? Absolutely. mean, you you can put leverage just about on anything. ah For us, we've not used leverage, ah but we've got a fund right now that we're currently talking to our bank about that and how they're going to typically look at lending, at least on a mineral deal. Is they're going to kind of look at your average cash flow? Make sure you're not in some sort of a flush situation where it's brand new wells coming online and the production is super high, but it's declining very fast. They're going to look at all that and just a high level overviews they're going to offer probably they'll lend it like a 36 month multiple. Okay. Now, you can take that and leverage that. I've got, example, I've got an asset now that we're looking at that it's about a million bucks. purchase price that we could lever some of our cash from uh one of our existing funds. That asset is generating about $25,000 a month in royalty income and the payment on that is about seven. So it's additional income leverage that we can put on that fund to get additional return back to our investors. Because remember, our funds, it's an equity thing. It's oh an equity multiple. um Where the banks, it's a flat. interest payment. So I just think you got to be careful and just not get over levered. There's groups out there. There's even a group out there that their entire strategy is debt. The whole thing. Not going to mention any names, but just you got to be careful because the pendulum can go the other way and you could lose your shirt and you got to be careful there. So, would the bank be doing its own, are these specialized lending institutions? Okay, and they're doing their own pricing, investigation, everything. I mean, they're loaded. They've got engineers on staff or, you know, they work with consultants. I mean, there are, you know, certain banks that do energy lending. You would rarely see a bank lend on energy that does not have that type of bench behind them. Right, yeah, mean, sounds smart, makes sense, yeah, okay. Yeah. It's just so unique, I with just all the variables. It's not like a commercial real estate with a cap rate, where it's just flat. um There's just a lot of variables and you just got to kind of know what you're doing. I don't know if you want to talk about ESG at all. I mean, we are, it's, no, mean, it's, listen, was, you know, Blackstone pulled a lot of their capital a few years back. It's not as popular of a term today with the current administration for whatever, whatever way you go, but it's just, it's, you know, I think it affects more of the groups that are backed by private equity. an institutional capital that have to do have to have some sort of mandate. But hey, natural gas is clean. And I know, I know people that I know a group that that, you know, had an ESG strategy that hey, we're only going to be buying natural gas minerals. And it's clean and it kind of checks the box. so um yeah, but we don't typically see um You know much of that where we are privately owned investors are you know interested in energy they know that there's only so much and demand keeps increasing and so on and so forth so we don't see it we don't see it a ton Okay. I didn't necessarily think it was relevant per se, but yeah. If there are, we'll kind of close I guess, if there are any ah landowners, mineral owners that are listening, I'm sure they can reach out to you, but what should they kind of have in mind or prepare for before they reach out to you? You know, I we talk to people that are, have it all organized. We talk to people that it's in a shoe box. We talk to people that aren't even sure what they own. So we talked to, I'd say an ideal scenario is um someone has a price in mind. ah They've got some check stubs from an operator so they can point to payments. um And that's pretty much all we need. And even if it's not a price, can get there. And again, we will, you know, pop the hood and show you how we get to our number. uh I think that's important, is demystifying that piece instead of just lobbing a number over there. you know, we can find pretty much anybody anywhere that owns oil and gas minerals, but it just helps us get going if you've got a check stub that you can share with us. Are the assets you're picking up, are they just in Texas or would this be for anybody that's from the Dakotas down? we're buying everywhere in the lower 48. Okay. Because we look at cashflow, we look at development opportunities, and so we can fit a decline curve to all of that pretty easily. um It's when you start buying in some of these more technical basins where there's new development, like the Uinta up in Utah, and it's just they're learning it, and that's where it gets a little more complicated. um you really kind of need to know the geology, but if we're buying in the middle of Reeves County, mean, there's hundreds, not thousands of wells around you that you can fit a decline curve to, and you've got to check stuff that you can pull from and look at the differentials and see what that looks like from the pricing and get to a number that fits. In all these different states, are you obligated, and I'm sure you are, to the taxes in each different one of these states? Like different production taxes or uh almost like, guess, maybe a sales tax or something? Yeah, different states do different things. know, production and severance tax is usually handled by the operator and netted out of your check. But you have like in Texas, you got ad valon taxes, are in effect property taxes that we have to pay. uh And so you just need to kind of know that some states don't have that. They don't have a property tax. So just depending on kind of where you're going, some states require that you file a kind of a a sales tax when you purchase in that, you know, up in Oklahoma and then over in West Virginia that you got to state what you purchased that asset for and you pay a tax at that point in time, similar to real estate. But in Texas, you don't have to do that. So yeah, you just kind of need to know the lay of the land and what's going on and a good land man out there can always help you. Cool. Is there anything else you want to share with us today? I know it's been kind of, probably don't do another episode and dive deeper into some of this stuff, but yeah, I feel like we gave people a pretty good overview of minerals and royalties and kind of the funds and what you got going on. Yeah, I mean, I think just to kind of wrap it up, mean, the way I look at minerals are part of the bundles of six to go along with real estate. Okay, so let's not overly complicated and it's purest. It's a real estate transaction. uh We treat it that way. um I think you got to do right by people um underwrite with honesty, um you know, and everything else follows. So I think, you know, doing right being part of that good guys club is important. um But If people are interested in learning more about directly investing into oil and gas, not through a stock of Exxon Mobil, but directly investing, there's options. It's not just only investing in a drilling deal, which is what everybody thinks about. There's the mineral strategy that we do, and there's just not a lot of that opportunity out there if you look online. So welcome to opportunity to talk to anybody and just have a conversation. um If you own minerals, welcome to have a conversation with you as well. um think that we put fair offers out there and we communicate transparently. And you said you're giving a speech at NAEP. When was that? That's, I think, second week of February. So the big, yeah, big North American Prospect Expo. We're gonna really kind of go deep into the ground game, 2.0, and kind of what we're doing there. And we got a booth out there too, right next to the hub. So anybody going out to Nate, feel free to stop by, say hello to us. We'd love to visit with you. I've got, I usually have my two boys, Jet and Bo out there. They're eight and 12 teaching them sales, how to pitch. We've got Red Bull out there. So if you need to pick me up, come see us and my boys will pitch you. Okay. Yeah, that's awesome. Well, hey, I appreciate you, you know, willing to come on and talk to me. I always say that, you know, none of this happens unless people are willing to do it and have a conversation. uh you know, hopefully we provide a value to you and to the listeners. So really appreciate your time, Jason. Thanks Travis, I appreciate the time as well. had a fun time.