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Dallas-based private equity firm Merit Energy Co has set aside $1 billion, including $485 million in a just-closed fund, in dry powder through a strategy that targets mature oil-and-gas fields, the Wall Street Journal reports in an exclusive article.
The company, which operates energy assets and manages investment funds, took just over seven months to raise its Merit Energy Partners L vehicle, which helped the company hit its goal of amassing about $1 billion of available capital.
Merit’s investment strategy focuses on conventional oil-and-gas opportunities as opposed to shale assets favored by most private-equity firms. The firm also targets less coveted areas in states such as Arkansas, Kansas, Oklahoma and Texas. Indeed, the company currently has no assets in some of the most popular U.S. shale regions, including the Permian Basin in West Texas.
Big oil has been shedding non-core assets of late, creating a new opportunity in industry mergers and acquisitions.
Most recently, in June, Shell announced it would be jumping into this trend by shedding non-core assets in favor of refocusing on core assets of oil and gas producing, refining and marketing.
Late last year, Shell sold nearly all of its Norwegian oil and gas assets, and the integrated oil majors are now streamlining their portfolios to focus on the most profitable projects.
At the same time, private equity is emerging as an important financier of oil and gas companies as more conventional lenders shun the fossil fuel sector.
According to an analysis from the Private Equity Stakeholder Project and Americans for Financial Reform Education Fund (AFREF), the eight largest buyout firms have put nearly as much money into coal, oil and gas as Wall Street banks. According to the nonprofit group, the PE firms, which include Apollo Global Management, Blackstone Group, Brookfield Asset Management, Carlyle Group, KKR and Warburg Pincus, collectively oversee $216 billion worth of fossil-fuel assets--on par with the amount of money that big banks put into fossil fuels last year.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.