KKR/Chesapeake Energy: A $250 million partnership

Private equity firm KKR and Chesapeake Energy, the second-largest U.S. natural-gas producer, are joining forces to buy interests in oil and gas royalties. They will offer property owners cash upfront, even before they’ve ascertained how many barrels lie under the ground. In exchange, the two firms will get rights to owners’ future shares of production revenue. KKR will commit an initial $225 million, and Chesapeake will provide $25 million in addition to finding, acquiring, and managing the investments. This is Chesapeake’s first partnership that will acquire royalties, rather than a direct interest in fields. KKR’s move is part of a push by private equity firms to make more energy investments.

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