Sunday, April 16, 2017

Carlyle's Hilcorp Gets Conoco-Phillips Assets at Half Price

WSJ reported:

Conoco-Phillips to Exit San Juan Basin in $3 Billion Deal:  Houston-based company has been selling off assets to pay down debt and shore up its balance sheet.
Houston Business Journal added:

ConocoPhillips is selling the San Juan Basin assets to Hilcorp San Juan LP, a partnership between Houston-based Hilcorp Energy Co. and Washington, D.C.-based private equity firm The Carlyle Group.
The Carlyle Group loves to buy distressed assets and got a huge discount from Conoco-Phillips.  SeekingAlpha noticed:

Book value of the assets amounts to $5.9 billion, while the company received just half that amount. This is highly disappointing as the company actually obtained a 1.2 times book value multiple for the assets, which were recently sold in Canada.   
Private equity's strategy is buy cheap and sell high.  Conoco-Phillips can only do so many buy high-sell cheap deals and survive.  How did Carlyle and Hilcorp get so lucky?

In an odd twist U.S. Energy Secretary Rick Perry called for a study to evaluate "to what extent regulatory burdens, subsidies, and tax policies are responsible for forcing the premature retirement of baseload power plants.”  How many baseload power plants does Carlyle own?  Last summer Carlyle's Cogentrix asked the state of California to subsidize its natural gas power plants.  History shows Governor Rick Perry gave Carlyle Group affiliate Vought Aircraft Aviation $35 million for 3,000 new jobs.  After six years with a Texas sized jackpot, Vought hadn't added to their workforce.  Vought cut 35 Texas jobs as of its target performance date.  Perry bold face lied and called it a 29,377 job gain.  Rick Perry loves to steer public money to his PEU friends and they love getting it.

Update:  In another odd twist Alaska Dispatch News reported on several Hilcorp oil/gas spills in Alaska and Louisiana.   ADN is owned by Alice Rogoff Rubenstein, the wife of Carlyle Group co-founder David Rubenstein.  Those reports occurred before Hilcorp and Carlyle announced the San Juan Basin acquisition from Conoco-Phillips