Pi Energy has a highly differentiated if not unique operating philosophy in the oil & gas industry. We believe our investors/limited partners should get their money back before we earn much profit.
Following are aspects of our structure that are different than other operators:
- No brokerage fee — this is often 7% of the capital raised. This money goes to an intermediary not to work in the oil field. The investor pays a brokerage fee to the sales person who adds no value to the opearations.
- No landman fee — the percentage is usually 5%. Frequently, the general partner takes 5% of the oil revenue beginning with the first barrel out of the ground. This could influence the amount of time it takes for the investo go get the original capital returned.
- Low drilling costs — our "turn key" drilling costs are 20% or more below other partnerships. How do we do this? Typically, the general partners keeps a significant portion of this and pays the rest to the people out in the field doing the work. Our mark up on the drilling costs are very modest in comparison.
- Carried interest — Pi Energy structures general partner compensation as a carried interest rather than royalty. With a royalty, the general partners gets paid starting with the first barrel out of the ground. We believe the investors should get their money back before we earn any meaningful compensation. Therefore, we accept no royalty only a percentage of the "cash on cash" return to the investor. As far as we can tell, this is unique in the oil industry. A side effect of this approach is the investor gets their money back sooner.
This is how we put the investors/limited partners first.
© Pi Capital Group, LLC 2014