Jordan Blum, editorial director, Hart Energy: We are here at Hart Energy's A&D Strategies and Opportunities conference in Dallas. I'm joined by Leslie Armentrout, the president and co-founder of Silver Cross Energy Partners. Thank you so much for being here. Really appreciate it.

Leslie Armentrout: Thank you for having me. I appreciate you bringing me in.

JB: Now I just wanted to get a bit of an overview. You're operating in the Permian, Andrews, Crane counties [Texas]. I wanted to get your take on activity increasing as well in the Central Basin Platform and how you're seeing things play out.

LA: We've seen over the course of the last year, you had a couple of big deals, Central Basin Platform deals come up, the Apache deal, Exxon, a lot of the other big ones like Chevron and Conoco had gotten out three or four years ago. So those big deals that come up, you're also seeing a lot of the people that started in the late '80s, early '90s. The guys that operate 50 to 200 barrels a day, they're now in their early to mid-70s, and they're saying, ‘okay, I'm ready to get out,’ right? So our first assets, it was a ground game from my contacts in Midland, once you've got that first deal landed, you become, once people understand that you're looking for Central Basin Platform assets and they know you can execute on a deal and you have the capital deals start coming to you, it is, it's still more of a ground game than it is the big deals.

It's a lot of really old waterfloods that just, they have a lot of liability associated with them, and so you've got to be careful. But there are some gyms in there, some stuff that has vertical wells, Wolfcamp wells that you could drill. The key thing is looking for the upside and making sure that you're not just getting a wellbore only deal that does not have value. So a lot of the Central Basin Platform is self-sourcing small deals, but there have been some big ones over the last year that have come to market and sold. Typically the east side of the Central Basin Platform, we see more activity related to the Barnett and that has increased the value of stuff like right on the edge of the platform.

JB: Very good. Can you elaborate just a bit on what you're most looking for in potential deals and maybe how relative oil price stability has helped?

LA: So when I started looking for deals in 2022, we were using the strip and we were using $65 and $2.75, $2.50 to $2.75 flat. So I'm an engineer by background. I don't mind putting the strip in, but I'm going to look for a price deck that is consistent. So I'm always evaluating deals from the same perspective, right? Because I'm comparing the risk profile versus just the value the first time I look at a deal. I look at $70. If it passes at $70, I'm looking for a PV-20 to -30 on the PDP assets and there's usually enough upside that we can get a 30% rate of return. Did I answer your question?

JB: I think so. Okay. Thank you very much. Switching gears just a little bit, but staying, I guess oily, you've been involved somewhat in the Utica in the emerging oil window there I think with Encino Energy and others. Just wanted to get your take on how things are playing out, what you're seeing.

LA: When I worked for Encino, I left Encino in 2022, one of the last things I did was put together evaluation model for the oil stuff on the west side of the play. There is tremendous value there. The limiting factor is how do you get it out? Because there's only one refinery in the region. That challenge is going to take a bigger company than the Encinos of the world. In order to kind of get things off of high center. Either you're going to have to turn one of the other pipes around or you're going to have to put rail in like they did in the Bakken like Hess did in the Bakken. I think the likes of EOG will do that, and I think that'll open up that basin. It's always going to be a challenge though, because there's only one zone in the Utica. So building that infrastructure out, you've got a limited land position. Once you get too far updip, the oil is going to be a little bit too heavy to move.

You've just got to make sure that you have a way to get it out. And to me, that's going to be the challenge is finding a way to get it out and not over drill it. But you're also going to have to get rid of the gas and getting rid of the gas in that market, if it's too liquids-rich—man, Williams has, they have some great contracts. So you just have to be careful about how much capital you commit and the timing so that you don't get over levered. Basically trying to get into and build it big enough, but at the same time, you're trying to not overcommit capital to it.

JB: Very good. Well, thank you again so much for joining us here. We really appreciate it. To read and watch more, please visit online at HartEnergy.com.

LA: Thank you.

Comments