Target: Oil and gas royalty interests
Price: $250 million
Sponsor: Kohlberg Kravis Roberts & Co., Chesapeake Energy Corp.
Kohlberg Kravis Roberts & Co. and Chesapeake Energy Corp. will form a partnership to invest in mineral and royalty interests in oil and gas assets in the United States, which the companies said will be seeded with $250 million, sister news service Reuters reported. Under the terms of the agreement, Chesapeake, the second-largest U.S. producer of natural gas, will contribute 10 percent of the initial investment and focus on finding, acquiring and managing royalty interests.
The deal highlights growing private equity interest in the energy sector and comes at a time when decade-low natural gas prices have forced producers to seek partnerships to bolster their depleted cash flows. Last month, a consortium led by private equity firm Apollo Global Management struck a $7.15 billion deal to acquire El Paso Corp.’s oil and gas exploration and production business. Another private equity major, Blackstone Group LP, said it would invest $2 billion in Cheniere Energy Partners LP to help build Cheniere’s first export plant in Sabine Pass, La.
Chesapeake has said it would raise $10 billion to $12 billion from assets sales and joint ventures. The Oklahoma City-based company faces a funding gap in billions for next year and it needs to cobble together a series of deals to raise cash. KKR said it is making the investment through its affiliates and KKR Financial Holdings LLC.
In November, a consortium led by the private equity firm clinched a deal to buy oil and gas group Samson Investment Co. for $7.2 billion.