Larry Lee started the first iteration of RAM Energy in 1986 with a strategy of acquiring long-life, low-decline conventional assets. Today, although the industry has changed tremendously, the veteran oilman is continuing to use that same approach. Lee, president and CEO of Tulsa, Oklahoma-based RAM Energy LLC, spoke at Hart Energy’s 2015 A&D Strategies and Opportunities Conference in September.

In 2013, Lee restarted RAM Energy, focusing on conventional assets in Texas, New Mexico, Oklahoma, Louisiana and portions of Arkansas. In the interim period, RAM had acquired more than $900 million worth of properties, gone public, raised additional capital, acquired another company, and generally survived all the various ups and downs of the industry. In 2012, RAM recapitalized and re-emerged as Halcón Resources Corp.

“Our plan when we re-started the new RAM in 2013 was to buy these same types of assets, build them up and then eventually roll them into an upstream master limited partnership [MLP],” said Lee. The MLP market has changed, but the new RAM is staying the course. Lee prefers long-life deals, and is agnostic about whether they produce oil or gas. He has a strong preference to operate, and he typically looks for acquisitions priced between $15 million and $200 million.

“There’s never been consistency in our industry,” he said. “It’s always up and down, and I think if you’re in this business, you need to really take advantage of the ability to take some of the risks out of your commodity price.”

For a buyer, most oil and gas reserves are pretty easy to estimate, but what causes problems are price issues. “You just can’t control pricing, so you need to take advantage of the hedging opportunities that are available.”

RAM’s thesis is that the shale revolution has obscured the merits of many low-decline conventional assets and left them starved for capital. “But, you can still generate attractive returns on these assets by applying good old oil-and-gas expertise and some focused attention. We’re re-plumbing them, using great engineers and good field people.”

To date, RAM has acquired 52,000 acres, all held by production, and has reserves of 8.2 million barrels of oil equivalent (MMboe). It is making more than 1,300 boe/d, about 37% crude. The assets have a reserve life of 20 years.

To Lee, dealing with unconventionals means that if you miss the timing on prices, your returns really suffer, because the production is front-loaded into the first few years of a well’s life. Conventional production, however, works more like dollar-cost averaging. Year-to-year declines are gradual, reserve lives are predictable, production volumes can be hedged, and costs can be controlled.

With unconventionals, if operators miss the timing on commodity prices, returns suffer, because production is front-loaded. Conventionals work more like dollarcost averaging.

“You can generate very, very nice returns,” said Lee.

Right now, one issue RAM faces is the paucity of deals on the market. The number of transactions in the first half of 2015 has been disappointing, but Lee said that could change. “We bid on several things, but in some cases the company and its lenders wouldn’t allow the transaction to proceed. I think we’ll soon begin to see more agreement upfront as these companies bring assets to market.”

During the past five years, about two-thirds of transactions have been in unconventional assets, and one-third in conventional. This ratio is likely to flip going forward, noted Lee, as conventional assets are liquidated or monetized so that capital can be re-employed in unconventional plays.

And that’s just fine with the new RAM Energy. It is a ready and willing buyer for those traditional properties.

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