KKR & Co. is building a shale-oil acquisition vehicle with the $5.7 billion combination of two little-known explorers.
The buyout firm’s Independence Energy will merge with Contango Oil & Gas Co. in an all-stock deal that will be used to hunt down even bigger deals, Contango Chairman John Goff told analysts during a conference call on Tuesday.
KKR is bucking the trend among private-equity peers that have been unloading shale investments after back-to-back oil-market busts. After years of poor returns and swelling debtloads, shale drillers were already out of favor when the Covid-19 pandemic crushed energy demand. KKR’s move may signal a bullish turn with U.S. crude prices heading for the best annual performance since 2015.
“We think this is the right way to run an oil and gas business and we’re well-positioned going forward,” David Rockecharlie, who leads the KKR team that will manage the combined business, said in an interview. “The two companies have similar strategies in pursuing a differentiated cash flow and risk-based business.”
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