DALLAS—Having raised some $13 billion in institutional capital, American Energy Partners (AEP) has set its sights on being a “best-in-class asset management company” in oil and gas, employing a “single-play” strategy that affords its separate affiliates the flexibility to go public when markets conditions are favorable, CEO Aubrey McClendon told attendees at Hart Energy’s recent A&D Strategies & Opportunities conference.

American Energy Partners’ various affiliates now include five exploration and production (E&P) companies that collectively control some 630,000 net acres and produce 82,500 barrels of oil equivalent per day (boe/d). Established in April of last year, AEP now also operates two mineral companies and a midstream company. Its current headcount is 500 employees, up from 15 at founding, and it is adding 30 employees per month.

“We’re once again in a growth mode,” said McClendon, the former Chesapeake Energy Corp. (NYSE: CHK) CEO and pioneer in developing a number of major U.S. gas plays. “We want to build companies that are focused around a particular play or strategy,” he continued. “Basically, the market today is pretty clear in saying that it wants to invest in companies—particularly on an IPO basis—that are built around a specific play.”

McClendon noted that investors have tended to assign higher valuations to E&Ps “that have great acreage and great plays and are singularly focused on that play. We want to give them that in the form of a series of American Energy companies.”

To date, AEP has in place institutionally funded, play-specific companies in the Utica, the Woodford, Permian and Marcellus. Mineral companies are often formed in the same plays as the drillbit companies “to take advantage of some of the value we are creating for mineral owners,” said McClendon.

Play-Specific Focus

AEP’s Utica-specific company, American Energy – Utica (AEU), was initially capitalized in 2013 with $1.2 billion of equity commitments, led by The Energy & Minerals Group (EMG) and First Reserve Corp., and $450 million of second-lien debt. Additional capital was raised earlier this year. Committed capital currently stands at $3.2 billion.

AEU has acquired, or has agreements to acquire, about 280,000 net acres in the southern Utica Shale in Ohio. Currently, it is drilling with four rigs, with plans to scale up to 20 rigs in the next 24 to 36 months. It estimates it has an inventory of 3,000 locations in a region where nearby operators have disclosed wells with EURs of more than 20 billion cubic feet equivalent (Bcfe) per well.

“This is a pretty extraordinary asset,” said McClendon. “This is, in our view, pound-for-pound, the best gas rock in America, and we feel we have the largest position in the southern Utica play. We model to go from our current production of 200 million cubic feet per day to about 5 billion cubic feet per day in the next seven or eight years.”

Initial capitalization for American Energy – Woodford (AEW) was $500 million of equity commitments from EMG and a $180 million revolving credit facility. AEU has so far invested about $580 million in capital in acquiring more than 200,000 net acres. Plans are to grow to 250,000 net acres and drill roughly 1,000 wells over time. Currently, AEW is running two rigs, expecting to increase to six to eight rigs. Targets in the play are the Woodford and Mississippi Lime. Wells have an average EUR of 100,000 bbl and cost about $3 million.

The entry into the Permian Basin came in July of this year, when American Energy – Permian Basin (AEPB) purchased leasehold in Reagan, Irion and Crockett counties for $2.5 billion and later made “bolt-on” acquisitions of about $700 million. Production is running about 16,000 boe/d. AEPB is operating four rigs with plans to go to six to eight rigs by year-end 2015. It has a current inventory of about 2,500 locations. AEPB now has 90,000 acres with a goal of increasing to 100,000 net acres. With multiple stacked zones in the Permian, net effective acreage would then be equivalent to around 400,000 acres, located in the central Midland Basin focused around Reagan County, according to McClendon.

American Energy – Marcellus (AEM) was formed through the purchase of two private companies in June of this year for about $1.3 billion, giving AEM about 83,000 net acres and 270 MMcfe/d of production. It has one rig currently operating, with plans to go to three rigs by the first quarter of next year, and to higher levels as gas takeaway capacity in the region is added.

Away from play-specific vehicles, McClendon discussed American Energy – NonOp (AENO), which will invest $500 million in non-operated working interests in wells in certain areas, including the Anadarko Basin and Anadarko Shelf, Haynesville, North Marcellus Shale, South Marcellus Shale and the Eagle Ford.

McClendon was not overly concerned about tightness in the oilfield service sector, saying that, were it necessary, a new rig could be built in one year and a new frack spread in six months. “I don’t buy into the view that that is one of the choke points of our industry.”

On future demand for natural gas vs. oil, McClendon foresees “a multi-decade transition to natural gas that will happen. It’ll take a long time. In the meantime, we all have to work out how to make money at $3.50 to $4 natural gas, and you can’t do that everywhere.”