Oil & Gas Investor
July 23, 2008

Pine Brook Forms JV With Comet Ridge For U.S. Oil-Shale Development

New York-based Pine Brook Road Partners LLC has formed a joint venture with Comet Ridge Ltd., Melbourne, Australia, (Australia: COI) and will provide up to US$100 million of funding to the venture.

Pine Brook will hold a slight majority stake at first in the venture, named Comet Ridge Resources LLC, and fund the business exclusively until it reaches an 80% stake. Comet Ridge will have the option then to acquire interest, and will never hold less than 5% of the joint venture, says Pine Brook managing partner Craig Jarchow.

Comet Ridge Resources’ assets include shale assets in the Florence oil field in Colorado and 425,000 acres in the Grays Harbor Basin in western Washington. Jarchow says the company will use the proceeds from the equity commitment to fund drilling on the Colorado assets, where it already has five wells approved.

Jarchow manages Pine Brook’s energy investing activities. He was a director at First Reserve Corp. and held various executive positions at Apache Corp., including advisor to the president and chief executive, exploration manager for the Gulf Coast and Gulf of Mexico, and director of international exploration and business development.

Pine Brook president and CEO Howard Newman says, “The investment in Comet Ridge is consistent with our practice of providing growth capital to exceptional management teams in an effort to build companies of meaningful scale. Comet Ridge, in addition to its management talent, has meaningful intellectual property for exploring its acreage in the Rockies and Pacific Northwest.”

Comet Ridge president and CEO Andy Lydyard says, “The commitment of Pine Brook is a strong endorsement of the strategy, people, and projects that Comet Ridge has assembled in the U.S. We are very pleased to be partnering with the Pine Brook team and highly value the experience they bring to the joint venture.”

Jarchow says Pine Brook was fortunate to find a team to work with that Pine Brook has known for 10 years. Lydyard had experience in the U.S., including building coalbed-methane assets in the Wyoming Powder River Basin for Edison, N.J.-based J.M. Huber. Jarchow adds that Lydyard also played a role in the risk committee at Amoco, turning around and improving its E&P program.

“The No. 1 reason we’re excited about this deal is the management team,” Jarchow said. “Also, they are pursuing oil in fractured shale in the Rocky Mountains.”

Jachow says one of the factors so interesting about the deal is that it is working with an Australian public company. Comet Ridge’s Australian investors favored the company’s CBM assets in Australia, but placed less emphasis on the U.S. assets. This opened the door for Pine Brook to fund the U.S. assets.

He adds Comet Ridge will be a good match for the shale assets it will be working on, since Australian CBM producers approach production more like mining than traditional drilling.

He says, “The way they steer their horizontal drilling in coalseam gas is very different. And it has been very successful. And Andy thought, ‘I can take those learnings, and bring them to the U.S.’ And that’s how ultimately he ended up in Denver and focused initially on the Rocky Mountains.”

Pine Brook was founded in 2006 by Newman. Its previous investments include Asia Pacific Exploration Consolidated, a Indonesia, Vietnam, Malaysia and Thailand-focused E&P joint venture; Common Resources LLC a Texas, and Louisiana-focused E&P; Phoenix Exploration Co. LP, a shallow-water Gulf of Mexico and Gulf Coast-focused E&P company formed by ex-Gryphon Exploration Co. managers; Stonegate Production Co. LLC, an onshore U.S.-focused E&P company led by Mike Harvey, whose Gryphon was financed by Newman while at Warburg Pincus; Syndicate Holding Corp., a reinsurance firm that, as of year-end 2005, accounted for more than US$15.8 billion in run-off liabilities; and Aurigen Re Capital Ltd., a start-up life insurance company focused in Canada.