Exploration startup Venari Resources draws $1B funding

Dallas startup Venari Resources LLC said Tuesday it attracted a $1.13 billion investment from Warburg Pincus, Kelso & Co., Temasek Holdings (Pvt.) Ltd. and Jordan Co. to focus on deepwater oil exploration in the Gulf of Mexico.

The investor group will own almost 100% of the company with management holding a small stake, Venari general counsel Adam Rubin said in a telephone interview.

Rubin wouldn't comment on whether the company owned any properties but did say it was in the midst of "exploring opportunities" that may come to fruition in the next couple of weeks.

Venari claims the investment is one of the largest private financings for a startup company in the oil and gas sector.

The company is led by CEO Brian Reinsborough, who was previously president and CEO of Nexen Inc. unit Nexen Petroleum U.S.A. Inc., where he led the development and execution of its operations in the deepwater Gulf of Mexico. Reinsborough and Warburg Pincus came up with the business plan when Reinsborough was serving as executive-in-residence at the private equity firm.

Reinsborough, who also worked at Amoco Production Co. and Mobil New Exploration Ventures, pulled together a team over the past few months that includes members of his former technical and commercial staff along with colleagues from the industry who have worked together for 10 years, Rubin said. Rubin is former general counsel of Nexen Petroleum U.S.A.

Reinsborough said in a statement that Venari plans to be an industry leader in the deepwater Gulf, which remains one of the most attractive basins in the world to search for large oil reserves.

Seon Hwang, who led the investment from Warburg Pincus, said in a statement that Venari is the firm's sixth investment in the Gulf of Mexico over the past 25 years and it thinks the basin is an attractive area of high geologic potential given the revival of drilling and permitting activity after BP plc's disastrous oil spill.

Rubin said the game plan is to farm into prospects that are almost ready to drill, including buying working interests anywhere from 10% to 20%.

"What we found is there is an oversupply of high-quality prospects that have matured over the moratorium period, and a lot of the explorers need to drill these prospects or they will expire," he said. "We can potentially go in and participate if they are promising."

Rubin said the company doesn't plan to participate in the next government lease sale in June but may in later rounds.

Some companies are under less pressure to drill because they received one-year lease extensions from the government after being affected by the moratorium.

Nexen was considered a takeover target in January on the surprise news that its CEO, Marvin Romanow, was leaving the company immediately along with executive vice president of Canada Gary Nieuwenburg after disappointments over the company's C$6.1 billion ($5.9 billion) Long Lake oil sands project in northwest Alberta.

Last year Nexen sold a 20% working interest in its Kakuna, Angel and Cypress exploratory wells in the Gulf of Mexico to China's Cnooc Ltd. as part of a joint venture deal for an undisclosed sum. Cnooc bought Gulf of Mexico leases from Statoil ASA in 2009.

Deal activity has been heating up in the deepwater Gulf of Mexico since the moratorium was lifted and permitting resumed. In November Plains Exploration & Production Co. sold 20% of its assets there to EIG Global Energy Partners LLC for $450 million, and Anadarko Petroleum Corp. agreed May 10 to sell its Pompano field along with other assets to Stone Energy Corp. for $67 million. In April Newfield Exploration Co. said it's considering selling its deepwater Gulf of Mexico assets as part of its disposal program with a decision hoped for by midyear.

Venari Resources tapped Jim Rogers, See Hon Tunt and Drew MacIntyre at TD Securities and Jeff Zlotky, Timothy Samson, David Wheat, Anthony Campiti, Sharon Fountain, Julie Mediamolle and Sam Merrill at Thompson Knight LLP for advice.

Warburg Pincus used Scott Wulfe, Adam Larson, Caroline Blitzer and Tim Devetski at Vinson & Elkins LLP.

Kelso & Co. hired a Debevoise & Plimpton LLP team that included Margaret Andrews Davenport, Jonathan F. Lewis, David H. Schnabel, Erin Cleary, Adiya A. Dixon and Rohit A. Nafday.

Temasek used Jones Day's Mike Arruda, Dennis Barsky and Sean Murphy.

Jordan retained Mayer Brown LLP's Phil Brandes and Todd Bowen.