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    Midland investment firm focuses on conventional assets


    August 1, 2022 - Mella Mcewen, Midland Reporter-Telegram, Texas

     

      Jul. 31—Conventional, vertical wells built the Permian Basin's oil and gas industry and, while unconventional shales have dominated the region in recent years, continue to play a role in the industry.

      "Vertical wells can't scale up with horizontals," said Barry Portman, managing partner of Lodestone Energy Partners II and chief executive officer of BCP Resources. "The capital requirements, the production rates are different."

      Still, he said, conventional wells are still profitable and remain a huge part of the region. That is why Portman and his team have developed a novel roll up strategy of acquiring conventional wells with plans to develop those assets. Lodestone is the fund focused on opportunities while BCP Resources will serve as operator.

      Lodestone earlier this month announced the acquisition of assets from Hibernia Resources II that span Reagan and Upton counties. The assets contain 85 conventional and 21 legacy horizontal wells that comprise more than 2 million barrels of oil equivalent proved developed producing reserves with 63 percent liquids.

      The acquisition attracted investment partners including AggieTech of Midland and Masked Rider Capital of Lubbock, with the debt facility provided by Midland's Community National Bank.

      Portman said he had built a relationship with the bank, which liked the focus on traditional assets as well as that the company was local. He also found, in talking with the bank and investors, that the strategy of focusing on conventional assets is catching on.

      While conventional vertical wells can't meet the 500,000 barrels of oil equivalent per day some of the majors are reporting — or seeking, Portman sees opportunity in those wells.

      "We want to continuing acquiring as many verticals as we can in our roll up strategy," he said, instead of chasing horizontal wells.

      Said his wife, Cindy, also a partner in Lodestone and owner in BCP Resources, "There's still a lot of oil to be produced."

      Citing her husband's experience as an engineer — he began with Marathon in 1998, working their vertical wells — she said he was able to look at one of the first five wells the company acquired and figure out a mistake had been made in completing it. "It's making oil now," she said.

      The deal with Hibernia has opened the door to future deals, according to Portman, who said he found the number of investors interested in the proposal was more significant than expected.

      "To be able to look at larger transactions, we needed an anchor acquisition to prove ourselves," he explained. "(Size) is still a barrier, but we made a big jump with Hibernia. We find it gives us scope to be able to compete."

      In terms of accessing the services needed amid supply chain bottlenecks, he said, "We need to think outside the box, be creative, leverage our relationships. The size and scope of our material needs mat allow us to use smaller providers. We can also reuse equipment. There's surplus equipment available us that the majors can't use in their horizontal applications."

      The company's top priority will be to generate returns for investors, and he will look at any conventional project that meets that priority, Portman said.

      Her husband said that, in what he terms the shale age, some traditional knowledge has been lost. He hopes, in developing the conventional assets the company acquires, to transfer some of that knowledge to the next generation. He has managed to put together an experienced team, he said, and access to that experience is one reason he plans to stay in Midland.

      "I've heard from people that they've felt left behind in this horizontal age," he said.

      ___

      (c)2022 the Midland Reporter-Telegram (Midland, Texas)

      Visit the Midland Reporter-Telegram (Midland, Texas) at www.mywesttexas.com

      Distributed by Tribune Content Agency, LLC.

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