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Carlyle Group is weighing a sale or merger of its Gabon-focused oil and gas producer Assala Energy in the latest sign that high commodity prices may be ushering in a new period of dealmaking in the oil industry.
The US private equity group has launched a strategic review of the business, which it acquired from Shell in 2017 for $628mn, according to people familiar with the plan.
The process follows expressions of interest from other parties and could result in a sale of all or part of the company, or a merger with another oil and gas producer, the people said, adding that the review was at an early stage and may not result in a transaction.
Since Carlyle acquired the business five years ago it has spent about $750mn boosting production and extending the life expectancy of the company’s reserves from five years in 2017 to eight years today. It is now the second-largest oil producer in Gabon and among the largest onshore producers in Africa, pumping about 55,000 barrels a day.
Carlyle has previously received expressions of interest from other potential buyers and investors but rejected the proposals, one of the people said. But Russia’s invasion of Ukraine in February has exacerbated an energy crunch that has pushed oil prices to near-record levels this year and boosted the potential value of oil and gas assets.
In a sign of the renewed investor interest in the sector, Spain’s largest oil company Repsol last month agreed to sell a 25 per cent stake in its exploration and production business to Washington-based investment firm EIG for $4.8bn.
Carlyle is one of a handful of private equity groups that, over the past decade, have acquired projects from international oil companies seeking to reduce emissions by divesting from older oil and gasfields, particularly in more complex operating environments. Trident Energy, backed by New York-headquartered Warburg Pincus, acquired two mature oil projects in neighbouring Equatorial Guinea in 2016.
Carlyle, in partnership with CVC Capital Partners and Chinese sovereign wealth fund China Investment Corporation, also owns Neptune Energy, which produces oil and gas in the UK’s North Sea.
Through its Carlyle International Energy Partners investment fund, first launched in 2013, the US group has become one of the most influential investors in the oil and gas industry. It also controls large stakes in Swiss refiner Varo Energy and Spanish oil and gas company Cepsa.
While environmental groups have criticised private equity for prolonging the life of ageing oil and gas assets, Carlyle argues that it can be the best custodian for such businesses, ensuring projects are operated to the highest standards, and that it is better for the climate to exploit existing oilfields than drill new ones.
Carlyle and Assala declined to comment on the possible sale, which was first reported by Reuters.
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