#70: Create Passive Income and Save on Taxes Investing in Oil and Mineral Rights ft Troy Eckard

Foreign. Welcome to the Passive Income MD Podcast where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now let's get on with the show. Hey everyone, this is going to be a fun episode because we're going to be talking about a subject that I know very little about, to be honest with you. These oil and mineral rights. We're going to talk all about it. You may have heard about these things, I've heard about it before, but really it's just like any other investment that you want to get into, especially that's new to you. You're like, how do I get started? So we're going to be talking about the why, we're going to be talking about how to get involved. We found the perfect person to talk about it. This is Troy Ecker we're going to be talking to here in a moment. Since 1985, Troy's been in the US energy industry. So he's been in this quite a while, right? And he now he runs his own investment firm called Eckert Enterprises where he gives high net worth individuals, wealthy private investors, an opportunity to acquire these assets and gives them access to all of these oil and mineral rights, anybody. And he educates people on the topic. So honestly, I want to get educated today. I'm sure the listener does as well. Troy, how you doing?

Hey man, I'm doing. Life is fantastic.

Yeah, no, I love hearing that. I mean, Troy, thanks for this great time because you know, I use real estate as a vehicle to create passive income, but it's only one vehicle. There are so many other great vehicles that people can invest in. I've heard of oil and mineral rights before, but again, I was in that situation where I don't even know where to get started with this. How did you get started in this whole energy industry?

Well, it's very simple. I was in college studying to be a major in economics and finance and I had a older stepbrother I hadn't seen in a couple of years and he came through in 1985 where I was going to college and I was living in a travel trailer with more holes in it than a radiator, starving to death trying to get a degree. And he said, you know, if you came to Dallas, you could finish your degree at the University of Texas in Dallas and why don't you learn to be involved in the oil and gas energy space? I'll get you licensed, you can be a broker and you can take that economics and finance and really help high net worth investors really deploy their capital. I said sounds like a great opportunity. I think I'll take you up on it. And that's how I got started.

So for people that aren't maybe aren't as quite knowledgeable about this, what does it mean to be in the energy industry? What I don't understand what parts that you're, like you said you're going to sell some of that. Like what does that mean?

Well, the oil and gas industry is really just a series, just like traditional real estate. There's three components to oil and gas. There's what they call the upstream, the midstream and the downstream. Upstream in the U.S. oil and gas means anything to do with exploration. So seismic shoots, mineral rights, land acquisition, drilling and production. Midstream has to do with anything to do with the processing or transportation. So from the wellhead, the gathering lines of transportation, the refineries and then downstream has to do with the consumer consumption of that, whether it be propane, butane, gasoline, plastics and products. So our industry is cut up into three sectors and so you as an investor can invest in each one of those different areas of these of the industry, but you can do it through public investing like stocks and traditional public securities. Or, or you can say I'd really like to get close to the source. I actually want to own a piece of a well, not piece of a publicly traded oil company. So high net worth investors for the last 50, 60 years have been utilizing investing as an alternative investment by directly owning a mineral, right? Or a piece of a well or a pipeline or something where they say I want all the value, not just a dividend or some kind of equity stock growth.

I mean, what kind of returns are people seeing in the industry and what kind of returns are these? Are these like, you know, cash flow plays with distributions? Is that a big lump sum at the end of some of this when you sell it off somebody else? I'm just curious how it works.

Well, from the private high net worth investor side, traditionally as long as I've been in the business, which is 36 years, it's always been about tax write offs, right? So what happens is the United States government and the IRS decided we need more domestic exploration. We have all these rich investors. How do we get them to help participate in finding oil and gas in the US because we didn't have very good production versus consumption. So they offer these huge tax benefits. In the 1986 Tax Reform Act. They basically left oil and gas participation in drilling of wells as one of the highest tax deduction investments you can make if you're high income. So what you do is you say, okay, I want to put in a half a million dollars to save on taxes. What I really want is I want the investment to make back all the money except for the tax write off just to get me to par and then I hope the wells are successful. Well, so they took the risk because the cushion was the big tax write off. That's been the incentive for 40 years now. It's evolved where investors now look at and say, well I, I, I can invest for tax write offs, but I can also invest in things like other parts of the industry, saltwater disposal, wells, seismic shoots, et cetera. Each individual investment, like a duplex, fourplex apartment, self storage, all has their own financial metrics that goes off of it, right? But if I'm going to invest in alternative investments, alternative investment assets, I know I want above standard returns, I want above market average returns because I'm taking a bigger risk. So typically if you're going to invest in any type of energy asset directly, you better be hoping you're getting at least double digits and high teen returns to offset those risk you take. Expiration was very risky up until about 10 years ago. You were probably hitting, you know, four out of 10 wells, really high risk, right? But if you hit right, you might make five or ten times your money. Most investors like Vegas tried it once or twice and said, yeah, that's all the fun I can have. Then comes along this big shell revolution and this evolution. Now you can drill a hundred wells, you're going to hit 99 out of 100 and the only one you missed was probably a mechanical failure. So the risk of drilling has gone away. Now it's all about rates of return. So the whole industry shifted. So just to answer your question boldly, I wouldn't invest in any alternative investment in the energy space directly as a high net worth investor if I didn't think I can make 10% or higher. Your real risk is in the company sponsoring that opportunity or the company bringing that opportunity. That's where 90% of the failure occurs, is crooked liars, cheats and thieves. So if you can navigate and find the right company now, you have a legitimate good shot at a solid oil and gas portfolio that you directly own.

Okay, I'm going to sound really dumb with this next question, but okay, so I mean, pretty much all of this, I'm new to this. So, okay, so you as an investor, like what's the vehicle that I'm actually investing in? Am I buying a single well? Am I buying, like what is, you know, what are you helping me? Like for example, your company as an investment, like, what are you, what, what am I investing in exactly?

Well, think of it this way. So if I, if an oil company, it could be a major oil company. Exxon says I'm going to drill a well, it's going to cost $3 million. Even the majors like to diversify. So Exxon might take 75% ownership of the mineral leases, of the drilling, and they'll act like a general contract. They'll be the oil company in charge, the bills, the accounting. But there's 25% they didn't want because they want to diversify. That 25% remaining could be acquired. A company like mine could go out and lease from the mineral owner the right to drill that 25%. And I'm saying, okay, it's a $3 million well. I'm going to put up $750,000, but I'm going to take a piece. But I need some financial participation. So I'm going to call 10 of my high net worth buddies and say, look, we're going to drill with Exxon, we're going to take a quarter of the well. Exxon's the general contractor, they're going to send us a bill, will pay. They drill the well, if it's a good well, then they're going to hook it up, they're going to sell the oil and gas, they're going to handle all the accounting and we'll get a check and a statement every month from Exxon. But you need a facilitator in between that. You need a company that has the right management, just like a property manager on a condo complex, an apartment complex, that's going to help that high net worth investor fund it, do the accounting, get the distribution, do the taxes. So my company for 36 years has been working as that middle facilitator, helping high net worth investors get exposed. But we do all the accounting and all the back office work. And so that way it makes your life as a high net worth investor who's not in the business, able to invest in oil and gas without having the complications of the back office.

Yeah. So, okay, that explains a lot better. But am I getting, for example, as an investor in this type of thing? Like again, you said checks, monthly checks. So is that what I'm looking forward to as an investor? You said 10% annual return and that sort of thing. But again, that is more of a cash flow on a cash flow monthly basis.

Yeah. So the way it works. Let's talk about what I'm focused on now, which I think will help the best explanation. So we're in. We're actually moved up to the headwaters of the energy business. We're starting at the very catalyst or the point when Exxon or any major company decides to drill on private lands in the United States. They must contact the mineral owner who owns the land and the minerals and get permission through a lease, kind of like leasing your commercial property. We want the right to drill, we'll give you a lease bonus. And then we're going to go take all the risk and cost. You and I will be a partial owner of whatever activity that oil company drills and develop wells on that property. And so what happens is, depending on the success of that well, we literally could make 30 or 40% return in the first year in some cases. I've had entire oil wells pay out in four months, four revenue cycles, four monthly sales of oil and gas paid out 100% of the cost of the well. So your rate of return is completely going to mirror the success of the well, the type of well and whether it's oil or gas. So without getting too complicated for your audience, it boils down to this. You're going to buy either in a structured entity like an llc. We have a joint venture manager. You have an operating agreement and you're participating under that agreement, allowing somebody to manage the assets and the business on behalf of the few investors that have invested in it. The other way to do it is through a true joint venture, where maybe a company says, I'm going to be the joint venture manager. We don't have any tax ID entity. You're going to participate for your pro rider share. We'll organize it, we'll manage it. But you own direct interest. You can have that interest held in your own name. You can invest in an LLC of your own, but it allows you to still have that same slice of the pie. It's just what's best for you as far as your estate and for your maximum tax utilization. Most of our investors invest in their own LLC or their own name or their ira, and they like to take direct ownership. So Troy gets hit by a bus or Troy's a crook. They get their interest assigned out and they say, Troy's a nice guy, but he's gone and we still own our interest. They like that. Direct ownership.

Yeah. How do you mitigate risk as like an investor in this? Because, I mean, you mentioned that, you know, again, back in the day, it was like, you know, you hit one out of X number of wells that actually was productive and you just expect that to be a very, very lucrative well. Right. And so that kind of, you know, makes, takes the place of all the ones that don't do well. Now you said that with technology or kind of the, I don't know, different techniques that are going on right now, like hitting well is pretty much guaranteed. So, but then, so then how do you go about like mitigating risk as an investor to kind of spread that across? Cause I think that, you know, most of the people that are listening to this, yes, they love to hit the home run, but what they're looking for more is that kind of steady, consistent cash flow. They want to make sure they don't lose money first and create a nice source of income.

So what happens is, depending on what happens to the investor is the first and foremost thing is they've got to find the right sponsor and, and that sponsor must lay out their business plan. The business plan says, we're in expiration, we're shooting for the home run. You're going to hit four out of six, you're going to get big tax write us, but expect bad news six out of 10 times. I stopped doing that about five or 10 years ago because I'm getting older, my risk tolerance has been reduced. So we switched to a different model, which is now we buy oil and gas mineral rights. We go out and find where existing producing wells have already been drilled. So we know we have production, we know we have immediate income. We believe that the mineral rights we're buying will actually multiply, meaning more wells, more reserves will be produced. So we expect growth in that asset. But what we've done is we've accelerated the cash on cash return. We've eliminated the risk by 90 plus percent because we already have producing wells and we've added a really large growth component because we know there's going to be additional wells drilled. So the technology part is, is that what we used to have to look at in files and drawers and try to figure out where all the data was. The oil and gas industry has now evolved where they literally can go out to an area that covers 10 million acres and they can say, this field is the size of the Grand Canyon. We don't really need a geologist because we know the only gas is there. We need an engineer who's the most efficient Engineer that gets us the best rate of return and gets us the best value for the money that we invest. What we can do now we couldn't do 10 years ago is we can go online with all these online subscription, all these fancy software, scrape data out of all these non digital files. And now your petroleum engineer, your geologist, your acquisition team can do a macro comparison and say how is this area covering 250,000 acres? Compare and what does it look like and what's the economics? Now you have true data that gives you an actual financial model based on real substance. You didn't have that 10 years ago. So I can go into a field with a 99% success rate. I can then cherry pick the very best general contractor, the oil company is doing the best and based on rate of returns and then I can selectively choose the areas that I want to be in based on reserves and cash flow and go start working that market to find out who has minerals for sale in the very best position geologically and operator wise in the entire Oklahoma area. That's how we do it. Didn't have that 10 years ago. That's why mineral rights have really become a massive market. The last five or six years, we estimate it's about a half a trillion dollar market. Was not available six, seven years ago. Just wasn't.

I mean you mentioned tax benefits and you mentioned how, you know, especially with a lot of real estate investors, they love having that really tax protected income or like all those deductions right from taxes and that sort of thing. What's really available for investors in this type of investment?

I'll give it to you real simple. In 1986 they decided that when you drill a well, anything that wasn't tied to a tangible part of it, like a wellhead equipment, a cattle guard, fencing, anything that wasn't tangible, like labor and the drilling costs, you could deduct 100% of it. The equipment was then depreciated like a building or equipment over the next five or seven years. So there was huge tax write offs. And so that was a, it was a big thing under President Trump. He accelerated that by saying instead of trying to depreciate over five or six years, instead of taking the deductions over five years, I'm going to let you take 100% of what you put in oil and gas for drilling tax deductible the year it's invested, that expires this year. Next year it's only 80% and 60%. The Biden administration is trying to get rid of that altogether. They're trying to get rid of all tax write offs for the drilling because they don't believe that because of our success rate, we need those write offs. Now. Peter, I'm going to give you a little hint. And this is something I've been saying for years, and most investors don't get it. You'll have people contact you on oil and gas investing. I can get you a big tax deduction. That should be your first red flag. It should be a tax deferment because if I'm going to hit you successful well, it's going to generate 100% return on my money and make me a profit. If I'm going to give you a deduction, it means I'm going to lose your money. And it may be a play on words. So there are tax deductions in oil and gas, but if you know you're dealing with a successful company, it should be a tax deferment. And that's really what we do in real estate. We do that in oil and gas. We're simply taking today's money, letting the IRS rules help us compound and grow that. Which is why oil and gas is Also available for 1031 tax exchanges a like kind asset. So I look at oil and gas expiration from two standpoints. If I drill, I get a big tax deduction this year, but I'll recapture it over the next five or six years as I make a profit. The income I derive is 1099 income. But the IRS lets us get 15% of that income tax free because they know we're depleting the reserves. So that's great. I get 85% taxes, 15% I don't pay taxes on. If you manage it correctly, you can use tax deductions this year and to let you use the IRS's money to invest more money and compound your value. The tax free component lifts your yield year over year. And you can balance between drilling and buying something stable and reliable and low risk, like mineral rights, which is what our clients do. We'll do about $50 million this year in mineral acquisitions and we'll do about 5 to 15 million in drilling. And it's our clients who go, I made a lot of income, I need some write offs. I'll balance it. I'm trying to keep that income from the irs. And we use it as a management tool inside the industry, which is a very, very prudent way to work at owning mineral rights and owning only gas exploration wells.

You said something that interested me and I just Want to kind of hone in on that. You said it can be used as like a 1031 exchange. Now a lot of people, when I think of 1031, it's like for like type exchange to kind of push those taxes kick that can down the road. People are usually selling real estate and they're kind of 1031 exchanging to other types of real estate, like a multifamily apartment to another apartment building. Are you seeing that investors can take like a real estate or Multifamily and then 1030 want to exchange that into oil and mineral rights?

Absolutely. What has been on the books since the 1031 is that oil and gas producing oil and gas wells or mineral rights are the same qualification as a traditional piece of real estate, apartment complex, self storage, et cetera. The problem in the past has been that most 1031s were going into producing wells where you own the wells and those wells are declining, losing value. So you have this kind of de minimis return. And the idea of 1031 is to take your money, leverage it so the next investment grows, you can keep compounding value. So a lot of investors don't really like to roll out of a traditional real estate into owning interest in the wells because it's losing value as the wells are produced. But now that the mineral rights industry has become so liquid and so fundamentally sound and low risk. The difference is now that you can roll from a traditional real estate through a 1031 into mineral rights. Mineral rights hold their value, in fact go up in value like you would traditional real estate, because based on cash flow and the oil and gas reserves that are proven. So now all of a sudden we've seen this enormous flow of 1031 exchange from traditional real estate into mineral rights, where they're selling rent houses and apartment complexes and self storage, rolling it into mineral rights. Because they'll take today's high market value for real estate. They're buying a distressed oil and gas mineral rights today. They'll ride the mineral rights up over the next three years and go right back into traditional real estate in 2025 or 2026. So I've had a lot of wealthy clients over the years that just rolled in and out of oil and gas and traditional to balance that portfolio and take advantage of dips and highs within those markets.

Now to kind of dig in deeper with, with this whole tax situation, like you mentioned, this whole tax deferment you mentioned, you mentioned, all these kind of accelerate depreciation, these massive tax losses that you can get. Yes, like is this considered passive or income, you know, or active income? And can you actually use it to offset like your doctor day job?

Yes, you can. So under the, under the current tax law, if we have a successful, let's say a doctor engineer that makes a half a million or million dollars a year and they know they're going to be in that upper income tax bracket 37 to 40%. Well, they know what they owe in taxes. And the idea and the game is, how do I pay less taxes to use my money to make myself wealthier? If you were to invest, let's say you had a million dollars in income, you said, I need to reduce my tax because I'm going to owe 370,000. If you put $200,000 in domestic drilling with a 99% probability of success, I'm going to reduce my million dollars in W2 income down to 800,000. I just saved myself 60 to 80,000 dollars in taxes the minute I write the check. So if you're like me, Peter, you have quarterly tax estimates every quarter I invest, so my estimates lower. So I use my cash for myself. So it is 100% deductible. The year you make the investment, it reduces your W2 gross income by that amount, and that is 100% today, right now, the minute you write the check. That's why it's such a massively important thing, the high income earners.

I mean, it'll offset some of those cap gains as you have as well that are, that are sitting out there or.

Well, no, you're not going to cap gains because you need some capital losses, right? So this is true. This is true 100% income loss, right? So the way they treat it is that you have money, you've invested, you don't know if you're going to get a return or not. So they let you treat it as 100% deduction. Then what happens is you start getting your cash flow off your wells, which is usually about five months after you invest, you start getting revenue. We just did a five well program in December. Those wells are already online. It looks like 100% of those wells will pay out in less than 24 months. But my clients took 100% deduction last December. So I get 100% loss, I get 100% return on my money in 24 months. And I keep doing it every year, which allows me to build cash flow, build reserves using the IRS tax rules to do so while reducing my W2 income. It's a great, great tool. The biggest problem has been used to have 30, 40, 50% dry holes. Now we're hitting virtually 100% of the wells we drill. So I eliminated the potential of losing my money. Now I get to use the tax write off to create wealth and income. It's great.

Yeah. No, I think that's fascinating because I think physicians are always, always looking for ways to reduce their taxable income. And unfortunately, there aren't a lot of things that are available to us. It's just kind of the way where, you know, I know that when I talk to a lot of doctors, they feel like we're on the short end of stick, right? We hear about all these huge corporations, big CEOs, all this stuff that are just writing nothing right. In terms of taxes. I mean, they're smartly doing it right by using what's available to them. But I think as physicians, it just feels like there aren't many things to do. So this sounds fascinating.

Our three largest groups of clients that we have at our firm are engineers because they have no deductions. It's just all consulting fees, right? It's doctors and it's lawyers. 20% of our clients are lawyers. And so everybody's like, are you selling lawyers? Are you out of your mind having lawyers as clients? Why? Well, they'll sue you for anything. I said, no, they want the great guys. And the reason why it works is it's individuals with, with careers or occupations that generate a lot of cash. They don't need to buy any more equipment. They don't need to buy any more, you know, office furniture. So they're like, I get all this cash, how do I reduce that tax bracket? Well, oil and gas exploration domestically allows you to do that. So really, probably over 50% of our client base is made up of those three categories specifically for that reason.

I mean, why, if someone's like, you know, doing pretty well in real estate, they're pretty successful in terms of owning their own properties. Maybe they're doing a lot of these syndications and funds as passive stuff. Like, why even, you know, why should someone even consider kind of branching up into oil and mineral rises, something they may not have, like, a deep understanding of?

Well, I know that you and most of your followers are heavy, heavy traditional real estate investors, but let me, let me help you with this, because it's really. Tom, we've had record years last year. This year, we'll probably double next year this year for this reason. It is the most passive investment you'll ever have when you own a mineral, right? And the oil company comes in and leases your minerals. In that lease document, it says we're going to take on 100% of all cost expenses, liability, environmental and drilling. You, the mineral owner, are going to retain a royalty interest, meaning we're going to give you somewhere between 12 and a half, up to 25% of all future revenue with no shared expenses. So once I have my minerals and I buy them and an oil company drills well every single month when they sell the oil and gas, when they get their check in from the oil and gas buyer that buys the oil and gas from that well, they take the first 12 and a half to 25%, they set it in a royalty account. It's not subject to expenses, it's not subject to bankruptcy, it's not subject to claim or liens. It belongs to you and I, the mineral owner. So I get a check every single month regardless of what's going on in the market. And I don't have to ever worry about getting a bill. There's no management fees, there's no ongoing cost or capital. So it truly is 100% passive income. Our clients love that. In addition to that, what they like is because it's a title deeded piece of property they can transfer to their kids, they can give it without any obligation. So if I give a kid or grandkid a house now, they got rent, taxes and Sheetrock and stuff. There is some management to it. This is the most brainless investment because you, you could be in Cayman on a beach drinking a Mai Tai and your check shows up in your bank out every 30 days. And just as an example, we're averaging about 13.8% return on our mineral portfolio right now. And that's even at last year's distressed oil prices. So had we not had a distressed price last year, we'd probably be closer to 18, 19% per year with some of our portfolios doing well over 30%. This is not pitching Eckerd, by the way. I'm telling you, as an investor, I'm measuring that kind of return with complete passivity compared to my real estate portfolio, which has net operating income concerns, inflation rising, more expenses, fuel prices going up. I don't really care about that. I'll give you one example, Peter, you'll love this. So in February, when we had the big freeze, we have all, we've got 511 wells producing in Oklahoma. So big freeze occurs in Texas. The guys in West Texas pipelines freeze. They got to go to Oklahoma and Louisiana to buy gas to supply Dallas Houston, San Antonio, because they have to get gas to the customer. Well, it's a free market. So the buyers of the utility companies go buy gas. In OKLAHOMA we're getting $2 per thousand cubic feet, which is how you buy. So think $2 a gallon, $2 per thousand cubic feet. Normally in February they paid $75 per thousand cubic feet. In February they paid us 28 months worth of cash flow in a single month because they had to buy the gas to get all of us Texans freezing our buns off. Right? So, so the key is, is that you get the benefit of all these massive rises. You don't get hurt when the price goes down too bad because it's only down for 30 days. So from our standpoint, we get the benefit of additional drilling, aggressive oil and gas expiration when prices skyrocket. And we don't get hurt on the downside. Cause we get paid no matter what the cost of expenses are, we always get paid first. It's an unbelievably welcome passive investment. Remember, it wasn't like that five or six, seven years ago, the shale exploration. The US did one thing for private investors eliminated the key reason we didn't want to buy mineral spike. Seven years ago I didn't want to buy mineral knowing the wells were dry or had a 60% dry hole probability because then my mineral value was worthless. Because who wants to buy minerals in a dry hole? So now that we have such a high success ratio in areas that are so rich with oil and gas now I know I have future reserves. Future bay, the oil and gas minerals in West Texas. Those families have had minerals for 100 years. They were told the 1910s are going to be dry in seven years. They're still getting royalty checks 100 years later, four generations deep. The way it works now.

I have a question for you. So where do you think the market is going? I know that there is obviously a huge push for renewable energy. There's a lot of the rules, legislation that's coming out about cars needing to be energy efficient. I think California, they talked about them having to be all electric by a certain point or that's the goal. And everything's a shift towards renewable energy. So how is it going to affect your market, the mineral rights, oil and is this industry on the downslope you would say, or.

Because everything they're doing in this administration in the last four years, even under President Trump's administration is a promoting a non viable alternative to petroleum. The only way for wind and solar and the electric cars to Work. They got to buy electricity. Well, what generates electricity? Natural gas or petroleum or coal. Right, Fossil fuels. So you want every car to turn over to something of which you're trying to get rid of and you can't supply today because there's blackouts. In California, we froze to death in February. So you're saying I want every car to go to a source that we cannot supply. But more importantly is this. We already are in less than 18 months back to pre Covid shutdown consumption of oil in this country in less than 18 months. We're now back to 20.2 million barrels. But unfortunately, because our wells are not being supported by additional drilling, we dropped 22% in supply. We now have a president two weeks ago begging Saudi Arabia and Russia to increase the valve because we're running out of oil. Because guess what, I'm paying 375 or $4 for unleaded gas in Texas. I don't know what you guys are paying in the West coast, east coast, but it's higher. So what's happening is in order for alternative fuel or energy to work, this administration and the green deal must, must do whatever they can by restriction and regulation drive oil to $125 a barrel. So now the consumer says, do I want to have a combustion car and electric car? Well, if we're at $60 oil, it's a much cheaper car. And people are selfish to do what's best for their own interest. It's my belief they're going to drive oil to $125 a barrel or higher, natural gas to $6 per cubic feet or higher. Because now across the board, alternative energies make sense. So you and I need to buy minerals today because we can make a ton of money at $60 oil. But at $150 oil, we're going to need an armed guard to get our checks to. The bank is going to get robbed on the way.

With all this stuff that's going on right now in the Middle East. I'm sure there's a lot of turmoil over there right now. It's really unstable, obviously in terms of government and things like that. Does that impact what's going on here in terms of your world as well?

Yeah, the one thing that happened 20 years ago when I got in the industry that if you had any kind of conflict in the Middle east, it would drive oil up 10 to 20%. If there was a happen in the Persian Gulf or some kind of conflict. We've been missing that the last decade. We haven't had that geopolitical impact. And so we've kind of been in this mundane trading range where geopolitical just doesn't happen. The difference now today though is that for the last 10 years, we went from 3.8 million barrels a day in 2008 in US production, even though we were consuming 17 million barrels. Last year before we shut in, we were at 13 million barrels a day. We were about to become energy independent. So we didn't really care about geolocal pressure. It didn't put so much because we had the capacity here to fulfill our own needs. But now it's different. Now we're going backwards. Now we're down to 11 million barrels a day. We're dropping back down to 10 million barrels a day. There's no new drilling, very little drilling, no capital. Nobody wants to invest in fossil fuels. It's not socially popular. So what we're seeing is a rise in demand, drop in supply. Now you have something like Afghanistan, you have something like what's going on across the Middle east and all this movement in China. The geopolitical pressure easily could push oil over $150 a barrel. So my own prediction is this year we close out at 75 to $80 a barrel. By December 2022, we should be between 85 and $95 a barrel. And it's my prediction by the end of 2024, I think we're gonna see possibly a new record for crude oil over $145 a barrel. It is that bad. Now, since you're traditionally in real estate and your listeners have a lot of traditional real estate, how does rising fuel prices affect you? How does it affect inflation in the Fed's funds and borrowing? How does it affect the lawnmower, lawn mowing landscape? Guys, gotta buy more gas for your employees, get into work. It's gonna shrink your noi, it's gonna cause higher interest rate which is gonna squeeze your cost of capital and replacement cost and your cap rates and energy is going to boom. Traditional real estate is going to take it on the chin. And here's the question. So you asked, why do most high net worth investors who are in traditional real estate want to be in oil and gas? Because if I can balance it with a little percentage of my portfolio in energy, I'm taking advantage of an increase in oil and gas portfolio against the offset of a possible decrease in both my stock portfolio and my real estate. Really, really smart, deep pocketed investors have learned to balance that a having a toe in both. Both pools of water.

Yeah, it's something that you did touch upon and I'd like to touch upon it here as well. The whole, you said socially conscious kind of kind of movement right now to stay away from fossil fuels. And I guess there's obviously a financial component to that, but then there's like the ethical, moral component to that as well, like being in that industry. How do you feel about that, that whole movement and kind of what's going on? How do you justify kind of some of these investments and things like that and where it's moving?

Well, if you take a look at it, I look at your screen, I look at my screen. Everything behind you is made from a barrel of oil. The computer on it's made from barrel, your shirt is made from barrel oil. The phone you're on is made from a barrel oil. So the truth is it's not about whether or not it is a climate control problem. It's about trying to find alternatives. So here's what I think should happen in the next 30 years, and it's going to happen. All the electric cars, all the alternative energy, the growth in total energy consumption, the majority, the new growth will come from these alternative energy, which it should. But oil and gas is here to stay and it'll continue to be here because everything else runs off of the processed barrel of oil. What you and I should be thinking about is how do we get four people in the car going downtown instead of one person? How do we get mass transit? How do we encourage a proper disposal at the, at the trash compactors and stuff? How do we encourage, you know, what we could have done instead of promoting electric cars, we should have done is said, I'm going to give you a tax credit if you'll have a conversion on your car to burn natural gas, which is so cheap and so efficient and so clean and every car could have been converted. And we now have. We have more natural gas in this country that'll last us 300 years. We didn't do that. We said, let's go to electric car, which now is going to take off our electric grid, which we do not have enough of. And it's going to cost coal and oil and gas to fill that electric grid, which is not going to work. So the solution is there. The problem is that doesn't fit the agenda of those who want the only gas industry to go by the, by the wayside. Now let me add this little component. Every time they add a directive about getting away from fossil fuels and they start talking about pulling back capital or they want to add additional surcharge to a gallon of gasoline. It's just going to cause the price oil to go higher and higher. So it's almost like the middle to lower class is going to pay an enormous hidden tax on in fuel cost at the expense of some lofty green deal. That really is not practical at all. It's not fair to the consumer. But that's what's happening now.

Let's say people are listening to this and they're like, I want to get into it again, I don't know where to start. And they're trying to explore things online about this. I mean, obviously you run a company, so that helps people do this. But how do people go about doing the proper due diligence to make sure that they're making a good investment in this? It's a loaded question, but kind of at the basic level, what are the questions they need to ask and what do they need to look into to make sure they're partnering with the right people?

First and foremost, not a single investor who has less than $1 million of investable capital should ever invest directly in oil and gas. Basically ever. You don't have enough money, you're not qualified. I don't care if you say, well, I've got nine or you're not qualified. That's the first and foremost thing. The second thing you must remember, the oil and gas industry is like swimming in a pond with alligators in southern Florida. Nine out of ten of those ripples in the water are not just the wind blowing, it's a hidden alligator. Because it's a very difficult business to understand because it's kind of unique. It's like learning a different language. So you're going to get skinned alive because they smell you as being a rookie in the industry. The first and foremost thing, Peter, is that people need to learn to use that search engine. So if somebody is interested in oil and gas, start searching. How do I invest one on one in minerals or in drilling? The first 10 are ads. Who runs those ads? Crooks, liars, cheats and thieves. Because they know they're going to go rip them off. So they got to be on the front. What I really want is information from the Energy Information Agency, the iea. I want to learn about stuff from routers. I want to learn stuff from Bloomberg. I want to learn stuff from periodicals that are professionals in the industry. And the other thing that's really interesting, because of public disclosure, every oil company that's publicly traded has enormous reports and periodicals about the reserves and their drilling and the success rate and the economics and the rate of return. If you just pull up Continental Resources or Eventive or Exxon or Chevron, it tells you all about these shell plays. So you get a really, really deep understanding of the industry as a whole. And then when you come down to a specific use, let's just say hypothetically, somebody said, I want to talk to Troy and Eckert. You go to my site and I've got probably 100 videos, minerals 101, how to invest, tax write offs, what to do, due diligence. And I do that for a reason. My main goal is to run off the 99% of the people who are not qualified should never invest. And the remaining 1% must have a platform to learn and be educated. So you know what to ask, how to ask whether you want to be an upstream midstream drilling or you got to know what you want. And it's my job as an industry expert to inform you. So you can decide do I want to be in that space and if I do, which part of that space. And the final question is with who? That's really how the order goes.

I mean all this has been really fascinating. I mean this has been a crash course. I think it's mineral rights 101 here.

Welcome. Welcome to Caffeineville.

Yeah, I mean I'm definitely going to have some follow up questions down the line. This has been a lot to digest, but it's been actually really informative. I think it's fascinating to see how all these industries are out there working and you have no idea. Right. And there are ways to participate in these type of things. Create cash flow in a tax protected Isaiah tax deferred manner. Yeah. And this may be a great vehicle for people looking for alternate sources of income. And so I'm just curious, where can people find out more about you and your company and learn about this?

Yeah, the main thing to do is go to our website which is eckerdenterprises.com you can always call our 800 number, 527-8895 and ask for one of our wealth managers. We don't have brokers, we don't have sales and we have wealth managers that help our clients move in and out of self directed IRAs in and out of ten 31s. I take, I've been, I'm 57 years old, Peter. I've been doing this for 36 years and I take the approaches as follows. We're actually helping people manage their portfolios in a way that helps them grow it for their family and their heirs. Energy is our expertise. We give you advice on other things, but we really stick to what we know. And the main thing for us is that if we're not accretive, we can't help you improve your portfolio, improve your strategy. We're really obstructive to that. So we'll talk to you, we'll help you. If you got yourself in a jam and another oil and gas venture, you can't get answers, you call me. I love being a detective. I love forensic files. You tell me you're in a deal, it doesn't work out, call me. I'll help you figure out whether you've been hammered or not. I'll help you get your money back recovered. I, I love that kind of stuff. The positive note is today where I would leave your audience is look, we've got about a 24 month window where oil and gas price are still have a sign at the door says half price sale going out of business. Because we literally as an industry were going out of business last year because of the big Saudi Arabia, Russia. Today is the day to get serious about it. Because if you expect to have a rollover transition in real estate values or the stock market and oil and gas is poised to grow, whether I'm right or wrong and to what extent that may be, it may be time to look and see if maybe a portion of your portfolio fits in. Mineral rights, no exposure and passive cash flow. And if it doesn't, at least you're more smart about it. Maybe you'll buy some stocks, it'll help offset your stock portfolio. But it's in energy. Maybe that's something that's you ought to think about. All right.

All has been fascinating. I appreciate your time and your expertise. Definitely want to learn more. This has been fun. Let's do it again soon.

Sounds good, Peter. You have a great weekend, my friend. Take care of yourself.

All right. Thanks Troy. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Are you part of our community yet? Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. You can join us on our Facebook group Passive Income Docs and you can always learn more at our website, Passive Income incomemd. Com. Thanks again for allowing me to be a part of your journey. See you next time.