Direct Ownership, Maximized Value
Five States funds seek to acquire and optimize commercially developed, cash-flowing, upstream oil and gas fields—assets that are already generating income when purchased. Then by focusing on operational efficiency, reserve additions, cost management, and production marketing, we strive to create long-term value that can extend far beyond the conservative initial underwriting of each asset.
A private fund portfolio consisting of real producing oil and gas properties derives its value from the future value of tangible, physical reserves believed to be economically recoverable. Such a fund has assets that are not burdened by the overhead of a company umbrella, and unlike funds that can invest in publicly-traded securities, real asset funds are not subject to public stock market volatility. Real assets, unlike the stock of publicly-traded energy companies, carry little risk that income beyond working capital needs will be retained and used for other purposes.
Investment Process: A Structured Approach from Private Fund Formation to Returns
At Five States, strategy, discipline, and transparency drive every stage of the investment process. We form a private fund, raise capital from accredited investors, and then execute a targeted, step-by-step approach to acquiring, managing, and optimizing energy assets. Our focus on small-to-middle market assets allows us access to potentially high-value opportunities where market inefficiencies exist; these inefficiencies can yield above average returns over a long investment horizon. Throughout the process, we maintain open, ongoing communication with investors, providing direct access to our team and regular updates on fund performance.
Before acquiring assets, Five States establishes a dedicated private fund with which to buy a diversified portfolio of energy-producing assets. Accredited investors commit capital, and once the fund reaches its target raise, the capital deployment phase begins. Importantly, this structure allows us to bid on properties with cash in hand and without additional financing that can slow a deal closing and put it at risk.
We target small-to-middle market oil and gas assets with established production histories in mature, well-developed basins. We expect these assets to provide reliable cash flow and long-term potential, with minimal operational risk.
Our longstanding industry relationships provide access to marketed, lightly marketed, and off-market opportunities that larger allocators often overlook. The assets we select meet our disciplined investment criteria and we believe will offer strong risk-adjusted returns.
Every potential acquisition undergoes financial, marketing, geologic, and engineering evaluation to confirm that scientific rationale and a marketing thesis exists to support asset viability and long-term economic sustainability.
We implement conservative underwriting standards and commodity price hedging strategies to mitigate price volatility and stabilize returns in an effort to protect investor capital.
Our funds use modest leverage to improve returns. Relatively low levels give us comfort that asset cash flows can service the debt even at low commodity prices relative to our underwriting assumptions.
Once acquired, we work closely with operators to improve efficiency, reduce costs, and unlock upside potential, all in an effort to enhance the long-term value of each asset.
We prioritize investor communication through regular fund performance updates via quarterly newsletters, investor webinars, in-depth analysis, and notifications on market conditions. Investors have a direct line to management and can connect with our team at any time.
Our funds are designed with the intention to generate consistent cash flow, with quarterly distributions to investors. Returns come from a combination of ongoing income from producing assets and strategic exits when market conditions are favorable.
Where We Invest
Five States focuses on onshore, conventional oil and gas properties across the Midcontinent U.S., from the Gulf Coast to the Williston Basin. We target assets believed to be predictable over a long life and capable of providing net cash flow throughout the life of our funds. We primarily invest in conventional “hard-rock” reservoirs, only evaluating producing properties that have many years of publicly available production data.
Our cash-in-hand approach and rapid execution capabilities make us a sought-after buyer of producing properties, attracting a lot of deal flow and allowing us to close transactions with certainty and speed. Sellers come from many directions and they may be compelled to market their properties for a wide range of reasons, such as raising drilling capital, portfolio “pruning” after a merger, needing to provide liquidity for an investment partner, a fund reaching termination, liquidation pressure from venture partners, generational owners making estate planning decisions, etc.