Hi, I am Nissa Darbonne, executive editor at large for Hart Energy. Thank you for joining us. We're visiting today with Bryan Sheffield, founder and partner of Formentera Energy Partners. Bryan just spoke at our Energy Capital Conference in Dallas and he's visiting with us here now.

Bryan, for Formentera Energy Partners, you've amassed a lot of PDP (proved developed producing) reserves, but what you're putting together isn't just PDP. Your plans are not just PDP. Tell us more about this.

Bryan Sheffield, founder and partner, Formentera Energy Partners: First of all, I like to mention where I got the name from: Formentera is my wife’s favorite island in the Mediterranean. We had to think of a lot of names and a lot of people ask, "Where did this name come from?" So you should look it up, go [to] Google and just look at Formentera, the island. It's a very special place.

The strategy was PDP only in the very beginning because of this [dis]location of asset prices changing hands. You could pick these assets up at a very high yield and with a little bit of leverage, 30%, 40% leverage, that would enhance that yield if you locked it in hedging at three years.

Now we look back at our assets that we've bought. We have a lot of PUDs that we inherited. They're all held by production. There's work to be done on the assets that we have bought. We did not pay for it. So as time has passed, we have started to acquire more drilling opportunities.

Let me just give you one example: A lot of people still think we're PDP. I don't think that. We called ourselves a PDP-plus for a while, but I think we're right around 60%, 65% cashflow, PDP and 35%, 40% drilling. So the one example I wanted to use is Joe Jaggers. Do you remember Joe Jaggers?

ND: Yes.

BS: Great guy. People love him in the industry. He founded a few plays and got in early. He has this bird dog nose [to where] he kind of gets there and he understands the rock and he understands the logs. He's an operations guy. So he gets in early with his track record, moving from the Uinta to the Delaware, and now he had 30,000 acres in the Pearsall play, which you guys have been talking about for 10 [years] to 12 years because we backtracked and pulled all the articles.

I wasn't really interested when he called me up about it. I was like, "That's not what we do. I need cash flow." But then my geologist came to me and said, "I think we should look at this a little more. All the logs are there. The geology is there." And he pointed out a well that was drilled by Marathon [Oil], a 500 bbl/d well.

But if you look at the pounds [of] sand per foot, it's right around 400 [pounds] to 500 pounds per foot, and went into [how] industry's between 2,000 [pounds] to 3,000 pounds per foot. That well is in the center of this block in the Pearsall.

EOG [Resources] is all around us, right on the edge of the Eagle Ford. They have leased all around us. They are permitting and drilling also. So it's happening right now. We could end up drilling 100 wells on this 30,000-acre block. We're looking at potential wellhead returns north of 50%.

So the trial's out. We're going to drill there.

We want to drill in the Bakken. We have a lot of Tier 2. We have 170,000 acres up in the Bakken in Divide County, [North Dakota], and in a couple other counties, and we're watching these other operators drill 3- to 4-mile laterals.

The wellhead returns have gone from 30% wellhead returns, which we typically don't like with a G&A overhead that erodes your returns. We like north of 35% to 40%. These long laterals are pushing the returns north of 50%.

Formentera can’t just sit around and watch operators develop their own and making high returns. Investors are calling us saying, "What are we going to do about this acreage?" Most of my investors don't want to sell it. They've gotten almost all their money back through the cashflow. So it's a free call option owning these assets. So yes, there's a misconception of like "Formentera, PDP buyer. Bryan and PDP."

I'm back to what I was doing in the Midland Basin.

ND: That's great to hear. That's really great to hear. Also too, you're kind of doing it, although it's even more pure-play wildcatting in Australia. Tell everyone about Tamboran [Resources]. Also, Tamboran went public just this summer on the New York Stock Exchange. It was public already in Australia, but it's public now on the New York Stock Exchange [and] can access a broader base of capital that way. Tell us about the prospect in Australia — it's actually more than a prospect; it's well proven now — but the operating environment there that makes it not just friendly, but extra-friendly to Tamboran.

BS: Well, you got to look back at the history. Before I even look at a play, I always want to know who were the previous buyers. That's what we’ve always done in business development for Parsley, now to Formentera. Why did they sell? How was it developed? And I know Santos has an acreage block and my father was on the board back in 2012- 2014. He kind of mentioned that to me that there's multi-stacked pay that could emerge in gas. Multiple Marcellus'es, multiple Haynesville's stacked on top of each other.

And I remember telling my father, "I'm not going to even look at that because I'm IPO’ing Parsely Energy." I have my blinders on. Two years later, I see [the] front page of Wall Street Journal: "Aubrey McClendon gets a farm-out in the Beetaloo." I could have beaten Aubrey McClendon. He'd beaten me in everything in Reagan County [Texas, in the Permian Basin].

So I'm so frustrated. He's always ahead and he always has his geologist and his technical staff. He's always had an edge on that. And then the play kind of just fizzled. They banned fracking, did some research for about a year, a moratorium, and then it kind of came back.

My No. 1 geologist, Tom Layman, who ran my geology group--he's that conservative geologist that comes in and talks to you about the play. You want to listen. And he doesn't talk about plays much. He comes in my office, he's retired, and he says, "I just saw some logs into this play." And I said, "Which one?" [He says], "In Australia."

And I was like, "Oh, don't tell me it's the Beetaloo." And he said, "Yeah, how do you know about it?" And so that's kind of how I got interested. And I started by buying some private-placement blocks in the micro-cap companies that have no leverage.

Tamboran, Falcon Oil & Gas and Empire Petroleum. There are three of them. You could buy Santos, but they have so many other assets inside the company. And then Joel Riddle, the CEO of Tamboran, came to me and he got the Origin Energy deal. Origin had the most and the best acreage in the basin. Origin is a public utility company that needed to sell out because of rioters picketing outside of the building: "Get out of fossil fuels."

So they sold at the wrong time. They had to sell it because they had some carry wells. They did not want to put the capex into it. It's not their fault, but they had to go and sell the company. No one bid. There were a couple of other larger companies that bid and I think they kind of stepped off of it. It fell in Joel's hands.

[Tamboran] was a micro-cap company. He needed to raise some money. I introduced him to some energy hedge funds, a couple of other long-only [funds]. He still needed short money and he kept extending the deal with Origin. And then I said, "I'll tell you what. I'll buy half the acreage with you and we'll do this together."

So we are a joint venture 50/50 with Tamboran. Tamboran has a couple other blocks that are pretty good also, so they have their own operation rights on those. But we are a joint venture on this large block. We drilled the well last May. Normalized for a 2-mile lateral because it was only a short lateral, it came in at 19 MMcf/d and it normalized at 2 miles. That's above a Marcellus well. It hung in there the entire time for 90 days. So we know it's there.

We're drilling two more wells now. And then once we show those data points in the same area--we already have the money--[Tamboran] needs to raise a little bit more money to pay for the gathering and compression to the local sales line. You're going to see sales first-quarter 2026. That's the key moment.

Also, Empire is going to get to sales probably in early 2026. So once these micro-cap companies start getting to sales, you're going to be able to see the long-life reserves in these wells. You can already see what's going to happen.

On the political environment, the Northern Territory has shifted from left to right, and it just happened a few weeks ago. They won by landslides. [It’s the] first time, it's happened in 20 years now.

The left minister was working with me. I met her; she wanted to get the gas. I think politics-wise, the entire country of Australia, from left to right, understands they need the gas. It's because the electricity bills across the entire country are five times [higher]. The gas bills are like 10 times and it's going to continue.

This field will answer all their problems with 20 to 30 wells because it's only 20 [million] to 30 million people.

The gravy on the entire field is the LNG price, with all these LNG facilities all over the country, they're running out of gas.

ND: And I understand the arrangement is simply that you have the government's complete support to pursue development at the Beetaloo. They just ask that your first gas satiate indigenous demand, Australia's domestic demand, then your excess can be exported.

BS: And we just signed a contract with the Northern Territory in Darwin to deliver this gas to the local market. They even have a natural gas task force. The government created one to help facilitate the Beetaloo. So that shows you how important it is to them.

I have met Alister [Trier, CEO of the Northern Territory department of mining and energy], in his office and he has a bell outside his office, a bell hanging on the wall waiting for the first sales of the Beetaloo. This is how important it is to them. They have a staff pushing this forward working with the traditional owners.

The traditional owners are, by the way, going to get a royalty in this. It's going to lift poverty. I have gone to the town of Elliot. I have gone to these other towns and seen how bad it is, and this is going to lift the poverty and there's a job creation waiting for them. I'm thinking from food trucks to pumpers to family trees that will pump these wells for the next 100 years. They're the ones that live there. They're the ones that are going to get the jobs.

ND: And closer to home, the political environment. Trump? Harris?

BS: I kind of look at both Harris or Trump. I created Parsley into a $7 billion company during the Obama administration. Now, oil [production] did not go down the whole time. If you look at the chart, it went up the entire time during Obama. Why is that? Just because they stopped the Keystone pipeline. If they would've allowed that Keystone pipeline to come down to Cushing, [Oklahoma], it would've flooded the market. It would've depressed the prices, and I probably would've drilled half the wells [that I drilled].

So that kind of gives you an idea of what the Democrats do, and they actually end up helping us with their full regulation. And if they want to continue regulating fracking and making it harder to drill wells, all that's going to do is increase the oil and gas price. They should be more focused on getting flaring down to zero, getting leaks down to zero.

And then I'm hoping the Democratic Party comes full circle and realizes these natural resources help poverty. The Clinton administration took a lot of oil and gas money. It's not that long ago where they did appreciate what our industry has done, and it's a shame what's happened there.

So I'm more bullish if Harris becomes president because everything I've talked about, there's probably another 100 examples I could tell you on oil.

Now, Trump coming in, he will help us with the regulation. He's very supportive of our industry. I do worry about what's next with him. You worry about LNG being used as a political weapon against our allies. Would he do that? Would he not? I don't know. He uses the tariffs. I think it's a savvy idea. I'm not too sure [on] using it against the allies--because they need this energy.

He slapped a steel tariff on China, and then it would've been nice to have a little leeway on the oil and gas [industry]. We didn't have any time. We came out with our capex projections with Wall Street and our AFE prices shot up 30% overnight because we could no longer buy pipe from China.

So those are the unpredictable things I think of Trump. You just don't know. And as an oil and gas industry, there are a lot more line items down the AFE to drill a well that can be very sensitive of vast decisions made by a president to our industry.

ND: And further to politics. The FTC [Federal Trade Commission]. Your thoughts?

BS: Well, I'm just on the sidelines watching--and watching closely--and I have one observation that's very interesting. Hess and Pioneer. If you total their market cap, it’s probably close to $150 billion. They have moved up into Chevron and Exxon Mobil. What's really interesting is we've gone from three board seats down to one board seat, pulling those board seats together. One board seat from the smaller investor community that owns these independents is representing $150 billion.

And it kind of makes you wonder about the shareholders because the shareholders do want representation at board levels. So that's kind of the only question and observation I've thought that the media has not been talking about. When you see they've lost these board seats when the deal is cut. I do think there should be representation for shareholders.

Remember Pioneer and Hess bought smaller companies. Those shareholders have moved up and they want representation with board seats. That's the whole reason to have board seats. So that's my only observation and comment on that subject.

ND: Thank you very much, Bryan. And thank you for joining us. Stay tuned here at hartenergy.com for more actionable intelligence.

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