kkr forms $400m shale partnership with hilcorp, page-2

Another article on this - below the most important paragraph imo

"In addition to the development program, the company will actively look for opportunities to increase its acreage position in the Eagle Ford through leasing, joint ventures and acquisitions."

KKR, Hilcorp partner to develop Eagle Ford acreage

Published: Jun 14, 2010
Kohlberg Kravis Roberts & Co. and Hilcorp Energy Co., a privately owned oil and gas exploration and development company based in Houston, have signed an agreement for KKR to invest up to $400 million in Hilcorp Resources LLC, a newly formed partnership created to own and develop Hilcorp?s oil and gas properties located in the Eagle Ford Shale trend of South Texas.

In the April 2010 issue of Oil & Gas Financial Journal, Houston-based Hilcorp Energy ranked No. 4 in the company?s OGFJ100P list of privately held companies ranked by boe. The company ranked No. 5 in terms of top private gas producers and No. 3 in liquids production.

The company will develop certain acreage within the Eagle Ford, located in an approximately two hundred mile long area in South Central Texas, southeast of San Antonio. The partnership combines a capital commitment from both parties as well as the contribution of a 100,000 net acre Eagle Ford position from Hilcorp. Hilcorp will hold 60% and KKR will hold 40% of the company, with Hilcorp?s management and employees running the day-to-day operations.

Jefferies & Co. Inc. served as sole financial advisor to Hilcorp in connection with the transaction.

The Eagle Ford is comprised of a layer of rock found at depths of 7,000 feet to 14,000 feet, with a thickness of approximately 250 feet. The play is estimated to contain over 80 billion barrels equivalent (boe) of original oil in place. One of the newest shale plays in the country, the Eagle Ford has become an increasingly attractive area of interest for oil and gas companies given that it benefits from a favorable (oil-weighted) commodity profile and is located proximate to existing oil and gas infrastructure and liquids product markets.

Over the past year, Hilcorp has assembled approximately 100,000 net acres in the Eagle Ford, substantially all of which is operated by Hilcorp. Hilcorp is in the process of commencing its Eagle Ford development program and is currently running two horizontal drilling rigs in the play. In addition to the development program, the company will actively look for opportunities to increase its acreage position in the Eagle Ford through leasing, joint ventures and acquisitions.

?We believe in the long-term potential of the Eagle Ford and see a tremendous opportunity to drive job creation and related economic benefits for a variety of stakeholders in connection with the development of the Eagle Ford," noted Marc Lipschultz, member of KKR and Global Head of KKR?s Energy and Infrastructure business.

KKR has been investing in the energy sector for more than 20 years, starting with the United Texas Petroleum transaction in 1985. Today, KKR?s global energy and infrastructure team is comprised of 24 people in New York, Menlo Park, Houston and London. Recent transactions in the energy sector include Energy Future Holdings, Texas Genco, and ITC Transmission.

Most recently, KKR invested in East Resources. Plans for the proceeds from the convertible debt investment include credit facility repayment, exploration and development activities in the Marcellus shale, and new energy infrastructure development.

Hilcorp Energy Co. was founded in 1988 by current president and CEO, Jeff Hildebrand. Hilcorp has five offices and approximately 600 employees. Hilcorp has operated in South Texas since 1998 and is the largest producer of conventional oil in the region.

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a global alternative asset manager with $54.7 billion in assets under management as of March 31, 2010. With over 600 people and 14 offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes.