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You've now found your dysfunctional life coach, the Investor Formerly known as Prominent Businessman Chuck Yates. What's not to learn from the self-proclaimed Galactic Viceroy, who was publicly canned from a prominent private equity firm, has had enough therapy to quote Brene Brown chapter and verse and spends most days embarrassing himself on Energy Finance Twitter as @Nimblephatty. Chuck's diverse and entertaining guests do agree on one thing - Chuck Yates Needs a Job.
I, I, I, I, I, I, I, I. Pick up my arms of cane. Now we think I can see. So we started
Chuck Yates:Hey, everybody. Welcome to Chuck Yates Needs A Job. This is what I'm gonna call the intro to the Brian Sheffield Chronicles. As many of y'all know, I got to go to Australia. Brian's put together a big play in the Beetaloo Basin.
Chuck Yates:We've had some content on it. We had Alex Underwood on to talk about the Beetaloob Basin. We're gonna show more of this content. But I thought what I'd do right now is we put some clips together, and we've just kind of thrown them out on X and LinkedIn, and people have really liked them. So I'm gonna put them all together here, and you'll start getting a sense for Brian, what he's all about, what he's been doing in Australia.
Chuck Yates:And then over the next coming weeks, we're gonna put together more in the way of content there. Brian had a fascinating dinner with a fellow named Ben, who's a traditional owner in Australia who wants to build an oilfield service company. And so watching him and Brian talk about how this guy can build the company and make money off Brian was one of the most fascinating things I thought about the, the trip. So we're editing that, podcast, and we'll get that out in a week or 2. But anyway, I thought you'd enjoy all these clips, and this is kinda warming you up for more from Brian.
Speaker 3:Nice. Creamy. There we go.
Chuck Yates:Look at that. We got a pair.
Speaker 3:Oh, yeah, buddy. Yeah, buddy. That's big. Probably be here. Hang on.
Speaker 1:Hang on. Hang on.
Speaker 3:What's going on? I heard
Chuck Yates:the wildest rumor. Yeah. I heard big Texas oil man, Brian Sheffield, came here and tried to buy this place.
Speaker 3:I don't know about that. I And you don't get the wrong spot. Ain't got enough money. Alright. US.
Speaker 4:We didn't have any depth control. We didn't know whether these wells here would come in at 2,000 meters deep or 24, 25100. There would be at least several 100 meters of uncertainty on depth. We didn't know what units we would see here. This was before we had enough penetrations to say, hey.
Speaker 4:We've got incredible regional continuity on some of these units. When we drilled this well, I was thinking that we'd be using the seashell as the landing zone. We literally had 24 hours with the logs while we were drilling the well to make a decision where we would land the well, and we pulled a last minute change to land the well in the b shell rather than the seashell, because the sea shell looked better at Clallas 1 than the b shell did.
Speaker 3:And by the way, just for America
Speaker 4:Oh, yeah. So a shell is the deepest unit here, then we've got what we call the lower b. Think sort of like Utica analog, then we got the b shell, which is the main target that we're looking at here as we're going up, and the c shell is the shallowest one.
Speaker 3:In the Permian, we go a, b, c, d. Yeah. The other way from top.
Speaker 4:A geologist did this, so we started from deepest.
Speaker 1:Oh, god.
Chuck Yates:That damn geologist. You literally, in 24 hours, chose the target. Yep. That's crazy.
Speaker 4:So rushed petrophysics on it and then chose the b shell. After stage 7, we go to run our our next plug and we get caught early, but there was enough pressure behind the plug to dislodge it. We had to blank off a whole section of the wellbore, finish placing the rest of the stages, went to mill out. We could never get past the casing deformation. We cleaned up the well.
Speaker 4:I remember like I was here, we're waiting for the well to kick on. We're losing our wellhead pressure. You have no idea whether you're gonna see gas or or not. We didn't even know what the formation pressure would have been at this point in time. We had woke up, and you could see this big glow of the flare because the camp would just be down right around this way.
Speaker 4:So you could see the flare from the camp.
Speaker 1:How excited were you guys? Oh, yeah.
Speaker 4:It was like one of the, like, next to kids being born. It was no. It was honestly, like, you worked 3 years for this. In the Montney, you're drilling a well every second day. Here, it's like 3 years to get a single well.
Speaker 4:And that's when the moratorium came in place just before the election. We literally got notices right after the election saying you guys gotta stop.
Speaker 3:Oh, you knew?
Speaker 4:We risked the capital because we knew before we fracked the well. And we knew labor was gonna win. We knew that they were gonna put a moratorium in place.
Speaker 3:Y'all risk the capital because y'all figured
Speaker 4:We risked the capital Oh my because we didn't think we could win a battle without commercial proof of concept that there was actually something here.
Speaker 1:Yeah.
Speaker 4:We didn't think we could win win a fight.
Speaker 3:I'm glad that wasn't my money.
Speaker 4:No. You you came in after
Speaker 3:Came in after. I got a You you came in at the right
Speaker 4:you came at the right time. Like, the one thing that wildcatting is expensive especially in Australia and it takes a lot of money to actually work up a play to a point where you can actually do something with it. We originally thought that a Munji was going to be borderline oil. It came dry gas Shows you how far off our early early, like, basin model was.
Speaker 3:Ted Collins is the savvy billionaire. He passed away a couple years ago, but he used to be CEO of a public company, and I forgot the history on that, but he always talked about how he's the only engineer that turned into a land man. Some people call him 2% Ted, and some people call him 10% Ted. Some people call him 20% Ted. I don't know which one's right.
Speaker 3:I just knew he had 2 to 20% on almost every single freaking wellbore across the United States because he willed and deal. And then Patron Club, Houston Patron Club, he knew every single public CEO. I mean, this guy is a gamer. I didn't really didn't know much about him. I knew I was getting into Spraberry and contract operating my grandfather as well well.
Speaker 3:So Paul Treadwell, and we had no production. We're just a contract operator collecting Copas overhead, and we're gonna just pick up a couple of bread crumbs in the Spraberry. You know, when wells go down, the operator plugs are not watching their their leases. So a 160 acre lease opened up in Upton County. We're gonna go lease it.
Speaker 3:We're gonna drill deeper and drill a Wolfberry multistage frac, Spraberry plus the Wolfcamp, the Wolfberry play. So I got 75% at least. There's 1 mineral that's 75%. Then there's this 25% guy, I think it was Lecluse, his last name out of Fort Worth, on the edge of Fort Worth. And I was talking on the phone, like, once a week.
Speaker 3:I had to be patient. And you gotta remember I'm only, like, 31, so my negotiating skills aren't, you know, I haven't I haven't been around the block. And finally, I sent him over my lease, and he redlines it through his lawyer, and it takes like 9 months. So I'm I'm about to get this in a contract with my grandfather as well, working on some other leases. But this is the first time I'm about to get a 100% of lease and then I can go promote it and go raise money to investors because that means I can draw the lease.
Speaker 3:We're about to sign the lease and then the guy says, you know what? I wanna send this lease to a friend in Midland that is a good friend of mine, and I just wanna make sure I feel good about this lease. So okay. What's his name? He said, Ted Collins says, oh, I'm I went to you with Ted Collins, like, 6 to 12 months ago.
Speaker 3:He'll probably say this is the most fairest lease ever. The next day, Ted Collins calls me and he say, I got this lease here. This is a good friend of mine that I've known from 30 years ago or whatever it was. Say, Brian, just thought you should know I'm taking this lease. And I'm like, what?
Speaker 3:I thought you were gonna look at the lease and bless it so I can take the lease and now I got a 100% blocked. And it's like, no. No. I like this lease. I wanna take this lease.
Speaker 3:I'm just steaming inside. And then I called Ted the next day and I was like, Ted, I've been thinking about what you told me yesterday and I am not freaking happy. I am not happy what you've done. I've worked for 9 months to try to lease this guy. And you just come and take the lease, and I kinda I don't know if there were some f bombs or anything like that.
Speaker 3:And then then he's like, Brian, this is the how the business is done. You got 75%. I'm gonna get the 25%. I'm gonna sign the JOA, and this is how it's done. Told me how, the leasing place done in the Spraberry.
Speaker 3:I was, like, so hot, and I came down. He ended up calling me 3 days later. He's like, Brian, I've been thinking a lot about this. It's just not worth it. I I know you're upset.
Speaker 3:Just take the lease. And I said, no. I'm steamed down. I'm good. If as long as you sign my j o a, we're good.
Speaker 3:Don't worry about it. I sent my j o a. He signed it in one day, didn't even redline it, and then he sent it back to me. That's what you call a cool partner, a very good partner. And so I had Ted and a lot of my wells after that, but I learned a lot on that one.
Speaker 3:What I learned is oil and gas is very competitive. You gotta get the lease in the door. If you don't get the lease in the door, it's fair game. There's no, like, honor roll that, oh, you've been working this deal. That's not how it works.
Speaker 3:I was thinking about my first oil well. Well, Parsley Energy and I. Paul Treadwell and I were the only 2 employees when we drilled the DuSec number 1. It was a Wolfberry well in the middle of the Midland Basin. It's right off 349 on the border of Upton County and Midland County.
Speaker 3:Following our contract operating my grandfather's wells about a 110 stripper sprayberry wells on average about 3 barrels a day. Right when we started a contract operating the financial crisis hit, so we had no debt. We had not sold equity. We kinda just watch it from the sidelines. This track, this do set track, Carlos do set actually a good friend.
Speaker 3:He became a good friend over time after we drilled on him. Him and his family live out there, and that's why we call it the do set. You could see, 320 Acres slot that was surrounded by vertical wells, spray very wells all over the spray berry. For some reason, this 320 Acre track was never drilled. It just sat there.
Speaker 3:And I saw, I saw a name on there because you can see a name if someone leases it. It said Charlie Quia. And I I told Paul and I had a land broker. I think his name was Ryan Roberts. I said, I know Charlie Quia.
Speaker 3:I I I used to play tennis with him, in junior when I was in junior high and high school. And he, I'm I'm gonna call him up and just cold call him and just call him up and see. Hopefully, he remembers me. I mean, I went to SMU 4 years and traveled the world and all that and moved to Chicago and Spain, and I'm 28, 29 years old. And I'm gonna call him up and see if he remembers me.
Speaker 3:And I called him up and say, hey. I got Charlie, it's Brian and you remember me from the tennis days, and he remembered everything about me. You remember and I was like, you know, I've just moved to Midland. I'm not operating, and I'm a contract operator, but I wanna wanna drill my own own wells. And I I noticed that you have a lease that's about 10 miles away from my grandfather's old spray very well, and I have a pumper in the area.
Speaker 3:And if I drill the wells, I could just fold it in to our operation of the wells. And, tell me about this track that you have leased, and he he end up talking to me. I couldn't believe that he was actually talking to me. I mean, like, a 29 year old with no track record. Why would he wanna flip to me?
Speaker 3:And he he starts telling me he's got this is the 2nd time he's leased it up, I remember. 2nd or 3rd where he's leased up 70% of the the mineral owners. And there's a real fragmented tract. And 20 to 30 of the minerals, you have to get it all leased up and it's a big pain in the ass to get them all leased up within the 3 year term. 1 year has already gone by or maybe a year and a half and you say I can't get the Von ConocoPhillips to farm out to him.
Speaker 3:And that would be the 100% block. And, I remember, like, Ryan Roberts knew the ConocoPhillips land manager or something like that. And he end up having a beer with him at Nate. And that guy that guy agreed to, like, a 6 month term assignment. And Ryan's, I got you something.
Speaker 3:I got you a 6 year term 6 month term assignment. That's the only thing I'm gonna do. I was like, done. Do it. Like, no operator would ever do something like that ever.
Speaker 3:And we ended up getting getting it done. It takes another 6 months to get it. And so now we're under a year on the the mineral owners on their leases. And by the time we get ConocoPhillips, I have 1 year to put together. I think we drove 4 wells in there.
Speaker 3:We drove 2 other wells. My first six 6 well package, and I have 1 year to go sell it to investors. And as for, like, a 10 to 12% upfront carry for mow on each well and work and the investors will earn the offset prove undeveloped, and we'll drill those heads up when we down space. It's pretty wild how I raised the money on the fly. I went back to some of my grandfather's old investors that they drilled spray was with them in the seventies eighties.
Speaker 3:Most of them have passed somewhere in the eighties. They weren't interested. They were collecting the dividends. So I got a lot of those the first few months. Talked to this Abilene family that used to invest with my grandfather.
Speaker 3:The the sons I met the sons. We went out to their their office at, cattle ranch outside of Abilene. They turned me down. This lovely cattle family turned me down. They all just wanted to continue collecting dividends and they didn't want to drill because that took significant dollars.
Speaker 3:But I end up getting a couple traders out of Chicago and a Houston family 30 or 40% of the let's see. 6 wells $12,000,000 program or and then it's like less than that because Wolfberry Wells around one and a half at the time. And then a lot of guys in Midland heard that I put together a package right in the middle of the fairway, a Wolfberry package. And, yes, I was promoting somewhat, but the economics work where it's like a 40% wellhead return. And then you also earn your your puds heads up, which will drive the returns even more when you down space and drill the wells.
Speaker 3:And there's a whole like UT mafia group in Midland. I could name all their names and they they all like 1 guy said came in and say I wanna take a piece of that package and one one of them took it. All these other guys took 5%, 5%, then that was subscribed, finally over, like, 6 months. And so we had about 6 months to drill the well. The first well of the 6 well package is do sec number 1 was the first well.
Speaker 3:And I had commitment signed with investors in the joint operating agreement, but I met with the rig operator, Jackie Matthews, to contract this rig. And I met with him at this Mexican food restaurant called Reina's. I think it's called Reina's. And, man, it was like this deep dive Mexican food restaurant across the bridge on the other side of the interstate. And I couldn't believe it.
Speaker 3:He brought he brought, Mike Locker who who owned half his rig company and the mud business, Buckeye. And they came in and met with me and I couldn't believe that they were gonna willing to sign a contract with me when I basically wasn't sure if my investors would send the money when I AFE them. And I was taking a lot of risk and the rig operator didn't ask me anything, any questions about my financials. I guess he thought it was some rich oil boy that inherited money or something like that, which I didn't nothing from my grandfather and my father. And, we ended up signing a contract within about a week, and I had to go buy the pipe from textile, and they floated the pipe for me because I still didn't have the money until I a feed my investors.
Speaker 3:I actually whatever dollars I had, I already built the location with my own money. And so I really took a lot of risk and, yes, I had a lot of working interest owners in my first program like 20 or 30. And I felt good enough where if, 1 or 2 didn't send the money, I could probably call someone else on that list to take up the slack. So that's kind of the part where I felt I could sleep at night. But you just never know the first well of the investors are gonna send the money.
Speaker 3:And sure enough, I a f e, I cash called everyone for the full amount. And within 2 weeks, I had every single partner send their money to pay for the well, and that was kind of like when you looked at the bank account, you felt relieved. And that was all about drilling the well. We drilled the well, did a turnkey deal with Matlock. I think it was in, like, 20 days or something, which isn't that good, the first well.
Speaker 3:But it's the first well they drilled in the area going deeper through the Wolfcamp. We used BJ Services to frac the well. I told BJ, just do whatever Jim Henry's doing. And I hired a engineer named Nick to to perforate and design the frac, but also BJ was very instrumental of whatever you're doing over for Jim Henry, I wanted to do the same thing. And we ran 5 and a half inch casing.
Speaker 3:I think Pioneer was still running 4 and a half inch casing. So that that gives you, a wider diameter to get up to a 100 barrels per minute on the frat. And I promised investors 8080 barrel day well. 60 to 80 barrel day well. And I was kind of going off to Spraberry EURs and IPs initial production.
Speaker 3:And the well came in like 100 20 barrels. Paul Treadwell was out there when the well came on came in. He called me, and I remember I was in the grocery store. And I was like, he calls me at stop. And I swear to god, I did the pee wee Herman dance in the the, in the middle of the aisle in Albertsons right off Garfield across from across from the mall Caddy Quark from the mall when Albertsons was still there.
Speaker 3:And when you tell investors that you're gonna make a 70, 80 barrel day well, and then it comes in 120, that just sets off a huge track record in the phone ever since. The phone just all that my investors wanted more. They had cousins. They had friends. And my my rolodex went from 20 people to a 100 people.
Speaker 3:And that's how Parsley Energy kinda started. Through those carry work, and it's just running about a 100 wells. I call them the promotion wells. And as I sold sold leases and retained interest, my cash flow started to pick up. And like instead of selling a 100% of the lease and getting the carry 10, 12% or whatever it was, I started to sell 80% of the lease like midway, you know, 2 years later and I'd sell only 50% at least and I outgrew my investors.
Speaker 3:But all my investors got their own non op working interest. They got their own title. They got to do what they wanted to do with their own working interest. It wasn't through an entity. And that was the key.
Speaker 3:And most of the investors, that's how they liked it because they can go sell their interest when anytime they want. They can project their own budget. They can go nonconsent. Consent. They don't have to drill future wells.
Speaker 3:So they get I had kinda shifted a lot of the controls to them once they earn through the program. So that was, I look back and that was one of the most successful and beneficial days that I've, can always remember starting out Parsley Energy. It was amazing time. Chuck was texting me about something else, and I told him about I just found out my good friend, Audrey Steven, just passed about an hour and a half ago. I saw the news release, and I got really sad.
Speaker 3:Very, very sad because he was, like, kind of a role model competitor, but also a mentor when I grew parsley from day 1. Obviously, I have my grandfather and my father. But Audrey ended up becoming a big mentor of mine because he was actually in Midland while I was growing parsley, so he was the easy one to grab lunch with. And he's an amazing, amazing oil man. He is the guy is worth tens of 1,000,000,000 of dollars, and he still flew Southwest to Dallas.
Speaker 3:And he always had, like, a 30 year old car. It's all about his company. He was a guy at 70 years old, was still picking purse in the wellbores. I think he saw picking purse in the wellbores around 70, 75, I heard. But every time a log would come in, he would pick the purse for the Wolfberry, Spraberry at first, and add him to Wolfcamp.
Speaker 3:And I know he picked the purse and was he would help implement the frac design and frac job on the wells. He, also owns, like, every damn service company you can you can think of. Frac companies, wire line, pulling units, pipe yards, pipe distribution. He I think he even had his own marketing company for his own oil, which is crazy because it's everything that I learned was focus on EMP, focus on downhole, and that's it. So it's just a different mentality, but he did believe in he did come from the hard times of the Spraberry field, increase your margins, and I believe that's where it came from is by rolling up service companies to increase his margins because it was very tight in the nineties, eighties nineties when he's growing this company.
Speaker 3:Chuck let me tell a couple of stories. I told him I'm too sad to do it, but I figured I might as well try it. And he likes some reason he likes, windshield time. So I thought of one story.
Speaker 1:The
Speaker 3:first the first story where Audrey and I became friends, he I ended up recruiting one of his best geologists. His name was Randy Brown. He was a well known geologist in town. Little wild and crazy, Randy. Had a big heart, but he knew more about that Spraberry field in the Wolfcamp than any other geologist in the entire Spraberry field.
Speaker 3:Because he just worked it with Audrey since he was in his young twenties. And, I think he ended up breaking through the Wolfcamp, was the first one to drill Wolfcamp wells with Earl Minky. And those 2 guys don't get enough they don't get enough attention on that, on the breakthrough. I think Jim Henry gets most of the credit, which he did. He's the one that put it put first one to put significant capital in the wolf Wolf Terry Wells.
Speaker 3:But Earl Mick and Randy Brown were the first one to drill some Wolfcamp wells, I think, in the nineties through Arco. But, anyways, I I recruited him. I'm basically poaching him from Audrey. I did not know Audrey well, and, he's coming over. Took me a little while to get Randy to come over.
Speaker 3:And, one of the the executives, Joel Costello, called me and said, Brian, I was just pretty upset about Randy Brown leaving, and, you should at least call him. And, I got off the phone, and I realized I did not wanna call Audrey Stevens. And I knew I had to, and it felt it felt like I was being put in, the hard chair when you're a kid in detention. You know? And so I just picked up the phone and called them in my I remember my armpits was just sweating.
Speaker 3:I was just sweating sweating, just dripping sweat. And he picked up the phone. Sir, this is Brian Sheffield. And he was said hello, and and I said, I'm I was calling you to tell you I did I should've called you first about recruiting Randy Brown, and I apologize. I I didn't do it the right way.
Speaker 3:And he comes back he comes back and says, Brian, let's go have lunch. And he was like eating at these greasy, greasy Mexican food restaurants across the tracks in Midland. We went to lunch within an hour, and we ended up becoming great friends. And Randy Brown ends up not coming on board. He reneged on me and stayed with Audrey.
Speaker 3:And ever since, we had quarterly lunches. And we compared the the spray berry field and service costs and talked about oil prices, and I gained more knowledge out of Audrey and the it's as I became an oil man that you could ever imagine, learning just little details of him talking. And he doesn't talk too much. So when he does talk, you always kinda wanna listen. He's that kind of the introvert engineer type.
Speaker 3:Another story, he, I was thinking about, this track, the Cox number 1 in Martin County. And I think we ended up buying, like, 30 or 30% working interest, and he had the other 70% of leasehold. And he actually had operation right in the JOA. And so I approached him. This is a track in the middle of Martin County, kind of in the center to the west a little bit.
Speaker 3:Close right touches that old Knox Ranch. That's right on the outside, more towards the center. And it's a 160 acre track, and I went to him and I think we wrote a letter, and I went to him for him farming out the 70%. I remember Mike Mike Henson might had to be land. He's like, he'll never do that.
Speaker 3:He's he he doesn't farm out to anyone. He wants to own every spray berry acre. And we end up getting the deal, like, $700 an acre just before the wolf the horizontal play broke up. And he he end up saying yes to the deal. And I came back to my guys and I said, guys, we got the deal.
Speaker 3:And they couldn't believe it. And I was like, see, Audrey and I are friends. We we he likes me. We're friends. We could probably get some more deals from him.
Speaker 3:So we drilled the Cox number 1 and number 2 well on that track, and it was the worst spray berry well that you could ever imagine. I think it came in, like, 9 barrels a day, and we projected to come in around 70 barrels a day. And I went back to Audrey, and I said, Audrey, you were in that track you farmed you farmed to me? Well, it made 9 barrels a day. And I said, you knew that track was gonna be dog a dog shit.
Speaker 3:You know, he just had this little slight grin, this tiny grin. Not enough to be cocky or anything. You could see on the side of his mouth, and I just shook my head, and I kinda just laughed. And I think I told the same story in, on the video of one of his awards in Midland. Everyone in Midland was laughing, and he just knew what it tells me.
Speaker 3:Well, I said the dinosaurs didn't die right there in the middle of the Spraberry, but he knew and he knows every little inch, every little inch of the spray berry field. And he knows where the dips are and where where is this the spray berry oil and where there's not. His, his pipe yard is by far the biggest pipe yard you can ever imagine. Probably bigger than the Exxon pipe yard, bigger than the conical Phillips pipe yard. He built the biggest pipe yard, I mean, probably in the world.
Speaker 3:Bigger than distribution pipe distributors. You gotta go see it. If you're in Midland, Texas, you gotta drive by and see it. That kind of always is the shining star in in Endeavor's office right there. You pass Endeavor's office and then the pipe yards down the right.
Speaker 3:I forgot what highway in its office. It's right off of some Whataburger out there. Now I'd always drive by his pipe. I always wanna make sure if we're going out in the field, I'd always wanna drive by that pipe yard, and I just always wanted to look at it because you can't see the end. It keeps on running down to the other highway.
Speaker 3:No. Audrey's Audrey was a good man, and, it's a sad day today. And he surrounded himself with good people that built that company. And now Diamondback's gonna, merge with them, and it's gonna be one of the best biggest powerhouse independence United States for many, many years, and I'm really happy for Diamondback and Endeavor on their merger. And Audrey got to do the deal before he passed.
Speaker 3:It's gonna be a sad day. It's a sad day today. I'm gonna be thinking of family and this family.