Carlyle Group inks Oklahoma oil development deal with EOG

By Luke Geiver | May 30, 2017

The biggest name in unconventional oil development has found a partner for its Ellis County, Oklahoma, assets. EOG Resources Inc. has formed a definitive agreement with The Carlyle Group on a deal worth up to $400 million over four years. As an asset manager with global assets valued at $162 billion, Carlyle will fund the drilling and production program for EOG’s Oklahoma assets.

The company’s Energy Mezzanine Opportunities Group, will fund the effort. Through mezzanine financing mechanisms, the lender typically has the option to convert its investment into an ownership or equity interest in the company in case of default. Mezzanine financing is considered a blend of debt and equity financing. Investors in such deals take on an interest in the assets rather than taking on debt or a working interest in the production from the assets.

Carlyle launched its mezzanine financing options in 2010 and has since invested in the energy and power sectors, including power generation, renewable energy, oil and gas production, oilfield services and midstream infrastructure.

The Carlyle team targets investments that have the following characteristics: collateralization by hard assets, appropriate range of leverage profiles, current cash yields, proven technology, and, mitigated financial, commodity and construction risks if applicable.

Although terms of the agreement were not provided, after certain performance hurdles are achieved in the program, Carlyle’s working interests will largely revert to EOG.