Assume a team of E&P executives with a few ideas and strong industry connections receives a $200-million commitment from an E&P-focused private-equity fund. The team assembles a large, unproved leasehold position at an average cost of $200 per acre and begins geological and geophysical (G&G) spending and later, exploratory drilling.

  Further assume a “home-run” scenario where reserves are proved up and a majority of the subject acreage is monetized at over $5,000 per acre. It is not out of the realm of possibility that the management group, which likely contributed ...