TGP Pace Energy Holdings Corp., led by former Occidental Petroleum Corp. (Oxy) CEO Stephen Chazen, on Tuesday clinched a partnership with EnerVest Ltd. to form South Texas pure-play Magnolia Oil & Gas Corp.
The transaction, estimated to be worth $2.66 billion, would create a publicly traded independent formed from EverVest’s 360,000 net acres in the Eagle Ford Shale and Austin Chalk. Current production is 40,000 boe/d-plus, including 31,000 boe/d in Karnes County and 9,000 boe/d in Giddings Field. Production is liquids-heavy, 62% weighted to oil.
“In creating Magnolia, we have a unique opportunity to build a new company anchored by what we consider to be some of the highest quality oil producing acreage in the country,” said Chazen. “We believe Magnolia’s acreage in Karnes County has some of the best economics in the United States and, when coupled with the upside in the Giddings field, is a great fit with our criteria…
“Assuming moderate commodity prices, we plan to invest less than 60% of cash flow to fund a drilling program that consistently delivers more than 10% annual production growth.”
Chazen, who would be chairman, president and CEO, retired from Oxy in 2016 and last year helped to form TPGPace Energy, a special purpose acquisition company designed to prowl for oil and gas investments. Joining Magnolia as CFO is Christopher Stavros, the former financial chief at Oxy.
EnerVest CEO John B. Walker said he had known Chazen for more than 20 years, “and I cannot think of a better executive to lead Magnolia. The playbook he perfected at Oxy is a great match for the outstanding acreage we have assembled in South Texas over the last 10 years.”
EV Energy Partners LP, the upstream master limited partnership of privately held EnerVest, earlier this month agreed to restructure in a prepackaged Chapter 11 bankruptcy filing.
Once the transaction is completed, Magnolia is to trade on the New York Stock Exchange under a new ticker symbol. EnerVest would receive $1.2 billion in cash at closing and retain roughly 120 million shares of common stock in the new company.
The transaction is set to be completed by mid-year.
Magnolia’s acreage is to include about 14,000 net acres in Karnes County and 345,000 net acres in the Giddings field. The acreage position is almost entirely held by production. EnerVest’s South Texas team would continue to operate the assets under a long-term services agreement. Under the terms of the services agreement, EnerVest would provide more than 90 dedicated operating, technical and field level employees. Additionally, EnerVest would provide shared services for some corporate functions.
EnerVest funds are expected to be majority owners (51%) of the issued and outstanding shares of common stock. Following the closing, EnerVest also may earn up to an additional 17 million shares if some operating and/or stock price targets are achieved.
Magnolia plans to maintain a seven-person board, which includes EverVest and TGP representatives.