Eagle Ford: Big Deal announced March 20

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SPAC led by former Oxy CEO buying South Texas energy business for $2.66B to form new co.
John Walker, EnerVest founder and CEO, commented: “I have known Steve 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.

By Olivia Pulsinelli – Senior web editor, Houston Business Journal 3/20/2018

Houston-based EnerVest Ltd. will sell its Eagle Ford and Austin Chalk assets to TPG Pace Energy Holdings (NYSE:TPGE) for about $2.66 billion in cash and stock, according to a March 20 press release.

Fort Worth-based TPGE is an energy-focused special purpose acquisition entity led by Steve Chazen, former CEO of Houston-based Occidental Petroleum Corp.

Through the deal, TPGE and EnerVest will create Magnolia Oil & Gas Corp., which will trade on the New York Stock Exchange under a new ticker symbol. Chazen will serve as the new company’s full-time chairman, president and CEO. In addition to Chazen, the company’s seven-person board will include two appointees named by TPGE, two by EnerVest and two additional independent directors.

The deal is expected to close late in the second quarter of 2018. EnerVest will receive about $1.2 billion in cash and retain about 120 million shares of common stock. After the deal closes, EnerVest could earn up to an additional 17 million shares if certain operating and/or stock price targets are achieved, per the release.

Magnolia will be a large-scale, pure-play South Texas operator with more than 40,000 barrels of oil equivalent per day of production. It will acquire EnerVest’s approximately 360,000 total net acres in South Texas, including about 14,000 net acres in one of the most prolific sections of Karnes County and 345,000 net acres in the emerging Giddings Field.

After the deal closes, EnerVest’s South Texas operating team will continue to operate the assets under a long-term service agreement, with EnerVest providing more than 90 dedicated operating, technical and field-level employees to the endeavor.

“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,” Chazen said in the release. “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 percent of cash flow to fund a drilling program that consistently delivers more than 10 percent annual production growth.”

Credit Suisse Securities (USA) LLC acted as financial adviser to TPGE; Deutsche Bank Securities Inc. and Goldman, Sachs & Co. acted as capital markets advisers to TPGE; and Vinson & Elkins LLP acted as legal counsel to TPGE. Citigroup acted as financial adviser and capital markets adviser to EnerVest; Gibson, Dunn & Crutcher LLP acted as legal counsel to EnerVest.

TPGE was formed in early 2017 with the goal of building “a large scale, focused oil and gas business with a meaningful production base, strong free cash flow and a disciplined financial return philosophy,” per the release. The blank-check company — also called a special purpose acquisition company, or SPAC — completed its $650 million initial public offering in May 2017.