Oct 5, 2026 · 53 min
Alejandro Yela weighs oil reserves against software risk
A Decade of Oil and Gas Investing in One Hour | Alejandro Yela
The episode connects commodity valuation, geopolitical exposure, and technology risk to a disciplined microcap-investing framework.
- 1Proven reserves provide a more grounded valuation base than probable or possible resources, but timing and recovery rates still matter.
- 2Extraction, refining, transportation, and oilfield services carry distinct commodity and geopolitical exposures across the energy chain.
- 3Computer Modeling Group offers strong cash flow and margins, yet organic declines and artificial intelligence challenge its valuation.
Don't miss
Yela explains why Computer Modeling Group’s strong cash generation and competitive position may not fully offset organic revenue declines and AI risk.
The brief
Alejandro Yela draws on a decade spanning oil-and-gas debt, restructuring, M&A, and operations to explain why broad investors need deep specialization for individual decisions.
His valuation framework starts with proven reserves, then discounts production timing and recovery rates; probable and possible reserves may add upside, but they weaken the analytical foundation.
Across extraction, refining, transportation, and oilfield services, commodity exposure changes sharply. Low-cost producers can survive downturns, while midstream assets trade on steadier cash flows and dividends.
Yela’s Computer Modeling Group thesis shifts the discussion from geology to software: strong margins, free cash flow, repurchases, and acquisition potential meet risks from organic decline and AI.
The broader conclusion favors select suppliers and information-driven microcaps over fully valued Canadian producers, whose returns can be reshaped by geopolitics, infrastructure, and dilution.
What was said on this episode
28 statements · 19 positive · 7 negative · 1 mixed · 1 neutral
Investors need sector specialization to make sound decisions and build conviction.
“when it comes to making decisions and building conviction, you need to become a specialist”
Listen at 6:39
Proven reserves are more reliable than probable or possible reserves.
“1P reserves are 90% guaranteed, 2P reserves are 50% guaranteed, and 3P reserves are almost never there.”
Listen at 8:18
A company’s value can be estimated from discounted 1P reserves per share.
“What you do is you take 1P reserves and you divide that by the number of shares, and that is the actual value of the company.”
Listen at 8:29
Low-cost oil producers can gain market share when higher-cost competitors go bankrupt.
“if you can produce at 40 and this thing is priced at 50, for example, and the oil is priced at 50, there's a lot of your competitors, your poor competitors who will go bankrupt.”
Listen at 11:45
Midstream pipeline businesses are largely insulated from commodity price movements.
“when you get to midstream, it's already irrelevant because you are a toll booth.”
Listen at 14:14
Midstream businesses command higher valuations because their cash flows are more predictable.
“It definitely carries a higher valuation because it's much more predictable.”
Listen at 14:45
Brazil has a history of expropriating oil infrastructure assets.
“In fact, Brazil is very famous for doing this.”
Listen at 16:22
Investors seeking Canadian oil opportunities should search for reserve assets.
“Search for reserves. That's basically it.”
Listen at 17:34
Computer Modeling Group has no real competitor in complex reservoir modeling.
“there's really no competitor when it comes to the complex side of things.”
Listen at 21:20
AI currently threatens Computer Modeling Group’s base software business.
“the base software right now is being threatened by AI.”
Listen at 22:38
AI commoditizes reservoir-modeling software pricing.
“the price of all of these softwares becomes a commodity again”
Listen at 24:21
Alejandro considers Computer Modeling Group undervalued.
“I think it's undervalued, obviously, otherwise I wouldn't have bought it”
Listen at 25:33
Alejandro targets a dynamic 15% free-cash-flow yield for investments.
“I have a threshold of a dynamic, very important word, dynamic 15% free cash flow yield.”
Listen at 26:23
Computer Modeling Group’s price could rise approximately 50% to reach present value.
“they would still need to climb about 50% from the current price approximately.”
Listen at 27:04
Computer Modeling Group has effectively no risk of becoming worthless.
“the risk of it going to zero is nonexistent in my opinion.”
Listen at 28:54
Continued share repurchases should increase Computer Modeling Group’s valuation.
“If they keep doing that, it's inevitable for them to be valued at a higher valuation than they are.”
Listen at 29:10
LNG Canada project timelines and deadlines are unpredictable.
“Their timelines and deadlines are just, uh, they're not predictable.”
Listen at 30:34
Canadian LNG export projects give gas producers more market options and pricing power.
“with these projects, that is no longer the case because you have more options.”
Listen at 32:24
Floating liquefaction vessels can accelerate LNG export development.
“you accelerate everything.”
Listen at 33:52
Investors should currently avoid Canadian oil companies.
“In Canada, I don't think you should buy anything in Canada at the moment.”
Listen at 35:12
OMS Energy has approximately $40 million enterprise value and $154 million cash, with no debt.
“their enterprise value is currently about $40 million and they have $154 million in cash with no debt.”
Listen at 36:21
Investors can identify oil producers likely to survive commodity cycles.
“you can probably predict the people who survive those cycles.”
Listen at 39:37
Companies unable to withstand a decade-long war may become irrelevant and dilute shareholders.
“they become irrelevant. They will be diluted and they will probably kill every shareholder in terms of like money-wise”
Listen at 41:32
Northern South American production could replace supply lost during prolonged conflict.
“the missing supply will effectively be supplied by the north part of South America.”
Listen at 41:55
The coffee business plans to reduce costs by approximately 10–20%.
“we're planning on executing effectively a cost reduction of about 10 to 20% through our own cost reduction.”
Listen at 45:28
Private-business returns are primarily created through long-term operational plans.
“the actual money is made long-term through a plan.”
Listen at 48:39
Many private-equity groups rely on leverage, margin extraction, and perceived-value increases.
“What they, what these groups do in general has more to do with levering things up, you know, squeezing margins, you know, increasing the perceived value.”
Listen at 48:42
Palantir’s proprietary information access creates a substantial competitive moat.
“The information these guys have access to creates a massive, massive moat.”
Listen at 52:04
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
Featuring
Ian Cassel
PetrobrasListen to the full episode and explore every guest, topic, and moment on PodLume.