Tulsa Co Begins 3rd Venture To Get Oil, Gas Assets For Resale
January 08 2009 - 6:18PM
Dow Jones News
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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