The Southern Ute Growth Fund held a meeting on Thursday, Sept. 27 in the Sky Ute Casino Resort for the tribal membership. With oil and gas prices that took a hit in FY2017, the Growth Fund was eager to give updated numbers to the membership.
Red Willow
Red Willow is an exploration and production company for the Southern Ute Growth Fund that began on the Southern Ute Indian Tribe’s reservation and has expanded over time to hold interests in both onshore and offshore ventures in the United States. The current areas of operation for Red Willow include: The Deep-Water Gulf of Mexico, Delaware Basin, San Juan Basin and West Texas.
How does Red Willow make money? There are four main components to profit: volume, price, revenue and expense. With the strengthening oil prices and capital investments, Red Willow’s earnings were eight percent above budget for FY2018.
The Eastside Development operation currently has nine potential surface locations to access all development areas in which all expansion that occurs here, will occur on Fee Lands with no disturbance of Tribal Land.
The most current development on the reservation is North Carracas.
“Our goal for our North Carracas site is to have minimal disturbance of Tribal Lands,” said Jason Hooten, Executive Vice President of Red Willow.
Horizontal Development in the North Carracas area is something new and improved to look forward to in FY2019. Red Willow currently has three pads on Non-Tribal Fee Land and all activity will be focused along a single corridor including road, traffic, pipeline and the three pads. Along with these quad laterals, horizontal drilling will bring superior economics and lower operating costs.
Strategically, the Growth Fund wants to grow onshore production in West Texas as well as locally in the San Juan Basin with gas development, and even though offshore development and projects have been successful for the Tribe, Red Willow will continue to invest in opportunities in this region.
Red Cedar Gathering Company
From starter to majority, Red Cedar Gathering Company was once only 25 percent owned by the Tribe. In 1998 the Southern Ute Indian Tribe became the majority stake holder, owning 51 percent.
Red Cedar is a midstream energy company that gathers, treats and compresses natural gas from producers within the tribal boundaries and delivers the gas to various interstate transportation pipelines.
Red Cedar Gathering gathers gas from over 1,200 wells throughout 895 miles of pipeline that run within the reservation boundaries.
How does Red Cedar Gathering make money? Best described by a larger city “toll” road fee system. Red Cedar charges producers for a “ride” on the Red Cedar Gathering system. Fees vary depending on gathering or compression service and producers (different fees apply to different vehicle types for instance). The costs and expenses to operate and maintain equipment, general administrative costs and costs of sales on the system are only some of Red Cedar’s expenses associated with continued operation. With a goal to maintain and maximize return on existing investments, maintain high operational integrity, and a high-performance workforce — Red Cedar intends to stay well-trained, maintain an experienced workforce, extensive infrastructure, high profitability and cash flow.
Aka Energy Group, LLC
Known as an off reservation midstream energy company, Aka Energy group, LLC was created by Tribal Council in 2002. Aka gathers, treats and processes natural gas and natural gas liquids for market sale. Wholly owned by the Southern Ute Indian Tribe, Aka Energy Group is part of the oil and gas business that sits between upstream and downstream — the midstream. Midstream business takes place when you take crude oil and or natural gas from production facilities to processing and treatment plants for extracting Natural Gas Liquids (NGLs) and removing impurities, before transporting natural gas and oil to downstream customers.
Aka Energy makes its money by charging fees to producers for their product to be transported and sold. Currently Aka has two plants located in Gilcrest, Colo. and Malijamar, N.M.
Always trying to increase its capital, Aka constructed pipelines to PDC Connie Bihain, Ledford and Wiedeman Federal and has expanded this plant. The Malijamar site has tied in several new receiving points for incremental volume (with an attractive margin), installed a second compressor at one of its stations and upgraded dehydration systems.
The Malijamar plant is currently being sold and the money from the sale will go to pay off debt owed to the Southern Ute Growth Fund.
Growth Fund Properties Group, LLC
The Growth Fund Properties Group, LLC was first known as the Tierra Group, which started in 2000. Expanding to 15 cities and 10 states. Growth Fund Properties has a market value of $986 million.
Growth Fund Properties has multi-family housing in Austin, Houston, and Dallas, Texas as well as Oceanside, Calif. with the closest properties being Three Springs located in Durango, Colo. They are also invested in office buildings, industrial offices, hospitality and master-planned communities such as Three Springs and a new venture in Arvada, Colo. known as Candelas.
Most of the Growth Fund Properties’ assets come from apartment buildings, equaling 54 percent of the its total assets with vacant land/developed lots coming in second with 18 percent.
Land development is one way that Growth Fund Properties makes its money. They buy land, build, develop and sell developed lots to builders for profit, a perfect example being Three Springs in Durango, Colo. Since 2003, Growth Fund Properties has sold 328 lots and built 534 units in Three Springs. In FY2018 they have sold 20 lots, built 37 homes and 107 units. With its continued success at Three Springs, Confluence, Phase 2, has leased 100 percent of its units.
Some of the new ventures that Growth Fund Properties is involved in is the building and leasing of the Pierside South Apartments in Oceanside, Calif., which will be completed later this month. With a few new industrial building acquisitions out of state, the ProMach Building in Waukesha, Wis., Hialeah Building in Hialeah Gardens, Fla. or the Gladiola Building in Salt Lake City, Utah will also be completed this month.
With an overall vision to continue land development and invest existing resources, to provide long-term financial benefit to the Tribe, while reducing the Tribe’s overall financial risk; the Southern Ute Growth Fund will continue to invest, acquire and build going into FY2019.
“I know the Growth Fund has grown, but it takes money to make money,” Southern Ute Tribal Councilwoman, Pearl Casias stated.