Strawn’s familiarity with Appalachia, combined with his partnership with Phillip Thomas, inspired him to strike out on his own, and he founded Appalachian Mineral Partners with Thomas in 2012. Since then, the firm has closed on multiple funds. Strawn is “pleased with our funds’ performance both on an absolute basis and relative to other energy investments despite an extremely challenging environment over the past eight years,” he said.
Royalties versus operating
“The challenges that I witnessed on the private-equity (ownership) side and working at an operating business led me to seek out mineral rights. Drilling a single well takes a large coordinated effort, and a lot can go wrong. Many hurdles are in place: regulations from multiple agencies, landowners, contractors, employees, leases, right of way, marketing, cost overruns. That is one reason why we love royalties. There are no cost overruns after you purchase a property.
“However, we have had several challenges as mineral buyers at Appalachian Mineral Partners. Title is extremely challenging in Appalachia. We learned the hard way early on that outsourced title work is prone to mistakes. We now have our own highly talented, internal title team that we think is the best in the basin that triple checks every transaction before we close. This not only leads to airtight defensive title, but we can use their expertise to help source deals as well.”
“When Philip and I started the company, he was living in someone’s backhouse in Washington, Pennsylvania that happened to be Jimmy Buffet-themed. When I would come back to the Pittsburgh area, I would crash there, and that served as our makeshift office in the beginning. We didn’t really know how we were going to source acreage and capital at the time. I have fond memories of brainstorming over business strategy while a Cheeseburger in Paradise mural stared us down from the basement wall.”
“We’ve tried to shape the company to think long term, keep our reputation intact, treat people with respect and do the right thing. We may not always make the quick buck, but if we do things the right way, we should be successful in the long run.”
“Our primary short-term goals revolve around making sure we are investing in the best deals possible in our current vehicle.
“Our No. 1 long-term goal is for our investors to achieve outstanding risk-adjusted returns in every fund. We spend a lot of time focused on the downside risks. Buffet (Warren, not Jimmy) is over-quoted, but we love the Rule No. 1 ‘don’t lose money’ adage.”
Optimists and realists
“I’ve learned a tremendous amount from former bosses and colleagues as well as my partner, Philip. The partners of HM Capital and Caiman all had different styles from which I learned a ton. Caiman taught me the importance of pairing optimists with pessimists/realists. You need an optimist to have the guts to try something new, and you need the realists to figure out how to make it work while managing risk.”
Advice to young professionals
“Work long hours early in your career and read as much as you can. Also, don’t burn bridges. Treat everyone with respect. Not only is that the right thing to do, but it is also practical; someone who works for you one day could end up at a company you need to work with 10 years later.”
“You need an optimist to have the guts to try something new, and you need the realists to figure out how to make it work while managing risk.”