Three former Range Resources Inc. producer-finance managers have formed BlackRock Energy Capital Ltd., a Houston-based mezzanine-finance firm targeting deals of less than $5 million. The founders-Cathy Sliva, Dave Stevens and Scott Abel-hope to place more than $200 million during the next five years. The deal structure BlackRock will offer is nonrecourse and the expected rate of return is 15% to 25%. "We get paid out of production only," Stevens says. The structure is similar to that used by the Range finance unit, which was started in 1983 by Sliva and Stevens while with Tenneco Gas. The finance unit was part of Tenneco Ventures Corp., which managers bought out, took public as Domain Energy and merged in 1998 with Lomak Petroleum, which was renamed Range Resources. Sliva left Range two years ago; Stevens left in January. They formed BlackRock this spring. Abel left Range in April and rejoined Sliva and Stevens. "We're trying to re-create what we were doing at Tenneco and Domain," Stevens says. The new firm's funding comes primarily from a Houston investment company. BlackRock will finance 90% of asset acquisitions and 100% of project development. When a target rate of return is achieved, BlackRock conveys its interest back to its customer, except for a small position, usually a 1% or 2% override. "We're a different lender," says Stevens, who is a geologist with an MBA. Sliva and Scott are engineers. Each has roughly 20 years of experience. "It's not like we have a banker in the front room and engineers in the back. We're both." BlackRock's first deal, for $400,000, was closed in May. "We really like this business niche," Stevens says. "I enjoy working with the small mom-and-pop producers throughout the oil patch." That niche is wanting for competition presently. (For more on this, see "Where Art thou Mezzanine Financier" in this issue.) "There's a huge market for deals under $5 million," Stevens says. -Nissa Darbonne
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