Monday, August 24, 2009

Private Equity Opportunities in Natural Gas

Natural gas prices are lower than low -- less than $4 per thousand cubic feet equivalent, down from $13 last year -- and independent natural gas companies are struggling to keep developing their properties while staying afloat. That's probably one of the reasons interest was high in a luncheon hosted by the Independent Petroleum Association of America at the Petroleum Club in Houston on Wednesday, where the subject was "Private Equity Life Cycle in a Down Price Environment."

So over steak and potatoes, the audience learned that there's no real market for selling private equity-backed oil and gas explorers right now, so you might as well be acquirers of properties on the cheap and operate until the recovery comes.

Rob Jacobs, president of Fort Worth-based Classic Hydrocarbons Inc., which is focused on properties in East Texas and northern Louisiana and is backed by Irving, Texas-based Natural Gas Partners, said his three-year-old company would like to find a buyer but he's more likely to be in the buying mode right now.
"If Chesapeake and XTO are not buyers, then we can amass more properties," he said. "We can take advantage of opportunities that are there."

Rick Louden, CEO of Denali Oil & Gas Partners LP, which owns properties in South Texas and is backed by Quantum Energy Partners, Energy Trust Partners and Walter Oil & Gas Corp., said he's looking to make a large acquisition. "In the past, we haven't been able to make large acquisitions, but at today's prices, there are opportunities for less," he said. "There will be more distressed sales if gas stays at $3 to $4."

Louden expects publicly traded companies that are pursuing plays in different shales across the country will sell their more conventional oil and gas assets to fund development. "We haven't seen a lot yet, but it will happen," he said....MORE