The SCV Energy Fund 1 is a fund of Salazar Capital Ventures. Our Fund feeds into the $125 million KOPIII fund of our operating partner, King Operating Corp. Investing through Salazar Capital Ventures rather than directly in KOPIII gives you certain benefits, however. We enable a lower entry investment amount of $50K (vs. $200K) and our investors receive added waterfall equity in a 70/30 split compared to the main KOPIII fund entrants who typically receive a lesser 60/40 split.

At close, this third fund of King Operating Corp., KOPIII, will be $125 million. The SCV Energy Fund 1 (legal name: SCV-King Operating Oil & Gas LLC) feeds into KOPIII and is uncapped as long as subscriptions remain available.

We like the fact that the founder of King Operating, Jay R. Young, structured his oil & gas investment more like a real estate investment (though without the leverage), acquiring, developing, then divesting the assets as soon as possible to return capital to investors. This is a more straightforward, and diversified, oil & gas investment approach. Like typical real estate offerings, King has 20% of the equity as GP with an 80/20 split, wherein the LP investors (like our Salazar Capital Ventures’ investors) receive 80%. Once all investors have received 100% of their capital back, the split, or waterfall, shifts. Usually, the King Operating Fund waterfalls to a 60/40 split, in favor of the investor; however, by passing on fees and promoting incentives, we at Salazar Capital Ventures negotiated an increased equity amount to 70/30 for ourselves and our co-investors.

Not at all. Renewables currently make up only 13% of the world’s energy consumption, although they are increasing as a percentage of all sources. Demand for oil and natural gas is increasing worldwide, as forecast by OPEC+, ExxonMobile, EIA. Inflation additionally pushes prices higher. The state of the world and the decentralization of global trade are altering sources and uses. The US and other countries are looking inward to renewing manufacturing, and the AI revolution and data center consumption create demand in developed countries for increased energy. Over the past decade, the US has made strides in generating and supplying natural gas to the point that we are now major exporters. As countries continue to look inward and become more self-reliant, resource supply will likely create opportunities in many ways.

We’re not very concerned, since after all this is a diversified energy fund, ~40% oil, ~40% natural gas, and ~20% frac sand or oil field services, so the overall fund is not dependent on the prices of any one commodity. The average price over the last 20 years for a barrel of oil is $70. Although oil is currently in the low $60-65 range, Brent oil futures are favorable, while natural gas, including LNG demand futures are very strong. Management projections of oil price levels even at $50 or $60 boe, show a return of capital of greater than 2.5x to the investor.

We believe that oil and gas represents a unique investment opportunity at this moment in time. The current geopolitical landscape, inflationary pressures on the dollar, and new energy markets have created a favorable environment for this sector. With prices at attractive levels, and with the industry benefiting from both supply-demand dynamics and policy shifts, now is a favorable time to capture significant value in oil and gas assets.

This sector offers similar advantages to real estate in terms of revenue generation and tax benefits, especially when investing in operational, cash-flowing wells as opposed to speculative drilling. In addition, oil and gas investments are less reliant on leverage compared to other asset classes, which reduces the risks typically associated with interest rate fluctuations and banking pressures. In today’s market, this lower risk profile, combined with strong upside potential, makes oil and gas an attractive addition to a diversified investment strategy.

Given all of these factors, we see substantial opportunity to capitalize on the current pricing and momentum, positioning our investors to benefit from not only tax incentives, but also immediate cash flow and long-term growth.

Returns in the form of passive monthly income are a targeted minimum 9% cash flow (9-14%). From 2020-2024, the annual distribution was 8.8%. We firmly believe that combining existing actively producing wells with new sourcing will achieve close to a 3x return multiple based on history since inception. Commodity prices will determine long-term value, and given the near—and mid-term economic outlook, inflation is here for the foreseeable future.

Like the depreciation of RE assets, IDCs (intangible drilling costs) are tax deductible and can offset both cash flow and W2 income. The offering memorandum gives an example. These tax benefits are considered more impactful as the full benefits can be used against all W2 income (unlike real estate depreciation).

Absolutely none. We leave the oil & gas drilling to the professionals, while we take care of our investments and our investor community.

Generally speaking, sophisticated investors must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. To qualify as an accredited investor according to the SEC, at a minimum you must have earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, with a reasonable expectation of earning at least the same for the current year, or have a net worth over $1 million (excluding homestead), either alone or together with a spouse. Reference the SEC guidelines for a more detailed description. To find out if you are qualified under this definition, contact us.

We have followed them for several years. With any personal investment, we allow a period to see how markets and time change the investment vehicle or firm. During this time, we observed King Operating Corp to be of high caliber in many interactions and difficult operational situations. We have observed that they strive to take care of the investor, for instance, producing both K-1s and passive income checks ahead of schedule.

During 2020, COVID stopped the world, and logistics and the use of energy ground to a halt. This affected prices worldwide and stopped distributions. King Operating placed all investors into a new fund that grandfathered equity, unlike many firms of different sizes and scopes. By doing so, all those involved progressed to a 20% return with no loss.

This is not the case with this partnership, and we would not personally invest if this were the case.