Everything Jonathan Farber said on any show that made the record, most notable first. Each card names its show and opens the statement there.
Farber: Early one-off horizontal drilling boosted short-term output but damaged ultimate recoveries
“One of the ways that a lot of our peers adopted was when horizontal drilling was quite early, before we had really refined the well design and the fracking methodology, people went and drilled a lot of one-off horizontals in virgin acreage on drilling units th…”
Farber: Private equity investors irrationally sell 3x to 5x winners too early
“There's an anchoring effect in private equity, like in every area of investing, that is not rational. It's a very real and tangible thing. In our business, That's manifested by people looking at a three bagger or five bagger and saying, well, that's a great de…”
Farber: CrownRock exit driven by completion tech reaching theoretical maximums
“There's only so much resource that you're ultimately going to recover, and we just felt like we were getting closer to the sort of maximum economic recovery point, and that, that changed the risk calculus. You had this big asset, you had market risk in retaini…”
Farber: Exxon's Pioneer deal removed two of CrownRock's best potential buyers
“The flip side of that was the business had been so successful that we got to a size that very few companies could afford to bid in that process. And the deal that John was talking about with Exxon taking out Pioneer, that took two of our best buyers off the ta…”
Farber: Current lower ROI energy environment offers peak risk-adjusted attractiveness
“I think we're very driven by conditions in the industry today, and ironically, that is probably creating an overall lower ROI scenario, but one which on a risk-adjusted basis, we think is among the most attractive periods of investing that we've seen.”
Farber: Wolfberry was historically a promoter's paradise that produced oil without payout
“For many years, this was known as a promoter's paradise because you could drill a well in the Wolfberry and you always produced oil. It just typically didn't pay out.”
Farber: Lime Rock avoids aggressive debt, relying on heavy hedging
“And I think one of the calling cards of Lime Rock as an investment organization is we're reluctant to use aggressive leverage structures. We used leverage less aggressively, and when we did have leverage, we used hedging aggressively to ensure that we had the …”
Farber: Horizontal wells drove CrownRock's value, enabled by vertical drilling
“If you just look at the absolute breakdown of value creation in terms of vertical wells versus horizontal wells, Almost all the value creation ultimately resulted from the horizontal wells. We wouldn't have had the land to drill those wells on unless we held t…”
Farber: Lime Rock funded CrownRock land buys by selling packages to MLPs
“We sold a number of packages early on in the investment to MLPs, to these production-based partnerships that were public trading at good values, and we were able to lock in a lot of capital to cycle into land over time, and that's how we kept the initial inves…”
Capital Allocators 1