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Permian Explorer Tall City Ropes $500M From Warburg

Midland, TX-based Tall City Exploration III LLC, an exploration and production (E&P) company focused on the Permian Basin and backed by Warburg Pincus, said it has secured financing of up to $500 million from funds affiliated with the equity giant to pursue bolt-on opportunities in the basin.

Tall City plans to "apply the same proven geologic and petrophysics-driven thesis consistent with the team's prior successful ventures," including Tall City I, which included more than 90,000 net acres in the West Texas counties of Howard and Reagan.

In November 2014, Tall City, then backed by Denham Capital, sold 14,000 net acres in Reagan County to American Energy-Permian Basin LLC for $440 million. One year later, it sold its remaining E&P assets to Moss Creek Resources LLC for $803 million. The assets sold included 71,000 net acres in Borden and Howard counties, TX, plus an interest in 34 horizontal and six vertical wells that were producing 3,750 boe/d.

"Since our successful exit of Tall City I, we have been actively evaluating new opportunities to replicate our prior successes and continue to find attractive opportunities in the Permian Basin," said CEO Michael Oestmann. The company plans to "pursue attractive opportunities in this prolific region."

Oestmann formed Tall City in May 2012 with $200 million in backing from Denham. He began his career as a geologist and geophysicist with ExxonMobil Corp. predecessor Exxon Co. USA in 1982. Oestmann spent 15 years with Exxon and other operators before co-founding Piedra Resources with private equity partners. Piedra sold its assets to Berry Petroleum Co. for more than $120 million in 2011.

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