Silver Run Acquisition Corp., run by Mark Papa -a veteran energy businessman-will soon own a minority stake in Centennial Resource Development LLC, according to a source familiar with the matter who spoke to Reuters.
The investment will allow Silver Run, which went public in February, to develop Texas' shale fields at a depressed price point due to the effects of the chronic oil price crisis.
The move is a gesture of good faith in the leadership of Papa, who made EOG Resources a Wall Street darling, according to Euronews.
Riverstone Holdings LLC bought a minority stake in Centennial earlier this month. The deal ended Centennial's hopes to be the first energy firm to file for an initial public offering since the beginning of the crash in 2014.
Euronews' analysis of the move suggests Riverstone hopes to hack into the profitability of extracting shale from the Permian Basin in the western portion of Texas.
The anonymous sources informed about the Silver Run stake's size and scope declined to comment, and Centennial did not respond to a request for comment, according to Reuters.
Several capital investments have been announced this week by companies that have been able to weather the effects of the chronically low barrel prices.
Currently, Centennial runs 61 wells and plans to begin work on 1,350 other drilling sites across the Permian Basin, according to recent filings by the company ahead of a planned IPO.
The company says it would use the proceeds of a $100 million round of investments to pay down business loans and expand operations in needed areas.
First quarter data shows a net loss of $14.7 million for Centennial, of which Riverstone owns roughly 20 percent, according to regulatory filings.
By Zainab Cacuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More