Replies to This Discussion

Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on August 22, 2026 at 4:48

And a lot of infrastructure left over from SWN.

landownerPermalink Reply by Wymon Bares on August 22, 2026 at 4:51

Excerpts from Stone Ridge Asset Management Letter (Dec. 28, 2025)

 

“In 2023, amidst intense diligence for what ultimately became a $3 billion purchase of PDPsⁱⁱⁱ  in Arkansas’ Fayetteville Shale, we noticed that of the 860,000 acres included in the deal, 800,000 were covered with PDPs and 60,000 – all adjacent – were covered with grass. That’s a lot of undeveloped land.

“Why are there no drilling rigs here?”  

We decided to park our one major unanswered diligence question for the sake of efficiency, once convinced our PDP-only purchase could deliver our target returns.  

Two years later, after taking over operations of the 5,596 wells we purchased – and our internally reframed responsibility of powering the homes of four million American families – the question resurfaced. “Why are there no rigs here?”  

This time we could not shake it.

We learned that no one had drilled anything new for almost a decade, odd for a basin that size. A little stitious, we wondered, “Does treasure await?”  

We suspected the previous owner’s “denominator problem” could explain their lack of drilling. They were an enormous company. Any marginal improvements in Fayetteville, despite being potentially large in dollar terms, would likely not move the needle in ROE, their north star.  In contrast, Stone Ridge operates every day with a “no basis point left behind” mindset. One basis point is our north star.  And, to us, large dollars will always be large dollars.

We also learned that two important aspects of drilling changed in the past decade: technology^iv and cost. Completion – the act of getting a drilled well to the point that gas steadily comes out of the ground for commercial purposes – now benefits from better drills, smarter rigs, more powerful fleets, and advanced digital control systems. And following a version of Moore’s Law, the new and better technology continually costs a lot less. 

We decided to run a tightly controlled test program on our undeveloped land, drilling new wells, seeking fast, unbiased iterations, and updating – and hopefully tightening – the variance of our Bayesian prior – every day. Was there untapped gas under our 60,000 acres of grass? If so, where? If so, how much?  

Our approach was surgical. Two pads, five wells, disciplined design, unbiased data analysis, and adherence to the following mathematical identity.  

Drilling for natural gas ≡ searching for buried treasure in ancient rock

Though we did not shout “today’s the day” every morning during our Fayetteville testing, we did feel Fisher-like energy as our ignorance shrank. Less wrong. Even less wrong. Absolutely right.  

Eureka!  We found Fisher-like treasure.  

Composed of oil and gas, not gold and silver, our no-less-precious motherlode means that the $10 billion lifetime revenue we originally expected in Fayetteville now looks more like $15 billion. Discovering half an Atocha caused us to immediately shrink our priors in all seven U.S. basins we operate, a technical Bayesian statistical concept called “borrowing strength.” Our philosophy of probability theory, concretely applied to our Fayetteville test results, allowed us – with powerful practical efficiency – to know without knowing in the not-yet-tested basins. Less wrong.  

We are now in the process of learning as much as is known about drilling before tapping our AQ to push the limit “a little further than others” and get closer to what is knowable. Every day counts because there’s gold oil and gas in them thar hills. It is waiting.

• ‹ Previous
• 1
• 2
• 3
• Next ›
• Page