During 2004 through 2007 the RG Fund management focused on buying producing assets that were in low decline, stable, mature fields that had a long history of production to rely on. These assets were bought when oil prices ranged between $33-$40 per barrel. At the point of purchase, these assets were generating a 14% cash flow and were expected to recover the acquisition plus baked in development cost within seven years. Based on extensive due diligence led by our diverse technical team, our management team estimated production volumes could be increased by 25-35%. When factoring cash flow at those commodity prices, if successful, this production increase would generate a return as high as 20% which meant the principal would be returned through monthly cash flow over a period of sixty months or five years.
RG Fund has taken the above strategy of systematically increasing production and expanded its model to consider the fluctuation of commodity prices. Our management team’s direct investments have seen assets triple and quadruple in value. Although we cannot predict commodity prices, we can be prepared to act on them by either acquiring assets when there is an abundant supply, resulting in a downward price correction or divesting when demand creates a spread that results in what should be significant profitability.
RG Fund combines this approach by modeling a reinvestment strategy to drive compound returns that the assets are generating; therefore, attempting to achieve significant equity appreciation over the original investment basis.