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Tom Hicks Takes Swing at E&P in Resolute Energy Deal

Texas Rangers owner Tom Hicks hopes to swing for the fences in a $582 million trade that would give him privately held independent Resolute Natural Resources Co. Under terms of the transaction announced last week, the producer, founded by Natural Gas Partners (NGP), would go public and be listed on the New York Stock Exchange.

Resolute's principal producing assets include a Tertiary oil project in southeast Utah and a conventional natural gas field in Wyoming's Powder River Basin. The Denver-based producer also owns exploratory acreage in Wyoming's Big Horn Basin and in Alabama's Black Warrior Basin. Proved reserves at year-end 2008 were estimated at 49.3 million boe. In the first three months of 2009 Resolute produced, on average, 7,626 boe/d net.

"Resolute has all of the characteristics that we believe are essential for a company to succeed in the public markets: a high-quality management team with extensive experience and success in the upstream oil and gas business, a strong and flexible balance sheet, and a focused asset play in a sector poised for significant activity," Hicks said.

Hicks cofounded the investment firm Hicks, Muse, Tate & Furst and now is chairman of Hicks Holdings LLC. In addition to the Rangers, Hicks owns the National Hockey League Dallas Stars and Mesquite Championship Rodeo, and he has a 50% stake in England's Liverpool Football Club. Considered a savvy investor beyond sports, Hicks in 1986 paid $45 million to buy the soft drink labels 7 Up and Dr Pepper. Two years later he sold them for $700 million.

Resolute was founded five years ago by NGP and the former management team of HS Resources Inc. Resolute CEO Nicholas J. Sutton, who will continue as chief of the new entity, was CEO of Rockies-based HS Resources when it agreed to merge in 2001 with Kerr-McGee Corp. (see NGI, May 21, 2001). HS Resources was 77%-weighted to natural gas, with core holdings in the Denver-Julesburg Basin. The estimated $1.8 billion cash-and-stock merger at the time helped Kerr-McGee, since merged with Anadarko Petroleum Corp., to become one of the five top U.S. independents.

"This is an exciting time to invest in the oil and gas industry," said Sutton. "As a result of this transaction Resolute will be well positioned to generate strong returns for investors through the combination of its long-lived properties, a management team with extensive experience and proven results in upstream operations, the expected strong growth in demand for oil and gas, the potential for positive pricing trends and a greatly improved balance sheet.."

Sutton said he was pleased to have the continued support of NGP, which is to remain a minority investor in Resolute.

"Nick [Sutton] and his senior management team are among the best in the business, and NGP's relationship with them dates back more than 18 years to when we made our first investment in HS Resources," said NGP Managing Partner Kenneth A. Hersh. Dallas-based NGP, founded in 1988, is a $7.2 billion family of investment funds organized to make direct equity investments in private energy companies. "At that time HS Resources was a small private company cofounded by Nick that grew to be a highly successful independent oil and gas company."

Under terms of the agreement, NGP would retain a 26% interest in the revamped producer; Hicks Acquisition Co. public shareholders would own a 74% stake. The transaction implies an enterprise value to proved reserves ratio of $11.80/boe. Pending regulatory approvals, the acquisition is slated to close by the end of September.

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