New venture by Lola, Clear Cut vets raising up to $250M
October 19, 2018
Pittsburgh Business Times
Co-founders, respectively, of Lola Energy LLC and of Clear Cut Energy LLC have launched a new entity in Canonsburg that is raising a private equity fund of at least $100 million to ignite an oil and gas operating company, a mineral rights holding firm and, possibly, additional ventures.
Muddy Creek Energy Advisors LLC could raise as much as $250 million, according to a filing with the U.S. Securities and Exchange Commission.
In some ways, Muddy Creek can be viewed as a continuation of Lola and Clear Cut. But how it came to be is a complex story, so get ready for kinks and turns involving some of the biggest companies in Pittsburgh’s energy sector and a partnership rooted in tailgating at a college football game.
“The oil and gas operating company effectively is a repeat of Lola Energy, which was sold to Rice Energy in 2017,” said Jim Crockard, a Muddy Creek co-founder.
That sale, which closed before EQT Corp. completed its $6.7 billion acquisition of Rice last November, was driven by Denham Capital, the New York private equity firm that invested $250 million in Lola.
In fact, Muddy Creek is calling its company Lola Energy II. Crockard is its CEO, same title he had at Lola I. He started the first Lola, a Wexford-based natural gas company that bought acreage in Greene County and in West Virginia, in 2015. Before that, Crockard had worked at EQT for 14 years, where he had been senior vice president of business development and corporate treasurer.
The other Muddy Creek company is Mingo Creek Minerals, led by Evan Gelacek.
Gelacek had co-founded Clear Creek after six years as general counsel at the New York-based hedge fund Firefly Value Partners, for which he combed the Marcellus and Utica plays. Clear Creek was a mineral fund acquiring “extremely compelling” gas rights in southwestern Pennsylvania, the West Virginia panhandle and southeastern Ohio, Gelacek said.
Before that, he had been a lawyer at Buchanan Ingersoll & Rooney, which did some work for EQT, where his path crossed Crockard’s. Or recrossed. They’d met at a tailgating party at a University of Pittsburgh-West Virginia University football game hosted by Gelacek’s chemistry teacher at Ford City High School who was also Crockard’s fraternity brother at Tau Kappa Epsilon. And in 2016, when Lola I made a pass at buying assets of bankrupted coal company Alpha Natural Resources in New York but struck out, Gelacek took Crockard to a Penguins-New York Rangers game to commiserate. So they sporadically kept in touch.
At any rate, after the sale to Rice, Crockard and Dave Bradley — Lola I’s co-founder and chief commercial officer and a former EQT executive — were cooling their heels. They had one-year noncompetes.
Gelacek, meanwhile, had returned to western Pennsylvania to start his own fund, Clear Cut.
“The Rice team made an offer that Denham couldn’t refuse ahead of Jim and his team drilling their first well,” Gelacek said. “Before the deal closed, I introduced another 1,000 acres of leases into his deal, upped the ante for his team and had a bump-up at the end. And he texted me at 4 in the morning — I was the only other lunatic up — about joining forces.”
They decided to create a mechanism to raise money more broadly to fund Lola Energy II — Muddy Creek, which started courting investors in spring 2018 and officially began operations in September.
The team quickly took shape. Crockard, Bradley, Gelacek and A.J. Straub — Clear Cut’s co-founder who previously was a manager at Keystone Powdered Metal Co. — are founders and partners. The fifth partner, Lacey Vincent, a KPMG veteran who worked at Lola I, is secretary, treasurer and controller. At present, Muddy Creek employs eight full-time, or 20 counting contractors.
“The idea is to lease up 25,000 acres in the core and drill wells over the next three to four years,” Gelacek said. “It’s Jim and Dave on the exploration and production company side, A.J. and I on the mineral side.”
Mingo Creek will acquire mineral rights but not necessarily develop them.
“We saw a lot of transactions with Lola I where someone wanted to sell minerals rather than lease to an operator to drill,” Crockard said. “It’s a great opportunity for someone to be invested in but just didn’t make sense for the operating company. Now we’ll pass that on to the sister company, Mingo Creek.”
There’s potential for other related businesses, enabling Muddy Creek to keep more in-house by adding companies under its banner, but that depends on how much capital it raises. Lola II and Mingo Creek require about $100 million.So far, it has raised about $20 million, Gelacek said.
Muddy Creek is approaching pension funds, endowments and funds of funds. But its sweet spot has been “family offices and ultra-high-net-worth individuals — they gravitate toward this more than most,” Crockard said. “The investors could come from anywhere but we are a locally based fund and most of the money is coming from local investors. Which makes natural sense.”