Progress Report

Investing capital with strong operating companies

Carlyle Energy Mezzanine Opportunities Fund I

Houston-based Hilcorp Energy Company is one of the largest privately held oil and natural gas exploration and production companies in the country, and has been consistently recognized for its strong culture, values and ethics, both within the firm and in the communities in which it operates. Carlyle’s first investment with Hilcorp in 2013 focused on the gas-rich Utica shale in Ohio and Pennsylvania. Hilcorp has drilled and completed more than 100 wells over the past three years, and environmental stewardship and community engagement have been priorities at every turn. More recently, Carlyle formed a second, $1.24 billion joint venture with Hilcorp in 2015 to acquire, operate and develop onshore oil and gas properties in North America. Through both partnerships, Carlyle is actively leveraging the expertise of Hilcorp’s management and technical staff to operate with maximum efficiency and minimum risk, with a focus on reducing its emissions and environmental footprint.

A case in point: Water is a major component in drilling and completing oil and gas wells. The ability to recycle and treat water used in fracture stimulation eliminates the expense of hauling water off location for disposal while reducing the amount of water consumed in the drilling and completion process. Hilcorp employs a recycle/ re-use water-handling strategy in its Utica shale development operations that saves more than $200,000 in monthly operating expenses while at the same time lessening the impact on local water resources by not using fresh water.

In addition, Hilcorp incorporates best practices in field operations in its Utica development area, including using field gas or natural gas produced at the well for compression operations. All producing wells are currently on compression, increasing production and lowering costs on a unit basis while reducing flaring of natural gas.

By using pad drilling—drilling multiple wells on a single pad—Hilcorp reduces its environmental footprint. This results in less surface damage and less truck traffic on local roads. Utilizing pad drilling saves capital costs, concentrates the facilities for more efficient monitoring and reduces the amount of pipeline right-of-way needed for production gathering.

Hilcorp has been instrumental and influential in working with state and local governments to implement regulations and operating procedures for response to seismic activity. Hilcorp has been commended by state-level regulators for its proactive response to any issues related to minor seismic activity near some of its Utica shale operations.

Carlyle is proud to be partnering with Hilcorp to minimize environmental impacts and establish best practices to develop domestic natural resources.