Energy Investing 101

Horse trading always fascinated me. Lots of wheelin’ and dealin’. Lots of commodities passing hands. The energy in the air. The back-and-forth.The opportunity. The gumption. The importance of knowing what you’re doing or-–more importantly–in trusting someone who does. (If you don’t know what you’re doing and you get into horse trading, well, get ready for some life lessons.) It all seems so Texas. And the people. The life in it all.

I didn’t end up being a horse trader. (Well, yet.) But I figured out a way to incorporate its essence and energy into my professional life, following the old adage of “find something you like to do and you’ll never work a day in your life.” I found that the world of energy investment incorporated all those horse-trading dynamics I so loved. Plus there was a fundamental long-term demand, and it provided enough evolving opportunities to keep me on my toes. I was already good at the skills involved, then I got even better at them, then I wanted to create opportunities for other people, too, so we built Maevlo (May-v-low).

Maevlo has become successful because yes, we have the best tools in the industry and yes, we have come up with a killer strategy and yes, we are good at what we do. But the secret sauce is really in the soft skills, the human intangibles that come with each interaction. The skills that matter to people. The skills that lead them to describe Maevlo as trustworthy. Ethical. Transparent. (The skills that you want in a horse trader, by the way.)

And it is important to me that you see and feel that you are in good hands with us, which is why I like to explain what I am doing and why I am doing it. I also like you to have a firm grounding in this stuff so you can make your own educated decisions. So whether you are a potential investor, potential seller, or a current investor, this blog post is a quick distillation on the three ways you can invest in the energy space.

So let’s say you’re an investor, and you’re considering the energy realm. You might have initially had the idea of buying stock in an established company like Exxon. Seems obvious enough. But even if everything goes smoothly for a public entity, their stock performance can sometimes be driven by market catalysts that have nothing to do with their underlying business. Thus, your investment is just left to blow in the wind to some extent.So if you’re looking for something slightly different, what are your options?

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First, Some Terms. 

• Mineral rights

• Operating working interests

• Non-operating working interests

Mineral Rights

Mineral rights are, simply put, the hydrocarbon deposits beneath the surface that are tangible, real property.

(Mineral rights differ from surface rights, which give the owner the right to use the land’s surface for other purposes such as accessing wells, building pipeline, etc..)

For many, minerals allow entry into the energy space with minimal operational risk and are a strong value proposition for more stable, long-term holding.

As a mineral owner’s hydrocarbon deposits are developed, or better said, extracted to the surface by an oil and gas operator, they are then processed and sold at market prices.  From here the mineral owner receives a portion of the value of everything extracted from that piece of land, which is called a royalty. That's where we sit at Maevlo Production (one of our three unique mineral and royalty aggregator vehicles). It’s one of the many things we do: as the fund sponsor, and on behalf of our investors, we aggregate mineral and royalty rights to wells that have already been drilled, and also on lands that we believe will soon be drilled.  From closing on any mineral acquisition, we file the deed in the corresponding Clerk of Court and then we notify operator of the recent change of ownership, with Maevlo Production being the new mineral owner 

As a mineral rights owner, your role is straightforward: you own the rights to the resources beneath the land, but you're not involved in the technical aspects of extraction. You won't have any responsibility for well site operations, associated costs, or the financial pressures of production. Instead, you lease your mineral rights to an operating company, and they handle the extraction process. You then receive royalty payments based on the production from your minerals. This "hands-off" approach and the inherent stability of mineral assets have led to them being considered a relatively passive investment, similar to owning a rental property but with even less involvement required. You simply receive income from the production activity.

Working Interest Investments

Working Interest (WI) investments can be divided into operating and non-operating.

Operating working interests represent the operational side of energy production. When you hold an Operated working interest, you’re the owner of the wellbore and responsible for everything from drilling to the ongoing production and well operation. The operating costs, liabilities, and the pace of capital investment are on you. Unlike mineral rights owners, WI holders are active participants, contributing capital and ensuring production is consistent. There’s no “hands-off” option here—it requires diligence and financial commitment.

The upside here is that as the operator you control the pace and associated costs of any given well. The operator drives the boat when it comes to initiating all the efforts to drill a new well. They use their own discretion on who contracts services out and for how much. 

Being an operator in the energy investment spectrum is exceptionally capital intensive. Operators need all facets of the space on their team, from landmen to attorneys, financiers, accountants, as well as geologists, geophysicists, petroleum and reservoir engineers, and admin to navigate this large personality group.   

With non-operating working interests, we invest side-by-side with the operators as quiet partners with them. We’re not engaged in the actual operations. Risk/reward-wise, we stand right by the end of the drill bit. Non-op WIs provide a way for operators to diversify risk among other industry knowledgeable investors. Concentrating their capital in one area increases exposure to regional risks, so operators often carve out non-op WIs and sell them to sophisticated but non-technical investors. They propose a drilling and completion program with clear cost estimates and invite additional capital to offset risk. This way, an operating company avoids putting all its resources in one basin, reducing its capital concentration.

Alright, so we’ve got our terms. Now on to investment opportunities!

Matthew’s Three Ways to Invest

As with any investing, there’s a risk scale. And we all have different tolerances for risk! So let's look at a visual.

The Risk Scale

1 and 2) Mineral & Royalty–Lowest Risk 

• People can sell them in fractional amounts. Maevlo collects and aggregates them into a fund. You can “buy into a possibility” of future production, 10-20% per year. 

3 and 4) Production Acquisition/Development Drilling–Medium Risk

• Production acquisition is buying a working interest in an already-producing well.

• Development drilling is working in an area that has already been proved but you are drilling new wells.

• Divided into non-operating and operating. As discussed above, you pay others and you pay yourself, too

5) Wildcat Exploration–Higher Risk

• There’s the risk in searching. But big risk, big return.

• The first to discover a new shale, “play” or reserve spends dollars “poking holes” in hopes of finding a “gusher”.

Alright, so all this is just skimming the surface of mineral rights investment. If you’re thinking "Now what? How do I get these great assets on my balance sheet? Where do I start?" O what if you want to know what happens when mineral rights are passed down? Or you want to discuss production costs, or the costs involved in converting energy?

Well, you want someone who has experience in deal-making and a working knowledge of the geological and legal constructs of the most productive areas in our country. You want someone who knows what he is looking at, someone who has made the relationships, who thrives on the fizzing energy of a job well done and a deal dynamically made. Someone you can trust.

Someone like Maevlo. 

Our knowledge runs deep, and we are ready to share. My team and I will meet with you and answer any of your questions. We will show you what we are doing and why, and we can have a conversation about it, and you’ll get the information you need to make the educated decision that’s right for you.

Here’s the link to our contact page – schedule a chat! Or call (303) 219-0331.