EnCap Said to Seek $1.5 Billion for `Stack' Oil Explorer PayRock

EnCap Investments stunned the oil patch last year by selling an under-the-radar Oklahoma explorer for an eye-popping price. Six months later, the Houston-based private equity firm is angling to pull off a similar feat.

EnCap is working with Jefferies Group to find a buyer for PayRock Energy and is seeking at least $1.5 billion for the Oklahoma City-based company, according to people with knowledge of the matter who asked not to be identified because the information is private.

PayRock is essentially a sister company of Felix Energy, which EnCap agreed to sell for $1.9 billion in December to Devon Energy Corp. PayRock, like Felix, controls drilling rights in what’s known as the Stack, an oil-soaked stretch of land northwest of Oklahoma City.

The two explorers were the anchor customers for a pipeline company called Tall Oak that an EnCap affiliate sold for nearly $1.6 billion in January to EnLink Midstream.

Spokesmen for EnCap and Jefferies declined to comment. A representative for PayRock didn’t respond to a request for comment.

Shale Economics

The Stack and a nearby field dubbed the Scoop have some of the most valuable real estate in U.S. shale. That’s because wells there can still be profitable even when oil trades below $45 per barrel.

Those economics have spurred a flurry of dealmaking in the two fields. Newfield Exploration Co. agreed to buy about 42,000 acres in the Stack last week from Chesapeake Energy Corp. for $470 million, while Vanguard Natural Resources agreed to sell its Stack holdings for $280 million in March.

Gastar Exploration Inc. is also seeking buyers for its assets in the region, people familiar with the matter said in March.

EnCap started PayRock in 2012, according to its website. It’s not clear how many acres PayRock controls in the area, though at least three of its wells in the region produce the equivalent of about 4,200 barrels of oil per day, according to data Newfield detailed in an investor presentation this month.

Other major operators in the Scoop and Stack include Continental Resources Inc., Cimarex Energy Co., and Marathon Oil Corp.

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