Oil & Gas News

EnCap Eyes Nearly $3B Permian Asset Sale

EnCap, Permian

By: Reuters – EnCap Investments is exploring the sale of two Permian basin-focused oil and gas producers that could collectively fetch the private equity firm nearly $3 billion, people familiar with the matter said on Thursday.

Houston, Texas-based EnCap is working with an investment bank to independently sell Novo Oil & Gas Holdings and Forge Energy II, the sources said.

EnCap’s efforts to offload the assets come as it attempts to exit older investments profitably on the back of higher energy prices. Returning cash to investors will also boost EnCap’s attempts to secure commitments for its first flagship oil and gas fund since 2017.

Novo could be valued at more than $2 billion, while Forge is expected to fetch over $600 million, the sources said, noting volatile commodity prices could influence the final valuations. They also cautioned the sale of one or both companies was not guaranteed, and requested anonymity as these discussions are confidential.

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EnCap, Novo, and Forge did not respond to comment requests.

EnCap first invested in Novo in 2016, according to its website. Novo holds around 17,000 net acres (68.8 net square kilometers) in the north Delaware portion of the Permian and is expected to produce 60,000 barrels of oil equivalent per day (boepd) in May, according to the sources.

Forge holds more than 40,000 gross acres in the southern Delaware, according to its website. In 2018, EnCap invested about $400 million in Forge, which currently produces about 14,000 boepd, the sources said.

Dealmaking activity in the oil and gas industry has remained robust despite volatility in commodity and financial markets. The Permian, which stretches across Texas and New Mexico and is considered the heart of the U.S. shale industry, has driven much of the activity, as has EnCap.

On Monday, Ovintiv Inc (OVV.N) said it would buy assets in the Midland part of the Permian from EnCap for $4.3 billion. In January, Matador Resources Co (MTDR.N) bought Advance Energy Partners from EnCap for $1.6 billion.

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