AUSTIN—When oil is at $40 a barrel, little can raise operators’ hopes. There’s the faint glimmer of some $80 billion in private equity out there, but for many E&Ps the capital is out of reach.

Some see private equity as casting the production, ultimately deciding who still has the chops to play a pivotal role. At the recent Energy Capital Conference presented by Oil and Gas Investor, two operators who successfully raised capital in this downturn discussed how they handled the auditions so as to play a strong role in the oil industry today.

Frank D. Bracken III, CEO and managing director of LoneStar Resources LLC, came into a $100 million joint development agreement with IOG Capital LP last June with sufficient cash flow, solid preparation and an experienced team. He said LoneStar was able to “operate everything with a high working interest; that way we can control the timing, the quantity and the quality of capital expenditures.”

More than 50% of LoneStar’s oil is hedged at $77 this year, helping Bracken solve the “strategic disconnect between growth opportunities and liquidity preservation.” He aims to accomplish both goals by operating in LoneStar’s area of expertise—the Eagle Ford Shale.

A year ago, LoneStar identified a sizeable block of acreage in the Eagle Ford that was set to expire in 120 days. The company researched the offsetting wells “to get a feel for what the rocks would give us and what best practices would be” and contacted the current owner, a major oil company, to gauge interest in a farm-out.

Bracken and his team acted quickly after approval in May. They built an infrastructure by June and drilled and completed two 8,000-ft wells in July. They then fracture stimulated the wells in August and commenced production in September.

Full-length conference panel video: Frank D. Bracken III, CEO and managing director of LoneStar Resources LLC, and Parker Reese, president and CEO of American Resources Development LLC, deiscuss their successes in raising captial in this tough economic enviornment.

Using the IOG money on a drilling commitment earned LoneStar “a very nice additional acreage position in Gonzales County,” Bracken said. At present, the company is drilling two more wells in the county, and according to Bracken, “without that IOG money, that wouldn’t be possible.”

Bracken said he believes that a talented, experienced and cooperative team is more important than ever in executing his company’s business strategy and enabling success.

“I’m a banker; the strategy has always been returns, returns, returns and nothing else,” Bracken said.

He has been with the company since it was founded in 2012when oil prices were sky-high. Back then, “you didn’t have to be that good to make returns,” he noted. But in today’s environment, “your team is what’s distinguishing a lot of your returns.”

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Meanwhile, Parker Reese, president and CEO of American Resources Development LLC (Ameredev), gained $250 million in backing from EnCap Investments LP. Among other tactics to secure the funds, Ameredev used legwork to gain an advantage over the competition and maintain a capable team.

Ameredev plans to focus on an “acquire-and-develop strategy” in the Permian where “there are a lot of ways to win.” Reese emphasized the significance of not only developing a “credible business plan that ties the strengths of your team and commercial reality,” but also researching potential providers.

He advocated casting a wide net for capital providers, recognizing that they come from different backgrounds and possess different characteristics.

“All the work of building relationships, building a team, building a business plan—even sourcing transactions—almost all of that can happen prior to getting funded,” Reese said.

From his perspective in Ameredev as a newly funded company, Reese thinks that despite the plentiful equity being raised, “it’s going to be more difficult” for E&Ps to get funded in this environment. However, “capital’s going to find a way to fund the right project.”

And what a plus it is to be the right project. “That’s really the goal,” Bracken said, “to use someone else’s money to aggregate assets and hold onto them until pricing improves.”

Annie Gallay can be reached at agallay@hartenergy.com.