Bayou City Energy to pursue lower middle-market upstream investments

Bayou City Energy Management LLC (Bayou City, BCE) has launched its first private equity fund to make investments in the upstream oil and gas sector. The firm targets equity investments ranging from $5 to $50 million in the North American oil and gas exploration and production industry. The firm pursues privately negotiated investments through two strategies: Providing buyout and growth equity capital for small operators with current production, and partnering with operators to provide dedicated drilling capital in off-balance sheet structures.

Bayou City is led by William McMullen as founding partner, and Mark Stoner as partner. McMullen is formerly of White Deer Energy and Denham Capital and Stoner was previously vice president of finance at Alta Mesa Holdings. McMullen and Stoner are supported by Kristin Eby MacKelvey as CFO and Andrew Koehler as senior associate.

Commenting on the launch, McMullen said: "Our team has quickly worked to high-grade our proprietary pipeline of opportunities, and is very much in execution mode. The results of these efforts are borne out in Bayou City's first acquisition which closed on June 15, 2015. We have partnered with a seasoned and highly qualified management team in a producing asset that generates meaningful production and cash flow despite prior under-exploitation. We plan to make targeted investments in the field to improve operational efficiencies, replace obsolete equipment with modern oilfield technology, recomplete existing wells into new productive zones and drill relatively low-risk infill development wells."

Stoner added: "Small operators have historically been underserved by the institutional capital market. Oilfield operators work hard to boot-strap a concept into production and reserves but are often disproportionately vulnerable to cash flow disruptions during volatile market cycles like the one we are currently experiencing. Bayou City's strategy is to help small E&P companies fill the funding vacuum and provide the capital and expertise needed to unlock significant value for all stakeholders."

Bayou City was formed with an arm's length arrangement with Intervale Capital LLC, a private equity firm focused exclusively on oilfield services with offices in Houston and Boston. Members of Bayou City’s advisory board include Charles Cherington (co-founder and managing partner of Intervale Capital), Gregory Beard (head of natural resources and senior partner at Apollo Global Management), Alan Clemens (technical advisor to Quantum Energy Partners and chairman of Rio Oil & Gas II LLC), and Thomas Perich (chairman of Andrews Kurth LLP). The firm expects to add additional members to its advisory board in the coming months.

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