KKR to invest $400MM to develop Eagle Ford Shale through Hilcorp partnership

Source: Kohlberg Kravis Roberts & Co.

Kohlberg Kravis Roberts & Co. and Hilcorp Energy Company, a privately owned oil and gas exploration and development company based in Houston, Texas, today announced the signing of a definitive 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. 

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. Upon close, Hilcorp will hold 60% and KKR will hold 40% of the Company, with Hilcorp’s management and employees running the day-to-day operations. 

“With more than two decades of history, Hilcorp is a known leader when it comes to exploring for, developing and producing oil and gas, and Hilcorp’s management is unparalleled in terms of its experience in the South Texas region. This partnership is an endorsement of the founding vision of Hilcorp Energy and the strength and experience of its management team,” John Bookout, Managing Director of KKR, said. 

The Eagle Ford represents a promising energy development in North America. 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 Eagle Ford is richly deposited with hydrocarbons and is estimated to contain over 80 billion barrels equivalent (BBoe) 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, in some of the most attractive areas of the play, 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. Going forward, the Company intends to be creative in structuring future transactions as it expands its Eagle Ford position and believes that it can offer a strong value proposition to landowners and operators in the trend. 

“We are thrilled to partner with such an impressive management team on an investment that will develop much needed oil and natural gas reserves in Texas. 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," Marc Lipschultz, Member of KKR and Global Head of KKR’s Energy and Infrastructure business, said. 

KKR has been investing in the energy sector for more than twenty 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), Texas Genco (Texas), ITC Transmission (Michigan) and, most recently, East Resources (Pennsylvania).

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