Bayou City Energy (“Bayou City”, “BCE” or the “Firm”), announced its affiliate, BCE-STACK Development LLC (“DrillCo”) has entered into a Joint Development Agreement (“JDA”) with Oklahoma Energy Acquisitions, LP, a wholly owned subsidiary of Alta Mesa Holdings, LP (“AMH”, or the “Company”) to finance the drilling of joint wells on the Company’s acreage in the core STACK play of Kingfisher County, Oklahoma. The drilling program initially calls for the development of 40 wells, which will be developed in two tranches of 20 wells each. The parties may also mutually agree to additional tranches on the same terms as the initial tranches. Development operations on the 40 joint wells began January 2016 and are expected to continue into early 2017. DrillCo and AMH have committed to work together on any similar financial structures in Kingfisher County through the term of the JDA.
Under the JDA, BCE has committed to fund 100% of the Company’s working interest share up to a maximum of an average $3.2 million in drilling and completion costs per well for any tranche. The Company is responsible for any drilling and completion costs exceeding this limit. In exchange for the payment of drilling and completion costs, BCE will receive 80% of AMH’s working interest (the “BCE Interest”) in each well, which interest will be reduced to 20% of AMH’sinitial working interest upon BCE’s achieving a 15% internal rate of return in a tranche, and further reduced to 7.5% of AMH’s initial interest upon BCE’s achieving a 25% internal rate of return. The BCE Interest automatically assigned by BCE upon achievement of these return thresholds will revert to the Company.
BCE Founding Partner, William McMullen, said: “We are thrilled to partner with the technically expert management at AMH in developing what is rapidly being revealed as one of the premier unconventional resources in the United States. These wells deliver outstanding returns even at today’s depressed hydrocarbon prices, and BCE could not have found a better operating partner than AMH, who is leading the delineation of the play with demonstrated repeatable successes and its characteristic operational excellence.” Alta Mesa Holdings LP CEO Hal Chappelle added, “Bayou City is the ideal financial partner to help our Company achieve its objectives in the Mid-Continent region.”
BCE Partner, Mark Stoner, noted, “The formation of this JDA with AMH is a prime example of BCE’s flexible E&P investment platform. Such drilling partnerships allow BCE’s capital to target the best drilling locations available today via a resilient investment structure that allows both parties to achieve their strategic and financial objectives in a dynamic pricing environment.”
Bayou City Energy is a private equity firm focused on making investments in the North American upstream oil & gas sector, targeting deal sizes of $5 to $50 million. Bayou City targets privately negotiated investments through two complementary strategies: Providing buyout and growth equity capital for small operators with current production, and partnering with leading operators to provide dedicated drilling capital in off-balance sheet structures. The BCE team, combined with the Firm’s highly qualified Advisory Board and strategic relationship with Intervale Capital, provide small to mid-sized operators access to expertise, capital and quality services typically available only to much larger enterprises.
Alta Mesa Holdings, LP is a privately held independent oil and gas exploration and production company headquartered in Houston, TX with primary operations in the STACK play of Oklahoma, and South Louisiana. AMH is focused on maximizing the profitability of its assets in a safe and environmentally sound manner, by applying advanced engineering analyses and enhanced geological techniques to under- developed or over-looked conventional resource areas to create long term value.