Apollo Buys El Paso’s E&P Unit Before Kinder Morgan Closes on the Pipeline Segment

El Paso Eagle Ford Shale Map

El Paso Eagle Ford Map | Click to Enlarge

Apollo and El Paso reached a $7.15 billion agreement for El Paso’s E&P segment. The deal is subject to the closing of the El Paso-Kinder Morgan pipeline merger.

El Paso’s exploration and production segment has been on the sales block since the Kinder Morgan deal was announced, but the question remained whether the assets would be sold in pieces or all together.

While Apollo has been rumored to be considering the deal, it comes as a bit of a surprise that the private equity group acquire El Paso E&P. Most industry experts thought El Paso would be a great fit for an international company looking to expand its footprint in the U.S. (e.g. Statoil-Brigham). Low natural gas prices that are limiting many companies’ upstream budgets might have opened a window for the Apollo group to step in. [Read more…]

Reliance – Apollo Evaluate El Paso Assets

Since Kinder Morgan’s $21+ billion acquisition of El Paso was announced, it was believed Kinder would sell the accompanying exploration and production assets. We explored the possibility in more detail in the blog post “El Paso’s Eagle Ford Assets on the Market

The real question is whether the e&p assets will be sold all together or if they will be sold in parts. I’m sure Mr. Kinder knows how much other deals have gone for and he’ll want to get a similar premium for El Paso’s Eagle Ford assets. If he doesn’t get the premium or dang close baked into a deal for the entire business unit, he’ll sell the assets off one by one. Expect a decision on selling the whole or parts real soon. Publicized estimates of El Paso’s e&p value are around $8 billion.

Both Reliance Industries and Apollo Global Management are in talks to buy the unit. Reliance would be buying an operated stake in the U.S. where to date it only acts as a non-operated partner in the Marcellus Shale. Apollo would be adding a significant e&p business that it would likely grow and market to other companies or eventually IPO. Private equity firms like Apollo usually hold assets for 3-10 years.  [Read more…]