Exclusive: KKR prepares more Samson asset sales as oil prices plunge - sources

Mon Nov 10, 2014 8:01am EST
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By Mike Stone and Greg Roumeliotis

(Reuters) - KKR & Co (KKR.N: Quote), which led the acquisition of oil and gas producer Samson Resources Corp for $7.2 billion in 2011 and has already sold almost half its acreage to cope with lower energy prices, plans to sell its North Dakota Bakken oil deposit worth less than $500 million as part of an ongoing downsizing plan, according to people familiar with the matter.

KKR, one of the world's biggest private equity firms with $96 billion in assets under management, overpaid for Samson, and persistently low natural gas prices have hampered its ability to finance the company and added to its debt burden, the people said. KKR's plan was to shift Samson's assets from natural gas production more into oil and liquids.

With U.S. crude oil futures down 25 percent since June, Samson has hired Bank of Nova Scotia (BNS.TO: Quote) to sell the Bakken assets, and the company is contemplating more asset sales to raise cash, the people said, without specifying which other assets.

In the medium-term, Samson may look at acquiring higher-income properties, turning to its private equity owners or external investors for financing, one of the people said.

A Samson spokesman did not respond to several requests for comment. Bank of Nova Scotia declined to comment.

    Carlyle Group LP's (CG.O: Quote) NGP Energy Capital Management LLC, Crestview Advisors LLC and Itochu Corp (8001.T: Quote) invested alongside KKR in Samson. KKR, Carlyle and Crestview declined to comment, while Itochu did not respond to a request for comment.

Samson doesn't face any imminent debt maturities or breaches of credit covenants. But the Tulsa, Oklahoma-based company has posted large losses so far this year. Samson's bonds are trading around 70 cents on the dollar, indicating that KKR and its partners' equity in the company would probably be wiped out were the whole company to be sold now.

Samson's financial woes underscore how private equity's love affair with North America's shale revolution comes with risks. The stakes are especially high for KKR, which saw a $45 billion bet on natural gas prices go sour when Texas power utility Energy Future Holdings filed for bankruptcy this year.   Continued...