Exclusive-EnCap joins two Permian oil producers in $ 4 billion deal – Reuters source

By Shariq Khan, David French and Jessica Resnick-Ault

(Reuters) – EnCap Investments LP has merged two of its portfolio companies in the Permian Basin to create an oil producer worth more than $ 4 billion, including a debt that the private equity firm wants to make public next year, people who know the subject. he said on Monday.

Energy-focused investment has merged Advance Energy Partners and Ameredev II LLC, both operating in the Permian part of Delaware – a region of Texas and New Mexico that is at the heart of the U.S. shale industry, where production is expected to exceed 5. million barrels per day for the first time in January.

This year’s price spike sparked a merger in the North American shale industry as operators sought to scale down costs while production was slowly growing. The Permian has been the epicenter of the deal, with its position as the number one oil producing area in the United States.

The EnCap deal will create one of the largest privately owned oil producers in the Delaware Basin, sources said. The combined company currently operates eight platforms, according to one source.

All three sources spoke on condition of anonymity to discuss private information. EnCap and Ameredev II declined to comment. Advance did not immediately respond to a request for comment.

Reuters reported in June that EnCap had to sell Advance for about $ 2 billion, including debt, to get out of its initial investment seven years ago. Private equity firms typically stay active for three to five years before they go through sales or an initial public offering.

Over the past three years, purchasing companies have also often merged their energy companies – a trend the industry has called “smashcos”. These reduce management costs and create a larger business that is better able to operate when gross prices fall.

EnCap initially invested $ 400 million in Ameredev II in 2017 after the sale of its former Ameredev I to Callon (NYSE 🙂 Petroleum Co closed that same year. The combined company will be led by Ameredev’s management team, led by CEO Parker Reese, sources said.

EnCap may be looking to list the combined company as soon as next year, if commodity prices remain favorable, a second source said.