Texas Oil & Gas Follow-On Development
Contact: Tina Vital, Managing Director
Cell (917) 432-8474
Our client is seeking $75 million of equity (to supplement $31 million of client’s equity) for the follow-on development of ten development wells in the Culberson and Reeves Counties (Delaware Basin/Permian Basin), Texas.
- Client is forming a partnership with an operator and oilfield service firm to complete a 10-well development program; client will fund 90% of the capital and oilfield service firm partner will fund the remaining 10% on a pari-passu basis, collectively the “investors”; investment will follow a “DrillCo” structure (investors will fund 100% of the capital for new wells in return for 100% working interest in the wells until investors receive the greater of 135% of invested capital and an 16% IRR; once these return thresholds are achieved, the investor’s working interest will decrease to 5%)
- Follow-on investment structure allows investors to achieve equity-like returns, while holding priority at the top of the capital structure until investment thresholds are achieved; operator and oilfield service firm have successfully drilled and completed 64 wells together since 2013 (significantly delineating the acreage and mitigating geological risk; technical design and operating procedures have been optimized, mitigating execution risk)
- Ten wells will be drilled in two phases of five wells each; three-month evaluation period is planned after the first phase (allowing for measured investment after verification of operational results); as an additional benefit, this evaluation period allows for the reinvestment of early proceeds from the project ($75 million equity will be used to create over $100 million capital expenditure for drilling and completions)
- Significant infrastructure in-place – facilitates low transportation costs and supports delivery of production to end-markets
- Management team has deep upstream oil and gas exploration and production expertise in shale plays such as the Delaware Basin
In compliance with the SEC’s Marketing Rule, this information is being provided by Castle Placement, LLC (“Agent”), acting as distributor for its investment manager client (“the Manager”) with respect to an investment vehicle of the Manager (“the Fund”). Agent is not an investor in the Fund or an advisory client of the Manager. Agent has a material financial incentive to introduce Manager and Fund to prospective investors and is compensated based on the amount of assets committed to the Fund, which may result in a material conflict of interest between Agent and potential investors. Agent has a written agreement with the Manager for compensation of certain services including a referral fee and success fees, as applicable. Agent may be reimbursed for certain out-of-pocket expenses as it incurs in connection with referring investors to the Fund. Compensation paid to the Agent are generally paid over a period of years.