Shale bonanza spreads wealth to other sectors

June 17, 2011
Barrett Goldsmith

Energy-centric companies jump on Eagle Ford shale bandwagon

While high-profile exploration, production, and services companies in the oil and gas sector grab headlines by inking mega-deals in the fast-growing Eagle Ford Shale, a cadre of smaller companies in the Houston area are seeing growth spurts due to increased activity in the key South Texas shale play.

The stakes are high in the rush to Eagle Ford.

In the fourth quarter alone, 10 Eagle Ford deals involving acquisitions and joint ventures closed, worth $4.5 billion, while, in March, Anadarko Petroleum Corp. (NYSE: APC) of The Woodlands announced a joint venture with Korea’s national oil company that will pay $1.5 billion for a 33 percent stake in Anadarko’s Eagle Ford Maverick Basin.

But under the radar, numerous other Houston energy-centric companies, from law firms to transportation businesses, are signing their own joint ventures or opening new offices to take advantage of the shale-induced economic spurt.

Houston law firm Burleson LLP, for example, has shipped two local attorneys, Michael Browning and Mark Payne, to San Antonio and opened a new 10,000-square-foot office to handle Eagle Ford business.

Houston-based Palletized Trucking Inc., a family-owned transportation company founded in 1969, just signed a joint-venture agreement with midstream crude oil marketer Republic Gathering & Marketing LLC to haul crude oil from Eagle Ford. Republic expects to transport 600,000 barrels of oil a month out of Eagle Ford by the end of 2011, taking advantage of the slow build-out of pipelines in Eagle Ford by major Houston companies, such as Plains All American Pipeline LP (NYSE: PAA) and Enterprise Products Partners LP (NYSE: EPD).

And Houston-based Seitel Inc., a seismic data firm, just received a $125 million cash infusion from New York investment bank Centerbridge Partners LP for its shale expertise. Centerbridge, which has more than $17 billion in capital under management, specifically cited Seitel’s Eagle Ford presence as part of its decision to make the investment.

“All these companies you talk to about why they’re making these investments, it’s Eagle Ford, Eagle Ford, Eagle Ford,” said Tom Stilwell, an energy attorney with Houston-based Baker & Hostetler LLP. “That’s where the action is, and everybody from the major oil companies to the guy who hauls the (hydraulic fracturing) water off is headed that way.”

Daniel Layton, president of Layton Corp., a Houston-based private-equity firm and the parent company of Republic Gathering & Marketing, said local companies, such as Palletized Trucking, are part of an increasingly integrated Houston energy sector.

“It’s so much different than it was back in the boom-and-bust days,” Layton said. “But within today’s context, the Eagle Ford is different from, say Bakken (Shale) or even the Marcellus. Here in Texas, and especially Houston, we already have the infrastructure to hit the ground running. That includes physical infrastructure, but it also includes those service providers who have been through this and know what’s expected.”

Still, Layton said most companies looking to capitalize on the Eagle Ford oil rush are doing a better job of creating long-term business plans rather than make the mistakes of prior generations.

“It’s all about planning. You can’t just ride the wave,” Layton said. “The shale (revolution) is one of the most significant developments in the industry in the last four decades. But we have to all be smart about it.”  •  713-688-8811