A team of energy veterans have raised more than $100 million for another round of oil and gas asset acquisitions despite low prices and an economy in recession.

Rich Talley, chief executive of Primary Natural Resources III, said the investment vehicle aims to purchase small companies exploiting conventional wells in Oklahoma and Texas. In five to 10 years, the company intends to sell these assets, which it will bundle together, for $500 million, Talley said Thursday.

The undertaking shows that even despite the credit crunch, some firms are looking to take advantage of plunging asset values. The current environment may provide an opening for Primary Natural Resources to buy distressed properties from "mom and pop" companies that have overextended themselves on debt.

"We will be looking for those types of (distressed) properties," Talley said in an interview. "To do one of these, we try not to rely on the price of oil and gas."

On Thursday, natural gas futures ended more than 4% lower settling at $5.583 a million British thermal units. Crude futures, which are down more than 70% from their highs, settled at $41.70 a barrel on the New York Mercantile Exchange.

Primary Natural Resources also wants to capitalize on the fact that many large independent hydrocarbons producers, like Chesapeake Energy Corp. (CHK), have announced plans to sell off conventional assets in order to fund non-conventional shale plays, Talley said. Non-conventional oil and gas requires expensive technology to be extracted from the ground.

Primary Natural Resources plans to target wells that can be modified so that oil or gas can come from a different region of the reservoir. They are also interested in wells that are favorable to enhanced oil recovery methods like carbon dioxide injection, which works when the gas expands in a reservoir pushing additional oil to a production to the hole, or water flooding, which removes oil residue left over from initial drilling.

The funding for the venture comes from Quantum Energy Partners IV, which is managed by a Houston-based investment firm that has more than $5 billion in assets under management.

Quantum put up $100 million with the option for more funding down the road, Talley said. He declined to say how much he and his partners have invested. Currently, Primary Resources is not seeking any more investors, Talley said.

Quantum approached Talley about a year and half ago looking to do business, he said.

"We like them and we're glad they like us," he said.

This is the third time Talley has undertaken such a venture. In September 2003, Newfield Exploration Company (NFX) acquired Primary Natural Resources I for nearly $91 million.

The move allowed Newfield to expand its holdings in the Anadarko basin of Oklahoma and North Texas. The landwas listed as having 64 billion cubic feet equivalent of proved natural gas reserves.

"Primary Natural Resources has concentrated assets that are an excellent fit with ours," Newfield Chief Executive David Trice said in a written statement at the time.

In July of 2008, Resolute Natural Resources, based in Denver, purchased Primary Natural Resources II for $180 million, Talley said.

"We take a couple of months off to catch our breath," Talley said.

-By Susan Daker, Dow Jones Newswires; (713) 547-9208; susan.daker@dowjones.com

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