IFG WEALTH MANAGEMENT FORUMTHE PREMIER EVENT FOR NORTH AMERICAN FAMILY OFFICESApril 23-24, 2012, The Ritz-Carlton, Phoenix...
IFG WEALTH MANAGEMENT FORUMTHE PREMIER EVENT FOR NORTH AMERICAN FAMILY OFFICESApril 23-24, 2012, The Ritz-Carlton, Phoenix...
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Profiting from Oil and Gas Investments: Arthur N. Budge, Jr and Thomas V. Costantino of Five States Energy Company LLC

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Profiting from Oil and Gas Investments: Arthur N. Budge, Jr and Thomas V. Costantino of Five States Energy Company LLC, discuss their unique approach to investing in the lucrative oil and gas sector.

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Profiting from Oil and Gas Investments: Arthur N. Budge, Jr and Thomas V. Costantino of Five States Energy Company LLC

  1. 1. IFG WEALTH MANAGEMENT FORUMTHE PREMIER EVENT FOR NORTH AMERICAN FAMILY OFFICESApril 23-24, 2012, The Ritz-Carlton, Phoenix, Arizonawww.ifgwealthmanagement.comProfiting from Oil and Gas InvestmentsFOR IMMEDIATE RELEASEOver the last 100 years, producing oil and gas properties States adds investment value to our business partners withhave proven to be very strong and stable components to our understanding of the oil and gas transactions, and ourprivate wealth investment portfolios, as they have in-house geologists and engineers who can identifyhistorically been highly uncorrelated to financial indices, attractive investment opportunities.according to Arthur N. Budge, Jr, President and Chief Arthur N. Budge, JrExecutive Officer, and Thomas V. Costantino, Chief Financial Costantino - We don’t make investments in tax shelters. Chief Executive OfficerOfficer of Five States Energy Company LLC. However, it is However, there are tax benefits associated with oil and gas Five States Energynot a sector where passive investment is enough, they add. limited partnerships which enhance the returns of these Company LLC investments versus other investments. Oil and gasFive States Energy Company LLC is a private equity partnerships receive two favorable tax treatments in the USinvestment group that will be present at the IFG Wealth tax code. First, the percentage depletion allowance providesManagement Forum 2012 in Phoenix, Arizona, April 23-24. for the deduction of up to 15 per cent of gross revenue,Ahead of the event, Budge and Costantino talk about the oil even after the cost basis is fully depleted. Second,and gas sector, and how high net worth individuals can profit. intangible drilling costs, the cost of drilling new wells, can be expensed rather than capitalized. Fortunately, in theIFG - What is unique about the Five States’ approach current market, a lot of the value enhancement of oil andto investing? gas properties revolves around the development of additional wells in existing fields to increase totalBudge - Unlike many institutional funds, Five States takes a production and income.long-term value approach to investing in acquisitions, morelike an active oil and gas company than a purely financially- IFG - What is your outlook on this market?oriented investment group. We do a bottom-up valuation Thomas V. Costantinousing traditional metrics, expecting to earn our return from Budge - There is a huge overhang of natural gas production Chief Financial Officercurrent income derived from ownership and operation of oil in North America, so I am somewhat bearish on the Five States Energyand gas properties. We are not exclusively IRR focused. Our prospects for natural gas prices. But this makes it a good Company LLCinvestment approach is more aligned with the family office time for value investors to make acquisitions. We have notmodel. We use discounted cash flow models in project made a natural gas investment since 2004, and Five Statesvaluation, but also focus on achieving strong long-term sold all of our natural gas properties in 2007. However, Arthur N. Budge, Jr andcash-on-cash returns. Our investors tend to prefer long-term given the pressure that declining prices has put on the Thomas V. Costantino ofinvestments which pay stable or growing cash dividends, natural gas market, the value proposition is shifting us back Five States Energyrather than a highly volatile and unpredictable earnings into the buy mode, and we are once again actively soliciting Company LLC, discuss theirstream. Over the last 27 years we have consistently natural gas investments. unique approach togenerated double-digit cash-on-cash distributions. investing in the lucrative oil Costantino - The fundamentals on the oil side are much and gas sector. Five StatesIFG - Why oil and gas properties, and how do you stronger. That said, we are very defensive right now with is a private equityidentify good deals in this sector? regard to the near term oil price. We are 80 per cent investment group that will hedged on our near term production. Our current fund is be present at the upcomingBudge - The oil and gas sector can provide a uniquely hedged at a little over $100 a barrel for the next threestabilizing function within a portfolio. Over the long-term years. Last year we were able to make investments based IFG Wealth Managementproducing oil and gas properties have been non-correlated on an $85 pro forma, as the market trading range of oil Forum 2012.to most other financial indices. Oil and gas investments can prices moved between $80 and $100. By having an effectivegenerate a high current yield and are not dependent on hedge program, we locked-in additional margin, rather thanappreciation for a return. However, high yields are not speculating on the short-term performance of oil prices.earned in a passive manner in this sector. Success requires Our actions eliminated the price risk from our near-termactive participation by an experienced investor with a return on capital, without impacting returns if in theseasoned technical staff. Besides providing capital, Five intermediate to long term, oil prices go up. www.internationalforumgroup.com
  2. 2. IFG WEALTH MANAGEMENT FORUMTHE PREMIER EVENT FOR NORTH AMERICAN FAMILY OFFICESApril 23-24, 2012, The Ritz-Carlton, Phoenix, Arizonawww.ifgwealthmanagement.comSalpi Balian, Press Manager – IFG, pressifg@ifgemea.comThe IFG Wealth Management Forum 2012IFG’s Wealth Management Forum 2012 will take place at the Ritz-Carlton, in Phoenix, Arizona, April 23-24, and provides a unique platform for investmentdecision makers from single and multi-family offices to engage in vibrant benchmarking sessions and gain practical solutions and best practices to achieveoptimal portfolio returns.For more information please send an email to pressifg@ifgemea.com or visit the event website at www.ifgwealthmanagement.comThe International Forum GroupInternational Forum Group is a world-leading business information company, organizing exclusive, invitation-only gatherings of business leaders across multipleindustry sectors.Providing a platform for senior executives to build mutually beneficial business partnerships, International Forum Group has designed an unparalleled systemfor matching the core buying needs of the world’s largest organizations with the best solutions available in the global marketplace. Empowering all our clientswith the knowledge they need to lead in their respective fields is a fundamental goal of all our forums.For more information, please visit: www.internationalforumgroup.comFive States Energy Company LLCThe motto of Five States Energy is “Money Well Invested.” We take pride in being prudent guardians of the capital our investors entrust with us. Since ourfounding by Jim Gibbs in 1985, Five States has expanded from a focus on oil and gas investments to a broader platform by providing opportunities in energy,real estate and private equity.www.fivestates.comAll rights reserved. The above content may be republished or reproduced. Please notify prior to usage at pressifg@ifgemea.com www.internationalforumgroup.com

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