Independent capital for independent producers.

Arthur N. Budge, Jr.

Déjà Vu All Over Again (Again)

Those who have read my articles over the last 25 years know my favorite Yogi Berra quote: “It’s déjà vu all over again.” This is such an apropos description of the oil business I can’t resist continuing to use it frequently.  In this article, I will discuss how the oil and gas industry went...

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Five States Legacy Fund

We have been attempting to wind-down and liquidate Five States Energy Capital Fund 1, LLC (“Fund 1”) this year. Until the last few weeks we thought we were on schedule to do so. However, for reasons discussed in this article, we do not expect to be able to do so until next year. We...

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If You Don’t Have an Oil Well

When I was a boy growing up in West Texas in the 1960s, there was a frequent television commercial for the Western Company[1].  The ad concluded with a beautiful young woman in roughneck overalls and a hard hat hanging off the side of a drilling rig, speaking the famous tag line: “If you don’t...

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Changing Expectations

What a year! This time last year, I thought Mr. Trump was in the race to provide a media shill to allow the “real Republican candidates to debate the real issues.” After the primaries I thought a Republican victory over the Clinton machine was impossible. Equally surprising to me was the Republican dominance in...

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How We Purchase Oil and Gas Properties

Financial theory is based on the assumption that money has Time Value.  The idea is that a dollar available to you today is worth more than a dollar available to you later.  The mechanics are fairly simple: Borrowers will pay interest to get money now and repay it later. Lenders will be paid to...

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The Five Stages of Loss & Grief

In the last few issues of The Producer, I have discussed and illustrated the impact of the decline in oil prices on the value of producing properties. Also discussed was the fact that most producers who had what were previously considered “prime” debt levels drawn against their properties are now insolvent (their assets are...

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The News is So Bad!

I have received a number of calls recently with a common theme; “The News is So Bad!” This statement is usually followed by: “I read that the price of oil/gas will never recover”; “The drilling industry is collapsing”; “I read that the collapse of the oil/gas industry may go on for decades”; or “How...

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“Déjà Vu All Over Again” – The Market for Oil and Gas Assets

What a difference a year makes! At this time last year, oil was around $60 per barrel, and we thought we had taken a beating. When oil fell from $85 to $60 per barrel, the present value of the future production fell in half. Little did we know that, in 2015, we would see...

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Beyond the Storm, Bright Horizons

Over the last five years, oil production in the US increased by over 4.5 million barrels of oil per day (“bopd”) to almost 10 million bopd.  The US now rivals Saudi Arabia for the position of largest oil producer in the world.  This 4.5 million bopd increase is about a 5% increase in world...

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Change in The Oil Industry and the Impact on Five States

The Oil Market Over the last five years, oil production in the US increased by over 4.5 million barrels of oil per day (“bopd”) to almost 10 million bopd. The US now rivals Saudi Arabia for the position of largest oil producer in the world.  This 4.5 million bopd increase is about a 5%...

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How Do We Know?

Our most frequently asked question the last several months can be summarized as “How Do We Know?” Some specific questions are, “How do we know: When oil prices have bottomed? When it is time to buy? When the banks will force their non-compliant or insolvent borrowers to sell? When it is time to “back...

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Capital Rationing

Capital Rationing is a reflection of limited capital in an industry segment. Following the collapse in crude oil prices, capital in the oil and gas sector is now more disciplined, providing a greatly improved investment environment for Five States.

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Crude Oil: A Market Perspective

The decline in crude oil prices over the last six months has been dramatic. Since early summer, the spot price for crude oil traded on the New York Mercantile Exchange (“NYMEX”) has dropped from the $90 - $100 per barrel range, where it has been trading for the last several years, to about $70...

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Oil Fundamentals: Supply & Demand

As with all commodities, the price of oil is determined by supply and demand. People often think that oil is “special” because we are “running out,” and do not understand how prices can fall. But like all commodities, the daily price of oil is determined by daily demand and deliverable supply. When supply is...

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