Lime Rock Raises $1.9 Billion Fund to Retain CrownRock Interest

(Bloomberg) -- Lime Rock Partners, a Houston private equity firm, has raised a $1.9 billion fund to buy Permian Basin oil and gas producer CrownRock LP from another fund it raised 12 years ago, according to a statement Thursday.

The deal values CrownRock at $4.7 billion, according to a person with knowledge of the matter. The transaction generated a 24 times return on Lime Rock’s initial $97 million investment in CrownRock, said the person, who asked to not be identified because the matter isn’t public.

A representative for Lime Rock declined to comment on the financial details of the transaction, which weren’t publicly disclosed.

The transaction is a rare example of a private equity firm retaining a promising portfolio company by essentially buying out its own interest through a new fund. In May, one of HgCapital Trust Plc’s new funds and a co-investor bought a stake in British software group IRIS held by a previous HgCapital fund. Investindustrial, an Italian private equity firm, also created a new fund last year to buy assets it owned already.

Lime Rock first invested in Midland, Texas-based CrownRock in 2007 through Lime Rock Partners IV LP, a $750 million fund it had closed a year earlier. The name of the new pool is Lime Rock Partners IV AF, which has acquired CrownRock as well as everything else that Lime Rock had still owned through Fund IV, according to Thursday’s statement.

The "vast majority of the asset value" in the new fund comes from its interest in CrownRock, Lime Rock said in the statement.

Harbourvest Partners LP served as lead investor in the new fund, which received $741 million in new commitments from backers including investors in Fund IV. Lime Rock’s employees as a group comprise the largest single investor in the new pool.

CrownRock is one of the largest private equity-backed explorers in the Permian Basin, the most productive oilfield in the U.S. Its assets are operated by CrownQuest Operating, a Texas oil and gas producer that formed CrownRock as a joint venture in 2007 with Lime Rock.

CrownRock controls about 90,000 net acres in an area of the Permian known as the Midland Basin, where its recent production rate has been about 40,000 barrels of oil equivalent per day, according to the statement.

"We are grateful for the hard work of everyone at CrownQuest and look forward to the continued development of our assets,” Lime Rock Managing Director J McLane said in the statement.

Evercore Inc. was financial adviser to Fund IV on the deal while Morgan, Lewis & Bockius LLP provided legal counsel to both funds as well as Lime Rock.

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