Private equity (PE) investors still believe in Aubrey McClendon after they more than doubled capital investments this week in the Utica Shale-based enterprise.
American Energy Partners LP, launched last year shortly after McClendon was booted from Chesapeake Energy Corp., has secured close to $2.9 billion in financing over the past five months for affiliate American Energy-Utica LLC. The latest cash comes from $1.25 billion in financing that is set to close by Feb. 27.
The affiliated partner, which is not owned by McClendon, plans to offer $750 million of its funds in seven-year 3.5% convertible notes that could become common stock if and when an initial public offering (IPO) were to be launched. The pre-IPO convertible notes are designed to encourage an IPO; the notes also helped lower the cost of funding. A separate subsidiary would manage the leaseholds.
The Utica affiliate also raised its borrowing limit to $950 million, up from $500 million. More than 40 financial institutions participated to increase the borrowing limit target.
If the Utica affiliate were to publicly launch, it would be the second now on the table by a McClendon-led enterprise. In December, American Energy Capital Partners LP filed a preliminary prospectus with the U.S. Securities and Exchange Commission to raise through an IPO up to $2 billion (see Shale Daily, Dec. 16, 2013). When the IPO may be launched remains up to the company.
The stout capital infusions have come despite a lack of guidance on what's to be accomplished. Marketing materials for American Capital indicate it plans to spend $1.9 billion this year on Utica area drilling and land acquisitions, with as many as 11 rigs operating in the Utica by the end of 2014 and 30 by 2018.
The Utica affiliate has around 260,000 net acres, making it one of the top leaseholders in the play (see Shale Daily, Feb. 3). The unit initially secured leaseholds from various producers, including EV Energy Partners LP and Royal Dutch Shell plc (see Shale Daily, Aug. 21, 2013; April 17, 2013). The business also has partnered with Red Hill Development LLC and obtained midstream agreements with MarkWest Utica EMG and Utica East Ohio Midstream LLC (see Shale Daily, Oct. 3, 2013).
Lead investors in the ventures have been PEs, including First Reserve Corp. and The Energy & Minerals Group, a frequent collaborator with Chesapeake when McClendon helmed the company (see Shale Daily, Jan. 29; Oct. 10, 2013).
McClendon's only public excursions into the U.S. onshore since leaving the company he co-founded have been in the Utica, which in 2011 he said was the "biggest thing economically to hit Ohio, since maybe the plow" (see Shale Daily, Sept. 22, 2011).