In a few short years, an initial commitment of $300 million has spurred private-equity-backed Tall City Exploration LLC’s Permian Basin efforts into profits of more than $1 billion.
The Midland, Texas-based company said Nov. 30 it has sold substantially all of its E&P assets in the Permian to new comer Moss Creek Resources LLC for $803 million. The deal marks the final realization of the company’s goals.
Moss Creek was recently formed for the purposes of the transaction by Blue Whale Energy North America Corp., a U.S. subsidiary of a Chinese energy investment company. Through subsidiaries, Blue Whale has gained a significant foothold in the core of the Northern Midland Basin, with 2015 acquisitions totaling $1.4 billion.
Tall City’s agreement with Moss Creek consists of oil and gas rights to leases on about 71,000 net acres in Howard and Borden counties, Texas. The rights include interest in 34 horizontal and six vertical wells with about 3,750 barrels of oil equivalent per day (boe/d) of production.
Mike Oestmann, Tall City CEO and co-founder, said the company saw an opportunity in the Permian Basin when it was formed in 2012 with a $300 million equity commitment from Denham Capital.
“We’re pleased to have successfully executed our strategy to the benefit of all parties involved," Oestmann said in a statement.
Tall City's Course
In August 2014, Tall City said it owned about 84,000 net acres primarily in Howard and Borden counties as well as Reagan County. Oestmann said at the time the company was optimizing its assets for an exit in 2015.
In late November 2014, Tall City and Element Petroleum Operating II LLC sold about 15,000 net acres of leasehold—including 14,000 acres in in Reagan County—to Aubrey McClendon's American Energy - Permian Basin LLC (AEPB).
At the time, West Texas Intermediate (WTI) was trading at about $67 per barrel. Oestmann told Hart Energy then Tall City was willing to take a less than ideal offer from McClendon for $440 million in cash and notes.
Through the divestitures, the company's active drilling program will be maintained despite the market’s recent downturn, Oestmann said. It will also continue "providing jobs, tax and royalty income to the local, state and national economy,” he added.
RBC Richardson Barr was exclusive financial adviser to Tall City, and Bracewell & Giuliani was its legal counsel.
Blue Whale
Moss Creek also acquired additional acreage in Howard and Borden from another private-equity backed company, Plymouth Petroleum LLC, for about $281 million.
The assets include about 7,000 net acres and net production of 2,250 boe/d. The properties will be operated by Houston-based Surge Energy Inc.
In addition, Blue Whale closed an acquisition in the Texas Panhandle in April 2015 on behalf of a Surge subsidiary. The deal, with Juno Energy II LLC, included more than 7,100 net acres in Crosby County and 2,500 boe/d of production.
Including Moss Creek's transactions with Tall City and Plymouth, Blue Whale has acquired about 85,000 net acres in Texas for 2015. Blue Whale is led by Curtis Newstrom, president and CEO who formerly served as vice president of business development and strategic planning for Linn Energy.
The company is a subsidiary of Blue Whale Energy Ltd., an energy investment company based in Beijing engaged in the acquisition of upstream oil and gas properties in the U.S. and Canada.
Contact the author, Emily Moser, at emoser@hartenergy.com.
Recommended Reading
Texas LNG Export Plant Signs Additional Offtake Deal With EQT
2024-04-23 - Glenfarne Group LLC's proposed Texas LNG export plant in Brownsville has signed an additional tolling agreement with EQT Corp. to provide natural gas liquefaction services of an additional 1.5 mtpa over 20 years.
US Refiners to Face Tighter Heavy Spreads this Summer TPH
2024-04-22 - Tudor, Pickering, Holt and Co. (TPH) expects fairly tight heavy crude discounts in the U.S. this summer and beyond owing to lower imports of Canadian, Mexican and Venezuelan crudes.
What's Affecting Oil Prices This Week? (April 22, 2024)
2024-04-22 - Stratas Advisors predict that despite geopolitical tensions, the oil supply will not be disrupted, even with the U.S. House of Representatives inserting sanctions on Iran’s oil exports.
Association: Monthly Texas Upstream Jobs Show Most Growth in Decade
2024-04-22 - Since the COVID-19 pandemic, the oil and gas industry has added 39,500 upstream jobs in Texas, with take home pay averaging $124,000 in 2023.
What's Affecting Oil Prices This Week? (Feb. 5, 2024)
2024-02-05 - Stratas Advisors says the U.S.’ response (so far) to the recent attack on U.S. troops has been measured without direct confrontation of Iran, which reduces the possibility of oil flows being disrupted.