Buyout Firms Seize 'Window of Opportunity' in Permian: Jefferies

(Bloomberg) -- Energy pipeline stocks are languishing. That’s a boon for buyout firms eager to invest in the biggest oilfield in the U.S., a top oil and gas banker says.

Private equity firms have gone on a buying spree for pipeline networks in the Permian Basin of West Texas and New Mexico as rival public operators retreat from deal-making to fix their problems, Peter Bowden, co-head of energy investment banking at Jefferies Group, said in an interview.

Buyout firms have spent more than $6 billion on Permian pipeline assets since the start of 2017, according to data compiled by Bloomberg.

“What the big private equity firms have realized is that there is a window of opportunity while the public companies are experiencing weak trading performance during which they can come in and capture significant value in the Permian," Bowden said.

Examples of the trend include Brazos Midstream Holdings LLC’s sale of a Permian unit to an affiliate of Morgan Stanley for $1.8 billion last month and Blackstone Group LP’s $2 billion purchase last year of EagleClaw Midstream Ventures LLC (Full disclosure: Jefferies has carved out a niche as one of the top Permian pipeline deal-makers, with Bowden advising on several of the biggest deals in the region, including Brazos and EagleClaw.)

“Historically, the large, public midstream companies would have done these big deals, and in many instances they have tried to, but they are just not trading well enough," he said.

Buyout firms will lose their acquisition advantage as Permian production doubles in the coming years, he said.

"Ultimately, large companies will consolidate the Permian," he said. "We believe that could occur amidst a recovery in public company valuations over the next 18 to 24 months.”

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