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California Resources, Colony partner on Elk Hills development
CALIFORNIA
CALIFORNIA Resources Corp. (CRC) announced on July 23 that it had formed a joint venture with Colony Capital through its energy investment management unit, Colony HB2 Energy. Under the joint venture, Colony has com- mitted to investing $320mn to fund the develop- ment of CRC’s Elk Hills oil eld in the San Joaquin Basin. e partners noted they had the option to agree to raise the total investment to $500mn.
Under the partnership, Colony will fund 100% of the development wells and will earn a 90% working interest in them. CRC’s working interest is then set to revert from 10% to 82.5% a er Colony achieves an agreed-upon return. CRC added that Colony would also receive war- rants to purchase up to 1.25mn shares of com- mon stock with a $40 strike price upon funding their capital obligations.
e initial investment commitment will cover multiple development opportunities through- out the Elk Hills eld, CRC said. e funds will be paid over a period of roughly three years in line with a pre-approved development plan that
covers around 275 wells.
“We are pleased to partner with an outstand-
ing investment rm like Colony and its partners to provide certainty of development of our large and high value inventory at Elk Hills, a very long-lived field,” CRC’s president and CEO, Todd Stevens, said. “ is is the largest joint ven- ture capital commitment to date for CRC, and the terms re ect the sizeable project inventory we have established at Elk Hills. is partnership also provides additional exibility to aid in our deleveraging e orts through growing our pro- duction and cash ow.”
CRC says on its website that roughly 67% of its estimated proven reserves as of the end of 2018 were located in the San Joaquin Basin. e company has roughly 1.5mn net mineral acres (6,070 square km) in the basin, around 66% of which it holds in fee. CRC is operating and developing 49 elds in the San Joaquin, with the resources comprising a mix of conventional primary, improved oil recovery, enhanced oil recovery (EOR) and unconventional projects.
Blackstone reportedly considering Cheniere stake sale
US
BLACKSTONE Group is considering selling its stake in Cheniere Energy Partners, a limited partnership created by Cheniere Energy, accord- ing to sources familiar with the matter that were cited by Bloomberg on July 22. e potential move comes seven years a er the private equity giant agreed to invest about $1.5bn in Cheniere, which pioneered LNG exports from the Lower 48 US states. e company is now the largest US producer and exporter of the fuel.
According to the sources, Blackstone is work- ing with an adviser on the potential sale of its interest in Cheniere. e company is seeking a premium for its stake and marketing it to a small number of infrastructure, pension and sovereign wealth funds, said the sources.
One of the sources added that Blackstone began working with the adviser a er receiving unsolicited interest from potential buyers. How- ever, all the sources have noted that Blackstone is under no pressure to sell and may choose to keep the stake.
Regulatory filings show that Blackstone owned 203.4mn common units in Cheniere Energy Partners as of February 20. e stake
was worth about $8.8bn based on Cheniere’s unit price as of July 22 and equates to about 58% of the company’s outstanding common units.
Cheniere owned 51% of Cheniere Energy Partners as of February 20 through its ownership of about 30% of its outstanding common units and all of its subordinated units, according to the company’s annual report.
If a sale happens, it would be in line with Blackstone’s broader view on LNG. Earlier this year, Blackstone Energy Partners’ CEO, David Foley, said that while LNG “gets a lot of press”, other products of the shale boom might provide better investment opportunities given the num- ber of companies vying for a share of the LNG market. “It’s going to be a little bit more di cult for the start-up LNG companies to do what we did seven years ago,” he said.
Blackstone’s investment in Cheniere came as the company was lining up nancing while building its rst LNG export terminal, Sabine Pass. e terminal now accounts for over half of the US’ LNG export capacity, and Cheniere has also since brought the Corpus Christi LNG facility online.
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w w w . N E W S B A S E . c o m Week 29 25•July•2019
