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Blackstone Seeks ‘Early-Stage’ Energy Assets, Foley Says

Blackstone Group LP is seeking to take advantage of low natural gas prices, said the head of its energy investing business, after KKR & Co. and Apollo Global Management LLC announced multibillion-dollar deals for such assets.

“It’s not just the spot price but the forward curve for natural gas having fallen so much,” David Foley, chief executive officer of Blackstone’s energy fund, said in an interview with Bloomberg Television’s Cristina Alesci. “We’re seeing much better pricing on assets that are available, lower than what you would pay for a natural gas-focused company even just last summer.”

Blackstone, based in New York, is targeting smaller energy deals while competitors buy large operations as the price of oil climbs and energy companies unload mature oil and gas fields to finance new exploration. Apollo in February agreed to acquire El Paso Corp.’s oil- and gas-exploration business for $7.15 billion, and KKR in November agreed to buy most of Samson Investment Co. for $7.2 billion.

Foley said Blackstone is hunting for companies it can use as a platform to acquire more assets and expand into a business big enough to absorb commitments of hundreds of millions of dollars. Eventually, Blackstone would seek to exit its investments through an initial public offering or auction, he said.

Building ‘From Scratch’

“We’re not trying to look for the largest gas company to buy in a preexisting set of assets,” said Foley. “We’re looking at early-stage things, we’re backing management teams and building assets from scratch and buying smaller types of assets.”

The value of private-equity deals in the energy industry almost doubled last year to $32.8 billion from $16.6 billion in 2010, according to data compiled by Bloomberg, as the firms seek to build track records in order to attract capital from clients focused on the industry. Blackstone has raised $1.5 billion for a new energy-specific fund and is seeking $500 million more by the summer, Chairman Stephen Schwarzman said on a conference call last week.

“Investors like more targeted strategies these days,” President Tony James said on the same call. “Specialist funds are taking more and more of the assets that investors have to put out, so we’ll go along with the industry trend.”

Blackstone in February committed $2 billion toward Cheniere Energy Partners LP’s construction of a $10 billion plant to export natural gas. Cheniere operates the largest U.S. natural gas import terminal and, if built, its export plant would be the first in the country to ship super-cooled gas to markets too remote for pipeline delivery.

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