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Private equity group Carlyle has announced plans to build an oil and gas company focused on the Mediterranean after agreeing to buy a portfolio of projects in Italy, Egypt and Croatia from London-listed Energean for up to £945mn.
The acquisition is the latest foray into the upstream oil and gas sector by the US-headquartered fund, which has continued to buy and sell producing assets even as most of its competitors have backed away from such investments.
The new company will be chaired by former BP chief executive Tony Hayward and focus on producing gas from offshore fields in the Mediterranean Sea to supply markets in Europe and north Africa. Hayward is also chair of Carlyle’s Colombia-focused oil producer SierraCol.
While the initial plan is to increase production from the former Energean assets to 50,000 barrels of oil equivalent a day from about 34,000 boe/d last year, Carlyle signalled that it was likely to use the new structure to make further acquisitions.
“I think what excites us is to have a platform now in the region to actually go after this opportunity,” Parminder Singh, a managing director at the buyout group, told the Financial Times. “It’s a target-rich environment.”
The deal follows a familiar playbook for Carlyle, which alongside other investors in 2017 acquired a series of oil and gas assets including in the North Sea and Indonesia from French group Engie for $3.9bn before selling the company, known as Neptune, to Italy’s Eni last year in a $4.9bn deal.
While other private equity groups have stopped investing in upstream projects, in some cases due to climate concerns, Carlyle argues it has been able to reduce the carbon intensity of operations at the businesses it has owned, thereby reducing overall emissions and increasing the value of the assets to the next owner.
“It’s not something that we need to do as a box-ticking exercise to get legitimacy or permission from LPs or society,” said Bob Maguire, co-head of Carlyle International Energy Partners. “I see it as something that actually has real commercial value.”
Energean acquired the assets in Egypt, Italy and Croatia from Edison E&P in 2020 for $284mn. The sale comes as new wells at the projects in Italy and Egypt are about to start production.
Carlyle has agreed to pay a guaranteed $820mn for the portfolio, including $504mn in upfront cash, with further payments contingent on performance metrics across the portfolio.
Energean founder and chief executive Mathios Rigas said this was “the right time” to sell, adding that the deal would help fund the company’s flagship development in Israel, a new discovery in Morocco and a carbon capture and storage (CCS) project in Greece.
“We received the offer, we didn’t go looking for it,” Rigas said in an interview. “It was an offer that fits strategically with our objectives today, which is to free up capital, free up our management time . . . to go and grow businesses like Israel, Morocco, CCS and others.”
Energean will also use the proceeds to repay a $450mn bond and hand $200mn to shareholders as a special dividend, it said.
Rigas dismissed any concerns that the transaction would increase the company’s dependence on Israel, which he said already accounted for 80 per cent of the business. “We’re crystallising value for our shareholders and maintaining the same risk that we have today in Israel.”