QuikTrip is probing into other areas outside of its convenience store forte with its first venture into the energy sector.

 The company invested in a minerals and royalties portfolio in the first quarter of 2025, focusing on assets that generate consistent cash flows with limited downside risk and no capex exposure.

QuikTrip evaluated multiple working interest opportunities, including in midstream and non-operated assets, before determining that royalties offered the best risk-adjusted returns for their entry into the energy industry.

QuikTrip's investment strategy centers around its duration advantage with a 15- to 25-year hold period. This extended timeline allows the company to ride out volatility rather than being forced to liquidate during volatile 12- to 18-month periods that could kill investment returns.

The company is continuing to evaluate additional energy investments case-by-case, seeing opportunities driven by current power demand dynamics and natural gas market conditions across upstream, midstream and other energy sectors.

James Peachey, QuikTrip’s corporate development senior associate, delves into the company’s further valuation strategy with Oil and Gas Investor’s Deon Daugherty in this Hart Energy interview. 

Hi, I am Deon Daugherty, editor-in-chief of Oil and Gas Investor, and we are here in Houston today for the Energy Capital Conference. I have with me James Peachey. He is the corporate development senior associate for QuikTrip Corp. Talking to us about family offices today. So James, let's begin with you guys. What has interested QuikTrip in starting to invest in energy?

James Peachey: Well, our group, the corporate development group, Ross McLaughlin leads that group and I help lead it, and we have been tasked with really deploying any underutilized capital that we can't put into the convenience store business and finding places for it to really create wealth for the shareholders. And as we've started to look at ways we could put this capital to work, one of the areas that came up was energy. Really it came by because there's been a lot of folks leaving the space for non-economic reasons, which has driven down valuations. Those valuations., for someone like us who has very patient capital, we don't need to return dry powder to LPs [limited partners]. We would prefer the 10, 15, 20, 25-year investments. And so getting entry valuations that will allow us to get better cash on cash returns is really attractive.

DD: So are there particular segments of the industry that are most interesting? Oil, gas, services, midstream, where are you wanting to deploy your capital?

JP: That's a great question. So we've made one energy investment to date and that was in a minerals and royalties portfolio. We did that alongside some great partners and the reason we really enjoyed that investment and thought it was a great fit for our first energy investment was because it has really strong cash flowing assets. There's limited downside and it's so diverse that we feel that even if on our conservative underwriting in our models gas and oil goes flat, whatever it is, $2.50/[MMBtu] and $50/[bbl], we're still going to get a very solid yield from the investment. It's a long-term investment for us as well. But I think that being our first investment into energy, we looked at numerous other areas. We looked at midstream, we looked at some working interest non-op, and what we felt and what our guidance was after we talked about this internally was the risk reward just felt like royalties was a great way to enter in.

Not having capex exposure and not having additional risk, even though the returns may be better on paper. But I think that there's definitely an opportunity for us to make numerous additional energy investments over the next few years. But that's kind of to be determined and we'll evaluate them on a kind of buy/investment basis. We don't have a goal to say that we're going to deploy X amount of capital into upstream or midstream, but I think that given the dynamics of the power demand right now and natural gas opportunities, I think there's going to be some great opportunities that we're going to look at in older sectors.

DD: Okay. And when you said minerals and royalties, that doesn't surprise me at all. That's been a hugely hot market over the last couple of years, so that makes a lot of sense. And the little to no downside on it.

JP: Yep.

DD: So you've made one capital investment for oil and gas. When did you make that?

JP: We made that earlier. That closed in 1Q of this year.

DD: Okay. So you closed just as this volatility spree was happening, how did family offices, how does your firm in particular view volatility and the risk that comes out of that?

JP: So I think it speaks to our advantage, which the advantage we have that I mentioned a couple of times today was duration. If you have a 5-year return period and you know that at the end of that five to seven years you are having to liquidate and return capital to your LPs and you have a down period or a massive volatile period of 12-to-18 months, that could kill the investment returns. But if you have a 15-to-20-year hold period, then the ability to ride out the volatility is part the reason we don't make public investments. You are always watching the market and the markets turn on a media release or if something with tariffs happens, it can change the market 300 basis points either way. But I think that for us, the volatility is something that we expect. I mean the volatility in the oil and gas market is something that's been there for years, it's not going to change. But like I said earlier, trying to time the market, that hall of fame is empty. So by being able to say whatever point we enter in at, we have a 15 to 20 to 25-year period. So that volatility, we're not too concerned about it.

DD: Okay, that makes sense. So taking the long view, if you will, so as a private investor entering the energy space, what sort of common misconceptions have you run across?

JP: So a couple of things really come to mind. Number one I think is the misconception that family offices can move quickly. I think that there's a lot of folks that do move quickly, but with QuikTrip, we're investing on the company's balance sheet and we have a family of 30,000 employees.

So we're always going to do the right thing for QuikTrip, we're going to focus long-term. And when we think through that, when we have a deal brought to us and it's from someone who we've just met or met a couple months ago, we aren't built to be transactional. We want to truly get to know folks. We want to get to know the partners who we're going to be investing alongside, and that takes months and years. That's probably the first misconception that family offices can move quickly. Number two is that family offices often think about preservation of capital and for us we're targeting growth. So we are looking for net 15% returns, which you say to that, well, how did you get that out of a royalties deal? Well, again, I'm not saying that there's numerous opportunities out there, but the ones that we do find that do fit that kind of risk-adjusted return portfolio profile, we're going to be all over.

But they're the two biggest misconceptions. I think the speed at which family offices can move, and it's obviously different if there's a partner who we've had a relationship with for three, four or five years and they bring us a deal that they're going to be in this strong alignment upfront. But then also I think having the strong minority protections negotiated upfront and having that alignment before you go into the deal. That's another thing that some people may think family offices want to be passive, but we may want to LPAC seat, we may want a board seat and necessarily it's just to learn. We want to be able to be present, understand the decisions that are being made, not that we could necessarily bring any strategic value, but we would like to think that in a few years after having sat through board meetings and understood the industry and understand why the decisions are being made, we could hopefully start to grasp just a little bit.

DD: Now that's excellent perspective. Thank you for that. And thank you for joining us today and giving us your time.

JP: You're welcome. Thank you very much for having me.

DD: Absolutely. And thank you for joining us, we hope to see you again soon.

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