Oaktree Capital Management LP recently formed a strategic partnership with BKV Corp. to support the company’s strategy of acquiring natural gas assets, which the global investment firm sees as an “increasingly important fuel source” due to the growing spotlight on ESG.
BKV Corp. is the parent company of Kalnin Ventures LLC, the investment vehicle of Thailand-based Banpu Pcl targeting acquisitions of upstream gas assets in the U.S. Since its inception five years ago, the company and its affiliates have built positions in the Marcellus shale gas play within the Appalachian Basin and, more recently, in the Texas Barnett Shale through the acquisition of Devon Energy Corp.’s Barnett Shale position.
In particular, Brook Hinchman, managing director at Oaktree, cited BKV’s technology-driven approach to the natural gas market as a key driver behind the firm’s partnership. Oaktree has $140 billion in assets under management as of Sept. 30.
“BKV’s strong management team, data-driven approach, technological capabilities and demonstrated strategy to consolidate U.S. natural gas assets is attractive to Oaktree,” Hinchman said in a statement.
“As ESG has become increasingly important to the energy sector and U.S. natural gas has become an increasingly important fuel source for global power production, we are excited to support BKV’s expansion in the U.S. and Banpu’s advancement of a sustainable energy future,” he continued.
In a company release by BKV on Dec. 16, the company said Oaktree invested $100 million in preferred equity in BKV to support its Barnett acquisition from Devon, which closed early October.
Further, as part of the strategic partnership with BKV announced Dec. 16, Oaktree has committed to invest an additional $600 million in future mutually agreed upon opportunities in natural gas.
“The acquisition of Devon’s assets is especially attractive to Oaktree, given their proximity to key, in-demand markets, and the opportunity to optimize the cash flow of Devon through consolidation,” said Robert LaRoche, vice president at Oaktree who will join BKV’s board of directors as part of the partnership.
“We view this collectively as a recipe for success,” LaRoche said also noting BKV’s disciplined approach to all activities, from operations to underwriting acquisitions.
Based in Denver, BKV is currently one of the top 20 natural gas companies in the U.S. In its Dec. 16 release, BKV said the company and Banpu remain committed to continue acquiring PDP-weighted unconventional gas assets.
In a statement commenting on the Oaktree partnership, BKV CEO Christopher Kalnin said: “Our partnership with Oaktree brings additional strategic alignment and support towards realizing BKV’s aspiration of becoming a technology-driven natural gas E&P champion. We look forward to the potential opportunities this partnership will make possible.”
Guggenheim Securities acted as financial adviser to BKV for the partnership. Fox Rothschild LLP was the company’s legal adviser and Kirkland & Ellis, LLP acted as legal advisor to Oaktree.
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