Oil & Gas Dealmaking Heats Up With $20 Billion of Assets in Play

Buyout shops are finding a rare exit opportunity in the US oil patch.

US private equity firms are shopping more than half-dozen closely held oil and gas companies in Texas, Colorado and elsewhere that together are worth about $20 billion, after the Iran War pushed crude above $100 a barrel.

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That’s spurred long-time energy players to bring choice fossil fuels holdings to market.

EnCap Investments, one of the busiest oil and gas-focused private equity firms in Houston, is seeking $2 billion for Ridge Runner, which operates in the Permian Basin of West Texas and New Mexico, according to people familiar with the matter. Quantum Capital Group has separately picked advisers to sell Bison Oil and Gas, an operator in the Denver-Julesburg Basin. It’s looking to get a valuation of more than $3 billion for the company, said the people, who asked to not be identified because the details aren’t public.

Elsewhere, Greenbelt Capital Partners is exploring a sale of TRP Energy that could value the Permian Basin oil and gas explorer at more than $3 billion, the people said. Representatives for all three investment firms declined to comment.

The activity underscores one potential bright spot for US private equity, which has been struggling in recent years to sell or take public their holdings, after paying top-of-the-market prices during the post-Covid M&A boom. The industry is sitting on 32,000 unsold companies worth $3.8 trillion while the average holding period for assets has stretched to around seven years, according to Bain & Co.’s most recent private equity industry outlook.

The exit market in oil and gas has ratcheted up since Iran closed the Strait of Hormuz in February, sending crude prices up more than 50%. That’s a potential boon for the private equity firms that invest heavily in oil and gas, a sector that’s been fairly brutal to Wall Street firms through the decades.

“It’s not a rush to the exit, but it’s a market opportunity compared to the last few years,” said Rahul Vashi, a partner with Gibson, Dunn & Crutcher LLP in Houston. “This is the market private equity firms have been waiting for.”

While volatility may be an issue, higher prices have reset the “floor,” which could help avoid a “price mismatch,” he said.

The pipeline could also accelerate dealmaking in the oil and gas sector after a first quarter in which deal values rose 92% year over year at about $44 billion globally, according to data compiled by Bloomberg.

Source: Bloomberg

“The case for higher-for-longer oil prices is strengthening and creating the setup for an M&A rebound,” Andrew Dittmar, principal analyst at Enverus Intelligence Research, said in a note. “We expect that to translate into more private companies coming to market.”

Blue chip private equity firms such as Apollo Global Management Inc. and Carlyle Group Inc. helped bankroll the shale boom of the early 2000s, only to book massive losses when prices fell amid a supply gut. Big private equity has dipped in and out of the space through the years, leaving the bulk of the action to firms such as EnCap and Quantum, which specialize in funding upstart explorers, buying wayward assets, developing them and exiting when times are good—ideally to a major company.

EnCap has one of the strongest track records in Houston when it comes to doing that, having sold portfolio companies in recent years to the likes of Permian Resources Corp., Ovintiv Inc. and Diamondback Energy Inc.

Another long-time player, Quantum Capital struggled for almost two years to raise more than $10 billion for its various energy funds in 2024. Now the firm is targeting greater investments in the upstream oil and gas sector, which desperately needs more capital to power the electrification of the US economy, Executive Vice Chairman Dwight Scott told Bloomberg TV in April.

Other Assets

Some other assets in the market include Wildfire Energy, an operator in the Eagle Ford Basin of south Texas backed by Warburg Pincus and Kayne Anderson worth about $4 billion, people familiar with the matter said. Reuters first reported it was for sale. Representatives for Warburg Pincus and Kayne Anderson declined to comment.

Bloomberg News previously reported that Arsenal Resources and Beacon Offshore were exploring options including a potential sale. Arsenal, a natural gas explorer in the Marcellus Basin, could fetch close to $1.5 billion while Blackstone Inc.-backed Beacon could fetch more than $5 billion.

To be sure, the rebound is spurring other players to rationalize their holdings.

Energy trader Vitol has relaunched a sales process for VTX Energy Partners, which could fetch up to $3 billion, the people said. Reuters reported that it tried to sell the company about a year ago.

ConocoPhillips is exploring a sale of some of its Permian Basin assets as part of a broader streamlining of its portfolio, Bloomberg News reported in February. They’re expected to fetch about $2 billion.