privateequity

Crude Oil Production, North America (BI OILSN)

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Themes > Will PE Pounce on Energy in 2015? >> Exhibit 1 of 7

Private Equity Stalks E&Ps With Billions to Vie for Fewer DealsAnalysts: Vincent G Piazza & Gurpal DosanjhApr 16, 2015Expectations for M&A involvingexploration and productioncompanies may be too high, giventhat debt and equity markets remainopen for them to finance theircapital-intensive operations evenafter oil and gas prices plunged. Thedecline in E&P equities has helpedto draw the attention of privateequity firms, which have raisedbillions of dollars to buy energycompanies and assets. Thosethat do occur may push valuationshigher for purchasers, with privateequity and strategic bidders pittedagainst each other.

Key Points (5 of 7):* Private Equity Funds Amassing War Chest to Chase EnergyDeals* Where in Energy Will the Private Equity Money Go? Maybe NotFar* E&P's Credit-Market Access Will Determine Whether M&A PicksUp* Competition May Make U.S. E&P Deals Pricey, Assuming TheyHappen* Free-Flowing Capital Keeps Oil Pumping, Even for DistressedE&Ps

Crude Oil Production TeamBloomberg Intelligence




Private Equity Funds Amassing War Chest to Chase Energy DealsAnalysts: Vincent G Piazza & Gurpal DosanjhApr 16, 2015Energy companies will likelydraw the interest of private equityinvestors while oil and gas pricesare depressed. Funds have raisedabout $70 billion for deals, which willaffect valuations as they competewith other financial sponsors andenergy companies. Their access tocapital, operating acumen and abilityto recycle investments in liquidmarkets allows funds to maintain acritical role by purchasing assets,investing at different levels of atarget's capital structure or buyingoperating companies outright.

Crude Oil Production Team For interactive exhibit on Bloomberg, run:Bloomberg Intelligence PEFR<GO>




Where in Energy Will the Private Equity Money Go? Maybe Not FarAnalysts: Vincent G Piazza & Gurpal DosanjhApr 16, 2015Private equity funds are seekingto raise more than $126 billion toinvest across sectors includingenergy in addition to $70 billionalready committed by investors.Opportunities to deploy that capitalmay be limited if credit marketsremain open to E&Ps, given thatproducers have been able to financethemselves as they await a recoveryin oil and gas prices. Fewer assetsfor sale will restrict private equitypurchases and lead prices to riseamong competition from buyers.

Crude Oil Production Team For interactive exhibit on Bloomberg, run:Bloomberg Intelligence PEFR<GO>




E&Ps' Credit-Market Access Will Determine Whether M&A Picks UpAnalysts: Vincent G Piazza & Spencer CutterApr 15, 2015The plunge in oil and gas priceshasn't prevented E&Ps from raisingdebt, and while several producershave cut capacity, the industryoverall seems to be weathering thedown cycle better than anticipated.Credit is the lifeblood of capital-intensive E&Ps and a decline in itsavailability would force companiesto seek alternative financing, sellassets or place themselves upfor sale. With access to creditmarkets still relatively robust, M&Amay remain at less-than-expectedlevels.

Additional Reading:* Credit Should Still Be There for E&Ps Even With Oil Price Plunge* High-Yield Energy Bond Offerings Approached $9 Billion in March* Antero Resources, Newfield Sell Debt, Timing Bond-MarketRebound* BreitBurn Deal Lifts Distressed-Energy Issuance to $4.3 Billion

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Smart-Money Private Equity May Not Be Good for Public InvestorsAnalysts: Vincent G Piazza & Gurpal DosanjhApr 16, 2015Private equity funds have partiallyexited energy investments throughequity offerings worth $7 billionin the past year. Those equitieshave lost 20% on average, trailingthe S&P 500's 16% gain and theEnergy Select Sector SPDR FundETF's 11% drop. Private equity'sperformance can influence investorperception of future deals andmay limit capital raising. Sellinginvestments via public marketsor private auction allows funds torecycle capital and provide a returnfor themselves and their investors.

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Competition May Make U.S. E&P Deals Pricey, Assuming They HappenAnalysts: Vincent G Piazza & Gurpal DosanjhApr 16, 2015The precipitous decline in crude oiland natural gas prices should resetexpectations of potential buyers andsellers in E&P deals. Yet valuationssuggest that either fewer dealswill occur or multiples will retreatfurther, given that equities acrossthe three main U.S. oil-leveredplays still trade near where they didwhen oil and gas were higher. WhileM&A will likely center on distressedcompanies, liquidity for deals mayoutstrip the assets available, stokingcompetition and pulling bid priceshigher.

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Free-Flowing Capital Keeps Oil Pumping, Even for Distressed E&PsAnalysts: Vincent G Piazza & Gurpal DosanjhApr 16, 2015The pace of domestic hydrocarbonproduction may be more resilientthan expected, as E&Ps seekoperational efficiencies and othercost savings that should generatehigher returns and more productivewells. Liquid capital markets aresupporting this level of activity,and even distressed operatorshave obtained financing during thelatest slump in oil and gas prices.That is keeping output robust andsuppressing commodity benchmarkprices. Once capital is rationed,retreating output should supportprices.

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