Acquisitions Anonymous - #1 for business buying, selling and operating - Girdley wants to buy an oil well - Acquisitions Anonymous 182

Episode Date: April 7, 2023

Michael Girdley (@Girdley) and Mills Snell (@thegeneralmills) talk about an oil well in Nevada. -----Thanks to our sponsor!This episode is sponsored by Acquisition Lab. Acquisition Lab, created by Walker Deibel author of Buy Then Build: How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business. After going through the Lab's month-long intensive, you have ongoing access to almost daily Q&A sessions with advisors, regular live deal review forums with Walker, hand-picked vendors for your deal team, and a very active Slack group with other searchers on this path. Our team personally understands how to buy a business and will help navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close. The Acquisition Lab recently celebrated its 70th business being acquired and well over $100m in aggregate transaction value. The Lab is there to stand by your side, so you can take the right action (at the right time) and avoid wasting countless hours trying to "go it alone".For more information, check out acquisitionlab.com (link in the show notes) or email the Lab's director Chelsea Wood, [e-mail] to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, Michael here. Welcome to the internet's number one podcast about doing case studies and examinations of business for sale. Me and Mills, and this is Michael, got together today and talked about a crazy deal, which is a bunch of oil wells for sale by a guy in New Jersey. So this was sent to us by a listener. We had a ton of fun talking about it and got exposed and exposed each other, I guess, to a number of different things about the oil business and things. we've seen around that market. So I really had a ton of fun with this episode. And then Mills brought in a surprise deal that we talked about.

So good times and enjoy the episode. This episode is sponsored by Acquisition Lab. Acquisition Lab created by Walker Debel, author of Buy Then Build, How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business.

After going through the lab's month-long intensive, you have ongoing access to almost daily Q&A session, with advisors, regular live deal review forums with Walker, handpick vendors for your deal team, and a very active Slack group with other searchers on this path. Our team personally understands how to buy a business and will help navigate all the complexities of the process, as well as provide a trusted framework,

tools and resources to support you from search to close. The Acquisition Lab recently celebrated 70th business being acquired and well over $100 million in aggregate transaction value. The lab is here to stand by your side so you can take the right action at the right time and avoid wasting countless hours trying to go it alone. For more information, check out AcquisitionLab.com, link is in our show notes,

or email the labs director, Chelseawood, at chelsea at buy-then-build.com. Mills, Mills, you're still in Austin after all this time? I can't believe it's been three whole days. You're still there? I know, I know. It's amazing. You're wearing the same clothes, too? Freaking amazing.

All right, I got us a deal. I got us a deal. It's a listener submitted. Can I, do you want to read this one or should I read this one? You might be able to see it better than I can because I can't pull it up very big. But I just love, I love the, my favorite part so far is that it says broker, Bob. There's no last thing. It's just Bob, the broker.

All right. Okay, so here's the listing. It's from businessbroker.net. And there's a case study in the title is Own Absentee Run, Oil Wells and Naval's. for $200,000 plus per year. This location, however, is listed as Cincinnati, Ohio, Hamilton County. So here's the business overview. They're asking $230,000 for something that's going to do annual revenue of $800,000.

No, $8 million. Do you want to pause there? Are you throwing up quietly in your hand? Eight million is what it's saying. $8 million revenue, $230,000 asking price. and is listed under a category of e-commerce and retail websites. So it's a tremendous opportunity, Mills, to own 2% of two oil wells to be drilled in Nevada.

The wells will be drilled next to the most successful oil well drilled in the last 60 years in the U.S. It produced over 4,000 barrels of oil per day over seven years before production started declining. These two wells are in between properties that produced on one side, over 22 million barrels of oil, on the other side, just over 10 million barrels of oil. The men behind the 10 years of research on this project include a man considered to be the number one geologist in the country who founded the Bakken oil fields in North Dakota. Another is considered to be the number one oil man of all time in Texas.

The potential returns on this project are absolutely huge. All incredibly extensive research has everyone evolved, very confident that these two wells should produce at least the same 4,000 barrels per day, if not more. They are absolutely convinced Nevada has more oil than Kuwait. plus the underground composition in Nevada is found in only one other area of the world, the Middle East. Should the two wells combine to produce 1,000 barrels per day, each using an average oil price of $90, a 2% owner would make approximately $450,000 per year.

The numbers are big and they are real. Should the two wells combine for anything close to 4,000 barrels per day, the nearby well produced for seven years, you are looking at life-changing money. As oil prices go higher, I am convinced we will hit $150,000, $2,223, per barrel. Your monthly check gets larger. I have a ton of info, plus you can visit the well site. Bob, and then here's Bob's phone number.

The property is leased. The owner is willing to, this is not a franchise resell opportunity. Let me make sure. Year established is 2017, two employees, cash flow, yeah. And then the broker's name is Bob, and that's his phone number. So Mills, do you want to own some oil wells that have not yet? had been drilled in Nevada. I just love that he says these numbers are big and they are real, but they are not real.

Like, nothing has actually happened. No oil has come out of the ground for these wells. It's a blue sky kind of thing. I don't know enough about the oil business, and you're in Texas, so you have a lot more to probably say about this just by being close to it. But when I was at Permanent Equity, Brent told the story about a guy from a guy from Texas who said, if you ever see an oil deal,

right, whether it's Texas or Nevada or the Southwest anywhere, if you're seeing it, I've already passed on it twice. And this is just like textbook, right? Why in the world do these guys need this money? If the deal is so good, why do they need $230,000 for

2% of the rights? No idea. And it's not like it's a lot of money. It's like 230 grand. And like, okay, that's a lot of money, but it's also not a lot of money in the grand scheme of the oil fields. You know, and it's interesting, you see guys like this, and a lot of them made a lot of money for a long time. And I used to get phone calls from guys like this in San Antonio. And it would be like, hey, Michael, you know, we got an oil well.

We're drilling down in the Eagleford Shale or we're drilling in Midland. Do you want to invest in this thing? And here's our study and here's all this kind of stuff. I'd be like, I don't know anything about that. I sell fireworks. So I kind of would ignore it. But yeah, and they would all talk like this. They would talk in all caps.

That's basically how it worked. For those of you who were not on YouTube following along, there's a lot of all caps in this listing. You probably could guess that. I just, you know, you've got to look at this and say, okay, they must need the money because they're trying to actually get, they're trying to bring this to fruition.

They say they've been working on it 10 plus years. That's not a good sign. But maybe that's how long it takes to research and permit and lease the land and drill the well and all that kind of stuff. But my guess is that they're saying, hey, look, we've been working on this 10 years. We've self-funded or we've gotten investors.

And we just need this $230,000 to get it across the finish line. And have you ever heard that story before? It does not always pan out. This might not be the last money they need. And, you know, it, again, nothing, it hasn't been drilled. There's no well yet. They're just, you know, predicating this on some future potential. There's no actual revenue.

There's no actual cash flow. It's just pro forma. All that being said, plenty of people have made gobs and gobs of money doing things like this. I just don't think that if it's that good of a deal, that it's going to make its way on the my desk. I mean, oh, like our pre-a-old. episode where I was making fun of New Jersey. This guy's area code is New Jersey.

It's so weird. It's in Nevada. It lists Ohio and he has a New Jersey area code. What's actually happening here? A craziness is evidently what's happening. And I love this line where the guy's like

I have the number one oil man in Texas, the number one guy who created, he founded the Bacan oil fields. That guy doesn't need... He was there when the dinosaurs... $30,000, I'm telling you.

He was, the guy who was there when the dinosaurs died and got covered up by rocks and then compressed into petroleum was there and created the Bacca oil, like the way this and it's funny. But then they are absolutely convinced Nevada has more oil than Kuwait. So you're telling me Exxon, Conoco Phillips, BP, oil, you know, oil, you know, know, oil giant number five, seven, all those people in Houston have been flying to Las Vegas for 70 years and not realize that there's massive oil well oils underneath the desert there. I mean, I'm flabbergasted, flummoxed, shocked.

This would be a good episode to have somebody on who really knows what they're talking about because we just make this up as we go. But I think this is the kind of thing that an expert could poke holes in, right? But they could also educate the heck out of us on about why and how like this scheme works. Because this scheme has been happening for a long time. Like just like you said, I mean,

I'm really far from it in South Carolina, but people in South Carolina get calls. And it's people saying, hey, you want to, you know, do you want to own a fraction of an oil well? And it's kind of like the lottery is my impression of it. Like they could, you know, they could tap, they could tap the well and all of a sudden like nothing comes out. And, you know, your,

your S-O-L. But you could hit a home run and all of a sudden, like, you've made it back, you know, in 20-fold. But I just, this is such an interesting, it's an insider's game. But to me, the reason they go to the outsiders, right, is because they can turn the tables, you know, and the information asymmetry works in the expert, you know, in their favor. There's that saying that, you know, when a man with experience meets a man with money, Have you heard this saying, Michael? No, no, go ahead. When a man with experience meets a man with money,

the man with the experience leaves with the money and the man with the money leaves with experience. Oh, man. That's depressing. Is this from Twitter? No, no. This is like an old truism that some gritty southerner told me. But right, like, if you have money and don't have experience,

if you're going up against somebody who has experience, you're going to walk away having learned something and they're going to walk away with your money. It's how it most often happens. Well, I mean, look, hopefully you run into people that have your best, are playing a long-term game, right? So we'll set up things where it's a win-win, right?

Like, that's how I think we've set up this podcast. It's a win-win for everybody. I'm still waiting for the winning to happen, but when there's a win that happens, we're going to all win together. We're going to high-five. We're going to high-five together when we get there. But no, I mean, on the good news,

this podcast. You know, Mirko left us and good luck to him on his next thing, but we're making an offer today on the next victim. So hopefully we'll have somebody in here that's better than me to admin our podcast and sell ads and stuff like that. So anyway, where was I on this stuff? Oh, okay. So, I mean, I think there's definitely like the meta here of this is there's like a very teachable moment, which is like as you're trying to figure out what to work on in life and what deals to do, Like you, there's two things that have to happen. Number one, you like have to go look at a lot of stuff, but in order to look at a lot of stuff efficiently

and be able to go through and uncover a lot of rocks and be like, okay, is that bug going to bite me? Oh, no, do I want to, like, do I want to own that? You know, like, you have to get very good at, like, filtering stuff very quickly and pattern matching here. And this is one of those things whereby reading it and pattern matching it and just knowing like,

hey, you know what? I've read the Wall Street Journal for a 10, years and nobody has mentioned oil fines in Nevada. You can start to kind of pattern match that thing and realize, oh, this is just something that's going to be either too hard or is a scam. Frankly, it just looks like a scam to me. Yeah. It's speculative. It's totally speculative. Totally speculative. By the way, I do have friends that have invested in these kind of deals. And they've, sometimes they'll be like, I made a shit ton of money. And then other times they're like, I lost everything, and it's mostly I lost everything.

Yeah. I had an old client who would do it. He would get these phone calls and he had run a really successful business and had liquidity and his phone would ring. And he's like, yeah, I mean, it's kind of one of those things that it's, you know, it's cool and it's sexy to be a part of. Like you can bring it up at a party and be like, yeah, my, well, well, you know, and it's like in his case, you know, I think you probably did 10 and one or two of them

were half decent and the others like were just dry wells, you know, but you still got to spend the money and he still has all that. at some cost and he lost the investment. It is the same thing with venture capital. Like you go look at a venture capital portfolio, it's perfectly normal. You have to, that's why when I tell friends,

if you're going to do like angel investing in potential high growth companies, you have to do 35 to 40 of them until you have a pretty good idea that you fit the mean. Like you can't do five or 10. So I have friends that'll come out and they'll do stuff like this, right, where it's like very speculative stuff.

Now I would not recommend this one because it has all the harm marks of smelling like a scam. But like if you are going to go invest in a very highly speculative asset class, like don't go out and put, you know, if you have a $500,000 budget to it, don't go out and put all $500,000 in three deals. And then you'll hear them. They'll be like, oh, I'll stop my money.

I'm like, you're supposed to. Like, that's called variance. That's the way that works. But if you're going to invest $500,000, like go put $25,000 in 20 deals, right? Or $10,000 and $50 deals. You'd be much better off doing that, and you'll see a much better expectation of return. Whereas when you have that high variance but low sample size, like you're screwed. Like you're in big trouble.

Well, and to your point, right, upmarket, that's what VC firms do. You know, they kind of know that just from a statistical standpoint, that's going to be what it is. What people tell themselves is, you know, oh, like, I'm so lucky. I have this opportunity, you know, and maybe it'll be different for me than it is for the experts. 100%. So I do have a very wealthy friend

that made all of his money in the oil business like this, the wildcatting business. And I sat down with him once. What is wildcatting, Michael? I've heard that turn. Wildcatting is like these people that go do a bunch of speculation like this,

right, where you're like wildcatting, like searching to try to hit the next thing. Because the way the economics work on wells, right? Like you have a big fixed cost and then unfixed upside. you know, uncapped upside, basically. So let's say, just hypothetically, you spend $2 million to go drill a new well, okay?

And you do all the kinds of the fracking stuff and the horizontal drilling, all, and maybe that number is ridiculously low, but just say you spend $2 million to drill a well, for example. You could make $0 on it, or you could make $100 million on it, or you could make a billion dollars on it. Like, you just don't know.

And so wildcouting is kind of this, like, going out and doing a lot of speculative kind of gambling, but by drilling holes in the ground. Yeah. Yeah. So this guy made his fortune through this stuff. And so not only was he dealing with drilling individual wells and, like, putting together projects and all that kind of stuff and trying to make money out of them, right, where

there's this wager and it could turn you to zero or it could get you 50 times on your money, not only would he do that, but he'd also have to survive the vagaries of the oil prices, right? Which is, like, if you're interested in and you want to do something fun at some point, you can go subscribe to these services that show you all the bankruptcies, in your state. And it's really fascinating in Texas. Like I was in there and I paid like $5,000 for the service. And I'm like in there looking at all the bankruptcies.

And I'm like, these are all oil companies. Like it's just like bankruptcy city. And it's so I talked to this guy who had done that as a career. And like they will vacillate between owning $5 million ranches and selling their personal home. And that's like, that's how it goes. This wall catarie kind of thing. Like, it is the boom or bust and then magnified on a personal scale. And so you'll hear about these guys who grew up that way and their parents grew up that way.

And they're like, yeah, I remember we had a private jet. And then I remember selling our house. Like, and that'll happen like three times in their teenage years. It was just like, woo, woo, woo, woo. Just a bizarre. These numbers are crazy, right? Like, what they're proposing is like $131 million a year in revenue from this one well, you know? I think those numbers are probably like realistic that can happen.

You know what I mean? Like I mean, just pure math on the barrels per day. But it tells you, right, if the upside is that big, that there's got to be, you know, massive risk around whether or not it actually hits and you're in the money or, you know, you got to dry well. It's totally, it's totally a fascinating deal. I had another funny story about oil stuff I wanted to share. I did tell you guys about my buddy who went to.

go work in the oil fields. He worked there for, he worked on an oil drilling rig. Were you there for that? It's all about that. So my buddy decided to go earn some extra money in the oil fields. By the way, they'll pay you like $10,000 to be there for like two weeks.

Because it's horrible. Like to clean things in these oil rigs, do you know how they clean things in oil rigs when there's oil everywhere? Put gasoline, you want it, right? Diesel. They have giant spray guns full of diesel. Then the other thing you talked about is, you know, you're out of the middle of nowhere, so it could be below freezing and you have to have water trucked in.

So he said one time one of the guys who was an ex-con, like they'll go hire, it's so hard to hire for these jobs that you take people straight out of prison. And he said that one time the water gets delivered in these giant like plastic canisters, right, which is like a good thing. You just put it outside. And then when you take a shower or drink, you do that. Of course, you're covered with diesel and oil sludge. So you're trying to get that off all the time.

and he said that so because it was so cold, they decided to take the water thing so they wouldn't freeze and they put them in the shed and they took one of those like cannon like propane heaters and left it on all night.

And so they left it on all night and it proceeded to melt the plastic containers that the water was in, which then caused the propane heater to malfunction and all the water caught on fire. Like that's how messed this whole situation was.

Like they caught their water. water on fire because they made it too hot. Like it was just like, wild west, you know. But he came back after doing three or four sessions and he's like, he's like, number one, Gurdley, nobody understands. Nobody understands the impact of the oil thing. Like nobody understands how what's going on out there in these oil fields. Nobody gets it.

It's just kind of like the border. Like nobody, everybody that talks about the border has never gone out of the border, like the, of the U.S. Like that, that's, he's like, nobody understands this. And he's like, also, I think we need to ban oil. he came back, he's like, this is so bad for the planet. We have to get rid of this. Yeah.

Well, I mean, most people just have no clue. Everything you and I are doing within like 10 feet of us, oil is involved in every part of it. Every part of it. Like life, you can get rid of it if you want, but life is going to grind to a halt. Everything you eat, everything you do, there is petroleum in some regards.

Your food is fertilized with petroleum. Your car runs up petroleum. Your tires are made from petroleum. this cup is made from petroleum, the coffee that came into it from Costa Rica. Petroleum was involved in every step to get it here, including killing the bugs that we're going to eat it. It is all part of the deal.

Anyway, that's a girly rant about petroleum. People just don't understand how pervasive it is in your whole life. Michael, I've never really been on this website, businessbroker.net. Is this one that I'm not super familiar with it, but do you look at it on a regular basis? No, I think it's an aggregator. Let me look here.

I'll click on it and see what they do. The fact they have financing involved. Oh, there's another oil oil one here for sale. Oh, it's also Bob. Frickin Bob. Bob's in your pitching his oil wells. Car wash for sale. Yeah, I don't know.

This is just these guys make these websites. And they just look so scamy. Yeah. They just look so scummy. And then, oh, here, British Swim School franchise. You can buy a British Swim School franchise from these guys. I think eventually you enter where Biz Buy Sell is, which is just you're, you have business listings that you charge a little bit for, but you're really selling scammy franchises. Yeah. Yeah, exactly. So, wow. And then, like,

I mean, this is the other thing I just pulled up there listing for British Swim School certified by Entrepreneur Magazine. Basically, if the word Forbes or Entrepreneur Magazine is associated to anything, you can just assume they paid for that certification. That's basically the, the way that works. Forbes and Entrepreneur Magazine are just like, I remember, did you, did you ever read Entrepreneur Magazine thinking it was actually for entrepreneurs? Yeah, and then you realize that's nothing to do with it. It turns out it's actually just a pamphlet to try to sell you scummy, to try to sell you

scummy franchises. I was like, oh, cool, a magazine for me. Nope, not for me. That was not for me. All right, so. We need to poke around on this website one day and find, and find, some other deals to talk about. It looks like there's probably some diamonds in the rough,

you know, in between all the franchise stuff, there's probably something worth talking about. A million percent. I mean, I think, I think at the very least you can spend time on here and see some of the stuff that's getting pitched to people. And it's just so, so bad. You know, and I guarantee you when you look at the docs on all of this,

it's heads-eye win, tails you lose for Bob. That's just the way this, these promoters, that's the way it works. And you'll get on the, maybe it would be a good thing to do just for one episode. We should have a phone call with Bob and record it.

That would be cool. Bob should have the episode. That would be really cool. Just so you're going to record you, you know, for this, are you open to it? I bet he would. Bob, we're excited about promoting your thing

to all of our listeners. And then just let Bob go. It's not like we would need to ask Bob any bad questions. You would just hear what Bob tells you. And I didn't go from there. And I took some of the calls once because I was just interested in how the people would kind of sell it,

but they don't actually show you anything. When you talk to these people, they don't actually show you anything that's a proof point that it's going to work. They show you somewhat correlated signs like this. This guy created the Bakken oil fields. This one is considered the number one oil man in all of Texas. So, I mean, you have to ask the question.

By the way, I get asked this question about my course. They're like, why are you selling a course if you, like, are successful in business? I'm like, well, I don't actually have to sell a course. I just do it so I can afford staff. so I don't have to do any work. But anyway, the, okay, if you're considered to be the number one oil man of all time in Texas, why do you need $200,000 from me?

Yeah. Like, it just doesn't make sense. It just doesn't make sense. If Kuwait, if this Nevada has more oil than Kuwait, why are there no oil rigs now? And then why is the one next door going dry? So you click on the next one, you go open a British swim school. That's how it works.

Did you see the listing I sent you in the chat? This is one I think we need to do next time. Where's the chat? Okay, here we go. Hardware and software networking and encryption solutions business. This is one we really need to do next time. It's like printed circuit boards, but they have one client in the Department of Defense.

I looked just in businesses like this. I looked at one that was probably 10 times. No, it was like 20 times the size in terms of revenue. I only have one client in the Department of Defense who represents around 80% of revenue. This client acts as a vendor to many other companies such as Lockheed. This is one of those ones where you have to like it

because a lot of people are going to walk away from it when you have one client. Oh, yeah, definitely. And I think the interesting thing about that is sometimes people look at a one client business and walk away and think you have 100% customer concentration, but they forget to think about why customer concentration is bad. And like the why of customer concentration being bad is,

you're not sure the revenue is going to last and you're going to continue to have a business. But it's okay to have one client. If you can prove that that one client is going to keep paying or you feel very confident that one client is going to keep paying infinitum. And this business has the Lindy thing going on, which is this client's been paying for 20 years,

and they've built some stuff on it that is very dependent upon you. So there's something to be said for knowing when to break your rules. Have you heard that idea that like beginners don't know the rules? Intermediates know the rules. Experts know when to break the rules. Such a great clue. That is good. So maybe I just like backdoor compliment of myself, which thank you.

Thank you to all my people. I think this would be a good one to do next episode. I don't know. Did I just do it? Yeah, you kind of did. That's it. They want three point nine times. They'll probably get it.

Yeah, I mean, and look, here's the nice thing about looking into a business like this, like with a one customer and 100% customer concentration. It's pretty easy to do your customer diligence. Just call them and be like, okay, how do I know you're going to keep paying? Yep. Go from there. There are some great, like, one customer businesses. Looked at a business that their one customer was Disney,

and they did painting for them. They, like, painted the rides. You know, like, they've been doing it for 20 years. Could it go away? Yes, but you just got to structure the deal the right way. And, you know, it's probably not going to change. Yeah. We look at some pretty fascinating, like, I mean, I think that's a good thing.

Like you find like a general horizontal kind of thing, but then you just find that they own a niche, right? And it's like, okay, I'm just going after that niche. And like, we've looked at it with the graffiti painting guys. And I think we've talked about one of my buddies, as the largest contractor in his city that only does traffic signals? If there's a traffic signal job, like there you've got everything you need. That's all they do. You just call them and they say, here's how much it costs and you show up.

Well, and certain things lend themselves, yeah, certain things lend themselves to customer concentration. Like anything that's aerospace or automotive related, there's just not that many customers out there, right? There's not that many manufacturers. I was talking to a guy the other day, a business owner that they make, they started making, it was a printing company and

not like the typical like sign, you know, quick print kind of places that are franchised, but they did a really specific type of sticker that goes on gas pumps. And, you know, there's only so many people who own and operate gas stations and there's not thousands of them. You're going to have customer concentration. But what they did to just massively grow the business, is started selling other stuff to gas stations, right?

They now sell the credit card readers and the pump handles and like components that go in the actual gas pump. But, you know, they just had their relationship and said, hey, what else do you need? What else can we supply for you? And, you know, 10X the business that way from, you know, the stickers and logos all the way, you know, to the whole shebang. Yeah, 100%.

Cool. All right, man. I think we're out of time. This is a great episode. Thanks for it. We did like a deal in a half. We did. Yeah.

Yeah. That's all right. I'll still put the oil thing in there. It gets some people going. It gets people going. All right. So ask for today. If you've listened this far,

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