The Future of Energy with Matthew Iak

t’s Georgie and the time is right welcome today’s guest strong and powerful. Matthew. Matthew, are you ready to do this? I’m ready. All right, let’s go. Matt is Executive Vice President with US Energy Development Corporation. They’re a leading oil and gas investment company that’s been in that they’ve invested in over 2400. Wells, the United States, Canada and have deployed over $1.5 billion on behalf of their partners. I bet those numbers are probably larger than that at this point, Matt, but we had the idea, say to have you on, tell us a little bit your personal last more about your work and why you do what you do?

Unknown Speaker 0:52
Oh. So outside of ego and hubris, you mean? Whatever, is outstanding, right. So I think what drives and motivates us all is, I have a wife and three beautiful children, and trying to build a legacy for them. And future generations is just just part and parcel of the our DNA. So it’s my primary Foundation, what we do is I think we’re pretty unique energy company in the sense that we marry investment philosophies, to the energy space, and we try to find the best risk adjusted arbitrage is in the best tax mitigation tools. So we’re constantly scanning and combing through the tax code to find nuances, great return arbitrage errs, and then we’re constantly operating and managing assets in the energy space that we believe will create the best kind of risk adjusted profile, and marrying the two things together and designing investments and bringing them to market. So that’s our that’s our passion. It’s really, largely a financial planning firm that uses energy as its medium. versus, you know, thinking of it as an energy company. It’s more of a finance company that that loves the energy space.

george grombacher 2:16
That’s an interesting way to think about it for sure. Yeah. How long? Have you been sort of looking at it in that way? Or have you always

Unknown Speaker 2:26
so I guess I’ve always looked at that way. I’ve been in the business for 1718 years. So quite some time, but in finance before that, on Wall Street, and when our companies are failing, second generation family company, and when my father in law and mother in law, were the founders, I guess we’d see her larger energy company. But they were there, their background was in education and finance. And so it was just a natural marriage, right? Just to, to his history, my father in law, and then to where we are now. And my partner, Mike, our CEO, my brother in law, he, he also comes from Wall Street background, so it just made a ton of sense to us to move in that direction. As we transition from generation one or generation two company,

george grombacher 3:15
that’s not the easiest thing to do.

Unknown Speaker 3:18
No, you know, no one wants to be the shirt sleeves to shirt sleeves, right. And one generation, nobody wants to be the one that takes something that’s grown and destroy it or shrink it. So it’s been really an amazing opportunity for us. And it’s really been amazing to grow and thrive, especially since people probably don’t recognize it today. But the energy industry has been quite volatile over the last 17 years. It’s never been an easy place to be into, to not just survive, but to thrive during that time, I think is a pretty special opportunity. Where are you in?

george grombacher 3:57
Yeah, yeah, there’s no doubt. And here we find ourselves in I don’t know if this is a certainly, I don’t even know if it’s a unique time. Are we in a unique and unprecedented time when it comes to energy?

Unknown Speaker 4:12
Yeah, I think we, yes, we are. And I don’t know where it starts and where it stops. But I think the all the different forces that are out there from from climate change to the geopolitical forces that we’re facing, to the ESG movement to your name, I think we’re in a very interesting time in shaping a lot of things going forward. So yeah, it’s quite unique, to say the least to be in the energy space right now. Yeah. And often it’s an interesting thing, because it’s, it’s often villainized. Right, one side or the other is it has to be good or bad. There’s no just energies. I mean, when we really look backwards at is the reason we live like we live, right? It’s the reason that everything’s worked. And then we have the society we have today is we’ve had abundant energy. It’s been the primary source of the US the global change in, you know, our lifestyles, our health, everything that we have, is really come from last 150 years of, of easy and accessible energy. So we should think of it as this unbelievable, great beacon of good. And yet, it’s turned into weapons of war. It’s turned into the worst evils ever. It’s really interesting how polarized it’s become. Yeah,

george grombacher 5:36
it is. Probably not all that surprising, because that’s sort of what we’d like to do is really draw lines in the sand and say, I’m going to be over here, y’all over there. With me here against me. Yeah. And we’re not going to have a thoughtful conversation about it. But that’s that’s sort of that’s the reality is that low cost energy has brought so many people out of poverty, certainly, it’s, it’s led to wonderful success here in the United States. But it’s helped so many people all over the world to, to extend life expectancy and live much better lives.

Unknown Speaker 6:11
Yeah, and it’s funny when you contrast even within the letters of like E, S, and G, right, so just take the social responsibility to the environmental and inherent conflict in the energy space between those two things, right, the socially responsible thing is to allow the rest of the world that is not industrialized, that doesn’t have cheap energy, to really allow itself to benefit from what we benefit from, right to have the ability to have the lifestyles that we have to have cheap energy to, well, that directly conflicts with the, you know, sustainable part of eat. Right, those two things are in a direct contrast from each other, and which is more important and powerful, right, the conditions in which humans live or x or y. And it’s an interesting and I think, finally becoming more of a thoughtful discussion, instead of just draw a line in the sand, choose one and let’s all hate each other. Right? I think that we can look back and a lot of it like, I think we look back on the 70s and say, you know, maybe our fight against nucular was ill conceived, well intended. But ill conceived. Right, maybe we should have been focusing on the improvements in technology to make us safer, because it is renewable, right and unlimited, and the single greatest source of power. And if we’re going to have an electric grid, you have only real two real choices, because you don’t want it to be coal, it’s natural gas or it’s nucular, the rest can’t do enough. So yes, you need solar and wind combined. But the only way to get enough for all of us to do get what we need is to go back and because I do think it’s interesting what time you’re in, and what period and what you think is right, versus what ends up being, you know, more responsible in the long run.

george grombacher 7:51
Hmm. Yes, that is, that is 100%, one of the most interesting things and something else that we’re grappling with as a, as a as a human race as a society right now. So in terms of the folks like you that are actually pulling this stuff out of the ground, I believe that the majority, the vast majority of companies that do it are, are smaller, independent operators. Is that right?

Unknown Speaker 8:18
Yeah, maybe not by quantity, it’s probably pretty evenly split between the majors and private companies. But in terms of the number, there’s far more small companies like any small business, right, there’s far more small businesses in America in the energy patch than there are large corporations. volume wise, that’s not necessarily foreign countries, and large consolidated. Us, oil companies probably have the majority of production reserves, but definitely not the majority of companies going after those reserves. And currently, with that aforementioned ESG movement, the majors have really been restricted in how much they produce. So the gap has really been filled by private companies over the last two years, maybe as long as four years.

george grombacher 9:09
Interesting. So when the public pressure or pressure from wherever is saying we need to produce a mission, whatever it is, you stopped doing what it is that you do, then that actually does have an impact on big producers, which leads to an opportunity slash need for smaller independent producers.

Unknown Speaker 9:32
Yeah, I mean, it’s it’s the only reason that we have enough production to meet our needs is that the independent producers kind of came in and filled that void. Because everyone else has been restricted banks can’t loan. large cap companies can’t issue new equity. They’re forced to operate within cash flow, pay dividends, buy back shares, invest in renewables and cap their carbon output. So they’re the only ones left are the private club He used to come in and fill that void. So it’s been a huge opportunity set. I think good and bad. So selfishly, it’s amazing. It’s fantastic. It’s created the probably the single, greatest wealth arbitrage, maybe in the history of the country, but definitely the history of energy in a four year stretch for private companies, but the bad side of it is, when you do that, you take from highly regulated, highly transparent processes, to less efficiency, and small operators, and maybe less transparency, and probably less environmental stewardship. So not speaking for ourselves, because we focus very heavily on it. But you know, a small company is gonna have a lot harder time putting in all those checks and balances and cost savings and transparency that a major has to. So in some sense, it was a great opportunity set. I do sometimes wonder if we’re doing a disservice in what we’ve done. That political

george grombacher 10:59
decisions have unintended consequences, Matthew, no. Never. As, as you looking at at Europe and Russia, and Germany and winter, what are your thoughts?

Unknown Speaker 11:19
I think we get through this winter. It’s a really scary situation. So to put this in context for everyone, there’s a real situation where people are not just rationed, but run out of energy in an industrialized world. That’s rolling blackouts, blackouts, like Dark Ages, style, we don’t have enough energy. The lines in Poland to get coal right now are so long, where people are actually getting physical coal for their house, to actually heat their house in the winter. And they’re waiting in lines as if this was the Soviet Union, right? Like, there’s some amazing things happening in an industrialized world that people just don’t comprehend. And I think what’s really scary is, but we realized from this goes back to that s component, the most socially responsible thing to do from a global perspective, is to probably have the best actors producing the most, and the worst actors producing the least, like, we want the US producing more natural gas, because of its standards. And we want Russia producing less, right? At the end of the day, if there’s X amount of supply going into market, you sure as heck don’t want Venezuela, Russia, Iran, and the worst actors in the world to have that power. Right? We really want it to be the countries that have so we want Poland to open up their own natural gas reserves. They’ve been unable to drill and Frack for the last decade. Well, they have enough reserves to provide for themselves, but because of their policies, they didn’t they relied on Russia. Well, that’s really bad. Social Responsibility. Right? It’s actually, you know, you we made our bad now we go lie on it. It’s pretty sad. And what happens is really scares me is next year, if they can, if we if Europe makes it through the winter, and has enough supply, the US is going to have a really difficult choice on its hands. And this is really natural gas specific, not so much oil, we produce and distribute about 20% of our natural gas through LNG globally. Well, natural gas is $70 and MCF in Europe, it’s seven here. Putting in context of cost. next November, we’re gonna have to choose to fill our own inventories. And if we don’t, we’ll see $20 and MCF gas. But socially, if we don’t, you’re up all without power. So if this goes on for another year, the question becomes, how do we weigh that economic cost? Who’s going to burden that? Who’s going to shoulder that right? If us doesn’t have excess capacity, and we run through a cold winter? Are people gonna be okay with one blackouts in the US to help Europe? I don’t think it’ll be you’ll realize how serious this is. And that we’re only a year away from absolute calamity. And maybe it’s happens this winter. No Alinea is when El Nino is in effect. And it’s scary if you get a cold winter right now, in Europe, what happens? So I don’t know. I’m not I’m not very happy with the global situation we face and it’s all self induced, which is even sadder.

george grombacher 14:16
Right? Scary.

Unknown Speaker 14:19
Yeah. We’ll see it, we’re 3000 miles away,

george grombacher 14:23
right? Everything’s fine here.

Unknown Speaker 14:25
The next year when we have $20 MCF gas in your, in your electric bills seven times higher, we’re gonna do what and by the way, seven times higher is nowhere near the 40 times higher. There’s a Europe like just putting it in context. And then just think about what that happens from an economic standpoint, the shutdowns, the inability to manufacture logistical. Everything’s a nightmare. Right? And people don’t realize it. We’re actually facing a similar situation that we seem to have averted here in the US. So I’ll use the kind of a political happened during the Keystone pipeline, kind of the big conversations for years or two. I don’t even really know what the Keystone pipeline is supposed to do. It’s supposed to bring heavy crude from Canada down to the US. It’s really what it does. And from a pure environmental perspective, you’d rather have it pipelines than irrelevant. Because it’s coming down to the firefighters needed to make diesel. Right? You need the heavy crude with the US light, sweet crude. Combine the two and essence you distributes the new diesels. And it’s still coming here, but it’s coming through Burlington Northern. Right, it’s coming through the railroads. It’s a lot less environmentally sound than coming through the pipeline. But now we’re getting less quantity than we should. And the problem becomes if you think about the US logistical supply and stitching issues, how do we get everything to market? How do we get truck it? Everything’s coming from diesel? Well, you went through a diesel shortage, and you already had a pricing diesel shortage this summer. That was nasty, right, but an actual supply side shortage where there’s not enough diesel to get supplies in market, what happens to inflation, too much money, too few goods, this doesn’t become a five year problems becomes a 15 year problem. And it’s all because we had made stupid political decisions based on feel good moments versus the actual necessities of what we need to run. And the Northeast seeing this in this evening in natural gas, where people in the North are going to pay obscene amounts for natural gas next year. Yet, because of the infrastructure in the south, the same amount of supply in the Utica and the Marcellus is there is maybe a lot more than in the Haynesville and the Permian, from a gas side, yet the South has unlimited infrastructures built pipelines, and the North didn’t allow it. And they can’t get product to market. It’s just as an amazing phenomenon that we’ve just done a poor job of politicizing everything, instead of realizing that it’s not political. This is just a political argument here just to do what’s right.

george grombacher 16:52
Sorry, it’s kind of a soapbox. Not at all. That’s, that’s, it’s I think, it strikes me that the sooner we can start having these real conversations about what the what life will look like, in a pretty short amount of time, the better cuz I can’t imagine you just throw a switch and all of a sudden, oh, just we, we went back to what we were doing before. Now it’s okay.

Unknown Speaker 17:20
Yeah, it’s crazy. In the, here’s the big kind of picture that people should get. Intelligent people should also say, renewables are essential, right. So you have 8 billion people on this planet. And there’s going to be 10 billion at some point in time, probably the next 10 years. And there’s not enough even if you didn’t believe in global warming, even if you just thought it was all hoax. The reality is, on the backside of this, there’s still people who need energy, and you couldn’t produce enough fossil fuel energy to handle on a 10 billion people load, especially the standard of living that everyone wants to live, which is our standard. Right now. That’s just a median standard. Globally, there’s just not enough to meet the growth of consumption, all the future growth, you need every source of energy, every renewable possible to try to meet that, to replace the growth, not even the baseload just to handle the growth of consumption. It’s an all of the above scenario, right? And there’s not enough landmass to do solar and wind, we know that. But there’s also not enough fossil fuels to provide everybody and you need all of the above and you need it strategically located in areas that have sun and that have wind and that have water for hydro, and you need all of it. And the answer is all of the above. It’s not one or the other. And I don’t know why we’ve turned it into this competitive, it has to be one or the other. The answer is no, for 10 billion people on this planet. We need every single source of energy, cheap and abundant and renewable and efficient. And you name it, so that all of our standards of living this can increase all of our health, everything that we do, right, we need more fertilizer, which means we need more fossil fuels, to create more fertilizer, so we have better farms to give us more food. It’s all a big circle, like this isn’t. They’re not against each other. They’re all for each other. Matthew act

george grombacher 19:12
the voice of reason. Amen. Well, Matt, thank you so much for coming on. Where can people learn more about you? How can they engage with us energy petroleum Corp. Us? Development Corp.

Unknown Speaker 19:25
Yeah, feel free to find us on any LinkedIn social media us mg 12 Corp or our website, US edc.com. Loved to chat. If you’re an investment professional, this is really what we do. Feel free to kind of on the investment side. We do a lot of education training, continuing education in the direct energy space, so feel free to call us.

george grombacher 19:49
If you enjoyed as much as I did show Matthew your appreciation and share today show the friend who also appreciates good ideas. Go to usedc.com just search for you The US Energy Development Corporation and find out if there’s an opportunity to work together thanks good research and until next time remember do your part by doing your best

Transcribed by https://otter.ai