What You Need to Know When Buying Oil & Gas With an IRA

Welcome everyone to the Directed IRA Podcast. This is Matt Sorensen, excited to be with you today because I have a special guest, Troy Eckert, with me. He is a pro in oil and gas investing and mineral rights. And so I want to have him on today to talk about how your IRA can invest in the mineral rights. I know that might sound crazy to some of you who haven't heard about self-directing. But this is something your IRA can do. And we're not talking about buying big publicly traded oil and gas companies like Chevron or something else. We're talking about buying actual mineral rights where you can own these assets, not a stock that otherwise owns some of this stuff, but you can directly own these owner's rights. So, Troy, welcome to the Directed IRA Podcast and thanks for being on.

Hey, thanks for having me. I'm always grateful to be on to educate and inform investors and see how we can maybe make them more aware of what value lies in U.S. oil and gas mineral rights.

All right, well, I know you've been doing this for a while and you've helped, I don't know, hundreds of millions, billions of dollars get invested into oil and gas. Why don't we talk about the different types of oil and gas investing here? As people are thinking that are new to this, they're like, how do I invest in this asset class if I've never done it before? Then we'll talk about the IRA component next here. But maybe let's just set this up first and into how you see people investing into this.

So the main thing that keeps it from being complex, Matt, is that I always like to say, if you look at oil and gas the same way you do real estate, traditional real estate, it makes it easier to understand. Okay. So if I want to go out and I'm a developer and I say, hey, I would love to develop property, I'm probably going to go buy raw land that's not entitled, probably agricultural land. I'm going to pay $2,000 or $3,000 an acre with the anticipation through entitlements and easements and right-of-ways and annexation, it's going to have a higher, greater value. Mineral rights are the same way. So you've got all these ranchers and farmers across the United States who are out there in the middle of nowhere. It just happens that's where the oil and gas is buried. So these ranchers and farmers, they own raw land like a real estate developer, but they don't want to give up their ranch. Well, the United States Real Estate Department allows us— our real estate department, real estate industry allows us to lease or sever sell the mineral rights. So it became a really fungible asset for these ranchers and farmers to be able to sell. Now, when you ask that question about, you know, how mineral rights and what the space is, we go to the next step, which is the development stage. Well, I don't have $10 million to drill a well. I'm just a rancher or farmer, and I don't have $10 million to go drill a horizontal well. So I need somebody to lease those mineral rights from whoever owns it. And that's going to be an Exxon or Chevron or somebody else. They'll go drill it. That's kind of the development stage. And then once they're up and producing, then you have more like what I call REITs. Somebody says, I just want the income and the cash flow, and I want to make money for the next 20 or 30 years. So we do mineral rights where the raw land developer buying the mineral rights that are going to be drilled on. We also participate in the drilling of the wells, which is the vertical integration, drilling and developing the cash flow. And then we also have producing developed properties where a lot of our clients say, I just want the income. I don't need to drill and I don't want mineral rights. I just want income. So That's kind of the three phases we do: mineral rights, drilling, and income. And that all ends up being the space that we focus on.

Okay. And there's different, I guess, risk profiles to those. There could be different tax incentives, right? The government puts some tax incentives in the drilling and exploration.

Sure.

But there might be more risk in that. You don't know what it's going to be producing necessarily. So why don't you talk about that when you're just talking to investors in general? Not that one type of investing is better than the other, but how should they be thinking about it for their investment portfolio, or what do you see some of the smart investors doing?

Well, to be candid with you, whenever I looked at oil and gas 15 years ago before the new technology, you almost had to risk mineral rights the same as drilling a well because we used to drill wells that were 7.5-inch hole in the ground the size of a paper plate at a picnic. You're trying to go down 1 or 2 miles and hopefully you hit a buried river channel or a buried deposit where dead plants and animals migrate— pond, a lake, a river, right? So it's— it was high risk. It was shooting a dart in the dark. Today it's not like that. Today we're talking about trying to hit the Grand Canyon with a rock. These things are 40, 50 million acre reservoirs that cover hundreds of thousands of miles in, in aggregation. So today the difference is I can actually look at mineral rights, an extremely low category of risk, meaning that I'm, if I buy in the right spot, I have extremely low risk. And on the flip side of that, if you and I were talking about drilling where there is substantial tax write-offs against your ordinary income, 15 years ago, I'd have to tell one of my partners, hey, look, we got a 35% chance of hitting the well and 65% of a dry hole. And they'd be like, well, I'm not doing that. So it really took even high net worth investors and high income investors. It separated the men from the boys quick. 'Cause like you had to be willing to lose your money 6 out of 10 times. Not a lot of people play that game. Yeah, today it's different. Today we probably are drilling, uh, we drill probably or participate probably 80 or 90 wells in the last 5 years. We've had zero dry holes and only 2 wells that probably won't pay out. So you're running 98 to 99% success rate. So now all of a sudden I look at the risk profiles and I say, really, the risk profile is more about the capital you're going to use than the results. If I buy mineral rights, I'm targeting an 11 to 18% cash-on-cash return. 15% of my income is tax-free because of depletion. And it's an asset. I write one check, no expenses, no more bills, no capital calls, 25, 50 years of cash flow. It's a no-brainer. I call it the most boring investment on the planet. Write a check, start receiving revenue in 6 months, you get a check for 25 years. I like boring and I like checks, right? But now I'm, now I'm a W-2 earner and I'm making a lot of money every year. And I'm thinking, man, I do not want to give my taxes to the government. I can invest this more smartly. So now I move to the second category, which is working, which is what we call the drilling and exploration side. Now when I put in $100,000, the IRS, because of the new one big beautiful bill, says if you invest $100,000 and you have direct ownership of it, you can write 100% of that money off your taxable income. I make $1 million, I put $100,000 in drilling, I now only report $900,000 in taxable income. Huge upfront tax advantage. Yeah. I also get 15% of that income without having to pay tax on it. So I get a double-edged tax write-off and tax-free income. It's higher risk because I gotta drill the well. The cost can vary depending on cost coming up or down, and I'm not sure the quantity. So the quantity has a direct reflection on my payout, how soon, how fast, and how much. And then of course, the last thing is of course gonna be midstream, which is the pipeline business, which we're also in. But that's just like owning a toll bridge. You're just charging a tariff and you're making money because somebody's moving gas or oil through your pipeline. But It's a fully integrated concept and each one has its own attributes if you know how they work and they interlock with one another. Yeah.

And so, I think a lot of people who are investing in oil and gas or that are new to it, there's some things to learn there. There's a great kind of overview of the landscape. And I think when people think about their buckets of money and particularly when we talk about an IRA investing in this versus some non-IRA money. And they're like, well, I want to do some of that drilling, and I like that tax write-off, the IDC, Intangible Drilling Cost write-off, where that I put $100,000 in, I get a $100,000 deduction off my W-2 or my business income. We love that. I mean, I'm a tax lawyer, right? I mean, that's a great tax strategy. We don't want to chase tax write-offs. I want good investments. But right, if I get an incentive to do that, I'd much rather do that with my non-IRA dollars. But A lot of people who are building for retirement and they're thinking of, you know, $100,000 in their IRA that's in a mutual fund right now, they couldn't even tell you the name of it, right? I mean, they're not trying to get tax write-offs with their IRA money or their old 401(k). What they're trying to get is return, right?

Right.

They're trying to get income off of this or they want this $100,000 to be $300,000, you know, 10, 15, 20 years down the road, right? Without having to put more money in, just the investment returns and the compounding and the gains of it. So, I think income stream is more attractive to people with their IRA. So, is this more of the mineral rights side? I mean, I think just from a, you know, the typical advisor, even a tax advisor on our side is agnostic to the investment or the returns, but just from a structure and the buckets of money, if I'm thinking of my IRA, I'm going down a mineral rights pathway.

Yeah, personally, I would never invest anything that has a loss or even really in my view, a potential loss inside my IRA because it's already money that I set aside. I've already taken the tax advantage by developing the IRA. The last thing I want to do is deteriorate the value. I mean, the idea is whether I'm growing at 6% or 16%, every year I need that IRA value to go up. I don't need to have risk. I can't take losses inside my IRA. So I tell my clients, never invest in working interest inside the IRA. Never, because you want that to be literally a compounding event that grows tax-free. So then as you get with your tax planner, your tax strategist, they say, okay, now we're at the point of extraction. I need that dollar to turn into $50 and I need that $50 to come out as cheaply as I can. I've never put anybody into a working interest position inside of a retirement account or a qualified account. I do tell them it's an unbelievable investment when it comes to mineral rights because I like what it does. The other thing I like is that when you think about the two, they somewhat complement each other. So we have a lot of our partners will buy mineral rights in their IRA and we happen to be drilling on the same leasehold that the mineral rights are on. They'll take the working interest position. So when you look at the 100% extraction value, the only gas in the ground, they go, I'm getting in on the minerals and I'm getting the working interest out of my own wells. Yeah. And it really, it really is a very complementary benefactor. But it's like you said, It's the right dollar being used for the right reason to maximize gain, maximize tax advantage, and minimize loss. Yeah.

As people are out there investing, I mean, I know there's different structures and ways people do this from different fund structures and everything. How do you guys structure your investments? If someone's buying mineral rights, like, what does that look like from a document and process standpoint? Sure. And then if there is a stream of income on that, like, how long is that typically? Where that stream of income could be being paid to the IRA.

Yeah, so having been in the investment business since 1985, had my own FINRA broker-dealer for 22 years, I personally don't like structured ventures. I don't like SPVs. I don't like LLCs and stuff if I can avoid them because you take away from the direct ownership and now you have this whole cumbersome document, management agreements, operating agreement. You've got all these. And the person who creates it 9 times out of 10 sets everything up in their favor. So, when you finally have questions to ask, are you reporting like, well, you don't have the right to that, I don't have to give it to you. So what we did at Eckerd is we structured everything under a purchase sale agreement. So when you buy mineral rights, we might go out and buy minerals in 20 different producing units with maybe 10 different oil companies, a little bit from Continental, a little bit from Exxon, a little bit from Chevron. We blend that into a portfolio, $5 to $20 million portfolio, and then you can invest $25,000, $50,000, $100,000 and you'll get your pro rata share. But it comes in a purchase sale agreement, which means it's fractional minerals. You own it, it's real estate. We manage it for you for free. And that allows you the flexibility of having a piece of real estate that you own that's got a management agreement and you can always go online and sell it. We have an online market. You do that right when you get to the back half of the, of the equation, which is the income. You say, well, what does that look in terms of return on my money? The when, the how, the now, and how long? When it comes to working interest, it takes about 12 to 14 months because you got to drill the wells, turn them online, complete them, get your contract. It takes a little longer. It's like building a self-storage or building an office building. It takes a little bit of time. When you buy mineral rights, the only mineral rights we buy are already producing income the day we buy them. So my company buys them first, then we invite our partners to participate with us. But I only buy cash-flowing assets. So let's say, Matt, you wrote a check today in your IRA and said, I'm going to be $100,000 in my IRA. 180 days or roughly 6 months, we already have first revenue. You'll get your first check. The first 2 or 3 checks are large because we've got 4 or 5 months worth of compound revenue we haven't paid out yet. That's bigger checks. And then it goes just to a steady eddy every single month. Those wells are projected to last anywhere from 20 to 75 years of income. Now, let's be realistic. It's like a 2-liter Coke starts out full. You shake it, it's going to come out very heavy in the first 4 or 5 years. Once it declines and levels off, now it's going to last 25 to 70 years. Well, I don't care if I've got either most, if not all my money back in the first 5 or 6 years. I hope it lasts 25 years because I can recycle my money and put it back to work. Most of our partners have found minerals are really, really a great compounding asset. Put the money in, take the revenue. 2 or 3 months later, you can buy some more acreage and buy more acres. Some partners started out with 1 or 2 portfolios. They're now in 30 or 40 portfolios using their income to keep compounding. And I think that's kind of the nice thing about the mineral rights. I don't have to worry about capital calls or undue expenses or liability. It's just money in, money out. The working interest is a little more dynamic in that if I get, if in my mind, this is the way my brain's thought for 42 years, is that look, if I can write a check for $100,000 and $37,000 or 37% was going to go to the IRS, I only need 63% to be kind of even mentally. I was going to give it to them anyway, right? Once I hit 64%, I'm gaining on what I would have paid the IRS. If you have the kind of wells we have, we're averaging about, I don't know, 45 or 50% return first year, first 12 checks. So by the 18th month, I'm pretty well at mental break-even between what I owed in tax and money. Now I'm getting more money back. And if you do that each year, get my tax write-off, revenue next year, I use the revenue plus next year's income. We imagine that you can almost have a 2.5 to 3x on on investment at the end of 5 years, 'cause I'm just recompounding it. I like to say to my partners, man, I like to say, I want to be your biggest tax pro. I want to make so much money for you that you're mad 'cause I keep giving it back to you so quick. But that's how you get wealthy in oil and gas. That's what Exxon does. They drill, they produce, they compound. They drill, they produce, they compound. Your clients, my clients, our participants that we're giving advice to, we're teaching you how to be like major oil companies. You're compounding your value by consistent investing.

Let me go back to the mineral rights. You're talking about buying kind of, you know, some mineral rights, you talked about coming like a package almost. Yeah. Where I've got an undivided interest or a fractional interest in different wells. So I'm not necessarily all in on one. Yeah. Well, is that intentional to like kind of diversify me around or why are you structuring it that way?

Well, it's for multiple reasons. You hit on the number one, which is diversification, because the bottom line is if I bought like the best mineral acreage in the middle of the Permian Basin in West Texas and it's Diamondback and Diamondback owns a million acres, But it could all be Class A and they go based on capital and based on drilling rates, we won't get to that for 7 or 8 years. So we own a gold mine, but nobody's got a shovel in the ground. I need that oil and gas to flow. So what we try to do in addition to that comment, we also value minerals from multiple components. Like, for example, we could have Exxon, Chevron, and Conoco, 3 majors drilling. We run analytics on it. We say out of all 3 of those companies that are all major multibillion-dollar companies, Exxon's not the best. They take longer, they spend more, they produce at a smaller choke size. Exxon thinks oil in 50 years worth more than oil is today, whereas ConocoPhillips says we like oil price today, we like a return on money. So they open the spigot up. So my rate of return's faster on Conoco, even though Exxon's a much more larger company, right? So in our analytics, we're looking at everything from price per acre, how many wells they're going to drill, what kind of results they have. It's a very sophisticated way to do business. They never liked this before. 15 years ago, we didn't have the, the internet, we didn't have the scraping, we didn't have the data. Today I can tell you every well drilled in the United States, what they drilled it, why it was good or bad, and then you can run analytics across it. It's changed the game, lowered the risk, increased the profitability. Very few companies know how to play the game. We just have created a phenomenal team that does that. So now when you look at a portfolio, and you say there's 20 tracks with 20 different companies in there, I've got 20 horses in the race and we have a bet on all of them. They're all going to win. I just don't know which one's going to be the third, right? I don't know who's going to win the Kentucky Derby.

Yeah, yeah. Um, okay, great. Now I think, uh, super helpful. I know you've talked a little bit about kind of some of the fraud in the space, and I know some technologies you're explaining has made it better for at least good operators to analyze and minimize risk, but still seems like there's fraud out in the oil and gas industry in general. I know you've been around and Eckard's been around. Eckard Enterprises has been around for decades. It's been around for a while. What advice do you have for investors as they're looking into an operator? And this isn't investment advice today, by the way, guys. I'm just trying to give you Troy here because he's had a significant amount of expertise in this space. He spoke at our Alt Asset Summit before. He's going to speak again. We've seen a lot of clients' IRAs invest with them and they've had good success. So, I don't mean this to be any endorsement anyway, but you seem to have done a good job and kept a clean track record. But what should investors be looking for?

Well, I'm very biased. So, when I think about my career, I started off with a premise, why not just do it right from the beginning? Why try to figure out how to gerrymander the results? If you're honest and you tell the truth, I've been doing this for almost 42 years. I've never had a single lawsuit or a single complaint in 42 years, ever, regulatory, anything. In addition, we're probably the number one sponsor in oil and gas to send out more revenue than anybody else. We just crossed $200 million out the door in cash flow out. So with that being the basis, I'll tell you how I got there. How I got there is simple. Any oil and gas sponsor, real estate sponsor, anybody else starts with the premises. You gotta know the who. Tell me who you are, how long you've been in the space, what gives you the credibility, what gives you the expertise, what gives you the experience. You'll find most of these bad actors have about a 2-year resume. Oh, I've been in oil and gas since 2022. What did you do before? Well, I did dog houses, pet food, and I did some buy and flips in mobile homes in the 1980s. The who is incredibly important. Just like you as a tax expert, I'm coming to you because of your expertise. If you said, I just got outta college yesterday, I'd be like, well, I'm glad you graduated first in your class, but what do you know about practical application? Right? The second thing is track record. And this is the biggest default that investors have. You're not getting a track record. Every mutual fund, stock, REIT, every single company says, here's who we are, what we did, and how we perform. Investors lose their mind when it comes to the alternative asset space. It's like, show me what you've done. Prove to me you've ever made the returns you're saying you can make on this investment. You may be a beginner. I'll give you credit for being a beginner, but I gotta chalk that up as a partial risk. So it's the who, it's the track record, right? And then it's the transparency. What are you charging me? Now that may sound petty. It's like getting croissants at a French bakery and going, I'm not eating the croissant. You tell me how much you made on profit on the croissant. He's gonna say, pound sand, go outside if you don't like it.

Right?

Yeah. But the truth of the matter is we are naturally thrifty as human beings. We want the most for the least we have to put out. I don't want somebody to work for free, but I don't want somebody to go charge me 4 times the price. And here's the problem, Matt. It's just math. I can take a well I'm drilling for $8.5 million. I can look at another sponsor. It looks clean. They look pretty sharp. You run the math. That guy's charging $28 million for the same well. It goes for $7 million. That means when I write a $100,000 check, he puts $75,000 in his pocket. What's his motive? He's praying for a dry hole because he's never going to be able to explain why his good well can't even pay out. So it's the who, okay? It's the track record and it's the terms. Show me, show me the deal. It goes across every alternative asset space. I don't care what it's in, it's the same basic thing. The thing is, then you have to have the courage by saying, if you won't answer my questions or show it to me in black and white, please don't contact me again. The answer is no. And that's the tough part, is having the, the respect for your time and money to be able to say, I'm owed these answers, And failure to do that means you're not able to make those answers, which means I'm unable to invest with you.

So, yeah, yeah, we did it. Mark and I did a due diligence top 10 list. Sorry, kind of a tongue twister. And the final one is be comfortable saying no. I mean, that was number 10 on our list. A lot of investors get so excited. And I think one of the ones I see people kind of get overly excited about and they overlook things is in oil and gas is they hear about this tax write-off and this huge tax benefit and they're like, well, they're saying I'm going to get a tax benefit. And I'm like, you still don't want to throw away money. They almost feel like they're buying a lottery ticket in some ways. Like, I don't need to look at it. Who cares? I mean, I'm getting this tax write-off. I mean, it's like I— for some reason, their guard goes down.

I feel like, well, you're the tax expert. Here's what I tell them. Look what I did, a big presence out with a bunch of doctors on Friday night. I said, what's the downside to paying your taxes? And they all look around. I go, you get to keep the other 63%, right? If I need to lose money, I'll go to the parking lot, set it on fire. I mean, I'd rather pay— I do. I pay big taxes every year. I would rather pay my taxes than drill a mediocre well. And I'm in the oil business. I need to make money. Otherwise, if I pay my tax, I get to keep the other 63%. But you're exactly right. To me, the word tax— if I look at all the Ponzi schemes the last 5 years and all the bad actors, it was all about waiving tax deduction. It's like chumming for shark. The problem is they're chumming for suckers and the suckers are the investor. Go tax write-off all your conservation easements, ATMs, the carbon sequester. These are all fraud because the investors were told tax write-off. See, I look at it differently. You're the pro, but the way I look at it, I've done this for 40, going on 42 years. Here's what I look at. It's not a tax deduction, it's a tax deferment. I deduct it this year, But by drilling a good well, I expect to make that money back. So I'm just deferring what I owe today using the IRS's share of the money to build more wealth. And I'll pay you my taxes next year. I'm deferring what I owe. My job is to keep deferring that like I have for 42 years till I die and my wife and her new boyfriend can figure out how to pay the tax, but I'm not going to do it. That's how I view life. It's not my job. My job is to build wealth using the IRS's money legally. That's what it boils down to.

Yeah, and I think that's a good point that you made at the beginning too, which was, you know, you still keep 67% of it. Yeah. Remember, this is a tax deduction, not a tax credit. When you give up $100,000, that's only helping you for the 37% you would have sent to the IRS. Correct. And so this is reducing your taxable income $100,000. So if you made $1 million that year and you invested $100,000, you're only taxed if you made $900,000, but you had to give up that $100,000 to put it into the deal. So we want to make sure we're getting good deals. I kind of think of the tax as like the cherry on top. Top. It's like, it's nice to have, but that's not where you start. That's kind of like later in the conversation. I think the first thing is, is this a good investment? Is this a good operator? Is it the right type of opportunity? And then the other thing you mentioned was, is it priced right?

Right?

Because it could be a good operator that's a shark out there that knows what they're doing. They're— and it could be—

well, it's also bringing an IRS risk. I think it's an IRS risk too. So the way the IRS works now, they got algorithms, right? So each oil well in the United States has an API number, like a Social Security number, right? So let's say I, my partners and I bought into a $7.5 million well, API number 1234. You get in the sucker deal and you pay 4 times the price, same, same well, API 1234. IRS looks at it, says, well, Matt has a 400% write-off in the same well Troy has a write-off. He paid $28 million, he paid, he paid $7 million. He took a write-off that doesn't exist. And so the problem is it's not just the economic differential, it subjects you to IRS audits. It subjects you to sticking out like a sore thumb. Bum. And so what you have to have is the confidence, not only with the sponsor, that they know their business, they can make you money, they're good at what they do, but they're going to put you out of harm's way by filing the taxes right, giving you the transparency, giving the information. So when you do make that investment, it absolutely is one that you can stand hard on with your tax preparer. Last year, Matt, from Christmas until New Year's was only like a 3-day window because it fell on a Wednesday. We were not going to open up our last drilling program of the year, and I said We might have a few partners that need it. Let's see if we can, where we go with it. It was like a $47 million fund, a 5-well package. We had the phone ring off the hook like I've never seen before. It's like chumming for shark. We raised like $33 million inbound calls saying, I saw you, I heard you on YouTube. I saw you such $33 million in 72 hours. And I would ask, do you want to ask some questions?

Nope.

Saw you on YouTube. I don't want to pay my tax. Here's a million bucks. I'm like, you do realize there's other questions. You're like, Don't care. I'm out of time. I'm sending you a million bucks. Let me know how it goes. Now, that is a, the old adage, a fool and his money are soon parted, right? Thank God they've invested with a company who legitimately is honest and does it. But do you think of how many calls did not come to Eckard, went to other sponsors, and that money is toast. It's gone. Yeah. So this is a great business. It's a tremendous change in how low risk it is, but it needs people like you who are experts in getting the information out. You have a great company. You're a tax lawyer. You know what's going on. It's almost like we feel like shepherds trying to hide the sheep because they're getting picked off one by one. Yeah, this is a great business, but you have to look at it as an asset class. It's not a Band-Aid for your current year tax problem.

Yeah. And I think just like any good thing you might love or find attractive, whether this is real estate or crypto or stock or venture, whatever asset you love, there's good deals and bad deals, good operators, bad operators. And oil and gas, something you can learn about. And to that, Troy's going to be speaking at our Alta Asset Summit. You can learn a lot more about this, altaassetsummit.com. He spoke last time. We had great reviews on it. It has a lot of good stuff to just teach you how they structure their stuff and how you should be thinking about oil and gas. So, one final question just as a big picture here. I want to give some people some resources too to learn more and some ideas. How is drill baby drill going?

Not good. Not good.

Like, no.

Yeah. Let's explain that. It can't, it can't be, be a tax professional, tax professional for half price. So the difference in the United States and everybody else around the world is the US oil and gas industry is owned by the private sector. So President Trump said, I'm going to fast track regulations. I'm going to give you this mantra of drill baby drill. And then everything he's done with his policies has been pushing the oil price down. So Exxon CEO all the way down said, oh, we hear you, drill baby drill, but we can't make any money below $75 a barrel. You know, we can squeak by at $65. And so what has happened is every oil company had already been prepared since 2018 to live off our cash flow. We paid off our debt, lived off our cash flow. So we're only drilling enough to maintain status quo, keeping our reserves up, outrunning our decline curve. But you lost about 300 drilling rigs, about 40% of your drilling rigs, because we said stop working, stop drilling. We're not going to sell our best location and geology and minerals for free. It's been there 100 million years. We'll wait another couple of years. And I think it's going to come back and bite us in the rear end because what's happening is the oil and gas industry is like trying to start a cold diesel tractor. You got to get personnel and equipment and manpower, and we've watched that decline. So we're pretty much just flatlined the last 24 months with two wars going on, Russia's infrastructure being destroyed by Ukraine. You take all that's going on, I would say you're going to see a rubber band effect in about the next 24 to 36 months. What that means is they're pulling the rubber band so hard against giving us value for commodities of oil and gas. When they finally need that because demand keeps going up, it's going to pop them right in the face. Say, we got to have an extra 2 million barrels a day. And we're going to say, well, we're going to have to gear up. What's that going to cost you? Well, it won't be $75 a barrel. It's going to have to be $95 a barrel because we're looking down the runway saying in 36 months, President Trump's no longer president. Is that a Democrat with anti-fossil fuel? Is that a Republican with fossil but not the backbone? So we move in very cautious cycles in that we're living on our own cash flow. Drill, baby, drill might as well be drill, sucker, drill, because it doesn't work. And so we've all kind of moderated. Now, I will tell you the good news that we found here in the last 90 days is that all these service providers are standing around with equipment in the yard. They're desperate for work. So the good news is we're drilling today wells that were budgeted for $8.5 million last January, 9 months ago. And the company is saying, we'll actually complete your wells. It's almost a 3 for 1. We'll charge you for 1 well completion. We're going to complete 3 wells. So our, our cost per well is down between $1.5 to $2 million per well, more than enough to offset the $63 oil price instead of $75. So whoever can drill today, whoever has those clients who trust the contrarian viewpoint, will drill the best wells at the cheapest price with the best personnel. Because when they laid off all these people, you only have your A-team left. The Bs are unemployed. So we're getting great wells drilled at the cheapest price I've seen in 6 years, which means the best economics. But it's drill baby drill is not working.

Yeah. So let me understand that from an investor standpoint is if I'm invested and let's say, I mean, you guys are managing the wells just as an example here or any operator, they might say, I'm not going to pull all the, the oil out of this well. There's not a good price on the market right now. This is a killer well. We're going to, like, let it sit for a while. Yeah, they do. Rather than take all the production out of it, they sit on—

they're called DUCs, drilled uncompleted. So you might drill it, run the pipe, it's ready to go. You just simply don't go perforate or make holes in the pipe. You don't frack it to open it up. You just wait. So they're called DUCs, drilled uncompleted wells. The problem is we've drilled so few wells the last year and a half that there's not a lot of room to be able to inventory those. Right. So what we did as an industry, we put pressure on all the service providers. You know, we're fracking with 28 million pounds of sand per well. So those guys are basically taking sand out of a quarry, cleaning it, bringing it to site. They were charging $75 a ton. We said, can't do it. Well, how about 50? Nope. How about 40? Nope. Go pound sand. I love that analogy. Right now they're down to like $25 a ton. We're getting 3 wells fracked for 1. You're never going to find that economics again. So we waited out the vendors. We've bridged that arbitrage between lower commodity and lower service costs. And now we're actually to the positive, we believe, economically. But your point is right. Exxon doesn't have to turn wells on. Chevron doesn't have to turn them on. We don't have to turn them on. But there is an advantage to having your production to market. When Russia started the war back in April of 2022, we had $129 oil and we had $110 oil for 6 months. We made as much money in 6 months as we would have made in 24 months. So it's kind of one of those— it's like the stock market. You want to be in because you don't know the few days where you get those upswings. And for us, it's just all about cash flow, return, and taxes. Yeah. Awesome. Yeah. Great business. It's just like me, I've been doing this since 1985. I'll be 62 this year. It is the most advantageous market for you and I as high net worth investors in the business I've ever seen. We've never been able to play with the big boys and it's probably the most transparent. Any well you call me on, I could pull it up on a computer and see any report like that. Never had that before the last 10 years. It's just phenomenally changed. Very low risk, very transparent, and now finally wide open to high net worth investors.

Yeah, that's— let me ask that in terms of who's it available to. You talk about how you don't have a fund structure, you have actual, you know, contracted rights. They have a fractional interest in a specific— so does someone need to be an accredited investor to do this? What is the— what's the requirements in terms of the investors, at least that you're working with?

I'll say it the way I've looked at it for 40 years. If you don't have a million-dollar net worth, not counting your house and earnings, go buy Exxon stock, go buy Diamondback. You have no business in direct ownership. You need the liquidity because your net worth is not an insult. I mean, congratulations for having any money to start with, because very few Americans do. But you really need to start a foundation. The foundation is, I started off when I was 20 buying Exxon stock and buying energy stocks because I didn't know if I needed the money as a young entrepreneur. Once you start learning and investing in stocks in energy that you like, by natural instinct, you'll start paying attention to the market. When you finally get a net worth that's exceeding $1 million, not counting your home and your couch and stuff, or you have an income over $300,000, now you really need oil and gas because it is part of the overall structure. High oil and gas prices affect real estate and medical, everything else, because they use our product. That's why President Trump is so hard jamming on energy. If energy truly were priced at 75 or 80, we'd be at a 5.5, 6% interest rate. He needs energy to stay low to make sure his plan of a low inflation rate exists. If we go to 75 or 80, he's got big, big problems. So for right now, to refinance the debt, we're the whipping boys. It's, it's whip the oil guys. They already have money anyway and just make 'em suffer, but they'll make their money back in 2028, which we will. But there's a real ploy to it.

Yeah.

Yeah.

Um, man, Trey, you just keep dropping such good pieces of info here. I'm trying to wrap this up, but that was a great point. I love your approach on that in terms of like someone's net worth and investing in this asset class and, and what When are you ready for it? And you know, that million-dollar threshold is the accredited investor threshold, but also is a good, you know, marker just for someone in terms of their net worth. And I think a good piece of advice for someone thinking about investing in certain assets and when am I ready to invest in anything alternative, there is some good rhyme and reason to that million-dollar threshold of when you should be looking at it. And maybe you're very high income and you're, You know, I mean, you should still set some money aside, but it was a great piece of advice there. And then great insight too on where we're at with interest rates and inflation drives that. And that was my question about Trump is like, you know, oil and gas is a big driver of inflation. Definitely his incentive is to get interest rates down. So you can see the dynamic there that he's dealing with.

Well, one thing to keep in mind, oil is not just a supply and demand commodity, it's also a dollar That's a currency commodity. So the dollar continues to deteriorate. And historically, every single pattern, when the dollar goes down, oil prices go up. So we're at 97.29. We were at 96 last week on the dollar. Oil was up to $65 a barrel. And what people don't understand is we might be parapluie on supply and demand and global supply and domestic supply. But in the reality is, as the dollar goes down, instead of taking $100,000 and buying 100,000 barrels of oil, we now need to bring $117,000 to buy 100,000 barrels of oil because our, our dollar goes down. Blackstone and other majors are suggesting that the dollar could be down in the 80s in the next 24 to 36 months because of our debt. And so one thing I would tell all of your audience, this is just far beyond oil and gas too, is that President Trump has an ulterior motive to lowering the interest rates. It's not just to get lower interest rates for paying off the national debt, but the Bank of England did this back in 2008. They had so many people keeping cash in the bank, the Bank of England finally said, we're going to charge you to keep money in our bank because we can't pay you interest rates. So you're not making money, we're charging you. I think President Trump said the only way to stimulate this economy is I'm going to lower interest rates at the bank so low, even fixed income holders are going to dump out of the bank and buy any investment they can because they can't live on 3% yields when you're in a 5% inflation market. So I'm predicting this massive flood of liquidity coming out of banks and money markets, finding anything from bonds, mineral rights, anything, because who can live on the 3% return when you're making 5% on inflation? You're already upside down by almost 3 to 4%. I think he's very smart. I think he has a lot of smart people around him and they said, we need this $5 or $6 trillion in liquid cash into the market to support his growth projections. If he doesn't do that, growth doesn't appear. We have a whole lot of AI data centers and nobody working. This is a master plan we have to be aware of.

Yeah. And I think a lot of people hear the drill, baby, drill, and they think that the purpose of that is typical Republican deregulatory type things. There's a much greater objective he's trying to reach there.

Yeah, much bigger.

Yeah, it's a much bigger master plan. Um, and I think on that money market flow too, that's definitely— I mean, you look at the money market flow in the last 2 to 3 years, it's insane how much money is sitting in money markets versus what was in there the last 2 to 3 years.

And I'll give you a good example. I— we, we talked to our partners right before April and said, you know, everybody's like, I'm tired, I'm not investing, everything's tight. We said, well, we found this new project Project generates $29 million a year and 11% fixed income. We raised $90 million in 3 weeks. And I joke with him, I said, I thought y'all said y'all were broke. If your idea of broke's $90 million, I want to be your kind of broke. But I, I was shocked. And that just tells you how much is sitting liquid because they're scared. They don't know where to go or what to do. But I think that's what President Trump's trying to do is get that money out of that market. That $90 million was committed in 3 weeks. Blew me away. And I just was laughing saying, Whenever he gets that rate down. What scares me though, Matt, is how many of these bad actors know that's coming and they're going to catch them. And I'm hearing about data center racks being sold. It's a Ponzi scheme. I'm hearing about all this kind of stuff. So the bad actors think the sheep are going to be let out. We are going to have our way with them. They're not going to know what's going to hit them because they're going to chase 5, 6, 8, 10%. A Ponzi scheme doesn't have to be 15% return. It could be a 9% return. Looking at a 3% yield in the bank. It doesn't have to be this fancy number. Ponzi schemes are Ponzi schemes. Yeah, it's just fraud.

Yeah. So of course, make sure you know who you're operating with, who's behind it, what's their track record, what have they done. And not just the opportunity, which can be exciting, whether it's oil and gas, AI, you know, crypto. Geez, who knows what that might be. So, Troy, thanks so much for being on. What are the resources you would send people to to learn more about Eckerd or just oil and gas investing in general?

Yeah, the one problem with oil and gas, Matt, is there's no central site. It's so easy to find stuff out on real estate and other normal, more traditional assets. We created on our site called Eckard Insights. We don't need your Social Security number. We don't need your net worth. You can literally sign up to Eckard Insights on our website and it has hundreds of hours of educational information that I put together, ebooks and everything else. And that's a good starting point. And then, you know, ChatGPT has done a pretty good job. I've been using that just to see if I were a client, what I could find. Yeah, it's somewhat limited, but it's pretty good fundamental stuff. But we created ebooks which really make it easy to understand about investing with a 1031, a self-directed IRA, what working interest does. And I think the other thing is, is that you just got to want to. Here's what I find. You got to want to— the desire. Like, if I want to know about raw land development, I can't just do it 2%, hope that it works out. If you want to be in energy and you find the value there, it's really not that complex. It's a different language. It's a different approach, but it's fundamentally the same thing across all asset classes. It's the who, what, where, when, why. It's risk, it's money, it's capital. But I'm going to put the monkey back on investors, Matt. I, I've talked to thousands of investors the last 3 years. Troy, I got burned in this. I got burned in that. So, well, show me your document. Oh, I don't know what I invested in. Well, I mean, you've got to be disciplined as an investor. I think this AI is going to be so scary what it's going to do to investors. It is Lightning fast and super scary. There's going to be a new employee in my office in about 30 days, a chatbot by the name of Roy. It's going to be a good looking guy with hair because I don't have any, and you're going to have an Australian accent, but they're going to take everything I've done and create this chatbot. Whatever you ask is going to use what I've already put out and ask the question in my voice. Now, is that not scary or what? So how are you going to get away from these sponsors and these fraudsters if you don't know? That's why coming to your event listening to somebody like Directed IRA, listening to you and I talk. Okay, if I don't have credible people, I don't care what it's saying. I don't know it's real.

It's scary. Yeah. And I think it does take a little bit of work. And so, you got to be willing to put in the effort. Yes. You know, it's not just about risking your money. It's also about your time. You got to invest your time into this to learn. And when I say risk your time, also be willing to say no. I think some people get so they research something, they get so excited about, and then they get more excited about it because they've— they're so far into it, but they're not willing to, like, pull the ripcord and say, yeah, it just doesn't feel right. So, you know, some of the best investors and the biggest accounts that we have, I always tell people, you'd be— they'll be like, what are they investing into? I'm like, you should probably be asking, what do they not invest into? Because they're looking at 10 deals for every one thing that they do.

If not 100.

Yeah. And these are alternative deals. This is not like they're like on a computer looking at PE ratios on a publicly traded stock and, you know, looking at some analyst report. I mean, there's some grunt work that goes into this investing, but I think that's the fun part. And that's where the opportunity is for us as investors and why we can get better returns and have a better portfolio at the end of the day is you're willing to put in the work, learn, find the good operators, and then go out and invest your money and try to grow it. All right. Troy's going to be, like I said, at the Alt Asset Summit, October 16th and 17th. You get to meet him in person and you also can catch that virtually too if you can't make it. It's going to be in Scottsdale, Arizona. Troy, appreciate you being on. We'll drop the link in the description to get to Troy's website where you can download some of those guides. And thanks everyone for being on the Directed IRA Podcast. We'll see you next week. Until then, stay calm, self-direct on. And thank you everyone for listening. A quick disclaimer and reminder: this presentation does not constitute an attorney or CPA client relationship, and it is always in your best interest to consult competent legal and tax professionals when conducting your own personal transactions. We also want to make sure you know this is not investment advice or financial advice. We're just trying to give you education, ideas, and strategies you can take to your professionals or conduct your own research on. We'll see you next time.