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KKR Continues Shale Rampage with RPM Energy Partnership

RPM Energy LLC and Kohlberg Kravis Roberts & Co. (KKR) have formed RPM Energy Partners LP to target joint venture opportunities with exploration and production companies in unconventional plays. They offer RPM's expertise and KKR's deep pockets.

The partners said the industry is ripe with opportunity driven by the capital requirements of oil and gas producers as they seek to develop newly acquired shale resource positions. "We estimate that the 'Big Six' shales alone could require in excess of $1 trillion of total capital throughout their lifecycles in order to maintain lease positions, construct infrastructure and develop the underlying hydrocarbons," said David Rockecharlie, Co-founder of RPM.

KKR said a partnership with privately owned RPM is the right fit because the oil and gas exploration and development company is led by veteran energy professionals Rockecharlie and Claire Scobee Farley. Terms of the transaction were not disclosed.

"With so many high-quality companies, of every size, looking for partners with capital and technical expertise to help them evaluate and develop their shale acreage, we see tremendous opportunity," said Scobee Farley, co-founder of RPM. "With KKR's backing, we expect to build an exciting new oil and gas company with a portfolio of asset positions in several of the unconventional resource plays."

The partnership will invest in or acquire positions in unconventional oil and gas properties in a wide range of basins. RPM aims to structure creative, mutually rewarding industry partnerships with existing land and working interest owners.

KKR, which has been investing in the energy sector and the oil and gas sector, in particular, for more than 20 years, said the formation of the partnership is an extension of its oil and gas strategy.

"Over the last few years, we have been building a platform to invest in both unconventional and conventional oil and gas assets," said John Bookout, managing director of KKR. The firm's recent oil and gas transactions include the Marcellus Shale via East Resources (see Daily GPI, June 10, 2009), the Eagle Ford Shale via Hilcorp Resources (see Daily GPI, June 15) and KKR's conventional oil and gas platform, formed with Premier Natural Resources.

KKR announced in June that it is exiting its investment in East Resources in connection with the signing of a definitive agreement for East's principal subsidiaries to be sold for a total transaction valuation of approximately $4.7 billion to an affiliate of Royal Dutch Shell Plc.

Getting a piece of the shales has been top priority over the last few years. According to a report this summer by Houston-based PLS Inc. and Derrick Petroleum Services, transactions for unconventional natural gas and oil properties dominated the U.S. deal-making landscape in 2Q2010 with 32 deals totaling $12.9 billion, or 59% of U.S. total value (see Daily GPI, July 15). The report found that the Marcellus Shale led all unconventional plays with nine deals for $8.2 billion, while the Eagle Ford Shale in Texas witnessed eight transactions that topped $3.1 billion.

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