Steve and Caleb Weatherl sold Stronghold Energy II to Ring Energy last year. Now, the father-son duo is back with a new company hunting for Permian Basin deals.
Their new E&P company, Midland-based Garrison Energy Holdings, secured a $500 million line of equity financing from an undisclosed institutional investor to pursue Permian acquisition opportunities.
Steve Weatherl is serving as executive chairman at Garrison Energy, while Caleb Weatherl is serving as Garrison’s CEO. The two previously led Stronghold Energy II, founded in 2017.
Stronghold II, which built a position in the Permian’s Central Basin Platform and was majority owned by private equity firm Warburg Pincus LLC, was acquired by The Woodlands-based Ring Energy in a $465 million deal in 2022.
In an interview with Hart Energy, Caleb Weatherl said Garrison Energy is still open to deals in the Central Basin Platform. But the company is evaluating potential deals across the Permian Basin, he said.
“Where we’ve been most focused so far is in the Delaware Basin, the Central Basin Platform and in the Northwest Shelf,” Weatherl said.
Garrison Energy is also fairly agnostic when it comes to the types of assets to develop, Weatherl said. The company is open to acquiring vertical drilling locations, horizontal locations or recompletion wells.
The Garrison team has had a lot of experience with vertical wells and recompletions in the Central Basin Platform: Ring Energy’s acquisition of Stronghold II’s mature conventional assets, primarily located in Crane County, Texas, expanded Ring’s inventory by about 500 new vertical drilling and recompletion locations.
“We’re really just focused on building a scale business and creating value,” Weatherl said. “The way we can do that is applying our geotechnical and operational expertise to go develop upside and build a large company.”
Garrison secured a $500 million equity commitment, but the company’s investors are able to flex up with more equity to consider deals larger than $1 billion, Weatherl said.
The company is also willing to evaluate deals as small as a section or two with quality inventory to develop.
“The larger we can be in a position with high-quality assets that have significant development potential, the better,” Weatherl said. “But, we’re not afraid to get there by aggregating small deals.”
There and back again
It wasn’t long – only a few months – after the Weatherls exited Stronghold Energy II that the team started making plans to get back into the Permian.
Ring closed its $465 million acquisition of Stronghold II in August 2022. The transaction added about 37,000 net acres and net production of 9,100 boe/d to Ring’s position in the Central Basin Platform.
And while traditional sources of financing have dried up for some E&Ps, the Garrison Energy team saw an opportunity to raise private capital to develop a Permian-focused venture.
Private equity firms are reportedly raising between $10 billion and $15 billion to deploy into the upstream oil and gas space after a multiyear hiatus, experts said at the World Oilman’s Mineral & Royalty Conference in April.
E&Ps from small independents up to supermajors are vying for scale in the Permian, the Lower 48’s top oil-producing basin.
Public companies including Callon Petroleum, Ovintiv Inc., Matador Resources and Diamondback Energy have deployed billions of dollars on M&A in the past year to grow their respective Permian footprints.
And after years of industry consolidation and well development, fewer opportunities remain to capture premium, core Permian acreage.
Privately-backed E&Ps generally own more fringe positions on the outskirts of the core resources play compared to large publics, according to an April analysis by Piper Sandler & Co.
As the Garrison team prowls the Permian for M&A opportunities, the company will consider deals outside of the basin’s core.
“We’re certainly not afraid to take some technical risk, go into an area that is maybe not quite as proven as the core-of-the-core and apply our geology and engineering expertise to help de-risk an area,” Weatherl said.
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