Private equity ups the ante in Permian race

Riverstone Holdings

08/05/2017 21:21

(The author is a Reuters Breakingviews columnist.  The opinions 
expressed are her own.) 
    By Lauren Silva Laughlin 
    DALLAS, May 8 (Reuters Breakingviews) - Private equity is 
raising the ante in the Permian race. With a new initial public 
offering from TPG Capital  TPG.UL  on Friday, the industry has 
raised over $2 billion this year through blank-check entities to 
buy up energy assets. As Exxon Mobil  XOM.N  and Shell  RDSa.L  
shift their focus to west Texas acreage, these vehicles will 
have to be nimble to avoid a shakeout. 
    The special-purpose acquisition companies are designed to 
compete with the majors. They are led by oil and gas veterans 
who know about rolling up shale assets. TPG Pace Energy Holdings 
 TPGE_u.N  is run by Stephen Chazen, former chief executive of 
Occidental Petroleum  OXY.N . During a 20-year tenure, he built 
the company into the fourth-largest U.S. oil and gas company by 
market capitalization and the largest producer in the Permian. 
Riverstone Holdings'  RVHL.SI  Silver Run Acquisition II 
 SRUNU.O  raised $1 billion in March. It's boss is James 
Hackett, who ran Anadarko  APC.N  for nine years. 
    Although these blank-check vehicles have the ability to 
invest all over the world, west Texas has been the focus of 
late. The SPACs face plenty of deep-pocketed competition. Exxon 
invested $5.6 billion in the region in January, buying assets 
from the Bass Family. In March, Shell said it plans to increase 
its shale output, including in the Permian, by 140,000 barrels 
of oil equivalent a day by 2020. Last year, two blank-check 
vehicles bought assets in the Delaware Basin, the western part 
of the Permian. If overall investments in the Delaware region 
alone continue at their current pace, they'll more than triple 
to $60 billion by the end of the year, and account for more than 
60 percent of U.S. oil and gas merger activity, according to 
Drillinginfo. 
    The private equity-backed vehicles have the advantages of 
being small and cash-rich. That's more important than ever as 
competition in the Permian heats up. Acquisition prices more 
than doubled in 2016 from the previous year, to $33,000 an acre, 
according to Drillinginfo. They've come off a touch so far this 
year, but special-purpose energy vehicles have already raised 
nearly four times as much in 2017 as last year. These companies 
had best move quickly while their checkbooks are flush. 
    On Twitter https://twitter.com/TheRealLSL 
          
    CONTEXT NEWS  
    - On May 5, TPG Pace Energy Holdings, a group formed by 
private-equity firm TPG Capital, started trading as the first 
special-purpose acquisition company on the New York Stock 
Exchange. The outfit raised $600 million with an initial public 
offering of 60 million shares at $10 each. The SPAC is being led 
by Stephen Chazen, the former chief executive of Occidental 
Petroleum. 
    - On March 29, Silver Run Acquisition II, a SPAC backed by 
private-equity firm Riverstone Holdings, raised $1.035 billion 
in an IPO. On the same day, Kayne Anderson Acquisition Corp 
raised $350 million in an IPO. On April 11, Vantage Energy 
Acquisition priced a $480 million offering. Each blank-check 
vehicle intends to make investments in the energy sector. 
    - In February 2016, Riverstone's first energy SPAC, Silver 
Run Acquisition, raised $500 million in an IPO. In October it 
purchased an 89 percent controlling interest in Centennial 
Resource Production, an oil company with assets in the South 
Delaware Basin of west Texas' Permian shale oil region. Terms 
weren't disclosed. 
    - KLR Energy Acquisition raised $80 million in March 2016 
with the intent of making investments in the energy sector. On 
April 27, it completed a merger with Tema Oil and Gas, an 
exploration and production company that focuses on the Delaware 
Basin. 
    - For previous columns by the author, Reuters customers can 
click on  SILVA/      
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TPG Pace Energy release    http://www.businesswire.com/news/home/20170504006720/en/TPG-Pace-Energy-Holdings-Corp.-Announces-Pricing 
Silver Run Acquisition II release    http://www.prnewswire.com/news-releases/silver-run-acquisition-corporation-ii-completes-1035-billion-initial-public-offering-300431480.html 
Kayne Anderson Acquisition release    http://www.businesswire.com/news/home/20170329006220/en/Kayne-Anderson-Acquisition-Corp.-Announces-Pricing-350 
Vantage Energy Acquisition release    http://www.businesswire.com/news/home/20170411005470/en/Vantage-Energy-Acquisition-Corp.-Announces-Pricing-480000000 
BREAKINGVIEWS-Wildcatters hold hot hand in Permian land grab     
  urn:newsml:reuters.com:*:nL2N1H80RT 
BREAKINGVIEWS-Exxon stakes long-term growth on short-term fixes  
     urn:newsml:reuters.com:*:nL2N1GE1WT 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Editing by Tom Buerkle and Martin Langfield) 
 ((Lauren.SilvaLaughlin@thomsonreuters.com; Reuters Messaging: 
Lauren.SilvaLaughlin.thomsonreuters.com@reuters.net)) 
 
Keywords: TPG PACE ENERGY IPO/BREAKINGVIEWS