UPDATE 2-New TPG venture to buy oil and gas assets

Wed Oct 13, 2010 6:22pm EDT

* To focus on conventional E&P assets

* Hopes to spend at least $500 mln over several years

* Announces $75 million deal in Mississippi (Adds quotes from TPG executive, background)

By Michael Erman

NEW YORK, Oct 13 (Reuters) - Private equity firm TPG [TPG.UL] said on Wednesday it launched a new venture to invest in conventional oil and gas assets in North America, bolstered by the belief that the segment has become undervalued.

Indeed, Petro Harvester has already announced its first deal, spending $75 million to buy oil and gas properties in Mississippi from Comstock Resources. (CRK.N)

TPG would like to invest at least $500 million in the venture over several years, called Petro Harvester Oil & Gas, the private equity firm's head of energy investing told Reuters.

"People are tending to sell what I call slow and steady, conventional oil properties. Our plan was to put together a team that could find the ones we like, properties that can benefit from greater operational focus and put together a good, old-fashioned oil-focused business," Michael MacDougall, the TPG partner in charge of energy investing, said.

TPG is bucking the trend of investing in so-called unconventional oil and gas resources, which include oil and gas shale and oil sands.

Shale plays -- where oil and gas are trapped in underground rock formations -- have become particularly sought after, with international oil companies lining up to spend billions of dollars to participate in joint ventures in these regions.

But Petro Harvester plans to look for value elsewhere, looking for conventional exploration and production assets where it believes it can drive up production.

The venture will be led by Gareth Roberts, who previously founded and led Denbury Resources (DNR.N), also a TPG investment.

MacDougall stressed that Roberts' involvement would be a benefit for TPG, whose relationship with the executive dates back to 1995.

"In firms like ours, if you've known someone for 15 years, it's a lot easier to back them in forming a new business," MacDougall said. "The message we're delivering is that Harvester is open for business and has a deep-pocketed friend in TPG behind them." (Reporting by Michael Erman; Editing by Steve Orlofsky, Bernard Orr)

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