PE agrees $2.1b Australia energy carve-out

The transaction will add $2.1 billion to Apache's coffers and bring a decade-long period of international expansion closer to its finish. The company is targeting growth in the North America onshore market, where production is more visible, predictable and repeatable.

Macquarie and Brookfield will use the assets to form a new intermediate oil and gas producer. Len Chersky, head of private equity for Brookfield in Australia, stresses that managing existing operations and serving the domestic gas market remains the top priority, but the consortium is keen to grow organically and through M&A. The latter may well provide opportunities.

"The combination of market volatility and significant capital commitments by current market participants may result in sales of non-core assets by other market participants," Chersky says. "The consortium is well placed to capitalize on those."

With crude oil prices down nearly 50% since June 2014, oil companies are looking to raise capital in order to repair their balance sheets. Last month Chevron announced plans to accelerate its divestment program through 2017 by increasing targeted asset sales from $10 billion to $15 billion. The company subsequently offloaded its 50% stake in Australian oil refiner Caltex for A$4.72 billion ($3.57 billion).

Last year Royal Dutch Shell exited Australia's refining industry through a A$2.9 billion asset sale to commodity trader Vitol and BP is also scaling back its exposure in this area.

In Australia and beyond, private equity investors are considering potential carve-outs, albeit with more of a focus on exploration and production. Chersky notes that PE players with dry powder and an understanding of upstream commodities could do well. "The down cycle always provides buying opportunities across the full value chain, including exploration, production and services," he adds.

Brookfield's investment in the Apache business will be held by its private equity platform, which has $21 billion in assets under management globally, including $4 billion in the energy sector.

The asset, which will be managed jointly with Macquarie, produced a daily average of 49,000 barrels of oil equivalent in March. It comprises interests in six directly-operated oil and gas fields and a two more operated by BHP Billiton; gas processing facilities and associated infrastructure; and exploration and production permits for several basins.

The consortium has already secured a long-term gas supply agreement with aluminum producer Alcoa, which runs from 2020.

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• Topics
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• Macquarie Group
• Brookfield Asset Management
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