Surge Energy Acquires GEP II’s Midland Basin Assets
Surge Energy US Holdings Co. has signed an agreement with Permian-focused Grenadier Energy Partners II LLC (GEP II) to acquire certain leasehold interests and producing wells in Howard County, Texas, for approximately US$420 million.
Houston-based Surge Energy operates as a subsidiary of Shandong Xinchao Energy Corporation Ltd., a Chinese energy company listed on the Shanghai Stock Exchange. The company was formed in early 2015 to make a significant acquisition in the U.S focused on shale oil.
The assets acquired cover approximately 18,010 net leasehold acres in the Midland Basin in Texas. They include an operated inventory of around 120 high-quality, economic future drilling locations. Production from the assets currently averages approximately 9,000 barrels of oil equivalent (boe/d), of which 75% is oil.
“This acquisition is consistent with our strategy of building a long-term, sustainable oil and gas company. The combination of both production and high-quality inventory support both near-term cash flow and strong economic returns for years to come,” stated Surge Energy’s CEO Linhua Guan.
GEP I was formed by Patrick J. Noyes in April 2007 in partnership with private equity firms EnCap Investments and Kayne Anderson Capital Advisors. Grenadier continued its partnership with EnCap and Kayne Anderson to form GEP II in mid-2012, with total funding commitments of US$340 million.
Citi is advising Surge Energy on the deal, while Jefferies is acting as financial advisor to GEP II. The transaction is expected to close in late Q1-2021.