Apollo, Riverstone Partner on $7B El Paso Deal

Private equity firms Apollo Global Management and Riverstone Holdings have teamed up to bid around $7 billion for all of El Paso Corp‘s exploration and production assets, Reuters wrote, citing people familiar with the matter. El Paso’s oil and gas assets include acreage in the Eagle Ford field of south Texas, one the most lucrative producing areas in the country, Reuters wrote.

(Reuters) – Private equity firms Apollo Global Management LLC (APO.N) and Riverstone Holdings LLC have teamed up to bid around $7 billion for all of El Paso Corp’s (EP.N) exploration and production assets, according to sources familiar with the matter.

The move is the latest sign that oil and gas assets are attracting greater interest from private equity firms who are challenging energy producers that have been buying up lucrative shale rock fields, such as those in El Paso’s portfolio.

Kinder Morgan Inc (KMI.N), which struck a $21 billion deal to buy El Paso late last year, is weighing whether to sell the whole business as one or break it into six packages and sell those off separately, the sources said.

The banks advising Kinder Morgan on the sale, Barclays Plc’s (BARC.L) Barclays Capital and Evercore Partners Inc (EVR.N), started peddling the separate packages earlier this week, three sources said. One of them said that indications of interest in the packages are due by mid-February.

Sources said that strategic bidders as well as other private equity firms would be interested in the packages.

El Paso, Apollo and Riverstone all declined to comment.

Kinder Morgan agreed to buy rival El Paso in October in a bid to combine the two largest natural gas pipeline operators in North America. But Kinder Morgan was not interested in owning El Paso’s oil and gas exploration and production business and promptly put it on the block.

One source said Kinder Morgan would likely make a decision about how it planned to sell the business by the end of the month.

A $7 billion price tag would be lower than expected for the assets that have been forecast to yield between 830 million to 840 million cubic feet of gas equivalent per day in the fourth quarter, according to an analyst.

“That strikes me as the result of the rapid decline in gas prices in the last couple weeks allowing bidders to be a little bit less generous,” said Duane Grubert, analyst for Susquehanna Financial Group, which is a market maker for El Paso shares.

Natural gas prices have recently accelerated the selloff that began in June, with NYMEX futures now trading at about $2.50 per million British thermal unit, the lowest level in more than two years.

El Paso’s oil and gas assets include acreage in the Eagle Ford field of south Texas, one the most lucrative producing areas in the country, as well as the Haynesville shale in Louisiana and stakes in offshore Brazil fields.

Kinder Morgan went public in February 2011 after CEO Kinder and private equity partners, including Riverstone, Carlyle Group and Goldman Sachs Inc’s (GS.N) buyout arm, took the company private in a management led buyout in 2007.

The private equity firms sold a 13.5 percent stake in the company’s IPO, but Kinder and the buyout funds still hold the vast majority of the company.

Last month, Kinder Morgan and El Paso said the U.S. Federal Trade Commission has asked them for more information on the planned deal.

The regulatory request will extend the waiting period under the Hart-Scott-Rodino law, but the deal is still expected to close in the second quarter of 2012, the companies said.

(Reporting By Greg Roumeliotis and Michael Erman; Additional reporting by Matt Daily; Editing by Maureen Bavdek, Gerald E. McCormick and Tim Dobbyn)

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