May 13 Concho Resources Inc said it
would buy all of the oil and natural gas assets of Three Rivers
Operating Company LLC, a portfolio company of private equity
firm Riverstone Holdings LLC, for $1 billion in cash.
Three Rivers owns 200,000 net acres in the Permian Basin, an
area spanning Texas and New Mexico that is undergoing an
exploration boom fueled by crude over $90 a barrel and
technology such as horizontal drilling to extract oil.
The company had only acquired its assets in the last two
years and the sale to Concho in a relatively short time frame
underscores the growth prospects of the U.S. energy sector.
Earlier this year, Riverstone participated in a consortium
led by Apollo Global Management LLC that agreed to pay
about $7.15 billion for El Paso Corp's oil and gas
exploration and production business.
Concho would finance the deal with its $2 billion credit
facility, which had about $1.8 billion available as of the end
of March, and would sell $200 million to $400 million of
non-core assets from the acquisition and its existing assets
over the next nine months, the company said in a statement
"This acquisition is expected to be immediately accretive to
earnings, discretionary cash flow, production and reserves on a
per share basis and provides an additional platform to
significantly grow our production in the Permian Basin," Timothy
Leach, Concho's CEO, said in the statement.
Three Rivers is mostly owned by Riverstone/Carlyle Global
Energy and Power Fund IV, a private equity vehicle managed by
Riverstone and launched together with Carlyle Group LP in
2007. The two private equity firms have since stopped working
together on new funds.
The $1 billion deal is profitable for the buyout fund based
on data provided in an IPO registration document filed last
January, when Three Rivers said it would sell shares to repay
debt under a revolving credit facility that had $286.5 million
outstanding as of the end of September.
The parent company of Three Rivers, controlled by the joint
venture private equity fund, had injected $270.7 million in
capital into the company from inception to the end of September
and had already received $60.1 million in distributions.
A Riverstone spokesman declined to comment, while Carlyle
representatives were not immediately available for a request for
Three Rivers obtained its assets through acquisitions. In
April 2010, it purchased oil and natural gas properties from
Chesapeake Energy Corporation for $202.8 million, and in
January 2011, it bought assets of Samson Resources Company for
$343.5 million. Together, the two deals represented more than
700 operated and 800 non-operated wells in the Permian Basin.
Concho said the deal with Three Rivers would give it proved
reserves of about 58 million barrels of oil equivalent,
estimated as of April 1, 2012, and an estimated current net
production of 7,000 barrels of oil equivalent per day.
The transaction is expected to close in July 2012, subject
to regulatory approval and custom conditions, Concho said.
JPMorgan Chase & Co, BMO Capital Markets and Vinson &
Elkins LLP advised it on the deal.