Since the great crash of oil in mid-2014, more than $100 billion has been raised by buyout firms and distressed-debt funds eager to scoop up energy assets on the cheap, Bloomberg reports. But as the months rolled by, few opportunities cropped up as cash-starved drillers limped along with the help of their bankers.
Not any more. What started out as a trickle has now turned into something much more, with Blackstone Group, Apollo Global Management and WL Ross & Co. all jumping in this year to buy a grab bag of assets at discounted prices.
Precise numbers are hard to come by, but Bloomberg reports that in its conversations with investors, bankers and analysts across the industry, there’s little doubt that private equity firms are ramping up their investments in everything from undrilled and developed oil and gas acreage to troubled loans.
“We’ve gone very aggressively into the market” after holding back for most of last year, says Shaia Hosseinzadeh, who oversees energy-focused distressed-debt investing at WL Ross, the namesake firm of billionaire dealmaker Wilbur Ross. “You’ll see more deals in the second half.”
Deals are picking up for a few key reasons. Oil prices are no longer in a free fall, but at around $40 a barrel, they’re still well below the $60 to $80 levels many drillers need to break even.
Wall Street has started to turn away the weakest borrowers after extending more than $2 trillion in loans and commitments during the boom. And with the cash crunch causing a surge in bankruptcies this year, many firms are looking to unload assets to stay afloat.
Much of the action is unfolding in distressed debt, where buyers have targeted loans and bonds with an eye on seizing ownership in bankruptcy or restructuring.
