Now and then, David Dewhurst—a tall, polished man with a generous smile—enters a double-wide trailer somewhere in West Texas to talk Permian Basin mineral rights.

Sooner or later, someone starts to peer at him closely.

“I’ve seen you before,” he said some say to which he replies, “You very well may have.”

The former Texas lieutenant governor waits a few moments more and, then, the oil and gas mineral owners he’s there to see start guessing just who he is. Sometimes he’s recognized; sometimes not.

“It’s really kind of funny. Sometimes they know who I am,” Dewhurst said. Dewhurst, of course, was a central figure in Texas politics for 12 years, leading efforts to cut state taxes 54 times. He unsuccessfully ran for the U.S. Senate in 2012.

He has followed a fascinating trajectory through oil, gas, the military, covert intelligence and politics before returning to oil and gas. He volunteered during the Vietnam War, joining the U.S. Air Force; he worked for the CIA in Bolivia. He even rode and roped his way into an induction into the Texas Rodeo Cowboy Hall of Fame in 2009.

He’s also handy with a gavel among a crowd of politicians.

His most persistent calling has been the oil and gas industry, a part of his life for 35 years. Dewhurst serves as chairman and CEO of Falcon Seaboard Diversified Inc., a company he helped co-found in the early 1980s.

“Almost immediately, when I stepped down [from his political post] in January of 2015, I went back to the oil and gas company I had helped co-found … and started looking at resource plays and how we could go after some …,” Dewhurst said, “because I thought that the opportunities—particularly in the Permian Basin and the Powder River Basin, which had similarities in the number of benches—were very attractive. So that’s what we did.”

Dewhurst, who is from Houston, has turned his attention more squarely toward the Permian only to find his time has been spent picking up jagged—but profitable—pieces. This summer, the company launched a $145-million investment fund, Falcon Seaboard Permian Fund I LP, that aims to buy up acreage in the basin.

It was a first for Dewhurst to accept outside investments. He wants to capitalize on opportunities in the Permian that are not being pursued by larger investment and strategic players.

“We believe the economics of strategically targeting and aligning with great operators and purchasing great acreage at attractive prices in the best basin in the country will be a very successful strategy,” Dewhurst said.

No contest

Advice for the budding Permian buyer: Don’t step on a supermajor’s cape. Or a large E&P’s for that matter.

“We spent a lot of time [after I left office in 2015] going after some bigger resource plays. Clayton Williams [Energy Inc.], Yates Petroleum [Corp.]. If you get involved in a bidding contest, you’re probably going to lose,” he said.

His strategy changed.

“In a way, it’s almost like a real estate play. In real estate, you make your money when you buy,” he said. “We’re looking at buying right” and then developing the acreage to increase its value.

Falcon Seaboard began working on rolling up smaller or distressed operators that might need cash or need to sell some acreage and talking with individual mineral rights owners.

For large companies, paying top dollar for acreage makes sense. Falcon Seaboard is more interested in developing small tracts that it can develop and arbitrage over time.

Dewhurst said his advantage is essentially a nimbleness that larger E&Ps lack. Falcon Seaboard has deals on the table for 80,000 net acres in the Permian.

The company is now purchasing assets piecemeal, a “section here or there,” throughout the basin. While longer laterals are the general preference for E&Ps in the Midland and Delaware basins, Dewhurst isn’t concerned about a lack of contiguous acreage.

“That’s fine,” he said.

Since the acreage isn’t contiguous, the company is able to acquire at a substantially lower price. As long as it’s enough acreage to drill horizontal wells, blocked-up land isn’t necessary.

“I can see where having disparate leases … is not a detriment but an advantage,” he said. “At some point, when we’re ready to sell, the adjoining operator will probably want that acreage and be willing to pay a few dollars more than he would normally want.”

The recent drop in commodity prices has left Dewhurst unfazed. He said transactions are moving faster than when oil was $50.

“We’re acquiring acreage as we speak that is below the current comps. In some cases, it’s because there’s a distressed [seller] and that works in our advantage. We can move quickly. In some cases, it’s putting together disparate small interests—half a section here, a section here—but putting it close together.”

And he’s seen bad times before.

In the 1980s, Falcon Seaboard invested in offshore Gulf of Mexico assets and, later, onshore assets. By 1982, Dewhurst sensed a downturn coming.

It was his first brush with downturn misery. The market rapidly deteriorated and he nearly lost everything in an oil and gas and real estate bust.

“I learned a lot,” he said.

He already had an aversion to taking unnecessary risks. When he was 3 years old, his father, a World War II bomber pilot, was killed by a drunk driver. His mother went to work as a secretary, and he grew up in “modest circumstances.”

“Consequently, when I got into business and got into the oil and gas business, I wasn’t in a position to take much risk,” he said.

Those experiences have clearly shaped a man as comfortable with heading a policy discussion as he is with talking to mineral owners in rural Texas counties.

When the former lieutenant governor sits down in West Texas homes, he spends hours taking the time to hear their experiences—gates left open; roads that need to be plowed once a year.

The hours he spends listening are also part of Dewhurst’s strategy. Knowing what ranchers and homeowners want can help close a deal. It’s also attention to detail that is lost on larger companies.

“There’s still plenty of opportunity in the Permian Basin if you’re willing to work harder than other companies,” he said.

It doesn’t hurt

During the past 20 years, Falcon Seaboard has generated roughly $1 billion in profits and debt reduction without using outside-investor money, Dewhurst said.

Still, the funds needed to capitalize on the opportunity he sees in the Permian—and to execute Falcon Seaboard’s plan—meant the need for investment. The strategic change comes after seeing firsthand what the basin has to offer.

“The last 25 years, we’ve only used our own money,” Dewhurst said. “We’ve lost some opportunities because we didn’t have the cash to invest. But we’ve never used other people’s [investors’] money.”

The fund was created to leverage the management team’s experience with aggregating acquisitions to purchase Permian acreage. The company may also invest and partner with other E&P companies to develop lower-risk oil and gas leases, drill lower-risk projects, and acquire and exploit established reserves.

Dewhurst is being choosy, “carefully reaching out, bringing partners in to join with us in this … very attractive opportunity.” Before his investment commenced, Dewhurst said he had roughly $100 million lined up.

The company raised its minimum of $145 million, though he may ultimately seek up to $300 million. About $200 million will be used to acquire leases, assets and small companies. The remainder will be devoted to capex.

He plans to use Entoro Group’s OfferBoard to attract some investment. Created in February in a combination of Clearinghouse Securities and OFSCap LLC, Entoro focuses on the distribution of direct investment opportunities to family offices and small institutions.

His move to find investors comes after the industry has witnessed a short, but lucrative, burst of IPO activity by special purpose acquisition companies (SPAC).

Most have been successful—and headed by big names in the oil and gas business, such as former CEOs and presidents of EOG Resources Inc., Occidental Petroleum Corp., Anadarko Petroleum Corp. and Encana Corp.

Dewhurst said he isn’t intentionally tapping into that wave and his company isn’t going public. But his name recognition and overall popularity are a welcomed boon.

“It doesn’t hurt at all, obviously, that I served as lieutenant governor for 12 years, and the reason I say that is because … my life is very transparent,” he said. “Our success in the oil and gas business and the pipeline business and the cogeneration business is all transparent.”

Falcon Seaboard drilled horizontal wells for years in the Piceance Basin. In the mid-1980s and into the 1990s, it developed cogeneration power projects that later sold for more than $1 billion, including debt assumption.

“That’s the reason why I think we’re getting the reception that we are. People have known me and know that I’ve always been straight with the people of Texas,” he said. “There’s never been any controversy involving me. I think that makes people feel good about investing.”

OfferBoard Goes Live

Former Lt. Gov. David Dewhurst was among the earlier cheerleaders of Entoro Group’s new OfferBoard, which was created through the combination of Clearinghouse Securities and OFSCap LLC.

“It could very well change how you market, how you reach the world of investors,” he said.

OfferBoard touts itself as a way to bring energy-related investment banking offerings and financial products to family offices, small institutional investors and international funding.

The platform offers a way to open investment opportunities to vetted investors on a global stage.

“Our primary goal is to offer the best transactions with better distribution,” said Jim Row, Entoro Group managing partner. “Entoro and OfferBoard are a perfect match: Entoro and our collaboration partners will continue to source quality energy transactions, and OfferBoard will become the premier distribution and execution platform for direct investment opportunities of $2- to $200 million. Our combined team is at the forefront of the convergence of energy, finance and new distribution technologies.”

As of September, the company was offering investment in a Permian Basin E&P seeking $145 million in $5-million increments. Two mineral companies are also seeking a combined $65 million for the Permian and the Scoop and Stack plays. Other E&P are targeting capital raises for the Arkoma Basin and for the Frio formation. Several other offerings were set for later in September.

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