One Driller in Texas is Still Buying Assets Amid the Oil Rout
(Bloomberg) -- Amid the largest oil rout in a generation, a pair of shalennials are planning to use a $750 million war chest to make acquisitions in the Permian Basin.
DoublePoint Energy LLC’s co-Chief Executive Officers Cody Campbell and John Sellers, both 38, had planned to sell their 95,000 net acres in the Midland part of the Permian this year. Instead, the company -- backed by private equity giants including Apollo Global Management Inc. -- now say they’ll use undrawn equity commitments to buy assets that may include acreage, royalties and water or pipeline infrastructure.
“Clearly the time frame has changed,” on a sale, Campbell said in an interview. With the oil rout increasing the opportunity for acquisitions, “it makes sense to go out and utilize the committed capital that we have and see if we can’t grow the business.”
Campbell and Sellers are prodigious deal makers, starting out signing leases on the hoods of trucks in the Eagle Ford shale play of south Texas a decade ago, graduating to a $2.8 billion sale of Permian land to Parsley Energy Inc. in 2017. Still under 40, they’ve personally made more than $500 million combined, according to an analysis by the Bloomberg Billionaires Index in 2018.
Their current business is their biggest yet and coincides with an oil price crash that saw West Texas Intermediate dip to $20 a barrel last month, the lowest level in 18 years. Most U.S. independent oil producers, public and private, are bleeding cash at current prices and weighed down by high debt burdens. Whiting Petroleum Corp., once a powerhouse in North Dakota’s Bakken formation, filed for bankruptcy protection last week.
“The reality is it’s pretty tough right now,” Sellers said. “We think there’s a number of opportunities out there.”
Even before the most recent downturn, the quick buy-and-flip model of selling leases in the Permian was long gone, encouraging DoublePoint to start a production company to drill their acreage. The idea was to generate cash that would be attractive to a buyer.
DoublePoint currently produces about 40,000 barrels of oil a day, but it is “heavily hedged” through the end of 2021, insulating it from the current downturn, Campbell said. The company had their syndicated credit facility recently increased 45% from a consortium of banks led by Citigroup Inc. Along with Apollo, its backers include Quantum Energy Partners, Magnetar Capital and GSO Capital Partners.
“The market wasn’t great for A&D before any of this happened, I can’t imagine it’s going to be good for a really long time,” Campbell said, referring to acquisitions and divestments. “If we do a good job and run the business in a prudent way, we can open the door to opportunities to sell it at some point in the future.”
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