Apollo quickly bets $2 bln on three energy deals

  • Zenergy draws $700 million commitment
  • $500 million goes to CSV Midstream
  • May pledge up to $1 billion to Caelus Energy

“Opportunities are presenting themselves most evidently within two overarching investment themes that we believe will persist, not just for a few quarters but for many years,” Black said May 8 on the firm’s first-quarter conference call. “The first opportunity is the massive capital investment needed in the energy sector and the second opportunity is the shifting financial services.”

Of the two themes, Apollo Global has been more active with energy deals of late.

On June 2, the firm pledged $700 million to a new partnership with Zenergy Inc to invest in the acquisition and development of upstream and midstream oil and gas properties. Zenergy will contribute $55 million to the effort. The team intends to focus on assets in the Arkansas-Louisiana-Texas region.

Capital for the deal came from Apollo investment Fund VIII LP, the $18.4 billion flagship fund that closed earlier this year, as well as the $1.3 billion Apollo Natural Resources Partners LP.  

On May 28, Apollo Global committed $500 million to a partnership with CSV Midstream Solutions Corp to build midstream facilities in the Western Canadian Sedimentary Basin.

And in April, the firm teamed up with Caelus Energy Alaska LLC to buy Pioneer Natural Resources’s Alaskan oil and gas business for $300 million in cash. Dallas-based Caelus Energy Alaska is led by Chief Executive Officer James Musselman, former head of publicly traded Kosmos Energy, which discovered the billion-plus barrel Jubilee field off the West African coast, and Triton Energy, acquired by Amerada Hess for $3.2 billion.

Apollo Global holds the option to invest up to $1 billion in Caelus Energy Alaska to develop the company’s assets and to pursue acquisitions or other additional investments.

Black said Apollo Global invested in the company at a price of roughly 6x EBITDA to 7x EBITDA, similar to the multiple in its buyout of the parent of Chuck E Cheese restaurants.

Josh Harris, senior managing director of Apollo Global, said the surge in U.S. shale oil and gas production has created a capital need in the $2 trillion range in the United States.

“There’s not enough capital and expertise to be able to exploit (the opportunity) in the short term,” Harris said on the May 8 conference call with investors. “Those private equity firms that have set themselves up with teams of scientists—landmen, reserve engineers for the petroleum experts—all over the continent are going to be able to take advantage of that opportunity and put a lot of capital to work. And Apollo is very well positioned relative to the expertise we have built up and relative to the size of that opportunity and our ability to take down big opportunities and exploit that.”