Deon Daugherty, editor in chief of Oil and Gas Investor: Hi, I am Deon Daugherty, editor in chief of Oil and Gas Investor magazine, here at the Energy Capital Conference in Dallas with Doug Prieto, the CEO of Tailwater E&P. Now, Doug, you have quite a deal to announce coming down. Tell us about that.

Doug Prieto: Well, thank you so much to Hart Energy for hosting me today, and thank you for this opportunity. Yeah, we were really excited to announce a Permian Basin non-operated transaction this week [Oct. 1]. It's over 5,000 net leasehold acres and over 5,000 net barrels per day production. It's spread across the Permian and all the best parts of the core, and it's operated by blue chip private and public companies. And we couldn't be more excited. It's got a really nice stable production profile that we were able to hedge, to lock in a distribution profile for our investors. And they're still over 20 years of inventory in our estimation, and we think that's only going to get better as these operators find new zones to develop and continue to be more efficient over time.

DD: Given the access to capital challenges that have existed for quite a while now, and the Permian through consolidation and just its prolific nature is very hot commodities, so to speak. How did this deal come together?

DP: I think it all comes back to relationships. So we did this transaction off market. It was on a negotiated basis. We knew the sellers and had talked to them for a while. We saw them putting together a fantastic asset. It was the right time for them to exit, and they wanted to do so in a reasonable timeframe and with certainty that the person who was going to work on the transaction was going to close it. And so in that same vein, we've seen such a capital vacuum post-COVID in respect to ESG. We had a lot of great relationships with institutions, investors and family offices who are looking for high quality assets that have durable cash flow, that have lower multiples relative to historical values. And so with those relationships, we were able to raise the capital in a short timeline and execute on the transaction as well. And so it created a win-win for everybody who was involved and we're really thankful for that. And we think this is going to be a very high quality asset to own for duration.

DD: Is this sort of an outcropping of the consolidation that's been happening? I mean, why now?

DP: Yeah, I think it's a couple of things. One, if you think about the capital intensity of our industry and where we sit today with development being better understood, spacing being better understood and the desire to drill all of those wells at once, it's a huge capital obligation for anyone who's operating there. And then again, we've had significant capital leave the space. So I mean, almost $58 trillion of assets under management has an ESG mandate now. And so when you pair those two things, it creates a pretty unique opportunity to be in the space. And with consolidation on the operated side, it's a little bit harder, but we've able to find in the non-operated context, the ability to come in and provide capital to operators to help them be more capital efficient and develop their larger inventory, and then also help those who have assets that need to exit as they invested over the call it the past five to 10 years. So we think it's a really unique opportunity. We're playing it through minerals and royalties. We're playing it through non-op. We're doing some management buyouts on the operated side, and so we're really at Tailwater, we're focused on full immersion and really investing in the energy space, both midstream and upstream as much as we can.

DD: Okay. And here we are at the beginning of the fourth quarter— 2025 will be here before you know it. What are your expectations for the market and deal making going forward?

DP: Yeah, I feel like as long as we can stay sort of between $65 and $80 [oil prices], there's going to be a really good environment to transact. This has been a really large week for Tailwater as a firm. We've done over a billion dollars of transactions on the midstream and upstream side, which is really exciting for us both buying and selling.

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And we continue to have significant off-market deal flow from relationships who know that we are going to be fair, we're going to be transparent, and we have the ability to execute. So we're very optimistic about going forward. There's a lot of geopolitical tension that we monitor very closely, but at the same time, these are investments that we're making for the long-term. And so we try and think about risk mitigation, but also what is a long-term outlook look like.

DD: Great. Excellent perspective. Doug. Thank you for the panel today. Thank you for taking some extra time to talk with us. Doug Prieto, CEO of Tailwater E&P. And I'm Deon Daugherty with Oil and Gas Investor. Thanks very much.

DP: Thank you for hosting.

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