Quantum Energy Partners announced on Aug. 30 the formation of HEQ Deepwater, a new venture with Houston Energy LP focused exclusively on developing deepwater projects in the U.S. Gulf of Mexico.

“The deepwater Gulf of Mexico is one of the most important hydrocarbon provinces in the world, uniquely capable of delivering large production volumes with lower relative carbon intensity than any other region,” commented Wil VanLoh, founder and CEO of Quantum Energy Partners, in an Aug. 30 release.

Upon formation, HEQ Deepwater received more than $400 million of equity capital commitments from Quantum and management. The company has already been active, recently acquiring a stake in the Shenandoah development in the Gulf of Mexico.

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Based in Houston, HEQ Deepwater aims to build a diverse portfolio of development stage upstream and infrastructure assets in the deepwater Gulf of Mexico. The company will be led by CEO Ron Neal, a veteran of the deepwater Gulf of Mexico who helped form Houston Energy in 1988.

“Ron Neal and the Houston Energy team have been friends of Quantum for over 20 years, and we are excited to finally be in business together,” VanLoh added in the release.

Houston Energy has a 30-plus year track record of value creation, boasting a roughly 80% commercial success rate and the discovery of more than 900 MMboe of audited 2P reserves from internally generated deepwater Gulf of Mexico exploration prospects, according to the release.

In addition, the Houston Energy team has been a participant in multiple facility scale development projects, such as the Delta House and Kings Quay complexes. 

Through HEQ Deepwater, Neal and his team will look to leverage their strengths and experiences from Houston Energy with the support of Quantum to partner with premier operators in the U.S. Gulf of Mexico.

“Houston Energy will continue to generate high-quality exploration prospects for our industry partners, but HEQ Deepwater will allow us to be a multi-dimensional partner for operators throughout the development cycle of an asset,” Neal explained in the release.

Without wasting any time, HEQ Deepwater closed on the acquisition of a 20% working interest in the Shenandoah development on Aug. 25 from an affiliate of Beacon Offshore Energy, which the release said marked the second major acquisition for the company. Terms of the transaction weren’t disclosed.

“Reductions in costs and project cycle times over the last few years have greatly improved the project economics of Shenandoah and other developments across this oil-rich basin,” according to VanLoh.

Located 160 miles off the coast of Louisiana in the Walker Ridge area of the U.S. Gulf, Shenandoah is co-owned by Beacon Offshore Energy and Navitas Petroleum.  Shenandoah, believed to hold 431 million barrels of oil, received project sanction on Aug. 25 and is expected to come online by late 2024.

In a statement on Aug. 26 commenting on the project’s final investment decision (FID), Wood Mackenzie Senior Research Analyst Mfon Usoro noted that HEQ Deepwater stepping into the Shenandoah project was not surprising as she suspects a dilution of ownership before or at FID to help reduce Beacon and Navitas Petroleum’s cost burden.

“The Shenandoah joint venture secured funds to the tune of $900 million for the first phase of development, highlighting our view that even with net-zero goals, both oil and gas companies and the global capital market still see value in high-return, low-emission oil and gas projects,” she said.

“We estimate a rate of return for Shenandoah at 37% and carbon emissions intensity in the U.S. GoM is one of the lowest worldwide.”

Once onstream, Usoro expects Shenandoah will catapult Beacon, which operates the Shenandoah project, from its current position as the 20th-largest producer in the U.S. Gulf of Mexico to the 10th spot. The company is led by Chairman and CEO Scott Gutterman and Marc Hensel, as president and CFO.

“We would like to congratulate Scott Gutterman, Marc Hensel and the entire Beacon team, as well as Navitas Petroleum, for their accomplishment of sanctioning Shenandoah, and we look forward to working together to bring the project to first oil,” Neal added in the release on Aug. 30.

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