Three Rivers, headed by CEO Mike Wichterich, will sell its 57,000-net-acre position to an undisclosed buyer after initially marketing its Permian Basin assets last April. (Image: Hart Energy)
Three Rivers Operating Co. III LLC, a private E&P with a 57,000-net-acre position in the Delaware Basin, is being sold nearly a year after it was first put on the market.
Private-equity backer Riverstone Holdings LLC said it agreed to the “sale of 100% of the assets” in Culberson and Reeves counties, Texas, held by Three Rivers, also known as 3ROC. Riverstone did not disclose the terms of the deal or the buyer. Three Rivers, based in Austin, produced more than 10,000 barrels of oil equivalent per day (boe/d) in January. The sale follows a gas dedication agreement by the company in December, the terms of which were also withheld.
Riverstone said that when the transaction closes, subsidiary Riverstone Energy Ltd. (REL) will realize gross proceeds of about $205 million. REL said in a Feb. 17 press release that it will receive a gross multiple of 2.2x based on its $94 million investment in the company and a gross IRR of 49%.
“This represents a gross profit of $111 million, which will be subject to taxes and a performance fee upon closing of the sale, which is expected to occur in April 2018 and is subject to customary closing conditions,” REL said.
In April 2015, Three Rivers received an equity commitment of up to $500 million from funds managed by Riverstone Holdings LLC and additional amounts from the company’s management team. The financial backing included up to $167 million from REL.
Three Rivers CEO Mike Wichterich founded the company in April 2015 following its previous iterations, Three Rivers Operating I and II.
The initial marketing of Three Rivers appeared to have stalled, with analysts at Seaport Global Securities calling it a “failed sales process” in late January.
“However, word from others around Midland is that interest in the acreage has rebounded,” the report noted.
Wichterich noted the topsy-turvy state of A&D at Hart Energy’s Executive Oil Conference in November.
A year ago, he said, large acreage positions in the Delaware Basin were the highly sought after. But buyer sentiment shifted to “we want a bolt-on acquisition. We want assets that can fund themselves,’” he said.
Three Rivers had made some changes to its completions approach and the company told Seaport that at least six of its wells were on track to hit condensate EURs of 800,000 boe to 1 MMboe.
The first two Three Rivers companies sold assets for a combined $2 billion, including a 2012 sale of 200,000 net Midland Basin acres to Concho Resources Inc. (NYSE: CXO) for $1 billion.
Subash Chandra, an analyst at Guggenheim Securities LLC, said in April 2017 that Three Rivers could command a $1 billion valuation based on a per acre cost of $17,500, assuming no valuation for production.
In December 2016, PDC Energy Inc. (NASDAQ: PDCE) bought nearby Kimmeridge Energy for $1.5 billion. The deal was valued at $22,000 per acre and included average production of 7,000 boe/d.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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