A version of this story appears in the September 2017, edition of Oil and Gas Investor. Subscribe to the magazine here.
At 2:45 a.m. on the May morning that WildHorse Resource Development Corp. was scheduled to give its first-quarter conference call after having gone public in December, CEO Jay Graham and his executive team were inking the final signatures on a $625-million deal with Anadarko Petroleum Corp. and KKR for a swath of acreage in the East Texas Eagle Ford play.
Just five and a half hours later, the WildHorse executives announced the deal and results. Reflecting completions honed during the downturn, 30-day IPs on some of the recent wells were around 1,000 barrels of oil equivalent per day or higher, and EURs were three and four times higher than offset older completion designs.
Additionally, mindful of balance sheet metrics, WildHorse constructed a unique financing mechanism to pay for the deal. While a portion of the cash price was pulled from its revolver, WildHorse raised $435 million from The Carlyle Group in return for preferred stock, considered a mezzanine equity instrument, which pays a 6% annual dividend either in cash or additional shares of preferred stock at WildHorse’s option. KKR elected to take its $69-million consideration in the form of WildHorse common stock.
Graham and WildHorse co-founder Anthony Bahr met while attending Texas A&M University and worked together as young engineers with Ocean Energy, led by CEO Jim Hackett, in the late 1990s. When Devon Energy Corp. bought Ocean, Graham followed Hackett to Anadarko, and Bahr went to Hilcorp. But the two always knew they would start something together and, in 2007, they reached out to their former Texas A&M engineering professor B.P. Huddleston for advice on doing so. “It’s about time,” Huddleston responded, as he always figured the two would start their own energy firm. He provided them their initial seed money.