Presidio Petroleum closed on an inaugural issuance of asset-backed securities expected to enable the Fort Worth, Texas-based team to pursue additional acquisitions.

“The Presidio management team has established a strong track record of strategic consolidation of legacy assets in the Anadarko Basin,” commented Robert Lee, managing director of Morgan Stanley Energy Partners, in a company release on Aug. 4.

The issuance of term asset-backed securities was made to Presidio Petroleum, a portfolio company of Morgan Stanley Energy Partners, in a private placement transaction with a syndicate of U.S.-based institutional investors. The transaction follows the successful integration of three previously announced acquisitions in the Midcontinent region since the establishment of Presidio’s partnership with Morgan Stanley Energy Partners in 2018.

“We continue to see opportunity to grow the Presidio platform through consolidation and improved management of producing assets,” said Lee adding that the “innovative securitization of Presidio’s existing asset base” announced Aug. 4 will enable the company to pursue additional, capital-efficient acquisitions in the Midcontinent region.

Presidio was established in 2017 as a differentiated oil and gas operator focused on the optimization of mature, producing oil and natural gas assets in the U.S. Since its launch, Presidio acquired assets located in the Anadarko Basin of Texas, Oklahoma, and Kansas from Midstates Petroleum in May 2018, Apache Corp. in July 2019 and Templar Energy in July 2020.

As a result, Presidio has achieved significant scale without drilling new wells, growing to 38,000 boe/d of net production under management in the Anadarko Basin since the start of its partnership with Morgan Stanley Energy Partners, according to the company release.

“Presidio’s disciplined operating model and culture of continuous innovation has enabled us to generate exceptional returns on capital from under-managed legacy oil and gas assets,” said Chris Hammack, co-founder and co-CEO of Presidio, in the release. “We look forward to continuing the efficient and responsible management of our assets under this new structure.”

Will Ulrich, co-founder and co-CEO of Presidio, also added that Presidio developed sustainability performance targets as part of the note issuance to formalize the company’s reduction of greenhouse-gas emissions as it aims to be fully compatible with the International Energy Agency’s recent “Net Zero by 2050” roadmap for the global energy sector.

“Presidio is the last and best steward of oil and gas assets which are essential to supporting the global economy as it continues to decarbonize,” said Ulrich.

Though terms of the transaction were not disclosed, Presidio said the notes are the largest single issuance of asset-backed securities by an energy producer, the first such issuance to a syndicate of note purchasers, and include two investment-grade rated tranches. Presidio’s plans for the net proceeds from the issuance include to accelerate its acquisition-driven growth strategy in the Midcontinent region and recapitalize its balance sheet.

John Moon, managing director and head of Morgan Stanley Energy Partners, also added, “We are pleased to partner with Presidio in pioneering the use of securitization as a financing strategy within the energy industry. Presidio’s diversified asset base and free cash flow profile are a strong match for long-term, investment grade debt securities, and this inaugural issuance to a broad base of U.S. institutional investors validates Presidio’s strong track record and differentiated strategy.

Sidley Austin LLP served as legal counsel to Presidio and Morgan Stanley Energy Partners in connection with the transaction. The Sidley team was lead by partners Daniel Allison, Marc Rose and Tracey Nicastro.

Guggenheim Securities LLC served as sole structuring adviser and placement agent to the companies for the transaction.

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