Private Equity's Billions Seek Energy Deals as Producers Reel

  • Encana sale of Louisiana asset was latest private equity buy
  • More gas deals than oil seen probable with exports in view

Private equity’s appetite for oil and natural gas acquisitions drove North America’s largest land sale of the year this week and is poised to spur more energy deals, according to a banker who worked on the transaction.

Firms including Blackstone Group LP, Warburg Pincus LLC, and EnCap Investments LP have together raised some $100 billion to spend on energy assets, Ajay Khurana, co-head of energy investment banking for the Americas at Jefferies Group LLC, said in a phone interview. They face less competition from oil and gas producers that are tight on cash because of the crude price slump, he said.

“The vast majority of buyers these days tend to be private equity or private capital, holistically defined,’’ Khurana said. “That’s largely driven by their ability to think long term and the fact that they have access to meaningful pools of capital.’’

Jefferies was among advisers to Canadian producer Encana Corp. on the $850 million sale announced Tuesday of its Louisiana gas properties to a venture run by GeoSouthern Haynesville LP and Blackstone’s GSO Capital Partners LP.

Producers Retreat

The agreement comes as mergers and acquisitions among producers in the sector have fallen with the price of crude. North American oil and gas deals amounted to $12 billion in the first half of the year, down 78 percent from the same period last year, according to data compiled by Bloomberg.

Gas-producing properties are more likely to sell than oil land amid continued weak crude prices, Khurana said. Also, prospective buyers have a more positive outlook for gas, with exports by tanker from the lower-48 U.S. states set to begin later this year, he said. 

There are some energy assets for sale in North America that should command offers of about $1 billion, and the question is whether prospective buyers will value them that way, he said.

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