Oaktree Capital Management, the downtown-based asset management giant, has invested $100 million in Denver-based oil and gas investment company BKV Corp.
The preferred equity investment will be used to help fund BKV’s acquisition of Oklahoma-based Devon Energy Corp.’s assets in the Barnett Shale in north Texas.
As part of the deal, Oaktree also agreed to make a future $600 million investment in unspecified “mutually agreed upon opportunities in natural gas.”
BKV’s deal with Devon Energy, first announced last December, includes properties that yielded an average of nearly 600 million cubic feet of shale natural gas in the third quarter of last year. The properties included proven reserves estimated to hold roughly 4 trillion cubic feet of natural gas at year-end 2018, according to Devon. Upon the deal’s close, BKV will become one of the largest natural gas producers in the U.S.
BKV had originally agreed to pay $770 million for the shale assets, but the agreement was amended in April to include up to $830 million in total proceeds. This included $570 million in cash and $260 million in contingent payments based on future commodity prices.
In a statement on Oaktree’s investment, Oaktree Managing Director Brook Hinchman said that BKV’s “demonstrated strategy to consolidate U.S. natural gas assets” had attracted his firm to the company.
“(Environmental, social, and governance) has become increasingly important to the energy sector and U.S. natural gas has become an increasingly important fuel source for global power production,” Hinchman said.
Natural gas is sometimes touted as a cleaner alternative to more carbon-intensive fossil fuels like coal, although it is still more polluting than most renewable energy sources.
“The acquisition of Devon’s assets is especially attractive to Oaktree,” said Oaktree Vice President Robert LaRoche in a statement, “given their proximity to key, in-demand markets, and the opportunity to optimize the cash flow of Devon through consolidation. We view this collectively as a recipe for success.”
