Private equity heavyweights Sam Zell's Equity Group Investments and Tom Barrack's Colony Capital Inc. have formed a partnership to provide capital and asset management in the U.S. upstream oil and gas sector.

Alpine Energy Capital LLC, the joint venture announced on Tuesday, is rebranded from Colony HB2 Energy LLC, which earlier this year provided up to $500 million to California Resources Corp. (CRC).

Barrack said "industry conditions” led to creating Colony a year ago, which since “have persisted and only become more entrenched."

Zell noted that the energy sector has been impacted by "a shortage of capital" because of the sector's "previous performance and investors' inability to earn a return." Chicago-based Equity has a long history of "investing in dislocated situations, of which this is an example,” he said.

The CRC infusion is said to be Alpine's first investment, with $320 million in the first tranche to develop about 275 wells in the flagship Elk Hills field in the San Joaquin Valley.

Alpine is headquartered in Houston under a veteran management team headed by Chairman  Craig Perry and Chief Investment Officer Bill Wicker. Perry said the joint venture (JV) was committed to "aggressively pursuing" upstream opportunities.

Under the JV, Alpine would fund 100% of the well development and earn 90% working interest (WI). CRC’s 10% WI would revert to 82.5% after Alpine gets an agreed-upon return.

CRC of late has received funding from other JVs, with one for up to $300 million with Macquarie Infrastructure and Real Assets, as well as a $250 million infusion from Benefit Street Partners LLC.