HM Capital Backs SunTerra Resources

HM Capital Partners has acquired SunTerra Resources LLC, a Houston-based oil and gas exploration and production company focused that will use under-balanced drilling techniques. No financial terms were disclosed.

PRESS RELEASE

HM Capital Partners LLC, a leading Dallas-based, sector-focused private equity firm, today announced that is has acquired SunTerra Resources LLC, a newly formed exploration and production company that will utilize underbalanced drilling techniques (“UBD”), and, in particular, underbalanced horizontal drilling (“UBHD”) to extract oil and gas from acreage with proven producing reserves.  Financial terms of the transaction were not disclosed.

UBD is an alternative well completion technique that enables exploration and production companies to reduce their overall finding and development costs and optimize their proven reserve base.  It involves drilling while keeping the pressure in the wellbore lower than the reservoir pressure in the formation being targeted, leading to enhanced drilling speed and reduced formation damage.  UBHD enhances the benefits of underbalanced completion techniques by significantly increasing the exposure of the wellbore to a given formation through the drilling of lateral extensions.  UBHD is a proven technique used worldwide to enhance well productivity while minimizing drilling and completion costs.

The acquisition of Houston-based SunTerra builds on HM Capital’s long and successful investment history in the energy sector.  Since 2004, HM Capital has invested in several energy platforms, including BlackBrush Oil & Gas, TriDimension Energy, Regency Energy Partners and TexStar Field Services.

SunTerra’s initial focus is to utilize its proprietary and specialized UBHD capabilities to drill on acreage currently controlled by other HM Capital portfolio companies, including BlackBrush and TriDimension.  SunTerra’s business model, however, is highly scalable and it is expected that the company’s expertise will appeal to other third-party operators with attractive acreage positions in other high-quality, proven basins.

The SunTerra management team is comprised of highly experienced and specialized engineers with expertise in UBHD.  The company’s Chief Executive Officer is Jim Hughes, who for over two decades acted as an independent consultant to companies such as Weatherford International and Haliburton Energy Services in the areas of underbalanced drilling, and is one of the five editors of Managed Pressure Drilling, published in 2008.  The senior management team also includes Bob Cuthbertson, Vice President, Engineering; Dale Cunningham, Vice President, Drilling Services; and Rodney Bray, Chief Financial Officer.  The management team is investing alongside HM Capital in the transaction.

Edward Herring, a Partner of HM Capital, said, “The acquisition of SunTerra Resources reflects HM Capital’s continued confidence in the long-term fundamentals of the energy sector and demonstrates the firm’s commitment to the continued pursuit of low-risk exploration and production plays.  We believe that the application of UBHD techniques in proven basins can significantly reduce our portfolio companies’ finding and development costs and enhance their well productivity.  Given the continued volatility in the commodity markets, we feel SunTerra’s expertise will give us a competitive advantage in drilling wells with attractive return profiles.  We are very pleased to get started with SunTerra’s experienced and proven management team to build the company’s value.”

Mr. Hughes said, “My colleagues and I are delighted to have the strong support of HM Capital Partners.  In considering financing options, we were attracted to HM Capital because of its depth of knowledge and experience in the energy sector, as well as the outstanding quality of its current portfolio.  The management team at SunTerra has devoted most of our careers to using underbalanced horizontal drilling as a completion technique to enhance financial returns, and we are now excited by the considerable opportunity to build a leading UBD company to serve independent producers that will benefit from our expertise.”

Rodman & Renshaw, LLC acted as financial advisor to SunTerra with respect to the transaction.  Mr. Cameron Smith, Sr. Managing Director for Rodman and Head of its Energy Group, added, “HM Capital, with its deep energy investment experience, and SunTerra, with its seasoned senior management team, make a perfect match.  We were pleased to help facilitate this transaction.”

About HM Capital Partners

Based in Dallas, HM Capital Partners LLC is a private equity firm that leverages twenty years of sector experience to acquire, change and grow strategically relevant businesses in the energy, food and media sectors.  Over the past four years, HM Capital has executed 22 transactions in the energy sector, representing more than $3 billion in transaction value.  More information is available at HUwww.hmcapital.comUH.