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July 19, 2025 13 mins

Jace Graham is with Rising Phoenix Capital where he invests in oil and gas leases. This is the real estate end of the oil industry which is entirely based on royalties.

To learn more, visit https://www.laplatapeakfund.com/

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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Welcome to the Real Estate Espresso podcast, your morning
shot at what's new in the world of real estate investing.
I'm your host, Victor Minash. This is the WEEKEND edition
where we interview notable people from the world of real
estate investing. Today is no exception.
We have a great guest all the way from Dallas, TX.
Welcome to the show, Jace Graham.
Hey Victor, thanks for having me.
Well, great to have you here. Now you come from a particular

(00:23):
segment of real estate, one that's not often talked about.
I'm excited to have this conversation because a lot's
changed, especially with a lot of the new emphasis and
especially since the the new administration on oil and gas.
And but before we do, perhaps give a little bit of your back
story and how you got to this point in your journey.
Absolutely. I'm Jace Graham.

(00:45):
I'm a, I'm a fourth generation, you know, oil and gas
professional. My family's been in the business
for God nearly a century here. I'm the founder of rising
Phoenix Capital and we focus on acquiring high quality oil and
gas mineral rights throughout the country and various basins
all over, all over the country. And but we also operate multiple

(01:05):
real estate related companies including SFR acquisitions at
scale. We do a lot of fix and flip
wholesaling, solar financing andhard money lending.
So, but oil and gas is minerals is where, where, where our
foundation is and the bedrock ofour strategy.
Now there's of course many different facets to the oil and
gas industry. And when people think about oil

(01:27):
and gas, they think first and foremost of the big brand names
like Chevron and Exxon Mobil andso on.
But in truth, the oil and gas industry is thousands of small,
almost cottage industry size companies that are involved at a
grassroots level throughout the nation.
You're absolutely right. I mean, you know you've got the
large EMP publicly traded companies out there that

(01:49):
everybody knows about and and you can invest directly in them
to the stock market. What we do and there's a lot of
groups out there that are maybe independent operators who go out
and drill oil and gas wells throughout the country.
But where we kind of play is from that more passive approach
where it's a real estate strategy through and through.
So most real estate investors don't realize that minerals, oil

(02:11):
and gas minerals are part of theoriginal bundles of sticks that
go along with real estate and they're deeded just like surface
land is. And yet it's often kind of
misunderstood and overlooked. So the truth is, I mean, oil and
gas mineral rights are real estate transaction at their
core. So, but without the tenants and
toilets, which is what we like. So no rehab, no monthly, and all

(02:31):
you get is that monthly cash flow.
Now, when you separate the mineral rights from the, let's
say, the meats and bounds of theproperty, that might just give
you the right to do the what's usually called the surface
rights, maybe to build a house or whatever that might be.
We're talking about the subterranean rights.
Now, this could be oil and gas. It could be water in some.

(02:52):
Parts of the. Country.
It could be other things, maybe things that are buried deeper in
the ground. How do you segment that?
Yeah, no, you're, you're exactlyright.
I mean, you have the surface estate.
And so when that president, many, many, many, many moons
ago, first patented land to thatfirst landowner, that landowner,

(03:12):
you know, owned all right, titleand interest when they said from
the center of the earth to the zenith in the sky, all right,
title and interest it. But what's interesting about the
mineral rights in the United States is, is one of the only
countries that does this. There's there's a small portion
in Canada, but other than that, those are the only two that the
minerals are can be conveyed with the surface.
But over time, those mineral rights are often often get

(03:35):
severed, meaning you can sell your surface, you can sell your
home with your land and reserve the mineral rights down below,
meaning you're reserving everything underneath the ground
to the center of the earth where, you know, oil and gas
and, and like you said, water would be established so that
then, you know, transacts over time through many families and,
you know, so it gets split up and fractionalized.

(03:58):
And So what we do is we identifyand find people that own mineral
interest in areas that operatorslike Chevron and Conoco
Phillips, like you mentioned earlier, are actively drilling
and developing those areas so that they're receiving royalty
income. The mineral owners are.
Now when we're talking about owning the mineral right, so you
let's say you go out, you buy the mineral rights on some

(04:21):
acreage. So now you own those mineral
rights, you then I. Presume lease.
Those mineral rights to an operator.
Someone that's. Actually going to.
Develop that that oil field. That is correct.
It's exactly how it goes. So, you know, you own the
minerals and you're kind of sitting there and an operator
like Exxon will identify an areawhere they think there's oil or

(04:41):
natural gas or a combination of the two and they will reach out
to you. You know, they know that who
owns the minerals because it's all recorded at the County
Courthouse just like a real estate surface real estate
transaction is. And they'll reach out and say,
hey, you've got minerals that wewould like to lease.
And typically a lease will last anywhere from three to five year
term. Me and the operators got that

(05:02):
amount of time to drill and develop and put a producing, at
least one producing well on youracreage.
And they'll pay you a little bonus on the front end and
they'll pay you a royalty, a lease royalty for everything
that comes out of the ground as far as the income they receive.
And typically that's anywhere from, you know, 15% all the way
up to 25%, which is, you know, you don't have to put up any

(05:24):
money to drill the wells. You get to receive that just on
a monthly basis. Nice quiet cash flow.
So that's what what it looks like and what we identify as the
people that are typically already been leased and are
receiving royalty income. So we've kind of taken some of
that, I won't say risk, but justyou know some of that out of the
equation as far as is there hydrocarbons, is there oil and

(05:47):
gas in this particular area? We, we want to make sure that
there is and that, you know, we,we know that there's going to be
future production down the road.Now, just because an oil
company. Leases the land.
It's a bit. Of A use it or lose it.
If they don't like you said, develop within the prescribed
time period, then you obviously get no income during that time
period, but then the lease reverts back to you.

(06:09):
You can turn around and lease itto somebody else who hopefully
will develop it at that point. Correct.
And what's really cool about oiland gas minerals is let's say
that you lease the land to Exxon.
Exxon drills the well, OK? And let's just say you've got,
you know, 500 acres on West TX or wherever he may be.

(06:30):
And so they drill one well and you're seeing the royalty income
on that one well. What our firm does is we
identify what the production looks like in the future
production on that one well willbe and we make offers based on
that. What ends up happening over time
is that Exxon will come back in and drill additional wells on
your acreage. So it'd be an equivalent to in

(06:51):
real estate to, you know, buyinga single story apartment
building and paying for that. And then you add additional
floors and rooms at no additional cost.
You get to benefit from that additional royalty income.
And that's the beautiful serendipity about owning oil and
gas minerals long term. What are your thoughts?
Now of course I'm presuming we're talking because there's

(07:12):
two types of plays Here's there's conventional plays and
non conventional. The non conventional being the
tight oil involves fracking. Those typically involve a very
steep decline curve where the production is going to be at its
maximum within the first few days of production and then it
declines from there. What about wells that are at the

(07:33):
mature end of their of their lifespan?
Because many of these wells may produce a trickle for the next
2530 years. Great question.
You're right. You know these the shell plays,
the shell revolution that has made the United States energy
independent. In fact, we're now a that
exporter of oil and starting as you know with the LNG and
liquefied natural gas exporting natural gas.

(07:56):
But yeah, it's those wells produce, you know, a third of
their overall life in the first,you know, one to three years.
These wells lastly they're from 30 to 4045 year life.
So yeah, you got a lot of flesh production coming in.
As far as the more established production type areas, what we
like to look at is and we like buying that type of asset class,

(08:18):
that type of production because it's very flat and stable.
Meaning you know it's your royalty income is holding
relatively flat assuming commodity prices aren't swinging
too far to the left or to the right.
But you can buy a nice cash flowing yielding asset typically
in a 15 to 18% cash on cash return on the open market.
So what we look for in those more established areas that

(08:42):
maybe the wells were drilled 10 years ago, 12 years ago, 15
years ago, is are we seeing any sort of Intel of new production
in new zones? Or are we seeing the operators
maybe downsize the spacing, meaning that they're drilling
wells closer together to to, youknow, extract more out of the

(09:02):
same lease or the same rock. So, you know, the US independent
energy producers and even the EMP companies, I mean, they're
resilient. They're always finding new ways
to develop that rock. I mean, just look at the Permian
Basin. It's the health in West TX.
It's the gift that keeps on giving.
It's like a layer cake. And they just keep finding

(09:22):
additional ways to develop and extract oil and gas, even though
it's been developed for the past100 years.
What are your thoughts on reworks?
And maybe let's take a moment and describe this for for the
listening audience that aren't familiar with oil and gas.
Oil wells often produce, they precipitate out paraffins, I
call it cholesterol for an oil well that basically gums up the

(09:46):
well and, and eventually that will reduce the production.
Now your production's declining me, you just may not know why.
Often times a chemical treatmentor a hot oil treatment or
something like that can break upthose paraffins and take a well
from producing 1 barrel a day to3 or 4 barrels a day and all of
a sudden the value that well hasbeen multiplied by that amount

(10:08):
simply by making that small, small investment.
To what an extent is that? Does that come into your
thinking at all? When you look at leases, do you
look at rework potential? You know, we we look at that as
just additional upside. We're not going to, we're not
going to underwrite that as partof how we're going to value that

(10:30):
from an offer to a seller or mineral owner.
We definitely factor that type of stuff in and and we're really
kind of comes into play is, is some of the re completions or re
stimulations refracts into some of these horizontal shell wells.
But you know, what you're referring to is kind of taking
some of these older, call it stripper wells that are
producing, call it one to two barrel a day and doing certain

(10:52):
things downhall to make them increase, even even water floods
or CO2 floods to start driving and, and putting pressure into
the formation. So we look at all that we, we
try to like just kind of really just look at what's the current
cash flow, what's the production, what's the decline
and what's, what's an offer thatwe can make out to a mineral
owner where we can transact on that.
But that's that's definitely something that we look at as

(11:13):
upside. But we're we're definitely going
to try not to pay for it. If you've got a new client,
someone who's new to oil and gasand you want to get them in at
the lowest risk end of the spectrum, where would you start?
I mean, I think just, you know, we, we've got a series of, of
producing oil and gas mineral funds.
So you're invested in a, you know, multiple assets across

(11:35):
multiple basins, diversified across hundreds of wells.
To me that that would be the safest and, and there's a proven
track record behind that ways also that people can invest into
oil and gas minerals there. There's public auctions, there's
energy net and oil and gas cleaning house where people take
mental interest and put them on the market to sell.
I just caution folks that if if they don't really understand how

(11:58):
to underwrite this, it's not like a cap rate in real estate
where it just holds flat in perpetuity.
You really have to understand the decline analysis like you
mentioned earlier, you need to understand kind of commodity
swing and commodity risk and then what you know, the operator
and, and how good they can develop that acreage.
So we've got trained in house engineers on staff that, you
know, went to school and understand how to underwrite

(12:19):
this stuff because Victor, there's no Zillow or MLS for for
this type of asset class. And maybe that's why the barrier
of entry is a little bit harder.But but that's, that's a
definitely way. And then also, you know, people
are 1031 exchanging from real estate into willingness
minerals. It's part of the bundles of
sticks. It's a real estate transaction.
So you can do a 1031 exchange, sell your real estate at the top

(12:40):
of the market and then transact into minerals and royalties, get
a nice quiet cash flow monthly payment, and if you want to sell
those minerals and you can do that and go back into real
estate. Love it.
Well, Jason, folks want to connect if they want to learn
more. What's the best way?
I'd say three ways. One, we've got a fund out right
now called La Plata Peak Fund, LAPLATA Peak P/E AK fund.com is

(13:03):
where you can learn more about that.
You can reach out and and touch base with us direct at
214-949-8861 or e-mail us at Invest at
risinghyphenphoenix.com. Love it.
Well, Jace, great to connect. And for the listeners at home,
definitely reach out to jacegraham@laplatapeakfun.com,

(13:24):
as well as the other ways the links will be in the show notes.
And in the meantime, have an awesome rest of your weekend.
Go make some great things happen.
We'll talk to you again tomorrow.
Nice you done.
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