This past week was the North American Prospect Expo, more commonly known as NAPE, and downtown Houston was abuzz with oil and gas deal talk.
The mood was upbeat, with an estimated 12,360 attendees and 700 exhibitors gathered on the floor of the George R. Brown Convention Center – up from last year, which was up from the year before. Still, the numbers were off from the high-point in 2015, when event organizers estimated there would be 14,000 attendees and 800 exhibitors.
Seaport Global Securities analyst Mike Kelly thought it was quieter on the floor this year versus last year with the “oilman optimism radar” at less than full strength.
“We were repeatedly asked, ‘When do you think investors will care again?’ by industry types,” he said. “‘When y’all can grow production, generate FCF [free cash flow] and not crater oil prices’ wasn’t the answer most were hoping for.”
Investment bankers seen at the convention center and at events around town said deal flow had started the year slow but was building. “It feels like the momentum is good,” Wells Fargo banker David Humphreys said at the event’s business conference on Wednesday.
The consensus seemed to be that oil and gas transactions are getting larger – with integrated oil companies like ExxonMobil, Chevron and Shell expected to engage in M&A this year – and that private equity firms are holding their investments for longer – or engaging in creative ways to eventually exit, including through the use of joint ventures. Blame the initial public offering market, which has been effectively closed for new oil and gas issues.
Consolidation also is expected to continue among mid-sized oil and gas companies, as was seen last fall. “There are too many players and size matters,” Drillinginfo senior director Brian Lidsky said on the sidelines of the event. “I’m looking for a second quarter pickup.”
Several law firms threw parties for their clients during the week, including Vinson & Elkins, Baker Botts, White & Case, Shearman & Sterling, Bracewell, Gray Reed and Kirkland & Ellis, whose shindig at the House of Blues featured a performance by Robert Earl Keen.
Thompson & Knight held its annual breakfast on Thursday before attendees hit the floor of the exhibit hall, where oil and gas executives could be seen ogling a replica of a 1936 Auburn Speedster, watching an artist paint colorful vistas and getting backrubs along with talk of deals.
Investment banks also entertained clients, including energy-centric Tudor, Pickering, Holt and Credit Suisse – in rooms next door to each other at the Four Seasons.
Seaport’s Kelly said the party scene was “as good as ever,” noting Kirkland’s event, mezcal old fashions at its own reception, Drillinginfo offering battling practice at Minute Maid Park and V&E handing out cigars and ties.
Despite all the NAPE hubbub, it was a decent week for transactional activity involving Texas lawyers, particularly on the private equity front.
There were 16 deals announced valued at $9.97 billion, up from 14 transactions worth $6.4 billion the previous week. For the second week in a row, there weren’t any capital markets deals. Eighteen law firms and 77 Texas lawyers took part in the activity.
M&A, PRIVATE EQUITY AND VENTURE CAPITAL
K&L counsels Lone Star on racking up $8.2B for 11th fund
Dallas private equity firm Lone Star Funds, which invests in distressed assets, said Feb. 14 that it closed its 11th fund at $8.2 billion.
The fund far exceeded its predecessors, Lone Star Fund X (U.S.) and Lone Star Fund X (Bermuda), which held their final closing in November 2016 with capital commitments of $5.5 billion.
William “Billy” Young is general counsel and chief of staff at Lone Star. He previously was executive managing director and general counsel at asset manager Hudson Advisors and managing director and general counsel of Hudson’s European business unit, where he focused on European transactions.
Earlier in his career, Young was a partner in the London and Dallas offices of Vinson & Elkins and was global head of its finance practice, a member of its management and compensation committees and co-head of the Dallas office. He also practiced at Gardere Wynne Sewell and Jackson Walker. He has a law degree from the University of Mississippi.
Lone Star said it focuses on opportunities that emerge during periods of market dislocation, often providing liquidity to companies in the aftermath of a financial crisis. Its emphasis is on businesses, sellers and assets that require capital support and management direction to succeed post-crisis.
John Grayken founded Lone Star Funds in 1995 after leading Brazos Partners, a joint venture between the Robert M. Bass Group and the Federal Deposit Insurance Corp. to acquire, resolve and liquidate 1,300 “bad bank” assets that were impaired as a result of the U.S. savings and loan crisis of the early 1990s.
Since then, the firm has raised 18 private equity funds with total capital commitments of $80 billion.
In 2015, Lone Star acquired U.K. property investment and development company Quintain Estates and Development for $1.1 billion (last year it aborted plans to sell it). And in 2017 it injected $1.18 billion into Portugal’s third largest bank, Novo Banco (formerly Banco Espirito Santo), in exchange for a 75 percent stake.
Jones Day advises Rivian holder on $700M Amazon investment
Jones Day said Feb. 15 that it advised electric truck start-up Rivian Automotive Inc. of Michigan on a $700 million investment round led by Amazon.
Rivian is a unit of Saudi Arabia-based Abdul Latif Jameel Cos. The round included investments from Rivian’s existing shareholders.
The company plans to launch an electric pickup and electric SUV in the U.S. in 2020 and overseas in 2021. It unveiled the vehicles at the LA Auto Show in November featuring a “skateboard” platform that it claims is flexible enough for different body types.
Rivian founder and CEO RJ Scaringe said in a statement that Amazon’s involvement with the company will help it create products and technology “that reset expectations of what is possible.”
Reuters reported earlier in the week that Amazon and General Motors had invested in the firm.
The company employs 750 employees in Plymouth, Mich., San Jose and Irvine, Calif., Normal, Ill. and Surrey, England.
Jeff Wilke led the deal from Amazon, which recently invested in autonomous vehicle technology provider Aurora that’s run by former executives at Tesla and Waymo.
V&E aids White Deer raising $557M for third fund
New York- and Houston-based private equity firm White Deer Energy raised $557 million from 60 investors for its third fund, according to a filing with the Securities and Exchange Commission.
The firm’s last fund amounted to $1.38 billion and its debut fund amounted to $821 million.
Vinson & Elkins advised White Deer with a team led by Robert Seber in New York but that included tax partner David Peck in Dallas.
White Deer targets investments in middle market energy companies active in oil and gas production, oilfield service and equipment manufacturing and energy infrastructure.
In 2017 it sold Rockpile Energy Services to the Keane Group for $284.5 million, O-Tex Holdings Inc. to C&J Energy Services for $240 million and Crescent Cos. to Rockwater Energy for $207 million. And last year it bought Appalachian oilfield services provider Deep Well Services from 3 Rivers Capital for an undisclosed sum.
Kelly Hart, V&E work on EnCap’s second $300M to Pegasus
EnCap Investments committed another $300 million to Pegasus Resources, a Fort Worth mineral and royalty company.
Kelly Hart represented Pegasus, having worked on its previous $300 million commitment from EnCap in 2017. The same team worked on the investment, including partners Tom Hegi, David Cook and Todd Spake in Fort Worth.
Pegasus is focused on acquiring and managing mineral and royalty properties in the core of the Delaware and Midland Basins in West Texas and New Mexico.
Pegasus CEO George M. Young Jr. said the additional capital allows the company to continue to source “best-in-class opportunities, under the premier operators, in the most prolific oil and gas basin in the world.”
EnCap co-founder and managing partner David Miller said the firm looks forward to being “part of the Pegasus growth story.”
Pegasus is continuing its partnership with Tilden Capital, which sources and closes mineral and royalty acquisitions across various basins, specifically the Permian.
Other Pegasus management include president and COO Will O. Rodgers and CFO Lynn Frank.
Founded in 1988, EnCap has raised 21 institutional oil and gas investment funds totaling $37 billion. It currently manages capital on behalf of more than 350 U.S. and international investors.
Gibson Dunn, Baker Botts work on $215M PBF simplification
Gibson, Dunn & Crutcher said Feb. 14 it advised Intrepid Partners as financial advisor to the conflicts committee of PBF Logistics’ general partner on its $215 million simplification transaction, which includes eliminating its incentive distribution rights.
Baker Botts counseled the committee with a team led out of New York, although senior associate Jared Meier in Houston also pitched in.
Matt Lucey, executive VP of PBF Logistics GP, the general partner of Parsippany, N.J.-based PBF Logistics, said the IDR simplification will immediately add to limited partner cash flow per unit, help PBF Logistics pursue growth opportunities and decrease its cost of capital.
PBF Logistics and PBF Energy Co. LLC, a unit of publicly traded PBF Energy Inc., agreed Feb. 13 to eliminate PBF Energy Co.’s incentive distribution rights in exchange for PBF Logistics’ issuance of 10 million of its units.
The value represents a multiple of about 11 times estimated IDR cash flow for this year.
Management expects the transaction to close Feb. 28, giving PBF Energy Co. 30 million PBF Logistics common units.
Analysts at Simmons Energy said eliminating the IDR’s should be viewed as a positive as it simplifies the structure and increases PBF’s ownership stake in the limited partner units from 44 percent to 54 percent.
PBF Energy Inc. formed PBF Logistics to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines and storage facilities.
Weil advises U.S. Renal Care on sale to Bain, others
Weil Gotshal & Manges said Feb. 13 it advised the management team on U.S. Renal Care’s agreed-to sale to a private investor group led by Chris Brengard and other managers along with Bain Capital Private Equity, Summit Partners, Revelstoke Capital Partners and Mark Caputo.
Terms weren’t disclosed. The sellers were Leonard Green & Partners, Frazier Healthcare Partners, New Enterprise Associates Inc. and Cressey & Co.
Weil M&A partner James Griffin in Dallas led the deal team. Other Texas lawyers in the group were tax partner Jonathan Macke and corporate associates Rob Martin, Meagan McKeown and Austin Freeman, all of Dallas.
Latham & Watkins counseled U.S. Renal Care while Ropes & Gray was legal counsel to the investor group.
Goldman Sachs and Barclays were U.S. Renal Care’s financial advisors. PwC was accounting advisor to the investor group.
The deal has to clear regulators.
U.S. Renal Care will continue to operate under its current managers, who will remain significant investors in the company.
Founded in Arkansas in 2000 by Brengard and other healthcare executives, Plano-based U.S. Renal Care partners with nephrologists and hospitals to develop, acquire and operate outpatient treatment centers for patients suffering from kidney failure, also known as end stage renal disease. The company provides patients with in-center and at-home dialysis.
U.S. Renal Care serves 25,000 patients in 335 dialysis facilities across 32 states and Guam.
Brengard said the additional support and resources will help the company embark on its next phase of growth.
Chris Gordon and Devin O’Reilly led the deal from Bain, which was founded in 1984 and manages $105 billion in capital. John Baumer did so from Leonard Green, which was founded in 1989 and whose most recent fund closed in 2016 with $9.6 billion in committed capital.
Kirkland, T&K aid on Longhorn’s Old Ironsides partnership
Kirkland & Ellis said Feb. 11 it advised newly-formed Longhorn Midstream on its partnership with private oil and gas investment firm Old Ironsides Energy to pursue midstream development and acquisitions in the U.S.
Corporate partners Kevin Crews in Dallas and Sam Peca in Houston led the deal team, which included associates Leon Johnson, Austin Elder and Monica Dion and tax partner Mark Dundon. Thompson & Knight partner Wes Williams in Dallas counseled Old Ironsides.
The management of Dallas-based Longhorn has developed and acquired midstream assets across all commodities in many U.S. producing regions, including the Midland Basin, Ark-La-Tex, the Mid-Continent and, most recently, the Denver-Julesburg and Delaware Basins.
Mike Davis, Longhorn’s managing partner and president, was previously co-founder and chairman of TPG-backed Discovery Midstream until its sale to KKR and Williams Cos. this past August for $1.2 billion.
Managing partner and CFO Elliot Gerson was VP of finance at Old Ironsides-backed Brazos Midstream until its sale for $1.75 billion this past May to Morgan Stanley Infrastructure fund North Haven Infrastructure Partners II for $1.75 billion.
Chief accounting officer Julie Hartmann worked alongside Davis as chief accounting officer and partner of Discovery Midstream.
Old Ironsides managing partner Sean O’Neill said the independent oil and gas investment firm has partnered with members of the Longhorn team across multiple ventures since 2009.
Kirkland counsels Stephens’ Kodiak on sale to EQT Infrastructure
Kirkland & Ellis worked on another deal this past week, saying Feb. 11 that it advised Kodiak Gas Services and the Stephens Group on the sale of Kodiak to EQT Infrastructure for an undisclosed sum.
Simpson Thacher Bartlett counseled EQT with attorneys out of California and New York.
Jefferies was Kodiak’s financial advisor.
Kodiak will keep its Houston headquarters and continue to be led by president Mickey McKee and CEO David Marrs.
Founded in 2011, Kodiak claims to be the largest and fastest-growing privately held contract compression business providing critical compression equipment in the U.S.
The target has more than 1,130,000 revenue generating horsepower deployed across key basins. EQT aims to support Kodiak on its next phase of development.
Alex Darden led the deal from EQT Partners, the investment advisor to EQT Infrastructure.
Stephens Group is a private investment firm representing the interests of Witt Stephens Jr. and Elizabeth Campbell.
The firm has invested $1 billion since 2006 across several industries, including industrial and commercial products and services, specialty distribution, technology infrastructure and tech-enabled services, B2B food and consumer products.
Kirkland aids Sentinel on Cresta-funded Texas GulfLink project
Kirkland & Ellis said Feb. 11 it’s also advising Sentinel Midstream on Texas GulfLink, its proposed deepwater crude oil export terminal near Freeport and related midstream infrastructure project.
The project is being financed in partnership with Cresta Fund Management, which Kirkland also counseled.
The project will include an onshore terminal with up to 18 million barrels of storage, an offshore 42-inch pipeline and a manned offshore platform to help with port operations.
The operations will be capable of fully loading very large crude carrier vessels, or VLCC’s, at up to 85,000 barrels per hour with a nominal capacity of 1.2 million barrels per day over 12 months.
Sentinel’s announcement follows seven other proposed crude export terminals vying to build a facility capable of loading VLCC’s without “reverse lightering,” which relies on smaller vessels to transfer crude cargoes and can add several days to loading times, according to Reuters.
Magellan Midstream Partners and Enbridge Inc. have announced similar projects in Freeport and Corpus Christi. Observers have said not all of the projects will be built.
Sentinel CEO and president Jeff Ballard said in a statement that Texas GulfLink will provide the U.S. with an economical solution to clear the oversupply barrels destined for the Gulf Coast.
Over the past year, Sentinel said it developed Texas GulfLink in conjunction with multiple stakeholders, including federal, state and local agencies. The project has secured commercial support to justify the capital investment and is preparing its submission of a formal permit with the U.S. Maritime Administration.
Chris Rozzell led the deal from Cresta, a Dallas-based private equity firm founded in 2016 by energy infrastructure executives that’s focused on middle market investments across energy and related sectors.
Dallas-based Sentinel offers midstream solutions for crude oil gathering, storage and terminaling.
Sidley, Locke Lord aid on EIV’s commitment to Woodland
Sidley Austin said Feb. 12 it represented Houston-based EIV Capital Fund on an undisclosed capital commitment to The Woodlands-based Woodland Midstream to form Woodland Midstream II.
Locke Lord counseled Woodland led by corporte partner Mitch Tiras in Houston. Other team members were corporate senior counsel Freddy Feldman and labor associate Jeff McPhaul, also of Houston.
Locke Lord’s Tiras also counseled Woodland I on its $40 million investment from EIV.
Led by Richard Wright, Woodland Midstream I acquired and developed greenfield projects in the Ark-La-Tex region. This past October, it sold those assets to Tailwater Capital-backed Elevate Midstream Partners for an undisclosed sum.
Joining Wright in Woodland II are chief commercial officer Darin Aucoin, previously VP of commercial activities at Energy Spectrum-backed Caprock Midstream (which sold its assets to Blackstone-sponsored EagleClaw Midstream in September for $950 million); and COO Doug Coleman, previously VP of new ventures at Energy Spectrum-backed Prism Midstream.
Woodland Midstream II said it’s committed to providing strategic, tailored midstream solutions to best meet producers’ needs. The company will be engaged in acquiring and developing natural gas, natural gas liquids, oil and water midstream infrastructure in emerging basins throughout North America.
Patti Melcher is managing partner of EIV, which she co-founded in 2009 after stints at Sandefer Capital Partners and SCF Partners. The firm provides growth equity to the North American energy industry with a focus midstream and related service businesses. EIV partner David Finan also worked on the deal.
Baker Botts aids Equitrans on simplification transaction
Baker Botts said Feb. 14 it counseled Equitrans Midstream Corp. on a sweetened simplification transaction involving affiliate EQM Midstream Partners. The value wasn’t disclosed.
Assisting were senior associate John Kaercher in Austin and associates Rachel Ratcliffe, Michael Portillo and Leah Leipold. Partner Mike Bresson and senior associate Jared Meier assisted on tax matters.
Equitrans’ Delaware counsel was Morris, Nichols, Arsht & Tunnell. Counsel to the conflicts committee of EQM’s board was Richards, Layton & Finger.
Guggenheim Securities and Goldman Sachs provided financial advice to Equitrans while Evercore did so for EQM’s conflicts committee.
Equitrans and EQM agreed to exchange and eliminate EQM’s incentive distribution rights, or IDR’s, and restructure the general partner interest in EQM.
The IDRs and the non-economic portion of the general partner interest in EQM will be exchanged and canceled for 80 million newly issued EQM common units and 7 million newly issued EQM Class B units, both representing limited partner interests in EQM, and Equitrans’ retention of a non-economic general partner interest in EQM.
Jefferies analyst Christopher Sighinolfi said the final deal terms mark an improvement from Equitrans’ initial 95 million unit exchange proposal and are slightly better than the 89 million unit swap he had expected.
The EQM Class B units are almost identical to the EQM common units except they won’t be entitled to distributions until later.
The IDR elimination transaction is expected to close this month, when Equitrans will beneficially own about 60 percent of the limited partner interest in EQM.
“The elimination of the IDRs is another step in removing the financial complexity in our structure and fully aligns ETRN [Equitrans] and EQM moving forward,” Equitrans and EQM CEO Thomas F. Karam said in a statement.
Winston, Bracewell aid on CSL’s Optum sale to LiquidPower
Winston & Strawn said it assisted CSL Capital Management on the sale of Optum Energy Solutions to LiquidPower Specialty Products, a unit of billionaire Warren Buffett’s Berkshire Hathaway Inc. Terms weren’t disclosed.
Bracewell partner G. Alan Rafte in Houston represented LiquidPower.
Started by CSL in late 2016 and led by COO Nagesh Kommareddi, Optum makes drag reducing agent, or DRA, products for midstream companies in a manufacturing facility in Chickasha, Okla. LiquidPower, which is led by CEO Michael W. Brown, claims to be global market leader in DRA technology and production.
Charlie Leykum is the founder of Houston-based CSL, an investment firm focused on building energy services and equipment businesses in the U.S. He previously was a portfolio manager at billionaire George Soros’ Soros Fund Management and an analyst at Goldman Sachs.
CSL has raised more than $1.6 billion in equity capital and commitments across various investment vehicles since its 2008 inception.
W&C, Pouls, BB advise on Ara’s Priority Power investment
Private equity firm Ara Partners Group said Feb. 11 that it invested an undisclosed amount in Priority Power Management.
Stephens Inc. was Priority’s financial advisor.
Midland-based Priority is an energy management services and consulting firm led by founding principal Padraig “Pat” Ennis and managing principal John Bick.
Founded in 2001, the company provides 1,300 clients with power solutions, including energy supply, risk management, demand response and private infrastructure.
“We are confident that this investment from Ara will take Priority into the next stage of its growth,” Ennis said in a statement.
Priority’s board will consist of Bick, Ennis, members of Ara and Brandon Schwertner, founder and managing partner of Teleios Commodities.
Troy Thacker led the deal from Ara, which says it invests in companies with sustainable competitive advantages built upon greater resource efficiency.
DG&C, TBTH&B advise on Stellex’s investment in Cisco Equipment
Stellex Capital Management has made an undisclosed investment in Odessa-based midstream supplies and services provider Cisco Equipment.
The transaction was done in partnership with Christopher J. Sibert.
Davis Gerald & Cremer shareholder David H. Smith in Midland represented Christopher J. “C.J.” Sibert as the buyer along with the surviving entity, Cisco Industrial Services. Todd, Barron, Thomason, Hudman & Bebout’s Steve Barron advised Scott Sibert as the seller.
Milbank, Tweed, Hadley & McCloy and K&L Gates counseled Stellex.
Oppenheimer & Co. Inc. was Stellex’s financial advisor and Syntal Capital Partners aided the Sibert family. Deloitte Corporate Finance represented Cisco. CIT Bank arranged and provided the debt financing.
Scott Sibert founded Cisco in 1978 and it’s now one of the U.S.’ top providers of equipment, services, parts and supplies to the midstream infrastructure, general construction, agriculture and general industrial markets. It operates four facilities and has more than 100 associates and 200 customers.
C.J. Sibert will continue to lead the company as it expands further.
Ray Whiteman led the investment from Stellex, which invests in in middle-market companies in North America and Europe through its offices in New York and London.
HuntonAK advises Insight Equity on purchase of Eddy Foods
Insight Equity announced Feb. 11 that it bought Eddy Packing Co., a Yoakum-based processor of smoked, cooked and fresh meats, from Mason Wells.
Hunton Andrews Kurth counseled Insight, including partner Gregg Schmitt and associate Patrick Quine in Dallas. Quarles & Brady in Wisconsin assisted the seller.
Insight’s general counsel is Rob Conner, who joined the firm in 2006. He previously worked with Insight on its legal matters while he was at Hunton & Williams (now Hunton Andrews Kurth). He started his legal career at Worsham, Forsythe & Wooldridge, which merged with Hunton & Williams in 2002.
Luke Bateman, a senior VP at Insight, said Eddy’s broad product offering and experience with various processing techniques provides a strong foundation for continued growth. Senior partner and chief structuring officer Eliot Kerlin also led the deal from Insight.
The private equity firm is partnering with incumbent management, including CFO John Fortino, and industry veteran Jim Reed on the transaction. Reed will be CEO.
Eddy’s meats are found under various store brands from regional grocers to large national grocery chains and in restaurants and wholesale clubs across the U.S.
Last year, Eddy recalled 49,558 pounds of smoked sausage products because they may have been contaminated with foreign matter, specifically hard plastic, according to the U.S. Department of Agriculture’s Food Safety and Inspection Service.
Insight makes control investments in strategically viable, middle-market manufacturing and distribution businesses across a range of industries. It’s based in Southlake and has an office in New York City.
Jones Day advises Pinnacle Propane on Heetco purchase
Jones Day said Feb. 15 it counseled Pinnacle Propane on its purchase of assets from Heetco Inc. for an undisclosed sum.
Stinson Leonard Street represented Heetco out of Kansas City.
The assets included a retail liquefied petroleum gas business in Nebraska, Kansas, Missouri and Illinois and a propane supply terminal.
The businesses included Heetco, Inc.-Kansas; Lewistown Heet Gas Inc.; Cole Camp Heet Gas Co.; and Heet Gas Co.