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Venado Eagle Ford-Directed Partnership Continues Long Line of KKR Unconventional Investments

Private equity giant Kohlberg Kravis Roberts & Co. LP (KKR) and Venado Oil and Gas LLC have formed a partnership to consolidate proven assets in the Eagle Ford Shale in South Texas. They said they will pursue additional oil and gas investment opportunities there as well.

KKR said the partnership will be principally funded by its Energy Income and Growth Fund I (EIGF). According to KKR, officials with Austin-based Venado, which has operated in the Eagle Ford since the play's inception, will apply their "expertise to acquire and enhance Eagle Ford assets through a focus on operational efficiency, technical innovation and strong community relations."

David Rockecharlie, who heads KKR's Energy Real Assets (ERA) business, said the firm believes Venado has "the experience and differentiated business approach necessary to acquire attractive Eagle Ford assets and enhance long-term value through superior technical and operational execution.

"KKR has a long history investing in the Eagle Ford, and we look forward to expanding our existing Eagle Ford asset position in partnership with Venado."

KKR said it has made more than 10 investments in the Eagle Ford to date, and that ERA manages a portfolio of oil and gas assets in conventional and unconventional plays across the country, including Eagle Ford, Bakken, Barnett, Haynesville, Marcellus and Utica shales, and the Denver-Julesburg and Permian basins.

According to a 10-Q filed last August with the U.S. Securities and Exchange Commission (SEC), more than $1.97 billion of aggregate capital has been committed to EIGF. That figure includes capital commitments by third-party fund investors and the general partner. At the time, $960.8 million had been invested in EIGF, while uncalled commitments totaled about $1.01 billion. The fund began in September 2013 and ends in September 2018.

KKR previously disclosed that investors in EIGF included pensions, sovereign wealth funds, insurance companies, foundations, endowments, private banking platforms, family offices and individual investors (see Shale DailyMarch 5, 2014).

KKR has a long history of energy investments.

The equity firm made its first foray into unconventional oil and gas resources in June 2009, when it invested $350 million in privately held East Resources Inc. (ERI), which held about 900,000 acres in the Marcellus (see Daily GPIJune 10, 2009). One year later, a unit of Royal Dutch Shell plc purchased nearly all of ERI's assets, including KKR's interest, for $4.7 billion (see Daily GPIJune 2, 2010June 1, 2010).

Days after the Shell deal was announced, KKR agreed to invest up to $400 million to help develop 100,000 net acres in the Eagle Ford (see Daily GPIJune 15, 2010). It formed a joint venture (JV) with privately held Hilcorp Energy Co. to form Hilcorp Resources Inc. Marathon Oil Corp., in turn, acquired Hilcorp's Eagle Ford assets for $3.5 billion in 2011 (see Shale DailyJune 2, 2011).

In October 2010, KKR and RPM Energy LLC formed a JV, RPM Energy Partners LP, to target opportunities with exploration and production (E&P) companies operating in unconventional plays (see Shale DailyOct. 28, 2010). That December, KKR formed a $1 billion-plus JV with El Paso Midstream Group Inc. to develop midstream projects in the Marcellus and Eagle Ford.

KKR acquired properties containing 93 Bcfe of net proved reserves in the Barnett from ConocoPhillips for an undisclosed sum in January 2011 (see Shale DailyJan. 26, 2011). Three months later, Carrizo Oil & Gas Inc. agreed to sell substantially all of its Tier 1 properties in the Barnett -- about 13,000 acres, including 75 gross (58.5 net) wells -- to a KKR affiliate for $104 million (see Shale DailyApril 29, 2011).

In December 2011, KKR acquired stakes in several unconventional plays in a $7.2 billion deal with Samson Investment Co., then one of the largest privately held E&P companies in the United States (see Shale DailyNov. 28, 2011). The Samson deal included assets in the Bakken, Cana-Woodford and Haynesville/Bossier shales, the Green River and Powder River basins and the Cotton Valley and Granite Wash formations.

Also in December 2011, KKR agreed to jointly build and operate midstream services in Canada's Horn River Basin with Quicksilver Resources Inc. (see Shale DailyDec. 28, 2011).

In March 2012, KKR agreed to provide a 90% stake ($225 million) in a $250 million partnership with Chesapeake Energy Corp. for investing in undisclosed oil and gas basins in the United States (see Daily GPIMarch 7, 2012). The next month, KKR and its affiliates acquired about 27,000 net acres in the Barnett and about 66,000 net acres in the Arkoma Basin from WPX Energy for $306 million (see Shale DailyApril 3, 2012).

KKR and its affiliates formed a JV with Comstock Resources Inc. to develop its holdings in the Eagle Ford in August 2012 (see Shale DailyAug. 1, 2012).

In 2014, KKR and another equity giant, Riverstone Holdings, combined undisclosed energy assets to form Trinity River Energy LLC, an E&P focused on the Barnett (see Shale DailyJuly 9, 2014). The next year, KKR and Fleur de Lis Energy LLC purchased Powder River and Green River basin properties in Wyoming from Anadarko Petroleum Corp. for enhanced oil recovery activities (see Shale DailyApril 2, 2015).

Also in 2015, KKR and Monterra Energy formed a JV to invest in the terminaling, storage, pipeline and rail assets for refined products, crude oil and natural gas liquids in Mexico (see Daily GPIMay 15, 2015). At the time, the partners said they would also consider investing in natural gas transportation, storage and power generation assets.

Last December, Veresen Midstream -- a 50/50 partnership of Calgary-based Veresen Inc. and KKR -- said it would fund 55-60% of the construction costs of the proposed $715 million Tower rich natural gas processing plant in the Montney Shale (see Shale DailyDec. 8, 2015).

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