George Solich’s FourPoint Energy LLC was in the thick of a bidding war in early 2013.

Solich had been watching from the sidelines when he saw an opportunity that pushed him back into the industry he loves and the competitive environment he delights in.

“We started seeing a fair amount of deal flow and wanted to not miss out,” Solich said. “We’ve been really evaluating opportunities, I would say, since the spring of 2013.”

He returned to the fray in the Anadarko Basin, where he had been so successful so many times before. And he lost.

Solich, FourPoint’s president and CEO, set his eyes on Laredo Petroleum Holdings Inc.’s interests in the Anadarko. Laredo Petroleum Holdings was offering 104,000 net leasehold acres in western Oklahoma and the Texas panhandle, as well as associated infrastructure.

FourPoint was neck-and-neck with bidders on Laredo’s assets but ultimately lost out. The winning bid was $396 million in cash.

Late into the year, FourPoint was again neck-and-neck to acquire SM Energy Co.’s (NYSE: SM) Anadarko assets, including its Granite Wash interests.

“I think at the end of the day we probably had the upper hand, but we needed the time to finalize our capital raise,” Solich said.

Without the finances in order, SM Energy ultimately passed Solich up for $343 million.

In both cases, the winner on the other side was EnerVest Ltd., a powerhouse acquirer and seller that is respected enough to swing a deal in its favor without always making the highest bid.

John B. Walker, EnerVest’s CEO, sat on the winning side of those bids. But Solich and Walker have known one another for about a quarter-century.

And Solich had an idea.

“I approached John with the idea: Let’s do a joint venture (JV), and we’ll put a big area of mutual interest (AMI) around the western Anadarko Basin and we’ll marry the strengths of both our companies,” Solich said.

Walker was intrigued, Solich said, especially since Solich’s team has experience drilling more than 250 wells, most horizontal, in the basin. FourPoint’s geological refining goes back 10 years.

“Where it was more of a new entry for them, we felt marrying our experience with their operational prowess was really a good thing,” Solich said.

That required a huge amount of paperwork, due diligence and fine-tuning.

Yet, “the great thing about our business is that John and I basically shook hands on the deal,” Solich said.

“I guess it was a little bit about relationships, a little bit about timing and a little bit about the opportunity,” Solich added.

On Jan. 30, the two companies announced that they had agreed to develop oil and gas properties together in the Western Anadarko Basin.

FourPoint, based in Denver, acquired producing and undeveloped oil and gas properties, and related midstream assets, from affiliates of EnerVest for $268 million. The companies also entered into a joint development with an AMI to own, operate and develop oil and gas properties in the Basin.

EnerVest and FourPoint will share in future lease and producing property acquisitions within the joint development area, which consists of 14 counties in Texas and Oklahoma.

EnerVest-FourPoint Joint Venture

Seller

Area

Original Purchase Price

$MM

Net Rate,

MMcfe/d

Net Acres

Proved Reserves, Bcfe

Laredo

Mid-Continent

396

55

95,000

266

SM Energy

Mid-Continent

343

44

58,000

143

FourPoint's purchase included an ownership stake in the Laredo Petroleum Inc. (NYSE: LPI) and SM Energy acquisitions closed by EnerVest in the second half of 2013.

The acquisition included interest in more than 1,200 producing wells with net production of more than 35 million cubic feet equivalent per day (MMcfe/d).

It also gave the company time to get its financial feet under it. FourPoint said Jan. 30 that it raised more than $1 billion in capital, including $200 million in direct private-equity and $800 million in term debt, from EIG Global Energy Partners LLC and funds advised by GSO Capital Partners LP.

“You really couldn’t pitch a JV to somebody who didn’t know you and didn’t know your track record, and you didn’t know them and their track record,” Solich said. “I think it boils down to relationships.”

Solich has a well-known reputation in the industry. His last career stop was in the Anadarko, where he started Cordillera Energy Partners III in 2007 and sold it in January 2012 to Houston-based Apache Corp. (NYSE: APA) for $2.85 billion. Cordillera had about 254,000 net acres of mineral rights in western Oklahoma and the Texas Panhandle.

In 2008, Forest Oil Corp. (NYSE: FST) closed its acquisition of producing assets in the Buffalo Wallow and East Texas/northern Louisiana areas from Cordillera’s subsidiary Cordillera Texas LP for $529 million in cash and 7.25 million shares of stock. This generated $873 million in total value.

“After you build three successful companies in 12 years, the only thing left to do is start a fourth,” states FourPoint’s website.

Strength in numbers

Phil DeLozier, senior vice president of business development at EnerVest, said the JV price tag was basically a negotiation.

“They worked to value what they thought the interest was that they were going to be acquiring from assets they had from the Laredo acquisition, as well as the SM Energy acquisition,” he said.

DeLozier said the JV is a good example of how important relationships are in the oil and gas business.

“In fairness, I think George initiated the conversation,” he said. “It was a very good idea that he had, and I think John and our firm quickly appreciated the value of having a strong partner such as FourPoint.”

An important aspect in any JV is to make sure both parties are aligned and playing off of each other’s strengths.

“One of the attributes that FourPoint brings to the joint venture is a strong geosciences and petroleum land management aspect. They contribute very strongly in those areas,” DeLozier said.

DeLozier said the three iterations of Cordillera have a rich and successful history working largely in the same areas.

The company’s database and understanding of the Anadarko Basin’s geoscience will be valuable.

“It lends itself to helping both of us understand the proper way to drill and complete wells in the various plays within the Anadarko basin,” DeLozier said.

The companies are looking at that three-to-five-year timeline with much work to do to ensure success.

“We’re hoping to create a lot of value for our investors by drilling and completing some really good wells in this area,” he said.

Solich said both companies have a lot of plowing ahead of them, but also a sense of excitement.

“Our teams are spending lot of time together and getting ourselves both integrated in two new acquisitions and two new ways to describe different zones,” he said.

Patience

In returning to the industry, Solich knew he wanted to capture assets in the Midcontinent and Permian.

The western Anadarko Basin contains a combination of gas, NGL and oil. At least one phase of his plan has started, but the Permian will be a tough play to get into, with prices sky-high.

“I think you just pick your spots,” he said.

As a private company, FourPoint will be a “lumpy grower.” It won’t be, quarter to quarter, consistently good. But over the course of five years, Solich wants to pick up small or large acquisitions while drilling wells and buying leases.

“Before you know it, we have a significantly good asset there,” he said. “We’re patient. If we don’t get it right away, we’ll keep plugging at it.”

Solich noted that FourPoint started evaluating assets in the spring. The company didn’t really make a deal until the end of 2013 with its JV.

“It’s not really a grocery store out there. You don’t just get to pick and choose off the shelf whatever you want to grow your company,” he said.

“It takes a little more strategy than that. Some of it is opportunity-based. And some is proactively based with greenfield activity development.”

But the A&D market lends itself to building, with companies realigning capital and talent to other plays. That opens up opportunities in what they leave behind.

“We’ve already looked at a lot of things and continue to evaluate as many opportunities that fit our geographic and strategy as possible. We’re pretty bullish that there will be a lot to look at in the next 12 months,” Solich said.

For now, the natural gas business is a big part of the company’s future, he said.

FourPoint is not a mass acquirer buying everything and putting it in a warehouse, hoping the price goes up and the tide comes in.

The challenge is to build a company that is sustainable in an era where natural gas and oil price volatility has been dramatic.

“You’ve got to have the kind of operation and kind of assets that can weather those swings in commodity prices,” he said.

Solich said he anticipates additional purchases in the near future, and that FourPoint is flexible enough to pursue additional capital in the next six to nine months.

“It’s a capital-intensive business,” Solich said, noting that the vertical drilling environment saw drilling costs of $1 million or $2 million. Today the cost can be between $6 million and $9 million.

“We feel like capital availability is an important part of the strategy,” he said. “I think we will be a little opportunity-driven,” he said.