Blackstone Unleashes Cash Hoard in Texas Shale Oil Land Grab

  • New partners Jetta and Guidon target most competitive fields
  • Permian Basin is the shale play "outperformer" in 2016: BMI

Blackstone Energy Partners LP is partnering with two oil and gas companies as it targets assets in the sought-after Permian shale formation.

Jetta Permian, formed with Jetta Operating Company Inc., plans to acquire leaseholds in the Permian’s Delaware Basin in West Texas and southern New Mexico, Blackstone said in a statement Thursday. The partnership has $1 billion of capital committed.

Blackstone has also designated $500 million in a partnership with Guidon Energy to acquire assets in the Permian’s Midland Basin "with the potential to commit significantly more with future acquisitions." Guidon purchased about 16,000 net acres in Martin County, Texas, in April.

Blackstone Energy’s private equity business, led by partner David Foley, raised $7 billion across two funds in the past four years. The most recent vehicle, which finished gathering $4.5 billion last year, had only spent about 5 percent of its money as of June 30, according to Blackstone’s second-quarter earnings statement.

Still Profitable

The partnerships underscore the industry’s interest in one of the few regions where drilling remains profitable at current prices. The Permian has dominated acreage deals among independent drillers this year. PDC Energy Inc. bought into the Permian with a $1.5 billion acquisition announced this week. Meanwhile Parsley Energy Inc. and Concho Resources Inc. also added holdings in the play this month.

A 28 percent rise in oil prices this year has prompted an uptick in investment in several key shale plays aimed at countering the rapid production decline in wells. "This renewed confidence has almost exclusively benefited the Permian, with the vast majority of oil-directed rigs being added in this play," said BMI Research in a note to investors this week.

The Permian’s multiple layers of oil-rich rock and well-developed infrastructure make it reliably competitive even in a volatile market, and the "outperformer in 2016," BMI said.

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