ORIX finds oil patch opportunity

A US subsidiary of the Tokyo-based financial services firm has provided $30m in financing for the acquisition of oil production assets in the American Midwest.  

Despite widely held pessimism about the current state of oil markets, opportunities still abound for lenders capable of spotting them.

ORIX Energy Capital announced Tuesday it provided a $30 million senior secured term loan to Campbell Development Group to finance its acquisition of 76,000 net acres of mature oil-producing assets from Rex Energy. The assets are located in Illinois, Indiana and Kentucky are currently producing around 1,700 barrels per day of light, sweet crude oil.

ORIX managing director Mark Tharp told Private Debt Investor the stretch loan has a four-year maturity, an interest rate in the high single digits and includes yield maintenance covenants.

The company also wrapped up the deal in about a month, according to the announcement.

“The team at ORIX Energy Capital displayed a creative approach, long-term focus and flexibility that were key drivers in us selecting them,” Campbell Energy vice president Jakob Campbell said in the statement.  

 According to its 22 August statement announcing the closing of the deal, Rex will receive net proceeds of approximately $40 million from the sale, with potential for an additional $10 million in proceeds over the next three years depending on commodity prices. Tharp explained that if crude oil prices were to rise above an unspecified quarterly level during that timeframe, Rex will receive unspecified payments under the terms of the sale.

Rex president and chief executive officer Tom Stabley told streetinsider.com that the sale was an important step in the company's efforts to improve liquidity as the State College, Pennsylvania-based company sharpens its focus on core assets in the Appalachian Basin. Rex's desire to move ahead with that transition likely accounted for the speed in arranging ORIX's loan to Campbell.

ORIX Energy Capital is a business unit of ORIX USA that provides US and Canadian energy exploration, production, midstream and services companies with private debt and equity capital. The Dallas-based firm typically provides loans of between $10 million and $50 million. The parent ORIX Corporation is a Tokyo-based financial services firm founded in 1964 that has units focused on lending, investment, life insurance, banking and other businesses.