KKR to invest $400 million in Texas shale

Buyout firm KKR & Co. may purchase about $400 million of Texas shale assets from Hilcorp Energy, according to reports.  New York-based KKR may partner with Hilcorp, an exploration and production company based in Houston, to develop the formation known as Eagle Ford in southern Texas, which has unconventional gas deposits. Unconventional gas is fuel trapped in shale formations, coal beds and impermeable sandstone rock. Eagle Ford is about 50 miles wide and 400 miles long, extending from TexasÔÇÖs southern border to the eastern part of the state. The formation delivers natural gas and is said to produce much more oil than other shale fields. Hilcorp would control 60 percent of the joint venture and run its operations, according to a report in the Wall Street Journal. Hilcorp would also contribute about 100,000 acres to the partnership, the newspaper said. Companies including Exxon Mobil and BP are racing to purchase unconventional gas reserves, betting that prices for the cleaner-burning fuel will rise as governments insist on lower carbon dioxide emissions and reserves in more accessible areas decline. BP has entered a joint venture deal in the Eagle Ford Shale with Lewis Energy Group, valued at around $160 million. In April, India's Reliance Industries announced a Marcellus Shale joint venture deal with Pittsburgh, Pennsylvania-based Atlas Energy Inc. Under the terms of the deal, Reliance will acquire a 40 percent interest in Atlas' core Marcellus Shale acreage position. KKR is thought to be seeking oil and gas investments as it exits a minority stake in East Resources, a developer focusing on the Appalachian basinÔÇÖs Marcellus Shale area which has agreed to be sold to Royal Dutch Shell for $4.7 billion. KKR purchased the stake in Warrendale, Pennsylvania-based East Resources for about $350 million in June 2009. In February, the buyout firm said it would partner with Tulsa, Oklahoma-based Premier Natural Resources to seek oil and gas investments in North America. In 2007, KKR and Fort Worth, Texas-based TPG, a private equity firm, agreed to buy power producer TXU Corp. (now Energy Future Holdings), for $45 billion in the largest leveraged buyout on record. HilcorpÔÇÖs primary operating areas are the Gulf Coast region of the US and WyomingÔÇÖs Powder River Basin. Founded in 1989, Hilcorp has grown to be one of the largest privately-held E&P companies in the country. Founded in 1976, KKR had $54.7 billion in assets under management as of March 31, 2010. It employs over 600 people from 14 offices around the world, managing assets through a variety of investment funds and accounts covering multiple asset classes.