When Mitch Solich, senior managing director of Denver-based SB Energy Partners, formed Shenandoah Energy in December 1999, he aimed to create good returns, acquiring and exploiting Rockies assets, mainly in the Wasatch play. He did that, and he did it a second time. Each time, he used private-equity funding. Now, he is gathering commitments to act as a private-equity source, through his new SB Energy Partners in Denver.

To start Shenandoah, Solich and partners raised $77 million of private equity from Shell Capital and Prudential Capital, and drilled 235 wells during an investment period of 19 months. The short timeframe was just the "optimal time to create value and liquidity for shareholders," Solich said.

After a total capital investment of $118 million and an increase in EBITDA (earnings before interest, taxes, depreciation and amortization) of 845%, Solich and team sold the company to Questar Corp. for $421 million.

"Our equity value in January 2000 was $75 million, and in July 2001 it was $296.6 million, which was a change of 296%," he told Houston Producers' Forum members recently. "That transaction worked out very well for all of our shareholders."

Next, Solich and partners formed Medicine Bow Energy, to pursue opportunities in the Rockies, Midcontinent and Texas. The name was Solich's second choice; his first choice was Ox Bow.

"I punched cows a long time ago, and I used ox-hide stirrups when I rode. It was very hard-you have to stay in the saddle until the job is done. I thought that was a clever analogy to the oil and gas business. Unfortunately someone already had the name and they were going to sue. I decided that wasn't a battle I wanted to fight, so we chose the name Medicine Bow instead."

Solich and partners started Medicine Bow in January 2002 with zero reserves and zero production. They didn't do a first deal until June 2003. "That's another of those pucker periods," he said. "It just took us a while to get one done."

The team received equity commitments when gas prices were $2.14 per thousand cubic feet. Medicine Bow was sold to El Paso Corp. for $846 million in August 2005 when gas prices were nearly $8.

"By that time, we had made it a policy to adopt a disciplined hedging program in everything we did," Solich said. "We had also made it a habit to use costless collars."

Solich is now trying his hand in the private-equity field with SB Energy Partners. "Everybody's doing it, so I thought it was the thing to do," he said. The start-up is gathering commitments of up to $450 million.

"I had been thinking of a model that deploys capital through a lot of management teams; not just one team," he said. "There are a lot of smart people out there, and we can't do everything. This will give us more exposure and allow us to take advantage of more good opportunities."



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