FOCUS-Hedge fund Elliott chases oil and gas deals, bucking Wall Street
(Amends Elliott's HQ in paragraph 20 to
By
Elliott Management, a hedge fund founded and co-led by
billionaire
"They wanted to hear about everything," one banker who attended a meeting with Elliott said, referring to opportunities in U.S. shale basins.
It is a contrarian strategy; many investment firms have exited the sector, burned by big losses from when energy prices collapsed, most recently in 2020 when concerns over the COVID-19 pandemic briefly turned U.S. crude prices negative.
The few remaining are capitalizing on the current energy price rally to cash out on assets rather than buy new ones.
In considering these deals, Elliott is showing an appetite
for risk that is rare among its
Each shale basin has different economics, but were oil
prices to remain above
Should U.S. crude, which briefly touched
Reuters spoke to more than a dozen industry sources about Elliott's plans, all on condition of anonymity to discuss confidential conversations.
Elliott declined comment.
"At these prices, sticking a dollar in the ground in an oil
or gas well is one of the best things you can do in
In the Eagle Ford shale basin in south
U.S. natural gas futures are now at
Elliott is looking to provide capital to management teams,
who acquire land and develop oil and gas production, the sources
said. Last year, Elliott invested in Validus Energy to help it
buy Eagle Ford assets from Ovintiv Inc (OVV) for
The two backers, Elliott and Pontem Energy Capital, are now
exploring a sale of Validus, with sources forecasting a price
tag of more than
CLIMATE CONCERNS
Buyout firms active in the U.S. oil and gas sector sold three times as much in assets last year than they acquired on a dollar-for-dollar basis, according to Enverus. The trend has accelerated this year.
Many private equity firms and hedge funds have exited the sector to address concerns from their own investors that they were contributing to climate change. Elliott, which also invests in clean energy and has pushed green policies at firms it backs, does not disclose who its investors are, and it is not clear whether or how it has communicated its foray into the U.S. oil patch with them.
Singer has been a backer of politicians expressing skepticism about how big a problem carbon emissions are. A big financial supporter of the Republican Party in recent years, Singer also chairs the board of trustees at the Manhattan Institute, a think-tank promoting free markets whose energy advocacy skews heavily to long-term fossil fuel usage.
While acquisitions in the sector are new to Elliott's
playbook, the
Elliott is expected to make a good return on Birch Resources, formed out of energy assets secured from the 2018 Chapter 11 bankruptcy agreement of Breitburn Energy Partners.
Founded by Singer in 1977 and currently managing around
Through its private equity arm Evergreen Coast Capital,
Elliott has pushed more into leveraged buyouts. It has this year
agreed a
(Reporting by