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November 2023
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AAM Magazine
November 2023
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PE Panorama: Carlyle puts faith in oil and gas sector

Private equity (PE) has a Part 2 story this week, with Royal Dutch Shell’s (Shell) disposal of a second major oil asset to a PE buyer, as it seeks to rebalance its structure following its US$54 billion acquisition of BG Group. A short while back, AAM covered Shell’s disposal of its North Sea assets to PE-invested oil and gas platform Chrysaor for $3.8 billion. Now, Carlyle-backed Assala Energy has “announced the acquisition of Shell’s onshore assets in Gabon, Africa, for $587 million”. Carlyle will also be assuming $285 million of debt, and reportedly adding on another $150 million if oil prices and production reach certain targets.

Carlyle may be looking to grow this already sizeable entry into the oil and gas field even further. According to the deal release, “over time the company will also actively consider new growth and expansion opportunities and seek to play an important role in the future development of Gabon’s energy sector”. The deal provides Carlyle with an uncommon opportunity to put a substantial volume of capital to work from the Carlyle Sub-Saharan Africa Fund, “a $698 million fund that invests in buyout and growth opportunities across Africa”. The rest of the capital for the deal comes from Carlyle International Energy Partners, Carlyle’s $2.5 billion vehicle for investing in all stages of the oil and gas industry chain.

If PE ever needed to vindicate its value case for the broader economy – which it hardly needs to these days when it owns so much of that economy – it could point to its appetite for major corporations’ cast-offs. Shell was looking to offload some $30 billion in assets. Thanks partly to PE, it’s already well on the way. And if Carlyle really can run those Gabon assets better than the seller, and enrich pensioners and other institutional investors in the process, why not? (Actually, there may be some answers to that question, but then why be churlish right now?) Certainly, Marcel van Poecke, head of Carlyle International Energy Partners, also said: “Assala Energy will also explore opportunities to invest in future projects that create sustained long-term value for the local economy.”

Meanwhile, students of the asset class with long memories may remember that back in early 2015, Apollo, KKR, and other PE majors were reporting low profits due to depressed prices of oil and petrochemicals assets. Obviously, those worries are now far behind – at least for Carlyle.