Private equity firm North Hudson Resource Partners plans to deploy more capital into the Permian and other regions with a new non-operated investment fund.
Houston-based North Hudson recently closed its latest non-operated fund at $232 million, North Hudson Managing Partner Mark Bisso told Hart Energy in an exclusive interview.
North Hudson has raised four discretionary funds for non-op oil and gas investments; the firm typically targets strategic partnerships on larger-scale deals, non-op AFE wellbore opportunities and acquisitions of ground-game acreage interests.
Bisso said dealmaking by North Hudson’s non-op platform, the firm’s primary investment platform, is keeping them busy.
“The deal flow is very active and dynamic,” he said. “We’re looking at two to four deals a week.”
Year to date, North Hudson has acquired more than $200 million of assets of non-op interests. Transactions ranged from as little as $500,000 up to $40 million—although the firm is able to participate in larger deals, Bisso said.
“We could really do most sized deals that present themselves in the non-op space—obviously with some limitations,” Bisso said.
Since launching in January, the firm has closed on non-op acquisitions valued at $650 million.
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Non-op deal flow
The non-op oil and gas world has always been competitive, but it’s a space that’s getting more crowded, Bisso said.
“The market’s gotten bigger. There are more people doing it on the buy side,” he said. “But there are a lot more operators that are regularly accessing this AFE [authorization for expenditure] market.”
That’s especially true in the Permian Basin, America’s top oil-producing region and the driver of U.S. oil production growth.
Of the roughly 600 onshore drilling rigs deployed in basins around the country, roughly half are drilling in the Permian, according to rig count data compiled by Baker Hughes Co.
North Hudson plans to continue committing capital to non-op investments in the Permian with its latest fund, called North Hudson Production Partners II.
The Permian has seen some large investments by players in the non-op oil and gas space: Northern Oil & Gas (NOG) teamed up with Earthstone Energy this summer on a $1.5 billion deal to acquire assets in the northern Delaware Basin from Novo Oil & Gas. NOG scooped up a third of the assets on a non-op basis for $500 million. NOG also partnered with Vital Energy to acquire a 30% non-operated stake in Forge Energy II Delaware LLC.
This spring, U.S. Energy Development Corp. announced spending $225 million to acquire a 25% working interest in the Mascot Project, a stacked pay asset in the core of the Midland Basin.
“Naturally, [the Permian is] where you’re going to find the most deal flow for people selling down AFEs,” Bisso said.
North Hudson also has non-op interests in the gassy Haynesville Shale and in the Denver-Julesburg Basin. The firm will continue to evaluate M&A opportunities in those regions with Production Partners II.
North Hudson is certainly not opposed to expanding its reach into other basins, Bisso said. The firm has looked at non-op opportunities in the Eagle Ford Shale and the Bakken but hasn’t yet invested.
“I think that’s probably a function of us probably not looking at enough stuff in those basins, given what we have going on in our core areas of focus,” Bisso said.
North Hudson works with more than 30 operating partners and has interests in excess of 1,500 wellbores across its non-op footprint.
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Operated and credit footprint
North Hudson’s non-op platform is the firm’s primary investment vehicle, but the firm also has a sizable operated investment in the San Juan Basin of New Mexico and Colorado.
In May 2022, North Hudson closed an approximately $402 million acquisition of LOGOS Resources II LLC in a deal with affiliates of ArcLight Capital Partners LLC.
The LOGOS deal included average production of 106 MMcfe/d and a 230,000 net-acre position in the San Juan. North Hudson raised a specific pool of capital to complete the LOGOS transaction.
“We have a very active drilling program going there,” Bisso said. “We’ll bring on nine wells this year, and we’re targeting to drill 20 wells next year.”
North Hudson also launched a credit vehicle, North Hudson Energy Credit Partners LP, earlier this year. The fund was designed to provide senior secured loan financing for middle-market onshore oil and gas companies.
North Hudson’s credit fund looks to make loans of between $20 million and $50 million.
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