Charlie Matter spotted the opportunity to start Case Energy Partners while working after college as a "landman"--someone who acquires mineral rights from landowners on behalf of large energy companies. After a few years, he came to recognize that the industry was woefully behind the times, and in 2012, at the age of 28, he struck out on his own with a mission to modernize the way things were done.
"We built a platform and our own proprietary process for identifying and acquiring these assets more efficiently," Matter says. "There are a lot of variables involved, and we look to mitigate risk and identify value."
Dallas-based Case Energy Partners identifies landowners whose mineral rights are potentially valuable to the oil and gas business, buys those rights at competitive prices, and then bundles them with others into diversified financial products that it can flip to larger, publicly traded companies. (Matter won't share the secret sauce that makes the company's platform work, but he allows that the technology evaluates patterns in the market to point to "undervalued" properties.)
Case Energy operates in a corner of the energy business that doesn't get a lot of press but that can be very lucrative. The companies that it sells to--Brigham Minerals, Kimbell Royalty Partners, and Viper Energy Partners, to name a few--enjoy yields from their portfolios that are, according to The Wall Street Journal, "upward of 10 percent."
The bar is high for Case to deliver great value to both the landowners it buys from and the companies it sells to--and it has worked. Case Energy, which invests funds from a few large family investment offices in Dallas, grew to nearly $27 million in 2018 revenue from $229,000 in 2016. That's a two-year growth rate of 11,653 percent, good for the No. 1 spot on the Inc. 5000 Series: Texas ranking.
The pitch to landowners is simple: Selling to Case is either a quick way to generate some cash or a smart way to diversify their holdings. "Let's say we value your property at a $1 million, and that is 60 percent of your net worth," Matter explains. "Any financial adviser would tell you not to rely that heavily on one stock. So we say, 'Why don't you divest all or part of that? Put the money in an index fund. It's diverse, it's easy to liquidate, and you don't have to worry about the price of oil.'"
Case Energy Partners, in turn, reduces its own risk by owning properties in oil- and gas-producing regions from Texas to North Dakota, Alaska to Pennsylvania--a total of more than 100,000 acres across 15 states. The company, which has been profitable since its first year in business, today has a team of 27, and Matter doesn't see any reason to tap the public markets or think about being acquired. "The goal is to have a sustainable private company that operates off its own cash flow for the next 20 or 25 years," he says. "It doesn't have to be massive."
It does have to keep evolving, though. "When oil is healthy, the business of flipping mineral rights works really well," says Stephens energy analyst Gail Nicholson Dodds. "But it ebbs and flows with the price of oil. They don't control their destiny."
Matter plans to be ready for the next bust in the cycle. For the foreseeable future, Case Energy will continue to invest in mineral rights, he says, but it is considering new ways to use its tech platform--such as finding properties it might hold longer term and operate.
Matter also has his eye on wind and solar energy, but doesn't plan to pivot in that direction until he believes they become viable investments. In the near-term, he still sees a bright future for oil and gas.
"In time, things will change," he says. "But for us to live the lifestyles we want, there is not a more cost-effective abundant resource available today."