Core Minerals sold its operated properties in the Illinois basin to a private buyer and retained certain non-operated properties. Core continues to entertain opportunities for exploration and development of oil and gas and purchase of royalty and mineral interests.
Trive Capital (“Trive”), the Dallas-based private equity firm, has sold one of its portfolio companies, Core Appalachia (“Core” or the “Company”), to Diversified Gas & Oil Plc (“Diversified”) for $183 million in cash and stock consideration, which was announced on October 11, 2018.
Core Appalachia, based in Charleston, West Virginia, was founded in 2016 with the acquisition of substantially all of the assets of Chesapeake Energy Corporation’s Southern Appalachian Division. The Company operates over 5,000 producing wells in Kentucky, West Virginia and Virginia across 1.3 million net acres supported by over 4,000 miles of Company-owned gathering pipeline and midstream assets.
During Trive’s ownership, Core created significant value by successfully optimizing its expansive gathering network and marketing functions, targeting strategic workover and recompletion candidates, and launching a development program of its Lower Huron and Berea acreage.
Blake Bonner, Partner at Trive, stated, “Trive is pleased to join Core in announcing this exciting realization just over eighteen months into our ownership period. We have enjoyed a very productive relationship with the Core team in which they worked tirelessly to unlock value by optimizing the asset in a short period of time. This symbiotic partnership allowed for Trive’s experience in executing complex carve out transactions to complement Core’s background operating similar upstream and midstream assets in the region. We believe the impressive performance of the Core team led to a very good outcome for all involved as the assets are ideally positioned for continued growth under Diversified’s ownership.”
“Trive has been instrumental in helping us carve out, expand and optimize the assets in our Chesapeake transaction,” said Core Appalachia President and CEO Jim Rode. “With Trive’s support, we successfully identified and executed several optimization projects in an otherwise forgotten basin. These initiatives led to a stabilization of production and midstream operations in a long-lived conventional asset base, all with the backdrop of volatile commodity prices. We view this transaction as a key milestone in the evolution of the Southern Appalachian basin and are excited to partner with Diversified for the next phase of both companies’ collective growth.”
Conner Searcy, Managing Partner at Trive, added “The success of our partnership with Core highlights another great example of what can occur when a management team and capital partner collaboratively execute on a strategic plan. We remain excited about the industry and look forward to continued investment alongside disciplined and experienced oil and gas teams.”
Trive Capital (“Trive”), the Dallas-based private equity firm, in partnership with Core Minerals III, LLC (“Core Appalachia”) has acquired substantially all of the assets of Chesapeake Energy Corporation’s Southern Appalachian Division. The assets include approximately 1.3 million net acres of conventional gas production and developmental acreage in Eastern Kentucky and West Virginia, a gathering system and associated midstream facilities. The assets also produce over 83 MMcfe/d through a system supported by over 4,000 miles of pipeline.
“We are excited to partner with a management team that has a long history of successfully operating production and midstream assets and a track record of driving results,” commented Conner Searcy, the Managing Partner of Trive. “We believe we have acquired an exceptional set of assets in a prolific area of the country with long-term potential and an ability to capitalize on several near-term tangible value creation initiatives to optimize the Southern Appalachian position.”
Core Appalachia President and Chief Executive Officer Jim Rode said, “The combination of substantial long lived reserves, the expansive gathering system with NGL and CO2 processing capabilities, along with an established firm transportation position provides Core Appalachia a growth platform conducive to its goal of being the market commanding, vertically integrated independent oil and gas company in the region.”
Trive Managing Director Blake Bonner commented, “We have a long track record of executing complex carve out transactions and look forward to partnering with a very talented team in Core Appalachia and quickly standing up the operations. In working closely on the project for almost a full year, the Core Appalachia and Trive teams were able to leverage each other’s strengths to chart a plan for successfully carving out Chesapeake’s Southern Appalachian Division as a free standing exploration & production and midstream company.”
About Core Appalachia
Headquartered in Evansville, Indiana, Core Appalachia is a privately held company focused on the acquisition and operation of producing oil and natural gas conventional and unconventional properties.
About Trive Capital
Trive Capital is a Dallas, Texas-based private equity firm investing in equity and debt securities with approximately $900 million in capital under management. Trive focuses on investing in what it sees as strategically viable middle-market companies with the potential for transformational upside through operational improvement. Trive seeks to maximize total returns to its investors through a hands-on, collaborative partnership with management teams and equity partners.
Core Minerals Management II, LLC, closed a $40 million equity capital commitment with Post Oak Energy Capital, LLC (Post Oak). Post Oak was established in 2006 and is based out of Houston, TX. Post Oak pursues private equity investments primarily in the upstream sector of the oil and gas industry in North America. Post Oak funded $10 million at the November 2012 closing, with the remaining $30 million available to support future activities.
Core Minerals Operating Co., Inc. was awarded the 2012 Facility of the Year at the Indiana Oil and Gas Association 2012 annual meeting. The facility is the Putnam Lease Tank Battery site located in Gibson County, IN. This site was acquired from Sun Exploration in 2010 and subsequently went through a major revitalization effort by Core. Core’s work on the facility was overseen by Vice President of Field Operations, Kenny Goebel.
Geologists and entrepreneurs want to get down in the Illinois Basin because this longtime oil haven has some life left in it, thanks to new sophisticated drillheads.
The rock beneath your feet has a name: the Illinois Basin. This type of rock covers much of its namesake state, but it also spreads throughout Southwest Indiana and Western Kentucky. Much of the rock is a mixture of limestone, shale, sandstone, and coal. It is a geologist’s dream.
More than rock collectors have had a vested interest in this crag because somewhere in this portion of the earth’s crust is oil. The crude is the domestic kind, a small proportion of the world’s production but the same type with the fluctuating prices that globally dipped below $33 a barrel in 2008 and rebounded above $100 this year.
Interest in the Illinois Basin began more than a century ago when entrepreneurs drilled straight down into the ground. The drill bits moved vertically and reached oil only at the entry point.
For the past few years, oil production from the Illinois Basin comes to roughly 40,000 barrels a day. One method for taking that oil from the ground is horizontal drilling. The concept dates back to 1891 when John Smalley Campbell applied for a patent. He envisioned a drilling system traveling parallel with an oil bore. Decades passed before anything resembling today’s horizontal oil wells appeared, and it was the 1980s before the practice was possible. A 1993 U.S. Department of Energy report called the achievement the first “within the imaginable realm of commercial viability.”
Today’s drilling technology garners more excitement. The process uses specialized bits and electronic transmitters inside the drillhead. It’s steerable, making horizontal drilling “faster, cheaper, and more effective” than vertical wells, according to the Department of Energy.
Recent activity from companies such as Core Minerals, George N. Mitchell Drilling Company, and CountryMark over the past three years indicates that horizontal drilling projects are coming quickly. The reason: Horizontal drilling means a more predictable profit margin for oil companies in the Illinois Basin. Leaders there have “found the Illinois Basin to be attractive because it is a reliable, predictable stream of cash flow as opposed to some of these resource plays which are either flash grenades that go from very small to huge in value or they are zero,” says James Rode, president and CEO of Core Minerals, headquartered in Evansville.
Rode is an attorney by training. He started in the oil business in the 1980s when prices were around $40 a barrel (comparatively steeper than the highest price of oil today). The Owensboro, Ky. native soared through a career that moved him throughout the United States. He even took a brief break from the oil business to launch an IT business that morphed into a network service provider until he sold it in the early 2000s.
But Rode is an oil man, and since 2006, Rode’s company, Core Minerals, closed 17 oil and gas asset purchases. They integrated acquisitions and divested a consolidated asset group. One reason for such a busy half decade: horizontal drilling.
It’s a technique used by companies with a lengthy history in the Illinois Basin. Chris Mitchell had finished middle school when he landed his first job on a Missouri oil rig. “I wanted to spend some time with my dad,” Mitchell says. His father, George, was the rig’s field supervisor, and his grandfather, Thomas, was one founder of Mitchell Brothers Drilling. “I don’t want to make you think that it was like I was being driven like a mule,” he says. “It was just like a summer thing.”
Originally published in Evansville Living