Q. What is the group’s objective?
Bill Weege: Our primary objective is to manage oil, gas and other mineral assets that clients have either in trust or in agency accounts. This includes everything from collecting revenues, paying operating expenses and providing monthly reporting to coordinating environmental assessment of working interest properties and evaluating and negotiating leases. We also handle farmouts, gas purchase contracts and other industry agreements, as well as valuing mineral assets for sales and tax purposes.
John Couzens: It’s important to understand our role in the context that Northern Trust’s client relationships include helping families manage their balance sheets. Many of our clients have unique assets such as investments in oil and gas properties, and our experience is that clients value our support and guidance. We tailor our responsibility to clients’ values and priorities by developing personal relationships with clients, and continually considering and doing what is in their best interest. We work to understand each client situation and stand prepared to navigate various market cycles and economic conditions. Our depth of resources and specialized skills are critical to successfully dealing with the complexities and technical requirements of the oil and gas business.
Bill Weege is manager of the Oil, Gas and Minerals Management Division based in Dallas. Bill earned an M.S. in Management and Administrative Sciences from the University of Texas at Dallas and a B.S. in Petroleum Engineering from the Colorado School of Mines. He is a Registered Professional Engineer in Colorado and California.
Q. What makes the oil and gas team at Northern Trust different?
Weege: Our practice is staffed with experienced oil field professionals, including a geologist and a registered professional engineer. The team currently manages more than 16,000 properties. People are often surprised when they get a call from a bank with professionals who are so well-versed in the industry. Our experts have all worked in the industry, so we understand how it works, we know the risk and how to manage it, and we do that on behalf of our clients to maximize the value for them. So it’s a very different experience than with most other banks.
Q. What strategies do you use to manage these assets?
Couzens: We manage day-to-day operations of mineral assets similar to a small production company, yet with the industry perspective that comes with the scope and scale of a larger organization and a multidiscipline team. We work with a wide variety of types of clients — from individuals to families to family offices. Sometimes these assets are held in conjunction with privately held businesses or family foundations. As part of managing these specialized assets, we develop personal relationships with the individuals or families who own these properties. We strive to understand their estate planning goals, the wealth transfer techniques they are using and the investment strategies they have in place to help make decisions about capital resource allocations, development opportunities or divestitures. We look for opportunities to facilitate growth with individual family members as well as a multi- generation understanding of these family assets.
John M. Couzens is the managing director of Northern Trust‘s Specialty Assets and Asset Advisory Services Group, which is responsible for clients‘ non-financial assets and unregistered securities. The Group has 65 professional staff and over $6 billion in client assets, mostly held in trust. John holds an M.B.A. from the University of Chicago and a B.A. with Honors from Villanova University.
Q. How does market volatility affect these types of assets?
Weege: Traditionally, oil and gas prices have a lot of volatility, but these assets also frequently serve to balance volatility in more traditional investments, such as stocks and bonds. While the volatility we’ve experienced in the stock markets over the past two years is unprecedented, it has validated the value of hard assets like oil and gas for families that are comfortable investing in these types of assets. These are assets that won’t disappear. Even if your property is not producing at its full potential, it still has economic value. With a stock investment, the company could go bankrupt, leaving your investment worthless.
Q. Can you share any specific examples of how clients have benefited from partnering with you?
Couzens: Recently, a California woman’s husband died unexpectedly, and as a couple, they had a long history of investing in oil and gas. They both knew the business and the properties very well. When he died, she was charged with the responsibility alone. One day, she was hit with a $200,000 request for capital from a major oil company on a development well. It was at that point that she realized she wasn’t equipped to evaluate the request. Fortunately, she was familiar with Northern Trust’s expertise, so she called us to help. We entered into an advisory relationship, and today we act as her advisor and help her evaluate these types of situations as they come up with her properties.
Q. How else have you helped families manage these assets?
Weege: We recently partnered with a family of five brothers who were managing these assets independently, and we brought them all together as one. To maximize their return and to make the ownership of these assets simpler, we recommended putting them into a limited liability company. This way, the family would have a smoother transition after the death of any family members and all of the assets wouldn’t need to be retitled. We’re always thinking of ways to assist families now, so that when these properties pass on in the future, they don’t have to spend additional funds or dilute the assets.
Couzens: When you think about our main mission as an organization, in terms of understanding a family’s priorities and goals over multiple generations, it falls into three buckets: evaluating and planning, growing and managing, and protecting and transferring. And this is what Bill’s talking about. Having an intimate understanding of the assets and how the ownership is structured is critical to providing that kind of advice and guidance. And that’s what we do best.