Kayne Anderson Capital Advisors LP combined three of its portfolio teams in the Anadarko Basin on May 20, continuing a trend in the private equity oil and gas space predating the many unprecedented events of 2020 that threw the industry into a tailspin.

In a release, Kayne Anderson Energy Funds announced the all-equity consolidation of Casillas Petroleum Resource Partners LLC, Native Exploration Holdings LLC and Acacia Exploration Partners LLC, three private oil and gas operators with assets across Oklahoma in the Midcontinent region including in the STACK shale play.

The merger results in the formation of 89 Energy III LLC, an Oklahoma City-based, private energy company, which concurrent with the consolidation closed on a new credit facility and additional equity funding from Kayne Anderson. Additionally, 89 Energy III will manage the assets of Triumph Energy Partners LLC, another portfolio company of Kayne Anderson.

The announcement highlights the continuation of a trend for pri­vate equity firms and their portfolio teams that for years now have dealt with a new reality from the increased focus on capital discipline by a majority of public E&P companies leaving less room for M&A and essentially derailing the build-and-flip strategy traditionally pursued by private equity.

As a result, many private equity firms have pulled back and refocused, including Kayne Anderson, one of the largest private equity investors in oil and gas which roughly a year ago consolidated its two energy teams with managing partner Chuck Yates also exiting the firm.

Commenting on the firm all-equity consolidation in a statement on May 20, Ryan Sauer, managing director at Kayne Anderson, said: “We are excited about partnering with the talented 89 Energy III management team and will look to create substantial value in our current Midcontinent asset through both the continued exploitation of the existing inventory and further consolidation within the Anadarko Basin.”

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89 Energy, co-founded in June 2016 by John-Mark Beaver and Ryan Rickett—both previously employed by Aubrey McClendon’s American Energy Partners, has a proven track record of operational success and sub-surface expertise in the Midcontinent region, according to the release. As part of the all-equity consolidation, Kayne Anderson’s energy private equity platform also announce a new partnership with the 89 Energy III management team who will serve as new leadership for the business going forward.

“We are pleased to announce the partnership with Kayne Anderson’s energy platform along with this transformative consolidation that provides scale and strong financial footing for a one-of-a-kind, highly economic Midcontinent asset,” Beaver, who serves as president and CEO of 89 Energy III, said in a statement.

89 Energy III’s operating footprint now covers approximately 80,000 net acres across Oklahoma producing about 21,000 net boe/d. Additionally, Triumph’s assets, which the company also manages, will add approximately 15,000 net acres in Oklahoma’s STACK play with roughly 6,500 net boe/d of production.

“89 Energy III is well-positioned to evolve with the changing energy landscape and to thoughtfully develop our assets and pursue strategic, scalable opportunities,” Beaver added in his statement.

At close, 89 Energy III’s new, three-year credit facility had a $250 million borrowing base. Further details on the additional equity contributions the company received from energy private equity funds managed by Kayne Anderson were not disclosed.

Wells Fargo Securities LLC served as left lead arranger on the syndication of the credit facility. Wells Fargo Bank NA is the administrative agent.

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