Private equity firms including Ares Management and Castle Harlan poured more cash into Houston energy operations this week, snapping up local companies’ oil assets and opening new offices here in a string of deals as rising crude prices stir up new fervor among private groups.
The transactions are among the latest examples of surging private equity investments in the U.S. oil patch and in Houston, where investors have instructed their publicly traded rivals to focus on making returns and developing the fields they already own, giving private firms armed with billions in newly raised capital an opening to carve out a bigger piece of the oil industry.
“These guys are getting back in the business,” said Roger Diwan, vice president of financial services at research firm IHS Markit. “A lot of money is going into infrastructure.”
Ares Management, a public New York investment company with $25 billion in private equity assets, made a deal this week with Houston private equity firm ARM Energy Holdings to fund the development of Houston-based Salt Creek Midstream, a firm launched last year with plans to operate oil and gas gathering pipelines, cryogenic processing facilities and other plants in the Delaware Basin in West Texas and New Mexico.
The firms said Salt Creek should be able to process 260 million cubic feet of natural gas per day by the end of the year, with the first steps of its projects launching this month. Permian Basin oil companies with 250,000 acres in Culberson, Reeves, Ward, Winkler and other counties have signed up to use Salt Creek’s pipelines and other facilities.
In another deal this week, New York private equity firm Castle Harlan bought Houston oil-equipment maker Exterran Corp.’s production equipment manufacturing assets in North America, forming a new company called Titan Production Equipment led by former Exterran executives.
The acquisition, expected to close this summer, includes a 210,000 square foot manufacturing facility in Columbus, Texas, and Exterran’s engineering drawings and designs for oil and gas production equipment such as separators used in processing hydrocarbons after they’re extracted from the earth.
The deal takes advantage of a lack of available equipment in U.S. oil and gas fields after the energy downturn that forced companies to cannibalize parts. Financial terms of the deal were not disclosed.
“The production equipment market currently faces constrained capacity, in which customers experience long lead-times, limited engineering support and product quality issues,” said Eric Schwartz, managing director of Castle Harlan.
Tally Energy Services, a Houston private equity-backed oil services company, announced its fourth acquisition this week only seven months after its launch by private equity firms RedBird Capital Partners and Sallyport Investments, raising about $130 million to make deals.
Though it didn’t disclose the price tag, Tally said it purchased the assets of Canadian drilling services company Gearcon Inc. and subsidiary Gearcon Drilling Tools, and plans to move their headquarters from Alberta to Houston. The move will add drilling motors to Tally’s operations.
Another New York private equity firm, Orion Energy Partners, said this week it has opened a new office in Houston, looking to strike deals in the U.S. energy capital after making a string of acquisitions of Gulf Coast midstream firms and oil field service companies over the past two years.
Orion’s investments in Houston companies has totaled almost $500 million over the past 18 months. It raised $816 million for a second energy fund in February.
Ethan Shoemaker, a managing director at Orion, said Houston is “the ideal market to anchor Orion Energy’s strategy in the region,” and the new office gives it a “local presence to identify and deploy capital into energy infrastructure businesses.”
This article first appeared on the Houston Chronicle – an Energy Voice content partner. For more from the Houston Chronicle click here.
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