Layline Petroleum Case Study
Layline Petroleum is a privately held independent oil and natural gas company based in Houston. Layline specializes in acquiring mature oil fields and applying different technologies to increase production. The Layline Petroleum portfolio includes shallow onshore producing fields in Texas and Louisiana that produce about 500 barrels of oil equivalent per day.
- Challenge
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With increasing energy prices, it has become practical to use extraction methods at mature oil fields that weren’t economical when prices were lower. Layline Petroleum has built a successful business based on its expertise in evaluating the potential of mature fields, moving quickly to acquire prime properties and producing them efficiently.
Early in 2007, Layline was getting ready to acquire four fields from EnergyQuest at a purchase price of about $17 million. Layline had negotiated with a third-party equity provider to provide $5 million to help fund the acquisition and CIT Energy was going to provide $15 million in debt financing. However, the investor pulled out three business days before the transaction was scheduled to close.
While confident that another equity investor could be found, Layline executives needed to close the deal on time to avoid having to renegotiate or, worse, losing the acquisition opportunity altogether.
- Solution
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Layline already had a strong relationship with CIT Energy, dating back to discussions between representatives of the two companies at the NAPE Expo, an important oil industry trade event.
When Layline’s equity partner pulled out of the acquisition, CIT immediately approached Layline and offered to provide enough capital to execute the acquisition, including bridge financing until another equity investor could be secured.
CIT Energy is a leader in advisory services and project and structured financing across all segments of the energy and natural resources industry. CIT Energy has the resources, knowledge, and commitment to create comprehensive solutions for its energy-industry customers.
- Results
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With just three business days to respond, CIT Energy team members worked overtime to provide a comprehensive integrated solution that met all of Layline’s requirements and delighted the company’s management.
CIT underwrote a $17 million financing needed to close the acquisition as scheduled. Included in the transaction was a 30-day bridge loan that enabled Layline to close new third-party equity funding on the strength of the CIT bridge facility.
Acquiring these four shallow oilfields in Texas and Louisiana added approximately 285 barrels of oil equivalent per day to the Layline production portfolio. The company continues to look for acquisition opportunities and has since closed a second acquisition at the Brookshire Dome Field for 220 barrels of oil per day, funded by an expansion of the CIT credit facility.
