Private company update

M&A

Private companies "are beginning to feel the squeeze," said Wunderlich Securities analysts in a mid-November report following news of RSP Permian's $137 million acquisition of oil and gas producing properties in the Midland Basin from Wolfberry Partners Resources LLC. At the time, Wunderlich analysts noted, RSP Permian's most recent deals involved private parties. "Many of the sellers were well aware of the value of their acreage. However, it is becoming more difficult for smaller players to reinvest capital given lower cash flows, longer payback periods, and costly borrowing options. As a result, they are being forced to choose between taking on more expensive debt or divesting their assets. As more choose the latter, additional opportunities could present themselves in the Midland Basin," the analysts said.

Effective September 15, Comancheria Energy Resources LLC acquired Leor Resources LLC and its subsidiary companies. Terms of the deal were confidential, but Comancheria's president and CEO, Kenton Holliday, offered that the acquisition affords the company "an excellent, balanced portfolio," continuing that the oil and gas properties "have value with respect to a balance of different play types, a balance of product types, and balance regarding a range of target depths." The East Texas location of the Leor properties fall into Comancheria's primary focus on East Texas opportunities. Comancheria, whose founding members comprise the former upper management team of Leor Resources, is based in Houston, TX.

AGREEMENTS

In mid-October 2015, Repsol and privately-held Armstrong Oil & Gas Inc. announced their agreement to realign interests in their Alaska North Slope exploration and development venture. The confidential agreement included a combination of cash, operational control, drilling commitments, and contractual adjustments for monetary considerations in excess of $800 million. Per the restructured agreement, Armstrong acquired a 15% working interest (to add to its 30%) in the initial development area near the Colville River Delta where the majority of exploratory and appraisal drilling activities have been carried out. Armstrong has the option to acquire an additional 6% and assume operatorship in the development area. Armstrong also acquired a 45% working interest (to add to its 30%) and operatorship in the jointly owned exploratory lands (750,000+ acres). It is anticipated that Armstrong, after exercising its 6% option, will own 51% and Repsol 49% in the development area, and Armstrong 75% and Repsol 25% in the exploration area. As part of the agreement, the planned 2015-2016 winter appraisal drilling campaign has been deferred. Over the last four years, the venture has drilled 16 wildcat and appraisal wells on the North Slope.

Armstrong and Repsol are in the early stages of developing their new discoveries in the Colville River Delta area located between the 3.5-billion-barrel Kuparuk River Field and the 700+-million-barrel Alpine Field. Permitting work is ongoing for a three-pad development. Field production rates are estimated to be on the order of 120,000 barrels of oil per day.

In late November 2015, Midland, TX-based BC Operating Inc. announced a joint venture with Tulsa, OK-based Nadel and Gussman LLC, combining the two companies' acreage and reserves in southern Eddy and Lea counties in New Mexico. The combined position consists of an acreage footprint of 50,000 net acres, and 5,500 boe/d of operated production.

BC will assume operatorship of the combined acreage including all existing wells. The position has multiple targets in the Permian Basin including Wolfcamp, Avalon, Delaware, and Bone Spring production. BC expects to run at least one drilling rig in 2016 and expects to add more acreage.

BC and Nadel and Gussman are both privately held. BC is the operating company for and owned equally by Crump Energy Partners II LLC and Crown Oil Partners V LP. Crump is supported by Quantum Energy Partners; Crown is financially partnered with Post Oak Energy Capital and Wells Fargo Energy Capital.