Ash is joined by Taylor Black from Eckard Enterprises to discuss oil and gas investment opportunities, with a focus on how these can serve as alternative income streams for dentists and other high-income professionals. Taylor explains their approach to transparency, direct ownership, and risk mitigation for clients interested in oil and gas, particularly in mineral rights and working interests. They also talk about how oil and gas compares to other asset classes like traditional real estate and the stock market, highlighting its potential for consistent passive income and unique tax advantages.

Taylor also covers the misconceptions about entering the oil and gas industry, the importance of direct ownership, and strategies for distributing investment risk. Taylor also reviews expected returns, the benefits of using IRA and Roth strategies, and the flexibility of exit options for investors. Real-world examples and important due diligence tips are provided for listeners considering oil and gas as part of a diversified portfolio.

To find out more about Taylor, visit: https://eckardenterprises.com/taylor-black/

Key Topics Discussed:

• Oil and gas investments as alternative income streams for professionals
• Eckerd Enterprises’ approach: transparency, experience, and direct ownership
• Explanation of mineral rights vs. working interests
• Portfolio diversification and risk mitigation
• Entry points and capital requirements for investors
• Tax strategies, including 1031 exchanges and Roth conversions
• Due diligence and questions to ask potential sponsors
• Expected returns and cash flow mechanics
• Importance of direct ownership and flexibility in exiting investments
• Use cases for dentists and high-income earners looking for passive income

Welcome to Beyond Bite Wings, the business side of dentistry, brought to you by Edwards and Associates PC. Join us as we discuss how to build your dental practice, optimize your income, and plan for your future. This podcast is distributed with the understanding that Edwards and Associates PC is not rendering legal, accounting, or professional advice. Listeners should consult with their business advisors before acting on any of the information that is shared. At Edwards and Associates PC, our business is the business of dentistry. For help or more information, visit our website at eandassociates.com.

Hello and welcome to another episode of Beyond Bite Wings. I'm your host Ash, and in today's episode we have a very special guest. His name is Taylor Black, he's with Eckert Enterprises. In fact, we're doing our recording in right here at the SWDC show. Now, Taylor and I, we've known each other for a while, and I decided, you know what, let's actually have him on the show and talk a little bit about the industry he's from and see if our listeners who are interested in this industry to learn more. Right. So without further ado, Taylor, how's it going?

Good. Thanks for having me, Ashur. It's great to meet you and glad to be a part of this podcast.

Perfect. Yeah. So talk to our listeners a little bit about Eckerd Enterprises. And what you guys do and what your expertise is in and how they could benefit from it.

Yeah, absolutely. So Troy Eckert, again, he's been in business for 41 years. He started his career off drilling wells, you know, the kind of the black eye of the oil and gas industry, right? You heard a lot about dry holes, loss of capital, you know, Ponzi schemes, the whole 9 yards. That's kind of where we set ourselves apart because he has over 4 decades of experience, has drilled thousands of wells. And we pride ourselves on transparency, track record, and direct ownership of those assets. So fast forward to about 7, 8 years ago, he decided to kind of peel off what he was doing in raising money for other capital providers and operators. He decided to do it himself. So like I said, to date, we have about $1.5 billion of assets.

All that is in the mineral rights space, which is for your passive income, and then also drilling. So mineral rights is kind of our bread and butter. That's going to be like your real estate, right?

Mm-hmm.

So passive income, Think of a rental income. It's all paid for by billion-dollar operators like Exxon, Chevron, Diamondback. They're paying you a proportional share of every drop and molecule of gas and oil that's produced on your asset. That costs $0 for you except for the acquisition cost. So very passive mailbox money is kind of the way I usually describe it to my clients. And then you got to the other side of the business, which is your exploration production, where the tax write-offs come in place. But we don't really say write-offs because a tax write-off really means you lost money, right? We're not in the business to lose money. We're in the business for tax deferments, right? To make your money in the long run.

So yes, it's very lucrative in that case. We can kind of get a deep dive on both assets. Be happy to explain both and you can go forward.

Okay, perfect. Well, you know, let's start with oil and gas, right? Why should one consider investing in this industry?

Yeah, that's a good question, Ash. So most of my clients who I talk to, You know, they're looking for alternative assets outside of the stock market, outside of the S&P 500, outside of real traditional real estate, but they don't really know what they don't know, right? So when you look at the inflation, look at like what hedges against inflation, oil and gas is there. It's been there for 100 years. With the stock market, everyone's like, oh, it's ramping up, ramping up. It just, it keeps climbing, climbing, climbing until what? It doesn't, right? Look at '08 crash, Black Monday. In less than a day, the stock market crashed in half, right?

Mm-hmm.

It can happen at a drop of a hat. And we kind of see that kind of tipping over in our industry. You kind of see that that might happen soon, right? We hear about it all in the news. But one thing that really stays consistent is oil and gas. Consistent returns. It's a commodity that everyone needs on a daily basis. Unless you're butt naked on a country road with no cell phone or clothes on or anything, you need a drop of oil and gas to survive in this world. Air conditioning, even Tesla drivers.

That's where your energy comes from is from natural gas. The number one provider of electricity is natural gas. It's abundant and it's cheap, right? So, one of our clients who are looking for alternatives outside the stock market, I said, look at oil and gas as a cash flow asset. It's every month, you're ahead. It's basically triple net lease. The mineral owners get paid first and then all the work is done on the operator side. So there's no headaches, no toilets, no tenants, no cash calls. There is nothing but just monthly passive income, which a lot of our dentists and other physicians really are striving for as they look towards retirement, right?

Mm-hmm.

So, you know, like my father-in-law, who's a dentist here in the crowd, he actually brought me on to Eckerd, you know, about 4 years ago. I was an existing client. I wrote my first check with Eckerd before I became an employee. But, you know, he looked at it like, I'm looking to retire at 65. How do I replace the income I'm having now as a practice owner and without having the headaches of HR and benefits and, you know, dealing with the day-to-day ordering materials, you know, this and that, it really can get cumbersome. And he really wanted to have an asset class that's going to provide him cash flow to sustain life as is without having to dip back into his pockets, right?

Right.

So while life outside the chair, that's really built his entire career to this point in time where now he is cash flowing to a point where he can retire. And not have to worry about where are the next checks coming from.

Right. Okay, that makes sense. So it's— and that's the thing, right? A lot of people, when they're financially planning their life and they're looking at various revenue streams, lucrative one is an owner-absentee one. And this oil and gas is one of those.

Right. Absolutely. Absolutely. And you know the deal, like I have a lot of family friends and also clients that are heavy in real estate. Well, they're taking all the appreciation that they have grown over the last 5, 10, 15, 20 years because it's been a frothy market, and taking these homes, these single-family homes or apartment buildings they have ownership in, and actually doing a 1031 exchange into oil and gas mineral rights. They're not losing out on the monthly income on the, the rental, but they're not paying the capital gains that incurred on the sale of a real estate property. So, uh, we've been seeing a lot of that coming through just for that passive income and just A more stable income source than the S&P 500 or even like T-bills or anything like that. So something outside of the traditional market.

Okay. Now let's also talk about the entry point for oil and gas, right? Because sometimes when we hear oil and gas, we're thinking of the show Dallas or, you know, things like that. We're like, oh, you need to— yeah, exactly. A landman or you need to have tons of money to even consider this industry.

Yeah, you're exactly right. I mean, honestly, when we started about 7 years ago, It took about $10 to $15 million to get your foot in the door. Nowadays, it can take over $100 million to really get an asset that's worth buying, right? So, the aggregation of capital is what's needed. And so, that's what we do best at Eckert. We aggregate capital with our 3,000, 3,500 clients. We ask them, okay, hey, we're going to go, we're buying this asset. Who wants to buy it with us, right?

Mm-hmm.

So, most of the time though, we already own the asset. Now, it's like we sell a portion of it to our clients. We rinse and repeat that income over and over, go and buy more assets, uh, throughout the year. But, uh, yeah, it definitely takes a very large financial, uh, burden to get started in this industry. And that's where we kind of get down to the, the individual investor who has the chance to participate at $100,000, $200,000, $500,000 at a time versus the whole $150 million.

So the question is, if, if you're looking at a project where there are potentially 35 investors interested in buying per piece. I guess what I'm wanting to know is, is the amount— I mean, it's still a huge chunk, but is it still a reasonable amount where I feel— I would feel like, okay, you know what, out of my entire range of investments, this is still a smaller chunk. I'm not putting all my eggs in one basket.

I mean, it kind of depends on which asset class you're looking at, I would say. But in the grand scheme of things, I would say Yes, it'll be a cornerstone of your portfolio. Absolutely. Once you get in the know what's going on and see the cash flow, see the tax benefits, because both sides, right? 2 different dollars. Like we were talking about before the show, it's like a lot of our clients are utilizing their IRA funds to go in the mineral space because first off, you can't touch it until you're 59 and a half or 72 or 73, whenever you can take the RMDs. And then the Roth conversion strategy. So 2 different buckets of money it's coming from.

Right.

And then you got the working interest. So the drilling the wells where you get that tax deduction, which is all your active capital, right? So yeah, I would say our clients are really putting it into a position where their main portfolio is not oil and gas per se, but they're starting to lean towards that because other asset classes are not performing to what the oil and gas industry is doing.

Right, consistently.

So I mean, look at the war, right? It really has shined a light on we need as a world oil and gas. The Strait of Hormuz, the other strait, once it shuts down, guess what? Spec'd up to $110, $120 a barrel. Well, everyone's feeling at the gas pump nowadays, right? We're out there spraying gasoline on the ground saying we love this because we're making a lot of money because we're owners, right? We're owners of the asset. So we're not just consumers of it, we're actually owners, which really sets us apart in this industry. So that's kind of what we see on our end with our clients.

Yeah. Let's also talk a little bit about distributing the risks. Like I know earlier on a phone call, we once talked about this where, you know, when you guys set up a package, it's not just with one prospect.

Right.

You mix it up. So the risk is—

Absolutely. Absolutely. I mean, so each well we drill now, it's all horizontal drilling, right? You're not taking, uh, doing any verticals or doing any kind of reworks. These are brand new $10 million plus wells, each single one. So we take a package, call it 5 different wells in different areas. You have a proportional share of each one of those wells at your, whatever your dollar amount you allocate. So it's $50 million, you do $500,000, you own that, what, 1%, whatever the number is, right? of each well. So it definitely spreads out your risk.

Now, if one well does fantastic, well, great. But if one is a little slower than the others, that's okay. You have other ones in your portfolio to outweigh any kind of slow performance. When you're drilling wells, you're going 2 miles into Mother Earth. The pressure down there, things can happen. Really, the risk nowadays with the liability, any kind of risk of loss of capital, is not where is it a dry hole.

Right.

It's, is it economical because of the mechanicals of it. Did we twist off a bit? Did I overpay for the asset? I see so many prospectuses of other oil companies that they— you do reverse math and you're paying $40 million for one well. That's uneconomical from the very beginning.

That's right.

Yes, you'll get distributions. You'll never pay out. A well's only going to make 2, 3, maybe 4x in its lifetime. So if you're paying $40 million for one well, there's no way you make your money back. So it's really about the who in this industry, who you're going to go with, and then really, do they have a track record? Do they have— they show you the AFE, which is the line item budget of that well, and do they have geologists and engineers on staff? Are they all consultants? So, you know, we provide all that stuff here at our firm, but, you know, it is an industry that has a black eye, like I said before, because of that. That's why we kind of set ourselves apart. That's why I'm blessed to be on the show to kind of tell you about what we do.

Okay. Yeah. Let's talk a little bit more on that, right? So what are we seeing? Because sometimes whenever people hear oil and gas, like, hey, these people, they're in that business, there's always that little gasp. Why is that? And then how do you guys let your people know that no, we're not one of them?

Right. Yeah, absolutely. But one thing is we have our own proprietary app, so you can download our app and it has all the production, daily production of the wells. Number 2 is that we provide transparency galore. We send you track record, we send you daily reports of the wells. We actually take you to the field and go see them with about 100 to 150 of our clients and go stand on the rig that you have ownership in. And you look at it and you meet the superintendent, you meet the people drilling your wells and taking good care of a $10 million asset. So we do these in-person field trips with our clients.

We have monthly field trips that we go as well outside of that. But we also hold conferences. We actually right now we're on a round the US tour. We've gone about 20 cities in about 20 days going face to face to our clients, getting them all in the same room, people who are not clients and people who are clients, and let them collaborate and tell them what their story is of what they have been seeing with Eckerd. I know we pride ourselves on transparency is number one, but again, another thing is direct ownership. You own that asset outright, which is very different in this world. So you don't get a K-1 like we talked about earlier. It's a 1099 when you get the income.

So it really puts it in perspective because you own the asset. If Eckerd's off the face of the earth tomorrow, you have that purchase sale agreement saying you own the asset. with or without us there. We just manage it on your behalf because we're the oil company. We know what to do. We're negotiating the terms and negotiating the deals with the suppliers, the whole 9 yards. You're just benefiting from us because we're the ones negotiating on your behalf. So that's kind of what's really—

So let's also talk a little more about the direct ownership because you're right, that's what sets you guys apart, right?

Correct.

So let our listeners know How it's done traditionally.

Yep.

Right?

And then why your way can be more beneficial.

Yeah, so traditionally what you see is where you are a general partner and then you're converted to a limited partner and you get a K-1, right? So after a year you convert from a GP to LP because the liability. Well, let me tell you this, Troy's been drilling wells for 41 years. He's had people unfortunately pass away through just different accidents. Rigs blow up. He had a rig blow up twice in a row. It's never made it past the individual or the operator insurance, that claim. And everyone, every service provider that steps foot on that pad site has multimillion-dollar insurance policies in place to offset in case something does happen. We had someone unfortunately pass away on our rig.

It never— our clients never knew because the insurance always took care of it, right? Things happen. It is the name of the business, right?

Yeah.

So the liability side is never an issue for us. It's never made it to the individual investor. Look at the BP spill in the Gulf. It was all taken care of by insurance, right? There's tons of different layers of insurance and LLCs put in place. But I know, me personally, I use a single-member LLC to keep it separate from my personal estate.

Right.

So there's different ways to do it. So on the liability side, it's never an issue, but a lot of people like the GP— like they do the GPLP for that liability insurance. they also have a document an inch thick. Well, the thicker the document, the more they're protecting themselves.

That's right.

I've seen documents where you can't go after the sponsor for over-promotion. You can't do anything. You don't even know the wells you drilled, right? So each well has what they call API. It's basically a Social Security number of the well. We provide that to you. Other sponsors, we've had some clients ask that for other sponsors and like, Wait, why are you asking that? No one's ever asked me for an API number, AFE, in, in 10 years of us just doing this. Because they're doing their due diligence, right? Making sure that they know that what they're buying is real and legit. Because if it's, if it's a GPLP, you're part of a company, you're not part of an asset.

That's right. And then let's also talk about the exit strategy. Let's say the investor is, you know, planning things out with his attorney. How does this look more lucrative to them?

So with direct ownership, you can actually sell at any point in time. And with the direct ownership, you can either 1031 out of a working interest program into traditional real estate, right? So with the direct ownership, it gives you the flexibility of exiting at any point in time, not waiting for the GP or general partners to do that on your behalf.

Awesome. Yeah, that's fantastic. All right. Now, is there anything else you would like our listeners to know about this industry, this investment?

Yeah, absolutely. So, I mean, we kind of touched on the working interest, which is where you get that tax deduction. Everyone preaches tax deduction, tax deduction. Yes, it's 100% tax deduction because of the big beautiful bill that Trump passed. It accelerated the tangibles that were usually sunset after 5 years, you know, depreciate it. So it's 100% tax write-off year 1. But don't fall for that, right? Tax deduction is great, but a tax deduction with a dry hole is the same tax deduction as a great well, right? You want great wells, you want cash flow, right?

Mm-hmm.

You want to, you want to make back the initial investment so you can redeploy, redeploy, redeploy over and over and over again. You don't want to have, uh, just a, a bandaid to fix a problem for one year. You want to build true wealth with this asset, right? So that's where we, we're really preach to our clients and educate them on— it's not just a one-time fix. This is an asset class in itself and an investment, but tax benefit— it has tax benefits. Don't do it for the tax benefits because that was how you kind of get yourself in a bad position, right?

But they can always talk to their CPA about it.

Oh yeah, absolutely. Talk to your CPA, your financial, uh, you know, advisor, whoever else, your lawyer, uh, before making investment decisions. Great. Uh, you know, read through the documents. But always ask the due diligence questions. Track record, do they have any felonies, how long they've been doing it, do they have API numbers, do you have AFEs, can you see the line item budget, who's the team? There's a laundry list of items you can ask to really protect yourself to make sure you're getting into the right program with the right person. Because again, it's not saying— it's not what the asset, it's who the asset. Same thing with multifamily, same thing with real estate.

Right.

Same thing with every asset class you can imagine. On the alternative space, it's not about what, it's about who.

That's right. That's right. And Troy's been doing it for 40-plus years.

Correct.

So he's got great credibility out there.

Yeah, absolutely. So, and then we touched a little bit on the mineral rights side, and that's kind of our passive play, right? And I'd love to go into that in more detail if you don't mind.

No, absolutely.

Yeah. So mineral rights are very on the opposite side of the working interest. So working interest participants get about 75% of the revenue. So for every dollar, 75 cents is split up between the working interest owners. On the flip side, the other 20, 25%, whatever it is, goes to the mineral right owners. You're the landlord, you're leasing the land to the oil companies, right?

Mm-hmm.

So at the— through that lease agreement, the operators are taking full responsibility to develop your property. So it doesn't matter if there's any kind of spills, issues happen, the operator's at 100% liability. You as a mineral right owner, you're just receiving monthly income generated every drop of oil and gas that comes out from those straws that they keep drilling on your property. Now, it goes down to where, right? You gotta make sure we're buying the right areas, 'cause you don't wanna buy— there's mineral rights right under our feet is the Barnett Shale, the most highly dense— density natural gas reservoir in the United States. But it's dry gas, and we're sitting in downtown Dallas. You think they're gonna have a rig out here drilling? Absolutely not, right?

Right.

Excuse me, but that's where, that's where Troy's kind of, uh, started out his career is here in the Barnett Shale and some other down in Austin Chalk. But you got to know where the mineral rights are. Every piece of property that you buy has mineral rights, but does it have oil and gas content or any kind of fossil fuels or any, anything like that nature? Uh, you've got to know what you're buying. So that's where our expertise comes into play. Uh, we own, uh, probably over 100,000 acres of minerals in Oklahoma, Texas and in the Bakken up in North Dakota, and we're cash flowing consistently month after month after month. Every single month I get a check in the mail or in my direct deposit of the minerals and the production that's going from the wells that I have ownership in. But I don't— I will never receive a single bill, right? The oil company is taking on all the liabilities. So on this middle right side are my father-in-law— again, I'm bringing up an example—

example.

No, but, uh, you know, it's great for your self-directed IRA. So a lot of, you know, high-income earners are looking for ways to, as they get towards the retirement years, how do I get my IRA or 401 to a Roth without having that tax liability of the, of dollar for dollar, right? Because the Roth conversion is a thing. Well, when with oil and gas and mineral rights, you can actually do a Roth conversion with your traditional IRA to a Roth. We're seeing discounts in here from 40 to 70% on a single package, meaning you could convert $1 million in your IRA and only pay taxes on $300,000 or $400,000 of it at the end of the day. Now you don't have RMDs. You can have tax-free income forever until you pass away, obviously. But you're not having that— you don't pay taxes later down the line. You already paid enough taxes throughout your career.

Why would you want to continue to pay taxes after the fact, right? If you look at the taxes, that you're going to pay in the future, you just worked probably 20 years of your career for free. You're giving it to the government. Why not do it now if you have the financial capability to pay the taxes now, not later? The only taxes— we're how many trillions in debt? It's only going to go up.

Yeah.

They're going to have to tax us. So the wealthy is going to pay 37%, 42%. It's only going to go up, man. Look, with Obama, it was over 40%. I mean, it's pretty— and then you tap into estate tax too. California, they're almost at 50% in some of those. It's crazy. So they're protecting their assets with mineral rights because it's tangible.

You can see it, touch it, kick it. Yes, it's underground, I get it, but they're coming out. It's consumable every single day, right? Just think about like with toothpaste. You continuously have to buy toothpaste. Everyone needs it, mostly. Hopefully you use it, right?

Right.

It's a consumable. It'll never be used again. Same with oil and gas, right? It'll always be found where it's always been found. So that's why we are buying in areas where it's being fully developed. We're seeing cash flow from day one, and we'll continue to see more cash flow as more wells are developed on our assets at no charge to us.

So that's one strategy, and that sounds like a very sound strategy. But let's also talk a little bit about the ROI. How much can they expect to get back?

Yeah, so on the mineral side, for our personal track record, we're averaging around 10.5% to 12% per year. on our minerals. Uh, you know, it's, it's everyone's different, right? Each package different, different areas, different commodity prices play a big factor in that, right? So, and the past 3 years when it was sub-$70, obviously some of our packages kind of didn't see the ROI bust that we thought would happen. Uh, but now it's $180, $190 a barrel, we're starting to see that ramp back up because we're getting paid for spot pricing. Uh, so, and then working interest, again, you got 20, 20% go to the Mineral owners, you got 75% going to the working interest owners. The working interest owners, we're averaging around 30, 33% annualized on that. It's front-loaded, right? The first 3 or 4 years, kind of see your full capital back in that first 4 years of production, and then it does taper off. But these wells will last for 25 to 50 years, so you get your full capital back first 3 or 4 years, and then it's just— there's positive cash flow after that, plus that initial tax deduction up front.

Okay, great. And then you said the check they receive in the mail or the direct deposit, that's after expenses, right?

Correct, yes, net.

So there's no bill that they—

Yeah, so you'll be taxed on, uh, on the working interest as ordinary income, right? So, but you do get 15% depletion allowance on it. So if you make $10,000 that year, you're only taxed on $8,500 of it, right? So there's a little bit of tax, uh, strategy in there, uh, which is why a lot of our clients use that IRA for the minerals. You do get that deduction up front for the mineral side as well, but it's really advantageous for your IRA.

Okay. And the ROI, that percentage that you just gave me, is the net?

That's cash on cash, correct.

Yeah.

Yeah. Okay.

Yeah.

That's net. Absolutely. And then pay your taxes, of course, on top of that. So it's depending on where your taxes, you know, where you live, it depends on that. But—

So it's a great alternative investment option, especially when you're thinking about diversifying your portfolio.

Absolutely. It hedges against other I mean, other assets, right? I mean, you got to have a little bit of everything. Not saying put all your assets in oil and gas, but as the stock market goes up, well, you can hedge it against the oil might go down, but vice versa, right?

Spread your risk.

Look at what happened in '08. Oil went to $146 a barrel. Well, your stock market got cut in half. So you have assets that complement what's going on in the world, and it will help you hedge against any kind of issues. You're in a winning circle. So it's just another asset or tool in your tool belt when it looks at your overall portfolio.

Sounds good. Well, thank you so much again, Taylor, for being on the show. This was great information. I learned a lot. I'm sure our listeners learned a lot.

Absolutely. Thank you, Ashraf, so much for having me. Your listeners can go to our YouTube channel, Ekre Enterprises on YouTube. We have a lot of information. Troy has done hours and hours of education there. You can go to our website, EckerdEnterprises.com, or look at our app, Eckerd Insight, and you can download that. And, you know, another thing I want to touch on too, Ash, before we leave is that I'm head of the wealth department here at Eckerd. We are not commission-based one bit.

So it doesn't matter if we have a $100,000 investment, a $50,000, a $1 million, we get the same paycheck every 2 weeks. So we're here to help you build a legacy and a cornerstone of your portfolio. We're not here to pad our own pockets. We're here to help you build a— Build wealth for you and your family.

Perfect. That's excellent. Thank you for mentioning that.

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