"Where is my distribution check?"

For this blog, we thought it'd be helpful to talk nuts and bolts. Let's talk shop. You decided to take the plunge into the mineral royalty space with a Maevlo fund. You got comfortable with the team here, our integrity, skill, and roguish good looks perhaps (read a little sarcasm at the end). You invested in the fund looking forward to those royalty distributions starting to hit the bank account. But when are they going to come? For first time investors in the space, that wait can sometimes feel long! So we thought it'd be good to just pull back the layers of the onion on how it all works, from your investment to that great moment when the cash starts coming back. 

Deal Hunting

So, right now fund 3 is all deployed in assets but Fund 4 is sitting at that starting point of the process, so what are we up to? We're looking at deals, lots of deals, every day. Everyday we get emails, snail mail, and calls right and left of people looking to sell. And these come in all shapes and sizes, sometimes it's as basic as an email that says, "We've got 50 parcels and want $2M for them, we're not really sure what percentages they are or which counties they're in. Are you interested?" So to even begin to get a feel for a deal, we've got some homework to do. And for each deal we're asking questions like what rock is it in, who are the operators, what if any post production fees are part of this deal. These are only a few of the variables we look at. Assuming our first pass review goes well, we then start running numbers through our petroleum engineering software and underwriting models and work towards an offering number we think it's worth. Every deal that makes it to getting a bid from us is a big research project.

But coming up with what we think a deal is worth is only the beginning of the negotiation process. Because, as we've found, every piece of land comes with a story. And these stories are the stories of the lives of the people we're buying from. Rarely is a mineral purchase a purely-down-to-the numbers "business" deal. We are a Life and Family outfit as well as investors, so we always ask, "What's the story of these minerals? How did you come by them, what have they meant to your family?" Now we can't pay you for your memory of grandpa who made you promise to never sell the rights, but we do want to take the time to understand the different forces in play in our sellers' hearts and minds. Sometimes we even say, "You know, maybe it's not the time yet for you to sell." 

All that is to say that getting to a price we can agree on, especially for the kinds of minerals that we want in our fund is a long and uncertain road. Sometimes the deals come hot and fast, sometimes we're kissing a lot of frogs and finding only a few princes. But when we do get there, what's next? Well, we work up the purchase and sale agreement which, when executed, moves us into our due diligence process. This is the part where we make sure we're not making a big mistake for some reason. Remember we're talking hundreds of wells, and for each well you have to look into the chain of title and historical deeds of record, confirming ownership. In fact it's a lot like a real estate deal. So we usually get 30-60 days for this process. Depending on how organized the title files that the seller brings, we can use every minute we get.

Now they're ours…but there's still a ways to go.

So we close the deal, wire the money from our fund to the Seller, and they mail the signed deed to us. We go file in the appropriate courthouse county clerk offices, and then finally send a court file marked copy of our deed to the respective operators notifying them to start paying royalties to us instead of the previous owner. This goes into the dark black box which is the owner relations department of the operating companies. From there we're in a holding period of between 30-90 days. They're the lynchpin in all of this and can sometimes make me crazy. They are always slow and often incompetent. For example, the "Haynesville Hammer" is a 200 well deal in Fund 3 that includes four different operators. We took title to the deal, effective on Nov 1, 2024. After negotiations, P&S, and DD, the deal closed around February 1, 2024. We get our copies of the deeds back from the counties and notify the operators around Feb 15th. 

At this point in a deal we’re at the mercy of the operator to expedite this change of ownership in their records and respond back to us. We wait for them to mail us back a hard copy of the division order which confirms that Maevlo 3 is the owner of these interests, if those are correct, which they're usually not, we sign and mail back (snail mail all of this). 30 days later, hopefully, we are in pay status, assuming they got the effective dates right which they often don't. The whole process usually takes 6-9 months from getting the deal on my desk to making distributions to our LP's.

Having been on every side of this industry, including in the back office of an operator, I sometimes have to walk the employees of the operator, well by well, how to correctly calculate our decimal interest for each well (this comes back to you needing a ‘guy’ that knows the industry right?!). That's just how the business goes. I'm not kidding, every single division order I've looked at in fund 1,2, & 3 has been wrong in some way when they came back from the operator. So, while we’re glad to see the operator recognizing us as the new owner to these wells, we’re very sharp with them to ensure our Funds’ are paid correctly for what we own! 

The nuts and bolts of Stewardship

But this is the nuts and bolts of stewardship, and getting it right is important. That's why I'm in it and that's why you're partnering with us to do this work. We always keep that partnership in mind as we hunt for the best assets, listen to the stories of the sellers, and make deals. So when your heels are cooling after making that investment with us, rest assured, we are working tirelessly to ensure your investment yields fruitful returns.