Longreach Energy Income Fund
To provide exposure to a diversified portfolio of predominately US Natural Gas investments held through mineral royalties and royalty-like interests. This fund is intended for Wholesale Investors only.
The Fund aims to deliver investors high yield and capital growth from investments in US subsurface energy assets containing Natural Gas and Oil.
Total Return Target of 20% p.a. of which income return target is 8% p.a. (net of fees) over 3 years.
Holds a Diversified Portfolio of Royalty ownership delivering long-life income and capital gain.
The US Energy Market is Unique
Eternal Ownership of Underground Reserves and Resources
- Mineral rights are real property ownership of everything that lies under the surface of the earth – subterranean real-estate.
- Private ownership of Mineral Rights only exists in the US (and a small part of Canada). Everywhere else these rights are owned by Governments.
- The Owner can develop, sell or lease these rights to development partners.
- Ability to establish projects with Equity upside plus fixed interest type payback risk profiles.
Why Now?
A Deep and Growing Local and Global Market
- According to the International Energy Agency (IEA) in 2019 the United States became the world’s largest producer of Oil and Natural Gas and has now converted from being a net energy importer to a net energy exporter.
- Recent US Energy Information Administration (EIA) research states that switching from coal to Natural Gas-fired power plants will reduce US greenhouse gas emissions by up to 55% and air pollutant emissions by up to 90% (1) 257 US Coal fired power plants are expected to be decommissioned or converted to Natural Gas generation from 2021-2048 (2).
- OPEC forecasts a 25% increase in global energy demand by 2045 (3) and the EIA forecasts a 50% increase in world energy usage by 2050, led by Asia which relies on Natural Gas (1).
- The US became a net exporter of Natural Gas in 2017. These export volumes are only expected to continue as new international pipelines (to Mexico and Canada) and LNG liquefaction and export terminals come on-line.
Sustainable Income Generation from Royalty Assets
Low Cost, Long Duration, High Margin Assets
- Acquire minerals and related interests.
- Income and capital gains from the production and sale of Natural Gas and associated products.
- Investment based on asset life cashflows: deep technical evaluation of future production volume and costs.
- High margin with low operating costs.
- Limited to no environmental liabilities.
LEH owns, leases and invests into operating onshore energy assets in the USA:
Longreach Energy (LEH) owns sub-surface real estate. The real estate provides ownership of everything under the ground and has been separated from and sold by the surface owner who originally owned both the surface and everything that lies below. LEH’s real estate contains proven and probable reserves of Natural Gas and Oil. The USA is the only country in the world where sub-surface property is readily tradeable and can be bought and sold by individuals and corporations.
LEH has unfettered rights to access the surface level of these properties for the purpose of extracting the minerals that lie beneath and through this activity, LEH generates attractive income and capital return.
Since inception2 LEH Fund 1 has delivered a total return of 130.9%3 on called capital and is delivering an annualised income yield of 8.2%. (26 Apr 22, 331 Mar 22).
There are two key ways that LEH generates return for investors:
- Leasing (Royalties): Rather than extracting the minerals itself, LEH leases its sub-surface real-estate to established Oil and Natural Gas operators who wish to drill for and produce the proven Natural Gas and Oil reserves. In return, LEH receives royalty payments calculated as a percentage of the gross revenue generated from the sale of the extracted oil/gas from the leased properties. This is referred to as a Royalty investment in the US and produces an income stream and as well as potential capital growth through the appreciation of the sub-surface real estate.
- Operating Interest (Royalty like): Longreach Energy also utilises the sub-surface real estate through the engagement of operating partners, providing them the capital investment required to undertake drilling operations to extract the Natural Gas and Oil from the real estate. LEH is not the developer and all reserves are proven and probable, there is no exploration risk. In engaging operators in this way, LEH enhances the return generated through its proportionate ownership in the project, reflected in the offtake of the production and revenue participation as well as having influence and/or control over the drilling operations without being the operator itself. This activity produces both an income stream as well as targeted capital growth.
Longreach Energy was established in 2017 and is a partnership between Longreach Alternatives and Giant Capital Management. The firm is US focussed and contains both experienced industry, engineering and investment professionals.
Formally a Macquarie Bank energy team, the Principals each have 20+ years experience in investing and managing onshore US energy assets.
Post Macquarie Bank, the team established Giant Capital and Between 2011 and 2018, the principals completed 35 deals with 13 being onshore USA with an aggregate value of US $1.6b.
In April 2018, the team launched the Longreach Energy Strategy, seeded by a large Australian Superannuation Fund. Since inception, the team have generated a total return of 92.5% on called capital and the strategy is delivering an annualised income yield of 7.9 %1
The team has a deep pipeline of investable assets in which to allocate, including several exclusive options over unique and attractive opportunities to provide swift deployment of new capital.
Longreach Energy (LEH) owns sub-surface real estate. The real estate provides ownership of everything beneath the ground and is separated from and sold by the surface owner who originally owned both the surface and everything that lies below.
As economies transition towards a future global energy mix increasingly powered by renewable energy, natural gas offers the most sustainable bridge to greener technologies. The majority of our investments are in natural gas reserves, which is viewed as the cleanest hydrocarbon and can be integrated with renewables to replace reliance on coal and oil. We also are exploring investment opportunities in a wider mix of energy sources, including renewable energy.
Longreach Energy has AUD$788 million assets under management as at 31 March 2022.
Andrew has extensive principal investment experience in global upstream gas and oil, gained during a career which has seen him co-found and lead the London office for the gas and oil investment division of Macquarie Bank.
He has particular expertise in transaction execution, financial modelling and structuring investments as well as identifying attractive projects and evaluating the commercial potential of assets.
Andrew and Thomas have been working together since 2005.
Thomas is a highly respected and experienced petroleum engineer and gas and oil evaluation specialist. He is particularly skilled in analysing and evaluating all technical aspects associated with gas and oil production, turning sub-surface data into cogent cash flow data for dependable, repeatable company valuation.
Thomas and Andrew have been working together since 2005.
Leading Longreach Energy’s US land services, Rita has over four decades of oil and gas industry experience. Beginning in the late 70’s, she has worked directly for several successful energy companies including Jack Kelley Oil, Phillips Petroleum, Brighton Energy, Primary Natural Resources and Magnolia Petroleum LLC. Her experience includes land management, such as specialising in coordinating acquisitions and divestitures, supervising land work, managing field brokers, company growth & development.
Relevant Documents
You should read the PDS, TMD (if applicable) or any Investment Memorandum (or other offer documents) related to this product before making an investment decision. These documents (if available) can be found at https://longreachenergy.com/, or if this is a "wholesale investor only" investment, can be viewed by contacting the Product Issuer identified on the aforementioned website.
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