TPG Pace Energy Holdings Corp, an energy-focused special purpose acquisition entity led by former Occidental Petroleum Corporation CEO Steve Chazen, is to buy the oil and gas assets owned by EnerVest Ltd for $2.66bn.
As part of the transaction, TPGE and EnerVest are partnering to create Magnolia Oil & Gas Corporation, a new company led by Chazen who will serve as Magnolia’s full-time Chairman, President and CEO. EnerVest will retain a significant ownership stake in Magnolia. The transaction is subject to approval by the TPGE shareholders and other customary closing conditions, and the new company will trade on the NYSE under a new ticker upon closing, which is expected to occur late in the second quarter of 2018.
The formation of Magnolia creates a large-scale, pure-play South Texas operator with top-tier Eagle Ford and Austin Chalk asset positions with more than 40,000 boe per day of production.
Magnolia will acquire EnerVest’s approximately 360,000 total net acres in South Texas, which consists of approximately 14,000 net acres in one of the most prolific sections of Karnes County and 345,000 net acres in the emerging, high-growth potential Giddings Field. The acreage position is almost entirely held by production, and the production from the combined asset base is heavily weighted toward oil. EnerVest’s South Texas team, which will continue to operate the assets following the closing of the transaction under a long-term services agreement with EnerVest.
TPG Pace Group and Chazen formed TPGE in early 2017 with the intent to build a large scale, focused oil and gas business with a meaningful production base, strong free cash flow and a disciplined financial return philosophy. Following its IPO in May 2017, TPGE began its search for attractive assets that would benefit from Chazen’s operating approach and succeed as a public company with low leverage.
A veteran of the oil and gas sector, Chazen has an established track record with more than 25 years of experience implementing disciplined growth strategies and generating shareholder value in the public markets.
Christopher Stavros will serve as the company’s Chief Financial Officer. Most recently, Stavros served as CFO of Occidental Petroleum Corporation. Chazen and Stavros share the philosophy of generating attractive full-cycle returns while maintaining a strong balance sheet with low leverage.
“In creating Magnolia, we have a unique opportunity to build a new company anchored by what we consider to be some of the highest quality oil producing acreage in the country,” said Chazen. “We believe Magnolia’s acreage in Karnes County has some of the best economics in the United States and, when coupled with the upside in the Giddings Field, is a great fit with our criteria. Our objective is to maximise shareholder returns by generating steady production growth, strong pre-tax margins in excess of industry norms and significant free cash flow. Assuming moderate commodity prices, we plan to invest less than 60% of cash flow to fund a drilling programme that consistently delivers more than 10% annual production growth. I look forward to leading this rigorous capital allocation process at Magnolia for the benefit of our shareholders and employees.”
“I have known Steve for more than 20 years and I cannot think of a better executive to lead Magnolia,” said EnerVest CEO and founder John B. Walker. “The playbook he perfected at OXY is a great match for the outstanding acreage we have assembled in South Texas over the last 10 years. All of us at EnerVest look forward to partnering with Steve as he builds Magnolia going forward.”
For in-depth information on the new company and the transaction details visit: http://press.tpg.com/phoenix.zhtml?c=254315&p=irol-newsArticle&ID=2338954
21st March 2018