Independent capital for independent producers.

Rules of the Road

Posted on January 24, 2018 in James A. Gibbs

This year begins the thirty-third year of business for Five States Energy Company. Some of our early investors have been participating with us almost as long, and continue to join us in new offerings of partnerships and funds.

When Don Malouf, Arthur Budge, Jr. and I organized Five States in 1985, we agreed to be guided by several principles for the business to which we have attempted to adhere through the years. With Don’s passing, we reflect back on these tenets with renewed commitment to continue the company as we believe he would have wished.

Plan for the future with a long-term investment outlook.

From the inception of Five States, our primary goal has been to accrete wealth for ourselves, our families and our investors through the acquisition of high-quality, long life, income-producing oil and natural gas properties to be held for income generation.  We manage the business conservatively, with an investment horizon of years or decades, rather than months.

Put the interests of our investors ahead of our own.

We’ve built our business on the concept that we’re successful only if our clients and investors are. To date most of our investments are structured as “back in after payout”, i.e. investors receive 100% of invested capital before Five States receives promotional benefit. The result is that Five States and investors have common objectives from the start: to recover investment capital as soon as possible, so that payout occurs quickly. Everyone benefits from low overhead and expenses charged against revenue.

Maintain significant ownership of the company.

Ownership in Five States is the principal personal asset of the Managers. Managers own a large percentage of the company, and have personally invested in every investment opportunity offered by the company since 1985. We “eat our own cooking”, and believe our investments and those of our clients and investors to be successful and profitable.

Manage the business with integrity, with quality business partners.

Integrity of the people we deal with, including employees, brokers, business associates, clients and investors, is of upmost importance to us. Prior to entering into a financial transaction of any kind, we strive to know as much as possible about the record and reputation of the persons with whom we’re to work. It’s usually the first step in our analysis of any proposed project.

Provide timely transparency in company and investment affairs.

We’d like our investors to be as knowledgeable and informed about their investments as possible. We try to make our offering documents, quarterly and annual reports, and correspondence comprehensive and clear, and we welcome questions about the company or investments at any time.

Enjoy the ride.

At the inception, Don, Arthur and I believed that a well-run oil and gas company, committed to long term objectives of acquiring and managing high-quality oil and gas properties, could be an interesting and fun experience. It has been!  Although Arthur and I will greatly miss Don, neither Arthur nor I have thoughts of doing anything other than continuing to enjoy our activities, our loyal employees and a host of wonderful financial advisors, family offices, and individual investors that have made running Five States such an enjoyable venture.