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Page added on November 23, 2019

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Billionaires Circle Distressed Assets in U.S. Oil and Gas Patch

Business

Billionaires are circling the distressed U.S. oil and gas patch, looking to pick up assets on the cheap at a time when the state of the industry is scaring off other investors.

Sam Zell has teamed up with Tom Barrack Jr. to buy oil assets in California, Colorado and Texas at fire-sale prices from companies trying to get ahead of a coming credit crunch. Dallas Cowboys owner Jerry Jones said his Comstock Resources Inc. is in talks to acquire natural gas assets in Louisiana from struggling Chesapeake Energy Corp.

“I compared it recently to the real estate industry in the early 1990s, where you had empty buildings all over the place, and nobody had cash to play,” Zell said in an interview on Bloomberg TV Thursday. “That’s very much what we’re seeing today.“

Thanks to the shale revolution, the U.S. has become the world’s biggest oil producer. The investors behind that growth, however, have little to show for it. After years of churning through cash with paltry shareholder returns, independent oil and gas drillers are down more than 40% since 2014. Lenders are becoming more discerning after easy money enabled much of the original boom.

Oil and gas prices, meanwhile, remain depressed.

That’s fueling a slowdown. The number of active drilling rigs in the U.S. has declined, and some of the biggest independent producers are lowering growth plans. Chesapeake Energy Corp., once the second-biggest U.S. producer of natural gas, warned investors last week that it may not be viable as a “going concern” if low oil and gas prices persist.

 

Here’s Sam

Enter the billionaires.

 

“What we’re seeing are situations where companies are taking steps in anticipation of problems rather than responding to problems,” said Zell, 78.

He and Barrack teamed up in September to create Alpine Energy Capital LLC, a rebranded Colony HB2 Energy, which was formed in 2018 and recently closed a $320 million investment with California Resources Corp.

“The seller in that was a big company — not in trouble but not terribly liquid, and therefore looking for ways to, in effect, get somebody else to put up the money to keep the game going,” Zell said.

A sale of Chesapeake’s Louisiana assets has been pegged as one of the few remaining options for a company that has become a poster child for the promise and peril of the shale industry.

Jones, 77, who owns 73% of Comstock, said through his assistant that a deal could be valued at more than $1 billion. That would give Chesapeake a cash infusion at a time when all eyes are on the company’s ability to pay its debts.

That cash-flush opportunists like Zell, who’s been called “the grave dancer” for his ability to buy at the bottom of markets, see value in assets belonging to an industry that’s in distressed-sale mode could signal that the bottom is here — or, at least, close.

Real Estate

Zell can call the top of markets, too. Many people said that’s what he did with the U.S. commercial real estate market in 2007, when he unloaded a portfolio of office buildings to Blackstone Group Inc. At the time, he denied that was the case.

It remains to be seen, of course, if oil and gas prices have hit bottom. Forecasts for next year don’t paint a pretty picture, but some analysts are pointing to a slowdown in U.S. production growth as reason to believe prices will pick up at the end of 2020 and into 2021.

Unlike Jones, Zell said he’s staying away from gas for now.

“The oil situation is in much better shape,” Zell said. “And the amount of capital is disappearing.”

–With assistance from Alix Steel and Sophie Alexander.

Chron



11 Comments on "Billionaires Circle Distressed Assets in U.S. Oil and Gas Patch"

  1. Richard Guenette on Sat, 23rd Nov 2019 11:09 am 

    The biggest problem in the West are political correctness and snowflakes (people who insult one another). We don’t need to “progress”- we are paying the price from it. In this day and age, most people don’t give a damn and deal with their own lives.

  2. Robert Inget on Sat, 23rd Nov 2019 11:28 am 

    This investor is avoiding shares in oil companies.
    Pipelines and NG service companies that pay as much a 20% dividend, going begging.

    One high divi company I’ve been following (ET) trades ten million shares almost daily, often ends up or down a few cents.
    Electrons, a few feet from ‘trading desks’ must be
    moving thousands of shares from one hand to the other in nano-seconds. It’s difficult not to believe some group isn’t front running shares. Another group may arb millions of shares for resale.

    WHEN the crash comes, I’ll be in the market with cash buying vital pipelines.

    Last thought. Canada, at present is Not Involved
    in Trump’s ‘War on Trade’. Canadian (soy) bean,
    pork, wheat,contracts with Canada’s Farmers will last for decades. American farmers that joined the Trump Cult will be forced to sell off prime land or
    let the bank have it.

    Trump’s friends in Russia will be here buying up not only distressed oil patches and equipment
    but great farmland as well.

  3. Duncan Idaho on Sat, 23rd Nov 2019 11:40 am 

    American farmers that joined the Trump Cult will be forced to sell off prime land or
    let the bank have it.

    The Fat Boy has been part of 6 bankruptcies, he is:

    https://uploads.disquscdn.com/images/12fa8c42356afd12932390b2212883d107f4395536f9df9f5b4abd5a10c0e4cc.jpg?w=800&h=640

  4. Richard Guenette on Sat, 23rd Nov 2019 11:47 am 

    The government should be downsized (remove the beaurocracy) , poverty should be reduced by creating jobs (hard work), taxes should be cut by 50% or more. The government should leave us alone, deregulate the whole economy and stay out of people’s lives.

    Freedom of speech should be protected. Our country is going extreme Left.

  5. Richard Guenette on Sat, 23rd Nov 2019 11:47 am 

    Trudeau is extreme Left.

  6. Robert Inget on Sat, 23rd Nov 2019 12:14 pm 

    North Korea, China, Cuba, are examples of true
    ‘extreme’ Leftist leadership.
    Does Trudeau measure up?

    Richard intends to lump in ‘center left’ parties in the US and Canada with murderous dictators.

    Even in Canada there are at least two parties, Green Party, Le Bloc Quebecois, proudly admit to being left of PM’s Liberals.

    If Richard thinks Free Health Care, low cost education, are far too leftist he should try to get any Canadian to come out against these at try to get elected.
    No ‘extreme’ left nations even have real elections

    As for 50% tax cuts. Our deficits under Trump
    have almost tripled. Ask any Right wing economist
    how that sugar high is working.

  7. Cloggie on Sun, 24th Nov 2019 5:44 am 

    No surprises here:

    https://www.dailymail.co.uk/news/article-7718627/Sexed-dossier-furore-alleged-poison-gas-attack-Assad.html

    “New sexed-up dossier furore: Explosive leaked email claims that UN watchdog’s report into alleged poison gas attack by Assad was doctored – so was it to justify British and American missile strikes on Syria?”

    Syrian poison gas attack never happened. Typical disgusting western false flag, after the Syrian “civil war” was initiated by western gangsters and their hired jihadist guns.

    The west lies about everything: Pearl Harbor, German WW2 “guilt”, holohoax, Iraqi baby-incubator, JFK-murder, Tonkin, 9/11 Arab boxcutter lie, Russian meddling, Ukraine, MH17, “diversity is our strength”, etc., etc. EVERYTHING!

    Bring down the filthy f*!

  8. Sissyfuss on Sun, 24th Nov 2019 8:50 am 

    Thanks for the laugh Duncan, though I might have nightmares later.

  9. DerHundistLos on Sun, 24th Nov 2019 8:53 am 

    Me too, Duncan and Siss!!!!!

  10. Cloggie on Sun, 24th Nov 2019 2:43 pm 

    Whitey at it again: ESA and NASA to collect stones from Mars, in search for life:

    https://www.independent.co.uk/news/science/mars-rocks-earth-life-planet-nasa-european-space-agency-a9215861.html

    “Rocks from Mars to be sent back to Earth in bold quest to find past life”

  11. Richard Guenette on Sun, 24th Nov 2019 4:45 pm 

    Mining here on Earth should continue. Nuclear power, fossil fuel power generation (oil-refineries, coal-fired power plants, LNG terminals, oil and natural gas pipelines etc.) don’t belong to the government. Workers are hired to keep our global economy going. Ignore the Green Meanies.

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