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KKR Kicks Off Second Half With Pair of Energy Deals

09 July 2014

Private equity firm KKR & Co. announced its first two deals of the second half on Wednesday, both showing an energy focus, with the firm taking a majority stake in British offshore oil and gas equipment provider OEG Offshore Group and agreeing to merge some of its assets with those of Riverstone Holdings LLC to form a new oil and gas company.

The KKR Natural Resources Fund's assets will merge with Riverstone’s Legend Production Holdings LLC to create Trinity River Energy LLC, which will be one of the largest operators in the Barnett Shale in North Texas, with about 258 million cubic feet equivalent per day of total production.

"We are very pleased to be combining these two portfolios of assets. Following the combination, Trinity will have an impressive position in the Barnett Shale and a mix of other highly prospective plays,” said Chris Hammack, president and chief executive at Riverstone’s Legend and the proposed chief executive for the combined entity. “We feel confident that our strong financial backing and experienced teams will allow us to build a highly successful company together."

The two deals come as the private equity industry has shown a strong interest in oil and gas plays this year as the U.S. shale boom continues and natural gas prices gradually recover.

Last month, Apollo Global Management LLC's Jupiter Resources picked up Encana Corp.'s Bighorn gas properties in Alberta for CA$2 billion (US$1.87 billion), in a bet that the downtrodden natural gas market will continue to recover, just a couple of weeks after forming a $755 million partnership with Zenergy Inc. to acquire and develop oil and gas properties in Texas, Louisiana and Arkansas.

The new Trinity River will also have properties in the Permian Basin, East and South Texas, Louisiana and Mississippi.

KKR’s contribution to the combined company is coming entirely from KKR’s Natural Resources platform, the statement said. Any future acquisitions made with Fleur de Lis Energy LLC, a new partnership announced in March, will not be a part of Trinity River, the statement said.

KKR's other deal announced Wednesday is to buy a majority stake in Aberdeen, Scotland-based OEG Offshore, a manufacturer of cargo containers to transport equipment and supplies to offshore oil rigs, for an undisclosed amount.

"We have achieved significant growth in OEG to date, but our teams have the appetite to accelerate our further development through both organic and acquisitive means,” said John Heiton, chief executive officer of OEG Offshore. “We believe that KKR will be an excellent partner to achieve those aims, given their global network and experience as a leading investor in the energy services sector.”

The investment in OEG Offshore comes amid a broader focus on Europe as the region continues its economic recovery.

The aggregate value of European private equity buyout deals last quarter surged 69 percent to $27 billion from $16 billion in the first quarter, according to a report by industry research firm Preqin last week.

Big deals in the region last quarter included one by Goldman Sachs Group Inc.’s private equity arm alongside Koch Industries Inc. to buy printing ink maker Flint Group from private equity firm CVC Capital Partners for €2.2 billion and Triton Partners’ €1.3 billion buyout of GEA Heat Exchangers.

Simpson Thacher & Bartlett LLP M&A partner Alvaro Membrillera led a team that included credit partner Ian Barratt and tax senior counsel Meredith Jones in advising KKR on the OEG deal.

Kirkland & Ellis LLP advised KKR in the deal with Riverstone with corporate partners Andy Calder and Amber Meek leading a team that included tax partners William Welke and Rachel Cantor; environmental partner Paul Tanaka; antitrust partner Ellen Jakovic; employee benefits partner Alexandra Mihalas; executive compensation partner Scott Price; intellectual property partner Neil Hirshman; labor partner Tim Stephenson; and real estate partner Roberto Miceli.

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