Private equity giant Carlyle is venturing into the Mediterranean oil and gas sector with the acquisition of assets from London-listed Energean, aiming to establish a new energy company.
Carlyle’s Continued Investment in Upstream Oil and Gas
This acquisition represents the latest move by the US-based fund into the upstream oil and gas sector, even as many competitors have withdrawn from such investments.
Carlyle has consistently engaged in buying and selling producing assets, solidifying its presence in the energy market.
The newly formed company will be led by former BP chief executive Tony Hayward, who also chairs Carlyle’s Colombia-focused oil producer, SierraCol.
It will primarily concentrate on producing gas from offshore fields in the Mediterranean Sea to supply markets in Europe and North Africa.
Expansion Plans and Growth Strategy
While the initial objective is to increase production from the acquired assets to 50,000 barrels of oil equivalent per day (boe/d) from approximately 34,000 boe/d in the previous year, Carlyle indicated that it intends to leverage this new structure for further acquisitions.
Parminder Singh, a managing director at Carlyle, expressed their enthusiasm for the “target-rich environment” in the region.
This deal follows a familiar strategy for Carlyle, which previously collaborated with other investors to acquire oil and gas assets from French group Engie in 2017.
The portfolio, including assets in the North Sea and Indonesia, was later sold to Italy’s Eni in 2023 for $4.9 billion, generating a significant profit.
Addressing Climate Concerns and Reducing Emissions
While some private equity groups have stepped back from upstream investments due to climate concerns, Carlyle argues that it has successfully reduced the carbon intensity of operations in its owned businesses, ultimately lowering overall emissions and enhancing the value of these assets for future owners.
Energean acquired the assets in Egypt, Italy, and Croatia from Edison E&P in 2020 for $284 million. The sale coincides with the imminent start of production at new wells in Italy and Egypt.
Carlyle has agreed to pay a guaranteed $820 million for the portfolio, with an upfront cash payment of $504 million and additional payments based on performance metrics.
Energean’s Focus on Flagship Projects and Diversification
Energean founder and chief executive Mathios Rigas explained that the sale allows the company to focus on its flagship development in Israel, a recent discovery in Morocco, and a carbon capture and storage (CCS) project in Greece.
Rigas emphasized that the deal was not actively sought but presented a strategic fit with their current objectives of freeing up capital and management resources for growth in these areas.
Energean plans to utilize the proceeds from the sale to repay a $450 million bond, distribute a $200 million special dividend to shareholders, and invest in future projects.
Rigas dismissed concerns about increased dependence on Israel, stating that the transaction crystallizes value for shareholders while maintaining the existing risk profile in the region.