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Blackstone Group LP (BX) to Pump $1.5 Billion In Permian

Blackstone Group LP (BX) to Pump $1.5 Billion In Permian basin

Blackstone Group is investing in the Permian as the shale region is still turning profits at $50 a barrel
By Faraz Illahi on Aug 26, 2016 at 7:45 am EST

Blackstone Group LP (NYSE:BX), a private equity fund with hundreds of billions of dollars in assets under management, plans to buy up oil and gas properties in the much-coveted Permian shale. The private equity firm has teamed up with two oil companies to invest in the Permian at a time when crude oil is flirting with the $50 per barrel mark.

Blackstone has formed Jetta Permian LP, in collaboration with Jetta Operating Company, to target assets and leases in West Texas and New Mexico. The two entities have committed $1 billion of capital to the partnership.

“A commitment of this scale, and flexibility combined with Jetta’s deep technical expertise and a long-term focus on best-in-class operations and results enables and differentiates Jetta Permian to pursue creative and unique opportunities of scale within the Delaware basin,” Blackstone said in a statement on August 25.

Blackstone also said it has committed roughly $500 million of capital in a partnership with Guidon Energy. The partnership will target assets in the Midland Basin in Permian. In April 2016, the partnership acquired approximately 16,000 net acres in Texas.

There is potential to commit “significantly more” capital in future acquisitions through the Guidon Energy partnership, Blackstone said.

Investments in the Permian Shale region are on the rise this year despite persistently weak oil and gas prices across the globe. It is one of the few areas in the US that is turning a profit at today’s prices, while other regions have failed to fetch much interest.

Despite posting a significant recovery since the start of the year, crude oil prices are still 50% below mid-2014 levels. West Texas Intermediate oil futures are currently trading at $47.2 per barrel while Brent oil futures are trading at $49.3 per barrel.

According to data compiled by Bloomberg, the Permian region has had more than $9 billion worth of exploration & production (E&P) deals. In contrast, other major shale regions like the Marcellus and Bakken have had much lower interest.

E&P deals in the Marcellus, Eagle Ford and Bakken shale regions total less than $5 billion.

Blackstone’s increased interest in the Permian comes as oil and gas properties have lost a significant amount of their value since the collapse in energy prices two years ago. While a substantial amount of capital was raised by private equity firms last year, very little of it was spent. Blackstone itself raised $4.5 billion to be invested in energy but only spent roughly $200 million of that amount, as of June 30.

However, since oil prices have somewhat stabilized in the $40s per barrel range, private equity firms are entering the market to pick up assets at discounted prices, betting on oil prices to recover in the long run.

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