Thursday, April 23, 2015

Carlyle Selling Energy Assets in Midst of "Buying Opportunity"

For months Carlyle Group co-founder David Rubenstein has spoken of the unique buying opportunity in the energy sector. Bloomberg reported:

Niska Gas Storage Partners LLC, the natural gas-storage company whose value has collapsed as energy prices slumped, is exploring a sale. 

Niska, controlled by private equity funds Riverstone Holdings and Carlyle Group LP, is working with Evercore Partners Inc. to find a buyer, according to a statement Wednesday. The sale is part of a broader restructuring effort that’s come as Niska struggles to revive its prospects amid a natural gas glut. In February, the company ceased distributions to shareholders to preserve cash. 
This is the kind of investment David Rubenstein has touted. 

Niska is one of many small companies in the energy industry, from explorers to oil-services providers, that have struggled as oil prices halved since June. Companies are slashing spending, suspending projects, and laying off workers to preserve cash while they look for investors still willing to bet on a recovery.
Why the sale during the best time to load up on energy assets?  Carlyle wants to get whatever equity it can out of Niska before it implodes and becomes the property of bondholders.  Carlyle already wrote Niska's goodwill down to zero

Amid the energy-price slump, Niska’s share price has fallen from a closing high of $16.32 last May to below $2 at the end of trading Tuesday.
Fitch Ratings reported:

Carlyle distributed approximately $30 billion of capital over the last 12 months (on an AUM basis), as the firm took advantage of strong market valuations to exit legacy positions.
Bloomberg played nice with Carlyle in its title for the article.  

An Energy Company Once Worth a Billion Dollars Is Putting Itself Up for Sale 
Niska's 54% owners, Carlyle and Riverstone, have nothing to do with it.   Not only do they have a controlling interest, they stand to garner most of the proceeds from an equity sale.  Can't make the PEU boys look bad, can we?

As for Carlyle's investments in the oil patch, it has over $10 billion in dry powder across three funds.  Apparently none of them are interested in Niska.

Update 4-25-15:  IHS Energy reported deal making activity in the oil patch is at its lowest level since 2008.  Sellers and buyers can't agree on prices.