January 29, 2015 / 2:58 PM / 3 years ago

Blackstone seeks energy investments as fourth-quarter profit falls

Stephen A. Schwarzman, Chairman and Chief Executive Officer of The Blackstone Group, in New York, February 27, 2014.Brendan McDermid

(Reuters) - Blackstone Group LP (BX.N), the world's largest alternative asset manager, said on Thursday it had reduced its exposure to oil prices and was eyeing new opportunities in the energy sector as it reported a 6 percent decline in fourth-quarter profit.

The profit decline was smaller than most analysts had expected, with some pointing to lower compensation expenses as the main reason Blackstone defied forecasts. Blackstone shares were flat in afternoon trading in New York at around $36.70.

Blackstone President Tony James told a conference call with reporters the firm had sold most of its assets exposed to oil before crude prices started to fall. Blackstone now has more than $10 billion in equity and debt capital available for energy investment opportunities, he added.

"We believe the recent free fall in energy prices will prove to be relatively short term, so we view this as a good buying opportunity ... Our people are scrambling and trying to come up for air, we are very busy looking at specific deals," James said.

Economic net income (ENI), a metric of profitability that takes into account the mark-to-market valuation of its portfolio, fell to $1.45 billion in the quarter from $1.54 billion a year ago, as Blackstone's real estate funds appreciated less.

ENI per share came to $1.25 per share, higher than the average analyst estimate of 92 cents, according to a Thomson Reuters poll.

Realized performance fees in its real estate division almost tripled and its private real estate fund portfolio increased in value by 6.8 percent in the quarter, less than the 13.1 percent appreciation seen last year.

"I think the (real estate) distributions this year will look even better than last year," James said.

Blackstone's private equity fund portfolio appreciated 4.2 percent in the quarter, also less than last year. Profit in the division soared, however, due to Blackstone Capital Partners V, a $21.7 billion buyout fund now paying lucrative performance fees not received a year ago.

Distributable earnings, or actual cash available to pay dividends, rose 38 percent in the quarter to $1.13 billion as Blackstone continued to generate cash by selling some assets.

Assets under management totaled $290.4 billion at the end of December, up 9 percent year on year. Fee-earning assets under management also rose 9 percent to $216.7 billion.

Blackstone declared a quarterly distribution of 78 cents per common unit.

Reporting by Greg Roumeliotis in New York; Editing by Chizu Nomiyama, Jeffrey Benkoe and Meredith Mazzilli

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