Energy services provider Nabors Industries Inc., which concentrates most of its activities in North America, and private equity firm First Reserve Corp. on Friday committed $1 billion to form NFR Energy Inc., a new exploration and production company (E&P). The 50-50 joint venture will focus on development and exploitation projects with Nabors’ existing customers and other operators worldwide.
Just last month the U.S.-based First Reserve closed Fund XI, the largest global energy fund ever, with total commitments of $7.8 billion (see NGI, Aug. 14). When the fund closed, First Reserve said its focus would be to invest in energy service companies to benefit from increased energy infrastructure spending and infrastructure assets.
With third-party debt, reinvestment of cash flows and the partners’ ability to expand their equity commitments, the companies said NFR will be able to invest more than twice its initial equity in projects. NFR’s focus is to “pursue development and exploitation projects” with Nabors’ existing customers and other operators, including operated and nonoperated working interests, joint ventures, farm-outs and acquisitions.
Nabors owns and operates more than 500 land drilling and 800 land workover and well-servicing rigs in North America. It also owns more than 100 drilling rigs on other continents. In the Gulf of Mexico (GOM), Nabors operates 43 platform rigs, 21 jack-up units and three barge rigs. Nabors also markets 29 marine transportation and supply vessels, primarily in the GOM. In addition, Nabors manufactures drives and drilling instrumentation systems and provides oilfield hauling, engineering, civil construction, logistics and facilities maintenance and project management services.
“This combination will allow each party to benefit from the extensive expertise, experience, relationships and asset base of the other, thus providing an enhanced platform for undertaking larger and more lucrative opportunities,” said Nabors CEO Gene Isenberg. The new E&P, he said, will enable First Reserve and Nabors to “exploit opportunities more rapidly and efficiently.”
First Reserve CEO Bill Macaulay said his company sees “great potential in combining First Reserve’s and Nabors’ respective strengths in the largest and best-funded venture ever of its kind. We expect NFR’s unprecedented combination of capital, experience, expertise and assets to provide for the rapid and profitable growth of a worldwide onshore E&P company. Nabors’ extensive rig fleet, he added, would be “enabling assets…in an era of active E&P spending.”
First Reserve is quickly making a name for itself in the energy field. Its previous energy equity fund, Fund X, closed in 2004 with commitments of $2.3 billion. With that fund, it made substantial investments in Dresser-Rand, Chart Industries, Pacific Energy, Weatherford International, National Oilwell, Foundation Coal, Alpha Natural Resources, Pride International, Superior Energy Services, Caledonia Oil and Gas and Chicago Bridge and Iron.
Two weeks ago, First Reserve acquired a 50% stake in Blue Source LLC, a U.S.-based aggregator of greenhouse gas emission reduction offsets. Terms of the transaction were not disclosed.
“We invest in the energy industry, so current and future protocols regarding greenhouse gases will impact everything we do,” said First Reserve Vice President Glenn Payne. “Companies such as Blue Source fit perfectly within our portfolio of best-in-class energy and energy-services businesses that offer attractive investment parameters, provide insight into emerging discontinuities and, in the case of Blue Source, create environmental benefits on a large scale.”
Earlier this year, Carlyle Group and its energy-investment affiliate Riverstone Holdings LLC, which also focus on energy assets, raised more than $3.8 billion for their Global Energy & Power Fund and nearly $700 million for a renewable energy fund. The fund already has purchased some of EnCana Corp.’s assets (see NGI, May 22), and in June, it bought a stake in a power project in Lake County, CA (see Power Market Today, June 9).
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