Presidio Petroleum LLC landed a $58 million acquisition following a major equity investment from Morgan Stanley Energy Partners (MSEP), the Fort Worth, Texas-based E&P said June 1.
As part of the agreement, Presidio formed a strategic partnership with MSEP, which makes equity and equity-related investments in middle-market companies mainly in North America. MSEP's investment in Presidio will help facilitate the company's acquisition of assets in the Western Anadarko Basin from Midstates Petroleum Co. Inc. (NYSE: MPO) as well as its future growth.
Midstates announced the sale of its Anadarko producing properties in the Texas Panhandle and Western Oklahoma in early April but didn't disclose the buyer at the time. The company said it earmarked the proceeds from the $58 million sale to pay down debt.
Midstates will retain its Northwest Stack undeveloped acreage in Dewey County, Okla. Similar to other public E&Ps, the company has faced increasing demands from investors for discipline and being cash flow positive.
In February, the company even pitched a proposed all-stock merger to SandRidge Energy Inc.’s (NYSE: SD) board and investors that would’ve created a large-scale E&P in Oklahoma’s Mississippian Lime play. The proposed merger, which according to Midstates would've generated free cash flow for at least five years, was later rejected by SandRidge on March 19.
John Moon, managing director and head of MSEP, points to continuing investor skepticism and a significant dislocation between equity prices and the commodity as factors that have tended to sour public capital markets—but place a premium on private capital.
“Right now, we are very busy,” Moon told Hart Energy’s Oil and Gas Investor. “With public producers’ new-found capital discipline, limiting capex to within cash flow and selling off noncore assets, you’re in a really good place if you’re a [private equity] firm with capital looking for opportunities.”
Presidio was formed in 2016 by industry veterans Chris Hammack (formerly of Trinity River) and Will Ulrich (formerly of Atlas Energy) to acquire, operate and optimize producing oil and gas properties in established U.S. onshore basins.
According to the company’s website, Presidio is targeting acquisitions between $50 million and $200 million where at least 70% of the acquisition value is attributable to proved developed reserves.
Hammack, who leads Presidio as co-CEO alongside co-founder Ulrich, said the partnership with MSEP supports the company’s goals.
“We are enthusiastic to be partnering with MSEP in support of our vision of building an industry-leading operator of overlooked, developed oil and gas assets,” he said in a statement. “We believe our relationship with MSEP will accelerate the growth of Presidio’s asset base across multiple basins where the Presidio management team has a long history of efficient and responsible operations.”
Presidio also expects the partnership with MSEP to provide the company with additional resources to potentially expand its asset base, according to its company press release.
Presidio, which Ulrich said was founded upon a philosophy of engineering efficiency, will continue to pursue multiple opportunities as part of its operationally-focused strategy
“Our competitive advantage allows us to unlock the value of acquired oil and gas reserves through leading operational practices, modern development technologies and the advancement and use of the digital oil field,” Ulrich said in a statement.
SunTrust Robinson Humphrey was Midstates’ adviser on the transaction. Sidley Austin LLP represented MSEP in connection with its investment in Presidio.
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