What may distinguish the leadership of EnerVest Ltd.'s John B. Walker is his willingness to trust (and be trusted by) major oil and gas companies while, indirectly, he bets against them.
In 2013, EnerVest bought and sold $3 billion in assets.The company's reputation for competence and funding occasionally won it properties at a slightly lower price than other bidders.And the company reciprocates: Its largest deal of the year, a $950-million Permian Basin sale, was not sold to the highest bidder.
Walker's greater task is to mastermind an ever-changing game that positions the company to be in the right place several years from now.He currently serves as Ener-Vest's chief executive officer and the executive chairman of EV Energy Partners LP, a Nasdaq-listed master limited partnership.
It's a gutsy job that Walker makes sound almost simple.“We're going counter to the market [in 2014],” he says.
That could be just talk, except that since 1994, EnerVest has been just about everywhere oil and gas has been and done well.It has acquired $8 billion worth of oil and gas properties.
In Ohio, EnerVest spent the better part of a decade buying shallow wells and accumulating 1.2 million acres.
As Walker describes it, “Wham!The Utica happens—a big shale play—and we have acreage all over Ohio.And we're the major beneficiary of that, because we didn't pay anything for it.”
This explains EnerVest's fixation on buying concentrated positions.At the end of 2010, the company had zero assets in the Barnett, Walker says.The company now owns $3 billion worth in the shale.
“It puts you in a position for serendipity to work,” he says.
Overall, 2013 was a modest year for US onshore A&D.EnerVest was the year's most active acquirer among E&Ps, with purchases of $1.5 billion in assets.The company is likely to be as active or more in 2014 as it seeks higher rates of return for investors.
One of the company's strengths is its relationships.
EnerVest doesn't merely bring big bucks to the table; it also brings trust.
This year, the company sold perhaps the best of its properties—26,519 net acres in the Permian Basin—to QEP Resources.The assets included associated production of 6,700 barrels of oil equivalent per day (BOE/d), of which 68% is oil.
Zooming in on 19,000 net acres in Midland and Andrews counties reveals a price paid for the package of $28,500 per acre.
“This sets a new high-water mark for acreage prospective for the Wolfcamp in [the] Central/Northern Midland [Basin] and is positive for other companies in the area such as Athlon Energy Inc., Diamondback Energy Inc., SM Energy Co. and others,” says Mike Kelly, senior analyst with Global Hunter Securities, in a recent report.
QEP Resources didn't offer the most money, however.
A number of high-quality operators looked the property over, says Phil De-Lozier, senior vice president of business development for EnerVest Ltd.
The spread in prices was close, but from a seller's point of view, EnerVest wanted to be certain its buyer would be able to complete the purchase, DeLozier says.
That relationship works both ways, Walker says.“We were told that in our Granite Wash acquisitions we were not the high bidder on either one.”
SM Energy Co. sold its properties in the Anadarko Basin, which includes the company's Granite Wash interests, to various affiliates of EnerVest for about $343 million.Also in 2013, Laredo Petroleum Holdings Inc. sold about 104,000 net leasehold acres in the Anadarko Basin to affiliates of Ener-Vest for $438 million in cash.
Both companies knew EnerVest, had done business in the past with the company, and held it in high regard, Walker says.
“They knew we had the money and they, like us, in some instances were willing to leave money on the table to do the certain deal rather than taking the chance for a little more money for the possibility that the deal wouldn't get done,” he says.
Headed into 2014, the company is making a wager on what may surprise some: gas plays.“We're buying long-lived, dry-gas reserves, or gas reserves with some liquids,” Walker says.“That's our criteria.They're strategic bets.If public companies are buying oil and bidding up the price of oil properties, then we are looking primarily at things they don't want.”
EnerVest is once again planning to stockpile assets that the market will eventually pay high prices to get.Says Walker, “We're either going to be right or wrong.”
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