Investing
Strategy
Valor Energy Group, LLC is located in Dallas, TX. Our Strategy said very simply is to locate niche segments of the oil and gas industry that can provide asset value and cash flow while adhering to our adverse risk philosophy. Over the next 10-15 years, there will be a frenzy of activity within the E&P side of the business.
“There is a “shale boom” going on globally right now, and in this new energy landscape North America is the leader.” By 2020 it is projected that the U.S. will surpass Saudi Arabia as the largest oil producer.
Just as important, the U.S. is expected to become the largest net exporter of fossil fuels by 2030.
“This “frenzy” of activity to get resources out of the ground and into the system will require a substantial expansion in midstream infrastructure.” Our vision includes a focus on finding opportunities within this segment. That shale boom has allowed us to capitalize on high-quality institutional level drilling programs primarily in south Texas and the Gulf Coast that are geologically and geophysical sound. We believe that the right investments in this area can provide significant returns while maintaining a low-risk asset-based philosophy.
Investment Objectives
Valor Energy Group, LLC will acquire, operate & develop oil and gas assets. This will include the purchase and development of interest types such as;
- Royalty Interest
- Mineral Right Ownership
- Working Interest
- Midstream Pipelines & Transmission
- Leasing and Drilling Activity
Valor Energy Group will look to improve cash flow and return on investment by:
- Increasing Commodity Prices
- Increased efficiency and implementing cost-cutting processes for operations
- Drilling new wells located on PUDs or geologically sound locations
- Reworking on existing wells and targeting other potential zones of interest
- Shutting in wells that are cost prohibitive
A key to our success is a forensic research approach. Our strategy includes using this expertise to create “branch” portfolios of royalty and mineral right interests in addition to our high-level exploration and production program.
We are excited about the opportunities that exist in areas that geologically match with today’s technology.
Mineral and Royalty investments in these areas in the early stages can generate income and provide substantial return upon liquidation. We will also continually evaluate the opportunities that exist in EOR (enhanced oil recovery) and another secondary recovery potential. There are a large number of wells that through time have been ignored or abandoned, today’s technology can bring a second life to thousands of wells. Local knowledge, extensive research, and our forensic approach can turn these old wells into good investments. Valor Group is committed to combining the disciplined talents of its team with a transparent view and successful execution of its strategy
Valor Energy Group, LLC will raise capital from accredited investors through Crowd-funding and SEC Rule 506c offerings.
These offerings allow for the advertising and general solicitation of Ventures to raise capital from accredited investors through all methods including, print, media and digital. This will cover a large part of all the costs required to drill new wells, rework existing wells, and other operational cost required to generate a return on investment. Participants in the offerings will share in the income and tax-related benefits. Valor Energy Group, LLC will receive payback from Venture Capital for expenses involved in sponsoring offerings. Ventures will also pay Valor Energy Group, LLC or it’s affiliated a fair market price for the rights of development to any property it holds an ownership interest in.
Royalty & Mineral Rights :
When an oil and gas company suspect’s that an area may be productive for oil or gas, it must gain the right to explore that area further. These rights are referred to as mineral rights. A lease contract is drawn up between the lessee and the owner of the mineral rights.
It is not uncommon for the owner of mineral rights to differ from the surface rights owner. Payment is typically made to the lessor at lease signing usually referred to as a “signing bonus.”
Mineral leases are typically for a set period and can also come with specific rights and restrictions regarding the activity that may take place.
The lessor typically receives a share in income from any oil or gas production that exists, this “royalty payment” typically holds the lease contract in place and can mean substantial income over the life of the lease. Since the start of the “shale boom” in 1999, the returns available for those willing to invest early in mineral acquisition have been enormous. There are numerous examples of minerals that were leased for less than $1000 per acre that later were valued at 10 times that. Valor Energy Group will also focus on buying the rights to the royalty interest in producing and non producing assets. Royalty Interest as mentioned prior receives a share in the income from any oil or gas that is produced. Royalty Interest owners do not share in any of the expenses of exploration, operations, or development. This is an adverse risk approach to sharing in the income of producing oil and gas properties without sharing in the high cost of extraction. Royalty Interests also receive unique tax treatment and can be qualified as real property for 1031 Exchange situations.
Mineral Rights Summary:
- Typically provide a deed and recorded ownership with lower risk.
- Provide cash flow in several ways if exploration company chooses to lease rights to drill.
- Mineral Owners receive lease bonus payments and a share in revenue if the well or wells are successful.
- This sharing percentage called a “Royalty” is negotiated before lease signing.
- Mineral Rights qualify for like/kind property in IRS Rule 1031 Exchanges involving the protection of gains from the sale of real property. Mineral Rights can also be passed on creating a legacy asset.
Royalties Summary:
- Royalties are the payments made from oil or gas production to the royalty owner.
- Many markets exist for the buying and selling of royalties.
- Royalty owners have the advantage of participating in revenue with no share in costs.
- Royalties are sold every day for many reasons.
- The value of these royalties can increase with additional wells resulting in larger royalty payments as well as increasing commodity prices.
- Provide immediate cash flow and act as a hedge against other markets.
- Payments can last for multiple Decades
Income Producing Properties:
A principal part of our strategy at Valor Energy Group is to target opportunities that can generate an immediate income stream while providing a value at purchase and increased return with minimum capital commitment.
There are thousands of wells producing at low levels across our country that have valuable, proven reserves still in their coffers. These properties can be acquired at negotiated discounts and brought back to life with relatively small capital investment. In areas throughout the United States, wells are producing at minimum levels.
These properties are sometimes referred to as “stripper wells.” A large number of these wells were completed with less effective technology from 30 or 40 years ago. Many still were walked away from or abandoned by operators they went out of business or as a result of a downturn in commodity prices. Through state agency’s many of these properties can be “adopted” at little or no cost. Some can be purchased at steep discounts from banks who have absorbed them as collateral, and many are on the market by operators without the capital budget to sustain them. A large number of these opportunities exist in areas that today are at the center of North America’s new “energy boom.”
Going into areas where we have well-known geology, existing infrastructure and today’s advancements in technology make these very exciting propositions.” New methods in EOR (enhanced oil recovery) such as CO 2 Injection, water flooding, and others can increase production from these wells 30-40% from current levels. Comparatively, this can be achieved with a relatively small capital investment. These investments also stand poised to benefit greatly if as expected oil and natural gas prices continue their rise in coming years.
Development & Exploration:
North America is currently seeing a drilling boom. Massive advancements have been made in finding sciences, drilling techniques and the completion & stimulation of the reservoir.
20 years ago, major discoveries became harder and harder to find if not impossible in North America. Independent operators working domestically were forced to go back to areas that had been thought to be depleted or uneconomic.
In that 20 years from then to today, many fortunes have been made.
Today’s drilling still has the inherent risk of exploration. However, it is undoubtedly easier to achieve success today than 20 years ago. A tremendous amount of historical data, advancements in technology, and a very active marketplace keep this area growing. We will utilize our relationships within the industry to participate in institutional quality drilling programs focused in the Gulf Coast and Southern Regions of Texas where our Geological and Geophysical Team has an abundance of seismic data, access to the best technology and interpretation software and intimate local knowledge of drilling and producing prospects. Our primary geological & geophysical consultant has found over $1 Billion of oil and gas assets over his career.
Summary Developmental Drilling:
- Drilling new wells in proven areas are considered to be development drilling. This would be the safest type of drilling participation as opposed to discovery or “wildcatting.”
- Sharing in the cost of these wells gives participants a share in the revenue.
- Using new technology in combination with solid data can result in a quick return of capital and decades of income.
- Today Drilling is more predictable than any ere before.
- This participation allows the owner to deduct a large portion of the costs to participate from IRS Taxes.
Midstream Opportunities:
The midstream sector provides the backbone of the nation’s energy infrastructure; this includes treatment & processing, storage, transportation, and pipelines. As E&P companies continue to drill at increasing rates current infrastructure is reaching its limit.
This can already be seen in places like Cushing, OK. Shippers wait in line to transport the product to refineries on the Gulf Coast. Thanks to the success of unconventional plays such as the Eagle Ford Shale or Niobrara Shale the demand is constantly growing for a new infrastructure capable of handling higher volumes and pressure.
It is projected that for every dollar spent upstream 15 – 35 cents will be spent on gathering, processing, and treatment infrastructure.
Currently, liquid rich resources are in high demand. Natural Gas Liquids (NGL) are products such as ethane, propane, butane and natural gasoline. These by-products of “wet gas” can easily add $2 – $4 to the value per mcf of natural gas. Additionally, an expansion in the crude oil transmission lines will provide alternatives to trucking product from the tank batteries on location to distant injection points. In combination with risk-management strategies such as “produce or pay” clauses, these investments can provide several benefits. “We are attracted by the increasing asset value, predictable cash flow, and potential tax advantages. We also like that it is typically a fee-based structure which fits with our adverse risk strategy”. Based on current drilling projections, the strong performance of wells, and additional acreage commitments infrastructure must expand. Standard Royalty plans to collaborate with proven midstream management teams on a variety of opportunities within this segment. “In between the wellhead and the refinery, many dollars are spent. We would like to share in that residual stream”.
