There’s a whole lot of private equity money out there, some of which is coming to Texas.
According to recently released data from Preqin, alternative investment firms worldwide had $1.8 trillion in what the industry calls “dry powder” as of June 30, with $1.09 trillion held by private equity firms. That tops the $1 trillion in 2017 and $838 billion in 2016.
All that cash has led alternative investment firms to slow down their capital raisings to $159 billion in the second quarter versus $166 billion in the first and more than $200 billion in each of the quarters last year. “The industry is possibly a victim of its own fundraising success,” Preqin said.
Those funds are being put to work on deals, which of course need lawyers to paper them.
In the latest Texas Lawbook weekly roundup, in-state lawyers worked on private equity deals involving assets up and down the energy value chain. A new management team in the oil and gas business also attracted an equity commitment from a well known, deep pocketed private equity firm that specializes in the energy business.
There also was a pair of senior notes offerings and an asset sale that involved the work of Baker Botts, a rig sale by a big oilfield services company and various oil and gas asset divestitures.
Transactions in the restaurant, marina and candy industries also were among the highlights.
In all, 14 deals revealed themselves this past week worth $5.37 billion versus 16 deals the previous week worth $11.2 billion. Ninety-eight Texas lawyers and 17 law firms were involved compared with a previous 74 lawyers and 15 law firms. At least someone is working during these dog days of summer.
Kirkland aids Brookfield on $3.3B asset purchase from Enbridge
Kirkland & Ellis said July 10 that it represented Brookfield Infrastructure on its purchase of Canadian natural gas gathering and processing businesses from Enbridge for C$4.3 billion ($3.3 billion).
RBC Capital Markets and Torys advised Enbridge on the sale.
The deal, announced July 4, involved Enbridge’s businesses in the Montney, Peace River Arch, Horn River and Liard basins in British Columbia and Alberta. The assets included 19 natural gas processing plants and liquids handling facilities with a capacity of 3.3 billion cubic feet per day and 2,220 miles of natural gas gathering pipelines.
The transaction has to clear regulators, with some of the divestitures expected to close this year and the rest by mid-2019.
Enbridge CEO Al Monaco said in a statement that the sale advances the company’s plan to become a pure-play, regulated pipeline and utility business.
The company has sold $7.5 billion in assets this year, more than doubling its initial $3 billion target.
Calgary-based Enbridge has been under pressure to shed non-core assets and cut debt. In May it announced it would bring affiliates Spectra Energy Partners and Enbridge Energy Partners and pipeline assets under one roof.
Brookfield Infrastructure is part of Toronto-based Brookfield Asset Management.
Baker Botts aids Transocean on $600M notes offering
Baker Botts said July 11 it represented Transocean on unit Transocean Pontus’ offering of $600 million in senior secured notes.
Specialists included finance partners Luke Weedon and Rachael Lichman and associates Clint Culpepper, David Nimmons and Jennifer Ybarra; tax partners Derek Green and Jon Lobb and environmental partner Aileen Hooks and associate Laura Williams.
Transocean’s in-house counsel was senior associate general counsel Daniel Ro-Trock in Houston.
Vinson & Elkins was outside counsel to the initial purchasers, including partners Mark Kelly, David Stone and Mike Telle; counsel Dan Spelkin; senior associate Doug Lionberger; and associates Andrew Klein and Maggie Webber.
Also advising were partner Wendy Salinas and senior associate Mary Alexander; partner Tzvi Werzberger, counsel Noelle Alix and associate Carter Olson; and partner John Michael and associate Ben Glass.
The notes are due 2025 and will be guaranteed by Transocean Ltd., Transocean Inc. and a wholly owned indirect subsidiary that owns the Deepwater Pontus. They will be secured by a lien on the Deepwater Pontus and certain other assets related to the rig.
The notes will bear interest at the rate of 6.125 percent per year and will be callable after August 1, 2021. The offering is expected to close on or about July 20.
Transocean Pontus plans to use the $586 million in net proceeds to partially finance the construction or acquisition of the Deepwater Pontus.
Baker Botts advises EQT on Appalachian asset sale to Diversified
Birmingham, Ala.-based Diversified Gas & Oil Corp. is purchasing 2.5 million net producing acres in Kentucky, West Virginia and Virginia from Pittsburgh-based EQT Corp. for $575 million in cash.
EQT said Diversified is assuming about $200 million in plugging and other liabilities. EQT is keeping the deep-drilling rights to the acreage.
Baker Botts said July 9 it represented EQT with a team that includes corporate partner Mike Bengtson, who offices out of New York and Austin; senior associate John Kaercher; and associate Rachel Ratcliffe. They had help from the firm’s London and Washington, D.C. offices.
Texas-based specialists included global projects senior associate Scott Looper; tax partners Jon Lobb and Matthew Larsen and associate Katie McEvilly; and employee benefits partner Rob Fowler and senior associate Krisa Benskin.
Diversified used Maynard Cooper Gale out of Birmingham.
The properties, which EQT considers non-core, include 12,000 wells with net production of 200 milliom cubic feet per day of natural gas equivalent from net proved, developed reserves of 1.6 trillion cubic feet. Their average net revenue interest is 92 percent. The production is mostly in Kentucky and natural gas.
The deal includes 6,400 miles of low-pressure gathering lines and 59 compressor stations.
Diversified is a unit of of Diversified Gas & Oil plc, which is listed on the London Stock Exchange’s Alternative Investment Market.
Baker Botts assists underwriters on $500M DCP notes offering
Baker Botts said July 11 it advised the underwriters on DCP Midstream’s senior notes offering worth $500 million.
The specialists included tax special counsel Chuck Campbell; environmental partner Scott Janoe and senior associate Kim Tuthill White; and real estate partner Connie Simmons Taylor and associate Nina Culotta.
Holland & Hart counseled the partnership.
The 5.375 percent senior notes due 2025 will be fully and unconditionally guaranteed by the partnership. The offering is expected to close July 17.
The operating partnership intends to use the net proceeds from the offering to redeem all of its outstanding 9.75 percent senior notes due March 15, 2019, and for general partnership purposes, including the funding of capital expenditures.
J.P. Morgan, Barclays, Citigroup Global Markets, Mizuho Securities USA, MUFG Securities Americas, SunTrust Robinson Humphrey and TD Securities are joint book-running managers. BB&T Capital Markets, PNC Capital Markets, SMBC Nikko Securities America and U.S. Bancorp Investments are co-managers for the offering.
Baker McKenzie advises Weatherford on $287.5M rig sale to ADES
Baker & McKenzie said July 13 it represented Weatherford International on the sale of the company’s land drilling rig operations in Algeria, Kuwait and Saudi Arabia and two idle land rigs in Iraq to ADES International Holding Ltd. for $287.5 million.
Weatherford’s in-house counsel included Christina M. Ibrahim, executive vice president, general counsel, chief compliance officer and corporate secretary; and Kyle L. Martin, associate general counsel for divestitures and acquisitions.
ADES used Hill Dickinson in London. Its general counsel is in San Diego.
Weatherford’s Ibrahim joined the company in 2015 after working for seven years in various roles at Halliburton, most recently as chief commercial counsel for its global operations. Before that, the Texas Southern University-educated lawyer was general counsel at WellDynamics for more than three years.
The asset sale includes 31 land drilling rigs and related drilling contracts and 2,300 employees and contract personnel. It will be executed in a series of closings, most of which will be mostly completed in the second half of the year subject to regulatory approvals and consents.
Weatherford, which is led by CEO Mark McCollum, plans to use the proceeds to reduce debt.
ADES CEO Mohamed Farouk said in a statement that the transaction more than doubles the company’s operational fleet. It’s part of its strategy of executing acquisitions while building its backlog and participation in tenders.
Weatherford said the transaction is the second of a series of planned divestitures to reduce debt and maximize shareholder value by refocusing its portfolio on the businesses most aligned with its long-term strategy. The company also plans to sell its remaining land drilling rigs via smaller divestitures in the coming quarters.
ADES is an oilfield service provider in the Middle East and Africa. It offers onshore contract drilling and workover and production services to such customers as Saudi Aramco and Sonatrach and through joint ventures with BP and Italy’s Eni. It has 1,500 employees.
Porter Hedges aids Middle Fork on $155M Uinta QEP purchase
Porter Hedges said July 10 it represented Quantum Energy-backed Middle Fork Energy Partners on its agreement to acquire Uinta Basin properties from QEP Resources unit QEP Energy for $155 million.
The team included energy partner Jeremy Mouton and energy associate David Mann. Partners Randy King and associate McCaleb “Mac” Marshall, partner Matt Lea and associate Denny Ng also assisted on the transaction.
Citigroup Global Markets Inc. was QEP’s financial adviser.
The deal involved natural gas and oil producing properties, undeveloped acreage and related assets in Duchesne and Uintah counties in eastern Utah.
The properties produced an estimated 605 billion cubic feet equivalent of proved reserves as of Dec. 31 and net production in the first quarter of 54 million cubic feet equivalent per day, 23 percent of which was liquids.
Denver-based Middle Fork is focused on the acquisition and development of crude oil and natural gas properties in the Rocky Mountain region. Publicly traded QEP has operations in North Dakota, Texas and Louisiana.
Raymond James analyst John Freeman said the price tag was in-line with expectations, which ranged from $100 million to $200 million, and QEP’s Williston assets may be next to be sold.
Analysts at Tudor, Pickering, Holt expect around $2 billion in proceeds for both of QEP’s Bakken positions for sale, which will help the company pay down debt as its management looks to reset its corporate cost structure, including financing and overhead.
TPH analysts think the company’s Haynesville assets will be the last to go with the hope that strip prices for natural gas improve.
Latham advises Safe Harbor Marinas on Koch investment
Latham & Watkins said July 13 it advised Safe Harbor Marinas on an undisclosed investment by Dallas-based Koch Real Estate Investments, an affiliate of Koch Industries.
The team included partner Jesse Myers in Houston along with associates Lauren Anderson, Madeline Neet and Erin Lee. Specialists included tax partner Tim Fenn and associate Jim Cole. Lawyers from the firm’s Orange County and Washington, D.C. offices also pitched in.
Jones Day counseled Koch with a team out of Atlanta. Goldman Sachs provided financial advice to Safe Harbor Marinas.
Dallas-based Safe Harbor Marinas claims to be the world’s largest owner and operator of marinas with properties in 18 states across the country serving 30,000 members. It recently added a 70th property to its expanding portfolio.
Safe Harbor was considering an initial public offering last year that would have valued it at $500 millon to $1 billion, Reuters reported early last year. It generates around $200 million in sales annually and is owned by American Infrastructure MLP Funds, Guggenheim Partners and Weatherford Partners.
Since 2003, Koch companies have invested about $80 billion in acquisitions and other capital expenditures. They have a presence in at least 60 countries and employ 100,000 people worldwide, 60,000 of which are in the U.S.
Katten assists Highlander on purchase of Queen City Candy
Dallas middle market private equity firm Highlander Partners added to its confection portfolio by buying Queen City Candy for an undisclosed sum.
Queen City makes candies such as gummy bears, neon worms, peach rings and gum drops. It already owns other gummy portfolio properties.
Katten Muchin Rosenman partners Mark Solomon and Peter Bogdanow, who joined the firm’s new Dallas office earlier this year from Hunton Andrews Kurth, counseled Highlander on the deal.
Vince Klee founded Greendale, Indiana-based Queen City in
1983. It expanded into a new state-of-the-art production facility
in 2015. Besides gummies, jellies and fruit snacks, the company
produces pectin and gelatin-based products.
Highlander, which is led by president and managing partner Jeff
Hull, has $2 billion of assets under management.
In May Highlander acquired 10 iconic brands, including Jolly Rancher, Milk Duds, Payday, Whoppers, Heath and Good & Plenty, from Finland’s Huhtamäki Oyj for an undisclosed sum. Before that it picked up Gimbal’s, a top maker of gourmet jelly beans and gummy vitamins, in 2017 and Hillside Candy, a top maker of organic, sugar-free nutraceutical confections in 2016.
Highlander partner Alex Guiva said Queen City is the firm’s fourth investment in the confection space in the last two years and its third food deal this year.
Locke Lord counsels XCL management on EnCap investment
Locke Lord said July 11 it counseled a new management team at XCL Resources on an equity commitment from EnCap Energy Capital Fund XI.
The team included partners Mitch Tiras, Greg Heath and Sara Longtain and senior counsel Mechelle Smith, all of Houston.
V&E partner James Garrett in Houston advised the EnCap fund, part of Houston-based EnCap Investments. The fund raised $7 billion in December, exceeding its target and the size of its 10th fund, which brought in $6.5 billion.
Shearman aids Group 42 on Texas Oilfield Fabrication purchase
Shearman & Sterling’s new Austin office advised holding company Group 42 on its purchase of Texas Oilfield Fabrication & Pipeline for an undisclosed sum.
The team included partner Carmelo Gordian, special attorney Michelle Kwan and associate Matthew Wade, all from the emerging growth practice, along with special attorney Clarissa Marischen. Attorneys from the firm’s New York and Menlo Park offices also pitched in, including on tax matters.
Opposing counsel was Selman, Munson and Lerner, also of Austin. The lead was Jack Selman, who had assistance from Mark Pietrantone, Marcin Daniluk and Peter Watson.
The acquisition adds pipeline and fabrication services to Group 42’s offerings and is part of its long-term strategic plan to expand its U.S. footprint substantially.
Group 42 is an energy-focused holding company based in San Antonio. Its units include Well Flow International, whose specialty chemicals and services support enterprise class producers in the Arabian Gulf, North Sea, West Africa and North America.
Founded in 2016, Texas Oilfield Fabrication is a privately held company in San Antonio that operates primarily in the oil and gas pipeline construction and fabrication business. It provides turnkey work to supply companies with pipeline systems along with construction, installation and maintenance services.
Jackson Walker, Reed Smith aid on Sumitomo’s IOG purchase
Sumitomo Corp. unit Summit Discovery Resources II announced July 6 that it picked up producing oil and gas properties in South Texas’ Eagle Ford shale from IOG Gonzales 1835.
Terms weren’t disclosed. IOG Gonzales 1835 is managed by IOG Capital, Covington Equity Investments and 1836 Resources.
IOG tapped Jackson Walker for legal counsel with James S. Ryan in Dallas serving as the lead partner. Sumitomo used Reed Smith partner Gary C. Johnson in Houston as the lead partner.
Johnson’s team members included energy and natural resources partner Daniella D. Landers and associate James M. Pappenfus and financial industry group associate Ali K. Burner, all of Houston. They had help from attorneys in the firm’s Pittsburgh and Philadelphia offices.
Ed Mello is IOG Capital’s manager of land and legal. Mello has more than 10 years of experience as a multi-dimensional landman. The University of Tulsa law graduate previously was senior project manager at Holland Land Services, overseeing abstracting, title curative, land due diligence and leasing projects throughout the U.S.
The transaction will make Summit the asset’s 100 percent working interest owner and operator.
The property spans 624 acres in Karnes County, which is known as the core of the Eagle Ford shale play and has a lot of production history. The asset’s peak production is estimated at 3,000 barrels of oil equivalent per day.
Sumitomo said the acquisition will allow Summit to expand its operating capacity and experience for growth by operating existing producing wells and developing future wells within the asset.
Hajime Mori is the general manager of the energy group at Sumitomo Corp. of America and is based in Houston.
Former Chesapeake Energy CFO Marc Rolland founded Dallas-based IOG Capital in 2014 to invest in and manage oil and gas assets. As of June, IOG had deployed more than $800 million in capital in more than 450 oil and gas wells across four states and 22 counties.
3 Rivers Capital sells Deep Well Services to White Deer Energy
White Deer Energy has acquired Appalachian oilfield services provider Deep Well Services from 3 Rivers Capital for an undisclosed sum.
Locke Lord partner Joe Perillo in Houston counseled White Deer while Metz Lewis Brodman Must O’Keefe in Pittsburgh represented 3 Rivers Capital.
Duff & Phelps advised Deep Well Services on the recapitalization of White Deer, including managing director James Rebello in Houston and director Andrew Oshman in Dallas.
Gray Reed aids BWW on sale to Spark’s United Restaurant
Gray Reed & McGraw partner Stephen Cooney counseled BWW Houston Partners on the sale of the five Houston-area Buffalo Wild Wings restaurants it owns with Crevest Ventures to Spark Restaurant Group affiliate United Restaurant Holdings for an undisclosed amount.
BWW’s financial adviser was the GulfStar Group, including managing director Scott Winship, vice president Charlie Craig and analyst Maclean Martin.
The buyer didn’t have a financial adviser. It used Doerner Saunders out of Oklahoma City for legal counsel.
Founded in 1982, Buffalo Wild Wings is a Minneapolis-based sports-themed dining chain in the U.S. The Houston restaurants are consistently ranked among its highest performing restaurants in the country, with outlets in Sugar Land, Copperfield, Hedwig Village, The Woodlands and Atascocita.
BWW Houston managers Stephen Chappelear and Clifford Sadowsky, two of the longest tenured franchisees in the system, are retiring.
Founded and led by Sanjay Mehra, Houston-based Spark is an emerging player in managing casual dining restaurants and is focused on partnering with top brands.
Winston counsels Rock Hill on investment in LQC Pipe and Supply
Winston & Strawn partner Richard “Dick” Wynne represented Rock Hill Capital Group on its investment in LQC Pipe and Supply for undisclosed terms.
Rock Hill announced the completed recapitalization on July 10. It’s the fourth investment by the private equity firm’s third fund, which has $150 million in committed capital and is focused on companies in the industrial products and services industries.
Houston-based LQC is a wholesale distribution business providing pipes, valves and fittings to midstream and downstream end-users. It was founded in 2008 by Frank “Skip” Spinale and his business partner Tim Rodabough joined the company in 212.
LQC inventories and distributes carbon steel, stainless steel and special alloy products, which are applicable to natural gas-related infrastructure projects and downstream turnaround projects. It’s become the preferred vendor for many large engineering and construction customers because of its service-oriented approach, Rock Hill claimed.
Rock Hill was founded in 2007 and is led by managing director Randall Hale. The Houston-based private equity firm invests in small-to-lower middle market companies in the South and Southeast U.S.
Last month Norton Rose Fulbright advised Vallourec on the $63 million sale of its drilling products activity to Houston-based National Oilwell Varco for an undisclosed sum.
The team was led out out of Paris but included Houston partner Charles D. Powell, San Antonio counsel Courtney S. Floyd, Houston and Washington, D.C. partner Layne E. Kruse and Houston senior associate Eliot Turner.
Vallourec is a world leader in premium tubular solutions for the energy markets. The transaction includes production sites for drill pipes, drilling accessories and other tubular products in North America, the Middle East, the Netherlands and France. It also has assets in Brazil.
The transaction closed on May 27 after its examination by the U.S. Department of Justice and Jafza in Dubai.