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KKR, Riverstone Create Barnett-Rich E&P

Two private equity giants are merging some energy assets to form Trinity River Energy LLC, an exploration and production (E&P) operator that would have a big presence in the venerable Barnett Shale.

Kohlberg Kravis Roberts & Co. LP (KKR) is combining assets from KKR Natural Resources Fund with Riverstone Holdings' Legend Production Holdings LLC. No financial information was disclosed.

Trinity would have 258 MMcf/d of Barnett gas output, as well as properties in the Permian Basin, East and South Texas, Louisiana and Mississippi.

"This is an opportunity to create a company with greater scale and a significant presence in the Barnett Shale, and thereby we hope to capture meaningful operational synergies as well as create incremental opportunities to generate additional value for our investors going forward," said KKR's Jonathan Smidt, who led the transaction.

Trinity would be headquartered in Fort Worth, TX, and led by Legend CEO Chris Hammack. Operations would be based in Fort Worth, with the finance, accounting and information technology arm in Houston.

"Following the combination, Trinity will have an impressive position in the Barnett Shale and a mix of highly prospective plays," said Hammack. "We feel confident that our strong financial backing and experienced teams will allow us to build a highly successful company together."

The transaction, set to close by the end of September, is one that makes sense, said KKR and Riverstone executives. Trinity would have "highly complementary producing properties and acreage positions," they stated.

Legend, founded in 2001 and based in Houston, entered the Barnett three years ago after purchasing Range Resources Corp.'s estimated $900 million portfolio (see Shale DailyMarch 7, 2011). At that time Legend also boosted its holdings in the Eagle Ford Shale in South Texas. The Barnett properties in 2011 included 390 producing wells and about 52,000 net acres, with output of 113 MMcfe/d, 86% weighted to gas. Legend was formed in 2009 to acquire and develop reserves in the U.S. onshore.

KKR's presence in North America's onshore has been growing. Since 2009 KKR has invested about $4.3 billion in the onshore and in March it completed a $2 billion fund focused on developing more unconventional resources (see Shale DailyMarch 5).

In 2012, KKR and affiliates made their third purchase in the Barnett in a $306 million agreement with WPX Energy (see Shale DailyApril 3, 2012). That deal handed it about 27,000 net acres, interest in 320 wells, 91 miles of pipeline and 67,000 MMcf/d net. KKR also gained assets in the Arkoma Basin, including 66,000 net acres, stakes in 325 wells and 115 miles of pipe.

KKR also in late 2011 led a group in paying $7.2 billion for Samson Investment Co. of Tulsa, at the time one of the largest privately held E&Ps in the United States (see Shale DailyNov. 28, 2011). Samson provided interests in more than 10,000 wells, with key positions in the Bakken, Powder River, Green River, Granite Wash, Cana Woodford and Cotton Valley, and the Haynesville and Bossier gas shales.

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