YouSaid · the spoken record

Tim Dunn

lines on the record: 90
first: 2025-01-20
most recent: 2025-01-20
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“I get very wrapped up and nervous about any public speaking opportunity. And I think in the last few years, I've realized that I just don't need to feel that way. And it's become much more enjoyable for me. And I've had a lot of stress over my life related to that, which would have been avoided.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish as a younger man I was much better at accepting constructive feedback. We're surrounded by much younger people in the organization now. And I'm always quite envious of how accepting they are of feedback, even critically. I think they view that as a real tool for improvement. I wish I would have been much more accepting of that. I probably would have improved a lot faster over my professional career had I done so.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had very low drama, no stress upbringing. And I think when you have that, you assume everybody else has a low drama, no stress upbringing. And I think when you run a business and you're managing people, I wish I learned earlier empathy. Everybody's got something going on behind the curtain. I would have benefited early on in managing people at Limerock understanding everybody's life circumstances may not be quite analogous to one's own and take pride in what you have, but assume others may have something else going on.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Clearly, for me, it's these two guys. I'd never had any ambition as a 24 year old kid working for an oil and gas company of getting into the private equity business. But thankfully, these guys had the foresight to do that and incredibly thankful that they asked me to join many, many years ago.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Me, it's texture, and a guy named Clepe Voidus, who ran Renaissance Energy, which really created this incredible expertise in the Western Alberta. When he got active in the play, it was viewed as washed up. And he just showed that by focusing on an area and developing expertise that others didn't have, you could create a tremendous amount of value. I think a lot of those lessons came home to roost in the Crown Rock investment.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly, my father, and John just mentioned another individual, Don Texter, who was a partner at Goldman, hired both of us, spawned our careers, supported our careers early inside Goldman. I think Da Vinci had a quote that sort of pity the pupil that doesn't surpass the master. And I think the Goldman culture was an embodiment of that line, and Texter certainly embodied it by giving us the runway to do what we did inside Goldman in the very early parts of our career.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“When I started at Lamarack, I felt like I knew a lot about the energy business. I didn't know anything at all about investing and just one thing that has stuck with me ever since those early days in 1998 actually came from Jonathan, which is to pay a lot more attention to the tales and less attention to the average because it's going to be the tales that really drive performance. Points about thinking about the full breadth of the distribution has really been influential in my life as an investor.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the early pieces of advice I got from Don Texter, my boss at Goldman, I was hired into the oil and gas group. I enjoyed it, but maybe I was expressing the desire to be more of a generalist or to move into another part of the bank that dealt with multiple industries. He goes, look The secret to being successful in the finance world is to be the biggest fish in a small pond. That's been a really critical part of my career. I think that's been critical differentiator for Limerock over time. And that was great advice.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“The best advice came from my dad was when I had a job offer at Goldman Sachs that was $32,000 and a job offer from a European bank that was $39,000. He said short-term decisions sometimes have long-term consequences. You can walk across the street to that European bank when you're working at Goldman Sachs. They'll hire you. You can't walk in the opposite direction at 85 Broad. That life advice, I need to remind myself periodically and certainly have channeled it in different form to my four children. It's quite useful.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“I get really annoyed at people that make bold pronouncements or predictions but then are unwilling to bet on those bold pronouncements or predictions. I make a lot of bets with people. I think it's very good at honing clear thinking. I have a big log of bets that I made with people, some spanning decades. I just think it's really good to focus the mind. Betting is good. Making bold predictions without being willing to bet, that's bad.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Can't stand it when people misuse the word fulsome. Fulsom does not mean comprehensive. A lot of people in the investment business think it does. And what really ticked me off recently, Ted, was I saw in one of the dictionaries, I don't remember which one, they've added that as a secondary definition because so many people incorrectly use it. So they're incentivizing dumb behavior.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Couldn't be more different. 1965, my mother was probably weeks away from her final vows as a Catholic nun, and thankfully she chose a different path. I rather jokingly, when I eulogized her at her funeral, I said the Sisters of Charity's loss was quite literally my gain.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Mine's actually very similar, but in a much more sophisticated way, I play really obscure strategy games. I probably spend way too much time doing that. I think they're great for training your mind, think about game theory, which is very, very applicable in our business. It's also very good for conditioning yourself to think about marginals. People on average think too much in terms of averages and not enough in terms of what's the marginal result of this decision that I'm making, which I think tends to produce better decisions. And games are really good at thinking about margins.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Primary lesson is just to focus on one or two of the top yielding monopolies on the board. You got to trade aggressively early on to get that position. And then obviously to some degree, there's luck that gets involved. But that's the focus. Getting early access to one or two good monopolies.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would just say private equity is not a manufacturing business, at least the way we invest capital, trying to do the same thing over and over again is really, really tough when you're trying to find really outsized investments. The lack of repetition is really engaging because there's always a new and different problem to think through and solve. And I'm not really good at repetition. I like problem solving. It lends itself to that very greatly.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Almost echo it. The welcome to the NFL rookie moment for me first deal I did, these guys would remember it well where the ink was not dry on the deal. Canadian pipeline construction contractor four weeks later after putting about $7 or $8 million into a company, I got a phone call from three of the division VPs saying we're leaving or the CEO's leaving, but we all ain't staying. Hightail it up to Calgary for a little sit-down. It reinforced the role the individual interactions, the decisions we take. They matter. You have to take decisions in this industry. Sometimes they're very uncomfortable. That to me is everything about private equity. The decisions you're taking alongside partners and deals ultimately matter much differently than should I sell my Halliburton and buy my Exxon, which was sort of day in the life before starting the business with John and Jay.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“That I love about private equity is you have the opportunity to roll up your sleeves, invest thematically, and most importantly develop long-term relationships with excellent management teams. That's what originally drew me to private equity. That's kind of why I wanted to be on that side of the business. I thought there were great opportunities that just suited me better to sort of work on establishing those long-term relationships.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Wouldn't say it's a factor. I don't think people's ROI expectations have been reset by the results on Crown Rock. 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.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Market today, it's a little bit back to the future from the days we started the business. There's far fewer people playing the game. The shales brought a rush of capital. The walls just opened. The big buyout shops right through to We own a lot of Permian exposure through the royalties and minerals market. We extended the Crown Rock relationship by buying up the underlying mineral rights in the basin as well as some other basins. But the risk profile as a result certainly may not allow for 79s to hit the board, but there's an oddity in terms of the feel of the risk of the portfolio in relation to what might be more standard PE return outputs that might fall more on the 2.5, 3, 3.5 are your success case deals.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of shale development is 2x that of solar and wind. I think we have a lot to be proud of in the oil and gas business as it relates to that, if that is your number one issue. You should be a very big fan of natural gas in the United States, which the shales have greatly allowed to increase.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“One thing that is often forgotten is when you look back to Paris commitments, I mean, the United States is really one of only a very small handful of countries that has actually lived up to Paris commitments in terms of per capita CO2 emissions reductions. That is primarily driven because of the displacement of coal, coal consumption in the U.S. is down 50% since 2008 right around the time that we invested in Crown Rock. And 80% of coal reductions have been allowed by the increase in production and consumption of natural gas, the other 20% from other renewable resources, solar and wind and geothermal and others. But it's been predominantly displaced by natural gas. When you account for natural gas emissions, the total emissions reduction that has been allowed by the increase of natural gas”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Held ourselves to a standard in terms of the operations of the portfolio companies or the assets we're managing, but there's clearly more ESG-minded metrics that get followed today that frankly wouldn't have been on the dashboard five years ago. I think most inside Limerock would argue we were following it. We just didn't have it in a harmonized manner that we do today. I think everybody in the industry has heard the call. This is something that matters today. It's going to matter in the future. The energy transition is real. It's going to take a long time and the strategies coexist for the foreseeable future.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Mark McCall came on board day one as our chief financial officer general counsel, sort of jack of all trades. We were smart enough to realize there were aspects of running a business that we were less interested in. Mark was recruited into the Department of Energy to run the loan program office at the DOE during the Obama administration. And when he came out of the administration, he came back to John and I and said there's growth equity opportunity set that we should be capturing at Limerock. And we discussed and debated it, gave him kind of a year runway to evaluate the market that he saw from that perch that he had within government. So how have we dealt with it? We've actually spawned an independent strategy under the Limerock umbrella to target growth equity. Limerock partner style deals, but in the new energy economy, separate team that is dedicated to that in the Limerock New Energy business. I think on the core oil and gas side of our Limerock partners and Limerock Resources business, we've always...”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Biggest shift, I would say, relating to ESG was more of an LP-related shift where we through time had been a very endowment foundation heavy LP base and somewhat coincident with the continuation fund. I think there was clearly a divestment movement on university campuses and those that bought into the destment movement wanted out. Those that didn't certainly had pressures that were less of a type, but more of were not going to do an incremental deal. So we did have the benefit, I think, of a few endowments that were able to roll into the structure, despite a lot of ESG non-fossil fuel type drumbeat that was happening on their campuses or at their foundation boards and the like, that issue has been most acute, I'd say, in LP interactions rather than day in the life in terms of limerock deal activity.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Much, much more efficient, more profitable shale development over time. I think that is a little lost in the conversation around energy over time, about just how big a technological movement this was. Thousands and thousands of people constantly innovating, making small changes, sharing that information broadly, ultimately to the benefit of the US consumer, the global consumer.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Shale technology has been not just in the energy industry, but for the global economy overall, in the absence of shales, I'm very confident that the oil price would be $50 higher than it is today. When we look over the ownership history of that 17 plus year duration for the ownership of Crown Rock, is that if you looked at the E&P oil and gas index, the XOP of independent producers over the ownership period of Crown Rock where we realized on that one specific investment a 79X ROI, the return on that index was 0.9x. You lost 10% of your money. And people point to that and say, oh, the shales were a scam, but the shales so disrupted the legacy oil and gas business in the US. It just consumed and destroyed a lot of capital, legacy capital that was in the oil and gas business and was replaced by.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cranrock as an investment essentially spanned the entire history of oil shale development in the US. The development of gas shale started almost 10 years earlier, but the development of oil shales was essentially coincident with the starting of Crown Rock. 2007, U.S. oil production as a share of global production hit its absolute minimum that we've seen over a seventy year time span. And at the moment that we sold it, it hit a local maxima that spanned 30, 40 years. The tremendous growth in oil production in the US is exemplified in the Crown Rock story. And one of our great frustrations as energy guys, not as investors, is this broader notion about whether the shales were a scam. There's been books written about how shale was a scam. And I think much less focus on just how disruptive”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“The 17 years you own Crown Rock, there are some pretty significant shifts in the industry. You talked some about the Shale Revolution and on the other side, certainly the last half, you have the whole ESG movement. And would love to get your thoughts on how you see this deal fitting into those two perspectives.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Uniqueness and the attributes of the deal in a post mortem sense. We need to be careful not to overread too many learnings and think that they could be applied to the standard deal that comes across in NGPE firm's desk. There are attributes of the people, the Midland Basin that you just don't replicate. It's a very special case. And there's probably some danger in thinking there's an application in a post-mortem for everything we do going forward because there's certainly not.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Their other peers, but massively more profitably, which allowed the outcome that we ultimately achieved. Frankly, that applies to private equity firms too in many respects because, you know, there's also a trade-off between managing money and accumulating assets under management and growing that way versus staying smaller, exploiting a niche where you have an edge, which is necessarily a more confined space and generating really high.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think their biggest differentiator relative to every other management team that we've ever dealt with is Tim Dunn and his lieutenants and partners had a greater respect for capital than any other management team I've ever met. Most of the time management teams are so focused on growth and so uninterested in the cost of capital that takes to achieve that growth. They end up making really poor decisions along the way. And there are excellent decisions that this management team made because they knew how costly capital was. They contributed a lot of assets initially on a big piece of the business right from the very beginning and bringing more capital in creates dilution. They viewed that as very costly to them and as a result they developed a number of solutions that allowed them to grow the business probably more slowly than”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“We put together a simple structure around this deal. I think a lot of people in our world get seduced by complicated structures that have many bells and whistles for different potential scenarios. And we made a cash investment the management team put in assets. We had an ownership structure and we were kind of immediately all on the same side of the table in terms of advancing long-term value. And I just think that being able to think about the investment, think about the best ways to grow value overall without worrying about when we're going to reach this tier of value creation and what that does to the management, participation and whether there's some sort of time limited other structure is just really helpful. And it's something that I certainly try to apply to other aspects of other things that I'm doing in life. I just feel like if you have simple incentives that are easily understandable, you can spend more time thinking.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Early in the year 2023, we had one of those strategy sessions where we got a lot of different views from investment banks. And I think we just came out with maybe an unspoken consensus that we should probably test the market and see what it would bear. We marketed it to a handful of firms that could take down a deal of this size. As John noted, there wasn't many of them. We got a lot of interest. It was competitive, I think multiple firms viewed the business in a similar way as was manifest by where the bids came out and we were able to strike a great deal with Occidental and they were a pleasure to work with and have a great vision. Wanted to keep all of the employees to really execute. It was a great addition to their portfolio.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Announces it's taking out Pioneer Natural Resources. So the merger buzz was not lying. There was certainly moves afoot that I think would encourage an owner of our type in that moment to say there's a window here not to be overly cliched when the ducks are quacking, time to feed them. And that was just a perfect moment, I think, to begin a process that we did begin. 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. The deal that John was talking about with Exxon taking out Pioneer, that took two of our best buyers off the table. It wasn't a big group to begin with. It was a little bit of a white knuckler going through this process.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“The whole period of the investment. But offsetting that, you didn't have as much additional upside. The well design, the frac design had unquestionably gotten much closer to their theoretical maximums. We don't know how much yet. And in fact, the degree of improvement and rig efficiency since we sold the investment just over the last year has been greater than people expected. And I just felt like the risk calculus had changed materially in the sense that there was just a lot less upside in the asset. And the merger market has a pulse and the pulse started to beat insofar as there was a lot of interest and a merger wave was soon to be upon us. And there were not many Permian companies like Crown Rock available. You kind of had the numbers in our favor, I think, in that moment in time with, I think, a lot of influence and input from the merger community saying the big boys are ready to come back and play and really almost to that moment Exxon.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“A couple of factors, Ted, that went into that. For one thing, we were getting close to the end of the continuation fund. I think we had two years left in the continuation fund. We had obviously developed a tremendous reputation for the business, for the management team, and the limited partner community. But doing another continuation fund structure at that point would have been a huge exercise. It would have been a massive undertaking. But the bigger factor, at least in my mind, was the phenomena that I talked about earlier, this sort of continual value creation through technology improvement, we thought it was no longer as real going forward. 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 changed the risk calculus. You had this big asset, you had market risk in retaining it as we saw come home to roost several times during.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“A management team that executes his vertical drillers, horizontal drillers, do the continuation fund. You make it through COVID. Management team now has a reputation of wanting to hold these assets forever. How do you then decide to ultimately exit?”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Business strategy at Crown Rock in the history of the investment, there's effectively two major phases. One was where we drilled a thousand vertical wells. And then there was an entirely new phase as we transitioned into becoming a horizontal driller, which was a very different skill set that we had to build within the business. And I think one of many, many great things that the management team did reinventing themselves as a preeminent horizontal driller has to be up there.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“through that period and had a different capital allocation objective. So you can't really fault anyone for selling, but I think you can give a lot of credit to new investors that came in into almost a single asset fund at a 20x ROI to buy into the vision that we had that there was a lot of continued growth yet to come out of that asset. And at that point in time, we were producing a little under $40,000 barrels a day. And we had projections to get well over 150,000 barrels a day if we held it for another five years. We briefly got over 160,000 barrels a day right before we sold the investment. So the thesis that we had going into the continuation fund bore out eerily correctly. It was a big effort getting that done. And from there, we had another seven years of runway to really execute on an entirely different”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we had a fund that effectively ended. That fund concluded came to an end, including its two option years in 2018, so we had to go raise an entirely new fund. I think it might be the largest continuation fund in the energy sector, even still. It was certainly one of the big pioneers effectively in single asset continuation funds in the energy sector when we did it. But that was a big six, nine-month process to get that done. Effectively, the investment at that point in time was marked at a 20x. So you really have to give a lot of credit to the investors that did come into the fund. I can certainly understand any investor that sold at that point in time. They've been in a fund for 12 years. They probably did a different”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's moments where the market collapses and you just have asymmetry in front of you, and you layer in the bet, and the challenge is don't overstay your welcome because whatever created that asymmetry is probably going to present itself again on the opposite end of the spectrum. We owned an oil sands company in Canada, first deal we did. We owned a shallow water jackup drilling company in the Gulf of Mexico and our second fund. outsized ROIs in both cases. In both cases, within five years of our exit, those companies were bankrupt. It just speaks to the fact that each year we were holding Crown Rock, the technology that was being really ubiquitously applied throughout the industry in horizontal drilling techniques, lateral lengths for the fracks. Everything was getting better every year. I'm not sure there is an analog to the question you're asking. This was very unique in so far as prices were coming against us at moments in time, three that Jay mentioned, but there wasn't that extinction.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Certainly, think about the offers we had had in a number of tangible offers to sell the business over time. And by the same token, we had consistent confidence that not only were our assets ultimately worth a lot of money, but that the technology was getting better. There was still this tailwind of value creation that was driven by improvements in rig efficiency and frack strategy and the layout of the wells, all that stuff was still getting better. So unless you felt like the impairment to oil prices was permanent and our background as research analysts gave us confidence that that wasn't really the case, it was just something that impacted the whole time of the investment as opposed to what we saw as the ultimate ROI on the deal.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was sort of a seminal moment in Limerock history. Jay put together this amazing 100-page PowerPoint. And the idea was, are we crazy to continue holding this deal? That's kind of the cognitive bias that we really had to overcome to achieve what we achieved on this investment. There's an anchoring effect in private equity, like in every area of investing that is not rational. It's a very real intangible thing. In our business, that's manifested by people looking at a three bagger or five-bagger and saying, well, that's a great deal. We got to sell it. We got to tell the investors about this. This is how you build a big AUM business over time is you realize those. You don't continue holding and taking risks. But in this particular case, Jay was able to put together a deck that was incredibly persuasive. There are moments when oil prices were minus $37 a barrel. It wasn't a happy day for us. And you could.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Month that we talked about it. I don't know, two, three hours at a strategy session going through a very long, exhaustive presentation on why we're going to continue to hold an investment marked at N8X for potentially another 10 years, which was the time span that that presentation ran through. And it was really healthy for the partnership to hear all of the questions, alternative cases to test that continued thesis that was held. And I think after that, there was just a much broader organizational buy-in. A big part of that 2013 presentation was we're probably going to get another oil price correction, another recession before too long. What does this look like if we go through another global financial crisis? And so when it actually did occur, when Saudi declared war on shale in 2015, I think at that point there was already just a lot of comfort.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was actually reasonable pressures that started to build up earlier than 2015. Maybe they kind of hit a crescendo in 2013 or so. The investment was marked at about an eight X ROI, which is a great investment. It would have been one of the top five investments we had ever made if we had sold at that point in time. You have a small team within a team that's managing this investment, but it's come to represent a large share of unrealized carry. And we have a partnership and other partners start to have a lot of questions like, why are we still holding this thing? What does it really mean? For the people that are working on it day to day, it seemed obvious as to why we were holding it, but that's because we're having at a minimum conversations every week with the management team, which we did for 17 years, in many cases multiple times a week. You live with it every day, you're very comfortable with it. But in 2013, there was enough questioning about why were we still holding this investment.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“You got through that 2011 discussion about longer duration hold with the management team, and then you hit the 2015 bump somewhere along the way. I imagine you guys are sitting back thinking, what did we just do? We had a great result and now it's back. How did those discussions go on your team”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Level of liquidity, what you find when you do that is almost no one wants to sell. As soon as you offer the ability But it's very rarely that they would ever actually do that. And the senior management team would never do that, even though we wanted to put more capital to work all the time. It really was great for tying further alignment to the business throughout the entire employee base.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ultimately, every employee of Crown Rock was an equity holder. I mean, that was a big part of the overall compensation scheme that we had there well over 200 millionaires were kind of birthed from the Crown Rock investment. I think our CEO had a very keen insight relatively early on, which is that if you give someone a piece of equity, they will very often undervalue that if there's not an option to realize the value that's there. Relatively early on, we started offering to buy back the equity from the employees on an annual basis. We would buy it back at whatever our mark-to-market value was that we reported to our investors. And in the early days, Limerock purchased a lot of those units back. We were able to invest around almost another $25 million in secondary purchases from various people that retired or other employees that just wanted to realize.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“Management team had wealth, but presumably not every employee in the company did. How did you think about over this long hold period making sure that the management team could retain the people they needed to to continue their growth?”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source
“We tried to keep the capital structure simple. We also had some sales of producing properties. 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, cycle into land over time. And that's how we kept the initial investment in the deal to $100 million while essentially putting a lot more money than that at work over time.”
2025-01-20 · Capital Allocators · Striking Oil – CrownRock by Lime Rock Capital (EP.428) · IDENTIFIED FROM THE TRANSCRIPT · source