Private Equity Just Dropped $2 Billion on These Petro-Plays

It’s becoming a sign of the times. E&P companies selling North American acreage—and private equity picking up the ground.

Last week we got two more big deals in the energy space. Showing that private equity appetite for oil and gas is running stronger than ever.

The first move came from Houston’s Riverstone Holdings. Which announced it will invest $675 million (in concert with Middle Eastern sovereign wealth funds) in the deep basin play of Western Alberta.

The investment will be completed through a vehicle called “Canadian Non-Operated Resources”. As the name suggests, the company’s aim will be to acquire minority interests in projects held by other players. Becoming a silent partner for the development of these fields.

And a bigger move from the financial sector came yesterday. When Blackstone Group announced it will spend $1.2 billion to acquire fields in the Haynesville shale.

The Haynesville stake is being divested by Shell. Who will now largely exit the play. (Shell also announced the sale of nearly $1 billion worth of gas assets in Wyoming and the Marcellus shale of Pennsylvania as part its divestiture.)

Such moves are a now-familiar pattern in energy. Following on the heels of big deals in places like the shallow-water Gulf of Mexico. Where Riverstone has spent billions of late to consolidate exploration and development assets.

And it’s interesting to consider what such changes in ownership mean for the industry.

On the one hand, it’s positive to see such strong investor interest in the sector. Showing that deep-pocketed backers believe in the profit potential of these plays.

But it’s also notable that large and experienced firms like Shell are choosing to move on. After all, these are the “frontline” professionals, who should know the assets as well as anyone. Leading to the question: what are they seeing that’s giving them pause?

It could simply be a matter of shifting corporate objectives. But we need to consider the possibility that we’re seeing a leading indicator of challenges ahead for this sector.

Here’s to challenge and opportunity,

Dave Forest