Eric Mullins used to be an investment banker at Goldman, Sachs & Co. (NYSE:GS) doing oil and gas deals. But for the last three and a half years, he's been at Lime Rock Resources -- a sister to private equity firm Lime Rock Capital -- buying up oil and gas assets. And high above the Houston skyline at the city's storied Petroleum Club, he told members of the International Petroleum Association of America and the Texas Independent Producers and Royalty Owners Association at a luncheon Wednesday that he was looking for deals, despite low commodity prices.
"There seems to be a dichotomy between those who say, 'It's going to be fine' and others who have taken money out of the market," he told the crowd. "We're wanting to invest."
In 2006 Lime Rock Resources did three transactions: It bought natural gas properties in East Texas from unnamed sellers for $80.3 million; natural gas properties in East Texas from unnamed sellers for $20.8 million; and oil and gas properties in southeastern New Mexico from unnamed private sellers for $28 million. And in January 2008, it closed three transactions with multiple unnamed sellers for properties in the Texas Gulf Coast, Permian Basin and Mid-Continent regions for $244 million.
Mullins says he typically buys conventional oil and gas assets, versus resource plays, and his typical investment is anywhere from $2 million to $50 million ($15 million to $25 million is his sweet spot). He typically slaps 40% to 50% worth of debt on each deal -- his lead banker is Wells Fargo & Co. (NYSE:WFC) unit Wachovia. He says he's not a seller of properties right now, but says he will be in the near term (his funds have a 10- to 12-year horizon). He's in the midst of raising a new $600 million fund, half of which has closed -- not a small feat in this economy.
"It's been a very difficult year for institutional investors," Mullins admits. "There's a substantial amount of capital and investors who think we haven't hit bottom."
- Claire Poole
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