Houston private equity firm Quantum Capital Group and Denver-based Caerus Oil and Gas announced Monday the closing of a transaction in which Quantum — via two separate portfolio companies —acquired Caerus’ oil and gas operations for about $1.8 billion, including the assumption of asset-backed securities and other liabilities.
Bloomberg first reported the news on June 25 citing unnamed sources.
Caerus is backed by a private investor group, including Oaktree Capital Management, the Anschutz Corp. and Old Ironsides Energy.
Newly formed QB Energy is buying the producing upstream assets, gathering and compression midstream assets, around 600,000 acres and all other assets in the Piceance Basin. Existing Quantum company Koda Resources is acquiring the producing upstream assets, gathering and compression midstream assets, about 160,000 acres and all other assets in the Uinta Basin.
Quantum has been on a buying and selling spree recently for big bucks. Earlier this month, it picked up North Carolina independent power producer Cogentrix Energy for $3 billion. And this past December, it shed East Texas upstreamer Rockcliff Energy II to TG Natural Resources, owned by Castleton Commodities and Tokyo Gas America, for $2.7 billion.
Vinson & Elkins provided legal advice to Quantum, QB Energy and Koda. Caerus tapped Jefferies and Evercore as financial advisors, Davis Graham & Stubbs and Latham & Watkins as legal counsel and Bank of America as capital markets advisor.
The V&E team was led by partners John Grand and Robert Hughes, counsel Elena Sauber, senior associates David Latham and Charlie Fitzpatrick and associate Pranay Malempati.
Assisting were partner Jackson O’Maley, senior associate Alex Turner and associates Zac Horne, Walt Baker, Phil Greenfield and Chris Chiavaroli (corporate); partners Hill Wellford and Kara Kuritz, counsel Evan Miller and associate Adam Thomas (antitrust); partners John Lynch, Todd Way and Jason McIntosh and senior associates Curt Wimberly and Dan Henderson (tax); partner Sarah Mitchell, senior associate Victoria Bahrami-Negad and associate Dean Dixon (insurance); partner David D’Alessandro and associates Matt Green and Morgan Whittlesey (executive compensation/benefits); and partner Danielle Patterson and counsel Megan Menniti (energy transactions/projects).
Also in the group were partners Suzanne Clevenger, John Decker and Mike Tomsu and associate Ryan Hoeffner (energy regulatory); partner Sean Becker and associate Ashley Plunk (employment/labor); partners Niels Jensen and Tzvi Werzberger, counsel Carter Olson, senior associate Demi Hueth and associate Avi Shchigel (finance); counsel Rajesh Patel and associate Haley Titcomb (technology transactions/IP); partners Matt Stammel and Nicholas Shum, senior associate Brooke Noble and associates Avery Westerlund and Hope Miller (litigation); and partner Matthew Dobbins and associates Kelly Rondinelli and Alyssa Sieja (environmental).
The team from Latham advising Caerus was led by Austin partner David Miller and Houston partner Pamela Kellet, with associates Zainab Hashmi, Robert Cunningham, and Corynn Wilson. Advice was also provided on antitrust matters by Washington, D.C. partners Jason Cruise, Peter Todaro, and Lindsey Champlin, with associate Doug Tifft; on tax matters by Houston partners Tim Fenn and Jim Cole, with associates Dominick Constantino and Dylan White; on hedging/commodities matters by New York partner Yvette Valdez, with associate Tiiu Lemsalu; on environmental matters by Los Angeles/Houston partner Joshua Marnitz; on benefits matters by Washington, D.C. partner Adam Kestenbaum and Houston counsel Krisa Benskin; on data privacy matters by Houston/Austin counsel Robert Brown; and on funds regulatory matters by associate Daniel Filstrup.
The lead from Davis Graham & Stubbs was partner Sam Niebrugge in Denver.
Tom Field, a partner at Quantum, said in a statement that the transaction represents a unique opportunity for Quantum to invest in substantial natural gas production alongside large, contiguous acreage positions containing sizable hydrocarbon resources with significant value creation potential.
“We believe that Koda and QB Energy are well positioned to steward the next phase of development and operation of the assets to serve responsibly natural gas demand centers in the western U.S. while generating attractive returns for our investors,” he said.
Chuck Davidson, another partner at Quantum, added the Caerus assets provide access to some of the largest natural gas resources in the western markets, which have experienced repeated, localized energy shortages in recent years.
“Alongside our partners at Koda and QB Energy, we expect to continue optimizing these operations, driving significant value for our investors while helping bring reliable, affordable, low-carbon energy to more end users,” he said.
Roger Biemans, CEO of QB Energy, claimed that the Piceance assets represent the largest single asset base atop the second largest gas resource in the continental U.S., with a shallow-decline production base with several decades of repeatable drilling inventory.
“These strategically located, world-class assets provide tremendous development potential in a natural gas market experiencing both significant demand growth and supply constraints,” he said.
Osman Apaydin, CEO of Koda Resources, said the transaction ushers in the “next chapter” of the Koda/Quantum partnership.
Dave Keyte, founder and CEO of Caerus, said over the past 15 years, the investment partners have established Caerus as one of the country’s premier natural gas suppliers.
“Caerus was the first company to fully adopt sandless fracks in the basin….to significantly reduce truck and rail traffic and improve well results to reach record productivity levels in the basin,” he said. “We also completed the largest water treatment facility in the western U.S. in order to recycle 100 percent of our produced water for fracking purposes, greatly reducing the need for fresh water and further reducing truck traffic.”
Keyte believes that the new group of owners will bring the right development and management capabilities to responsibly maximize the assets’ output over the long term.
Jordon Kruse, co-portfolio manager of Oaktree’s Special Situations Strategy, credits Keyte and his team for their work and operational discipline in consolidating a “world-class basin at deep value.”