KKR grows natural gas footprint with third Barnett Shale acquisition

Expanding on recent acquisitions in various unconventional resource plays across the US, energy private equity firm Kohlberg Kravis Roberts & Co. LP (together with its affiliates, KKR) has agreed to acquire certain Barnett Shale and Arkoma Basin properties from Tulsa, Oklahoma-based WPX Energy for $306 million. 

The transaction, which is expected to close in the second quarter, is being made through KKR Natural Resources (KNR), KKR’s 2010 partnership with Tulsa, Oklahoma-based Premier Natural Resources (Premier) and is KNR’s third acquisition in the Barnett Shale.  

“The last major acquisitions KKR/Premier made in the Barnett Shale were in 2011, when the firm purchased Barnett Shale properties from both Carrizo Oil & Gas and ConocoPhillips. The Carrizo properties were producing at 8.3 MMcfe/d and were purchased for $104 million in April 2011 ($12,530 per flowing Mcfe),” said the analysts in an April 2 note to investors.

The assets most recently acquires are comprised of 27,000 net acres in North Central Texas and Eastern Oklahoma and 66,000 net acres in the Arkoma.  The Barnett properties, currently producing 67 million cubic feet per day net, imply multiples of $3,290/net acre and $4,567 per flowing Mcfe, according to calculations by Global Hunter Securities.

“Transaction multiples are rightly moving downward with gas-heavy assets, though we do find interesting the fact that KKR is taking a consolidator's position in the Barnett. To us, it implies that at current gas prices, private equity could begin to grow their footprints into the natural gas markets,” said the analysts.

Since inception, KNR has acquired over $900 million of assets, including over $600 million of assets to date in 2012, and now operates over 150 MMcfe/d of net production.  The company has $1 billion of capital currently available for investment and the capacity to purchase over $2 billion of additional properties,

"We see attractive opportunities to invest behind the development of domestic energy resources and remain excited about the opportunity to grow our natural resources platform by continuing to acquire non-core oil and gas properties from high quality operators and allowing them to reinvest the proceeds in their attractive growth opportunities,” said Jonathan Smidt, a member of KKR and Head of KKR Natural Resources.

Although a number of private equity firms have been involved in corporate acquisitions and partnerships with public and private energy companies, KKR has been one of the most active.

KKR's recent oil and gas transactions include Samson Resources and Hilcorp Resources, as well as the formation of partnerships with Chesapeake Energy and El Paso Corp. 

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