Familiar Faces Launch Firms To Chase Diverse Array of Upstream Opportunities
Oil and gas entrepreneurs continue to spring out of the starting blocks. After completing the business equivalent of a marathon, they take a short breather and then look around for the next challenge. They are motivated in part by the opportunity to make a profit, but the number of executives who return to the race with fortunes unspent suggests the real draw is the chance to see if they can build another winning enterprise.
It helps that now is a great time to start an oil and gas company. Oil prices are high enough to justify applying an ever-expanding array of technologies that can unlock value in even the oldest fields. With private and public investors view ing the oil and gas sector as a terrific investment arena, experienced teams can ather the capital these technology-driven projects require.
Given that situation, it is no surprise to see new companies forming and old ones recapitalizing under new names. The only constant among many of these startups is that familiar faces are behind them.
PetroEdge Energy III President and CEO Larry Richard describes the company as a new play generator with a focus on unconventional opportunities. He says that is the same strategy used by his team’s two previous ventures, which built and sold assets in the Marcellus Shale. “Given product prices, we are looking to be more liquids-oriented with PetroEdge III,” Richard says.
Because its team had considerable experience in the Gulf Coast, PetroEdge focused its search for promising plays on Alabama, Mississippi, Louisiana and Texas. The company had several prospects, but Richard reports it decided to pursue the Lower Eagle Ford Shale in the Texas counties of Brazos and Burleson. He says the play stood out because the available data were robust enough for the company to evaluate the play and conclude it would offer strong economics.
Richard adds that PetroEdge was able to acquire a substantial position from a local producer, John Carr of Carr resources Inc. “He already had started building a position, so we were able to step in with a bigger position than we might have been able to get through grass-roots leasing,” Richard says. “This position is large enough that we feel we can grow enough to provide the returns our private equity partners need.”
PetroEdge has 19,000 acres in the play and continues to actively lease, Richard reports. He says the company
has drawn on its experience with unconventional resources to target acreage in the play’s core. “The data we have seen suggest the majority of our acreage is in the volatile oil window, where the oil has enough gas in it to give the best recoverability,” he remarks.
Richard says the company expects to drill its first well in November. If it goes well, the company will start a more aggressive drilling program next year. Richard points out that nearby wells in the play produce 500-1,000 barrels of oil a day, with the more recent ones near the upper end of that range.
To make itself an attractive acquisition, Richard says PetroEdge would like to expand its leasehold to 30,000 acres, and delineate and develop its holding. “Our current acreage is in three contiguous blocks, so we should be able to derisk it with a minimum amount of wells,” he offers.
In addition to testing its Lower Eagle Ford acreage, PetroEdge is evaluating other opportunities, he says. “We have two ideas we are working–one in East Texas and another in Central Louisiana–and we are looking at other ideas,” Richard reports.
Richard says the company hopes to find plays that extend across a few counties, not ones that cover half a state or stretch across an entire region. “Like many people in the industry, I believe all of the big plays have been found. There will be no more Eagle Ford that extends all over South Texas or Marcellus that extends over three states,” he says.
Citing his experience raising capital for PetroEdge III earlier this year, Richard says that reality has made pri-
vate investors more cautious. “Four or five years ago, if you had the right group of people, private equity firms would back you and allow you to find a play,” he says. “Today, unless you have built and sold three or four companies, you need to have a great team and an idea that is ready to go.”