In what has become a buyer’s market for well-capitalized E&Ps on the hunt for a bargain, Okla. City-based Mach Resources and its money-backer, Houston-based Bayou City Energy, have officially closed on an upstream/midstream acquisition that came perilously close to not happening at all.
Mach is an independent oil and natural gas producer focused on acquiring, exploring and developing high-return, low-cost products. Founded in January 2017, the company pursues assets with production history and development opportunity. Mach is located in Oklahoma City.
Bayou City Energy
As a private equity firm founded in 2015, Bayou City Energy (BCE) focuses on making investments in the North American upstream oil and gas sector. BCE targets privately negotiated investments through two complementary strategies: providing buyout and growth equity capital for operated assets with current production and exploitable upside and partnering with operators to provide dedicated drilling capital in off-balance sheet structures. The BCE team, combined with the firm’s Advisory Board and strategic relationship with Argus Energy Managers, provides operators access to expertise, capital, and trusted partnership.
In its third partnership since 2018, Mach and Bayou City formed BCE-Mach III, continued a strategy to scoop up distressed, underdeveloped, and undercapitalized assets in the Mid-Continent. Houston-based Alta Mesa, which sought bankruptcy protection last September, check-marked all the right boxes with 900 wells, 30 MBOED of production, and 72 MMBOE of proved reserves. Supporting those wells, the company’s Kingfisher Midstream subsidiary includes 453 miles of gas gathering pipeline, 157 MBWD produced water system capacity, 224 miles of water disposal pipeline, 108 miles of oil gathering pipeline, and 50 MBbls of oil storage capacity. BCE-Mach III announced in January it would purchase Alta Mesa’s assets for $320 million.
But like they say, everything can change in a heartbeat.
As commodity prices this year set off on a neck-snapping trip to free-fall land and the Coronavirus turned demand for oil and gas on its head, BCE-Mach III stumbled into a no-taker territory for the alternative financing needed to seal the deal. In March, Mach reluctantly announced it couldn’t obtain the funds for the purchase price agreed to.
Nevertheless, Mach CEO Tom Ward wasn’t about to let this first acquisition behind the “III” partnership slip through his fingers. The fit with Mach’s core areas in the Mississippi Lime and Western Anadarko Basin was ideal; the opportunity one for the taking that rode in lockstep with the company’s core business strategy. So, less than a couple of weeks ago, BCE-Mach returned to the bankruptcy table with a new offer. According to court documents, the sale of Alta Mesa’s assets was consummated for $159 million, almost half the original price of the first. For Ward, a combination of speed, agility and precision along with patience in a time of uncertainty will reap the big rewards as the market corrects itself. Such are the days.
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