Hong Kong's Kerogen makes Israel energy investment
Kerogen Capital, a Hong Kong-headquartered GP specializing in international energy investments, has committed an initial $50 million to a planned $1.3 billion development in gas fields off the coast of Israel.
The GP’s partner is Energean, an independent exploration and production player that focuses on the Eastern Mediterranean region. Its subsidiary, Energean Israel, acquired a 100% interest in licenses covering the Karish and Tanin gas fields in December 2016 for $40 million plus $108.5 million in contingent payments.
Kerogen’s investment, which is subject to approval by the Israel government, will take a 50% stake in Energean Israel, with Energean holding the balance. The capital will go towards financing the licenses acquisition as well as engineering design studies and field development plans. The fields are estimated to contain at least 2.4 trillion cubic feet of gas. It will supply Israel’s growing gas market, starting from 2020.
“This investment provides Kerogen with exposure to a large-scale, low break-even discovered gas resource located within an OECD country, which, as a near-term development, can benefit from today’s deflationary cost environment,” said Roy Franklin, executive board member at Kerogen, in a statement. He will become non-executive chairman of Energean Israel.
Kerogen closed its second fund at $830 million in August of last year and all three investments prior to Energean have been in Europe, where the end of the commodities boom has seen markets once characterized by aggressive cost inflation go into reverse. As a result, assets – some of them distressed – are available at competitive valuations.
The private equity firm has made two investments that are concentrated on the UK continental shelf: North Sea-focused Zennor Petroleum and Hurricane Energy, a specialist in fractured basement reservoirs. The third, which was announced in January, is an initial $100 million commitment to Pandion Energy, an exploration and production company that focuses on the Norwegian continental shelf.
Kerogen was founded by executives from J.P. Morgan's Asia energy and natural resources team who had subsequently moved to Indonesia-focused Ancora Capital. It raised in excess of $1 billion for its debut fund in 2012.
The GP targets international energy assets outside of North America, focusing on growth capital investments in established upstream oil and gas companies. Its strategy is underpinned by an appreciation of the role played by small but technically able companies in developing new plays and the increasing importance of Asia to the energy sector as an end user and strategic participant.
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