Investment firm BlackGold Capital Management announced late last week it has purchased Overriding Royalty Interests (ORRI) in the Utica shale of Ohio from an unnamed seller. We have a guess as to who did the selling.
What the heck is an ORRI? An overriding royalty interest is the right to receive revenue from the production of oil and gas from a well. The overriding royalty is carved out of the driller’s working interest and entitles the ORRI owner to a fraction of production, or rather the revenue from that production. It’s more common than you might think. Last fall Range Resources got $300 million for selling 1% of the revenue it gets from their production in Washington County, PA (see Range Gets $300M for 1% Royalty on Washington County Production).
The press release below, issued by BlackGold late last week, does not name party doing the selling, nor whether the seller is a specific driller (like Range), or a previous ORRI owner. From the language used in the release, it appears that perhaps the ORRI was already owned by someone else (not a deal with a specific driller).
BlackGold Capital Management LP (“BlackGold”), a private credit investment firm focused on the energy industry, today announced the acquisition of a portfolio of Overriding Royalty Interests (ORRI) in the Utica shale of Ohio. The acquisition was completed in conjunction with co-investors.
The ORRI will provide investors a portion of the revenue from natural gas production. BlackGold has also partnered with an established management team with a track record of investing in ORRIs.
“The energy sector is in a multi-year transition and the industry remains under stress,” said Adam Flikerski, co-founder of BlackGold. “We believe there is strong demand for us to fill a gap left by banks and provide capital to middle market energy companies, as evidenced by our robust pipeline of funding opportunities.”
Erik Dybesland, co-founder of BlackGold added, “Given the demand for capital in the energy industry and traditional sources curtailed, we believe that our platform provides the skills necessary to source opportunities, provide creative solutions for companies, and deliver solid outcomes for our institutional partners.”
BlackGold Capital Management, founded in 2006, has invested over $7.5 billion in both public and private energy companies, across upstream, midstream, and oil field services.
About BlackGold
BlackGold Capital Management LP is a leading investment firm focused on opportunistic catalyst-driven investments in the energy industry. The firm’s team has decades of experience and expertise in energy with extensive long-standing industry relationships. Founded in 2006, BlackGold seeks to generate compelling returns for its investors by employing a deep fundamental research-driven approach in analyzing energy assets and capital structures. The firm manages approximately $1 billion in capital across its investment platform which includes public and private commingled strategies as well as managed accounts. KKR & Co. LP, a global investment firm that manages investments across multiple asset classes, holds a 24.9% passive minority interest in BlackGold Capital Management LP. For more information, please visit www.BlackGoldCap.com.*
So if the ORRI was already owned by someone else, who might it be? That’s where our guess comes in (and this is only a guess, totally out of the blue). Last November, investment firm EnCap Investments put up for sale its ORRI in several “core” Utica Shale counties (see EnCap Looks to Sell Royalty Stake in “Core” of Ohio Utica).
The royalty interests EnCap listed for sale are located in Jefferson, Belmont, and Harrison counties–all prime locations. Some 6,325 acres of royalty interests were involved, sitting under producers including Ascent Resources, Gulfport Energy, Hess and XTO Energy. According to the sale sheet, EnCap was receiving an average of 0.7% royalty interest in some 150 producing wells which had generated $6 million in revenue during the previous year.
We never did hear if EnCap sold their ORRI. Perhaps BlackGold is the buyer? We don’t know–but you don’t often read about an ORRI going on the market, then a few months later someone buying an ORRI. We know, it’s always dangerous to connect dots, but in the absence of information from the seller/buyer, that’s what folks do.
*BlackGold Capital Management (Mar 29, 2019) – BlackGold Closes Royalty Investment in the Utica Shale
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