Irving, Texas-based private energy investment specialist Natural Gas Partners has agreed to sell Cortez Oil & Gas to publicly traded energy company Encore Acquisition for an all-cash of offering $123 million (€101 million).
Natural Gas backed Cortez’s startup and buildup with $22 million invested between March and November 2000. According to a firm spokesperson, the divesture will result in a 3.2 times realization on Natural Gas’s investment, or a net return of approximately $70 million. The transaction is expected to close in the second quarter of 2004.
Encore acquires, develops and exploits North American oil and natural gas reserves. Natural Gas had a small percentage share in the company before Encore went public in March 2001. Another initial backer, private equity giant Warburg Pincus, still holds a 24.5 percent share in the company, though the firm did not provide any additional backing for this purchase.
Cortez owns crude oil and natural gas properties in three regions: the Cedar Creek Anticline of Montana, the Permian Basin of West Texas and Southeastern New Mexico, and the Mid Continent area, which includes the Arkoma and Anadarko Basins of Oklahoma and the Barnett Shale near Fort Worth, Texas.
Natural Gas has a 92 percent stake in Cortez, which was founded by president, chief executive officer and chairman, Randy Hill, executive vice president Cory Richards and vice president Dave Myers. This is the second time the firm has backed this particular management team, which yielded NGP a strong return on a previous investment in Vista Energy.
The Natural Gas spokesperson attributed the success of the deal to a buy-low, sell-high approach as well the backing of a strong management team – the firm usually backs successful returning executives in new deals.
Founded in 1988, Natural Gas has raised a total of seven funds, most recently Fund VII, which closed on $600 million in March 2003. The firm has about $1.7 billion of fund under management.