Private equity firms are placing their bets on oil and gas

Fuel Fix:

Private equity firms including Ares Management and Castle Harlan poured more cash into Houston energy operations this week, snapping up local companies' oil assets and opening new offices here in a string of deals as rising crude prices stir up new fervor among private groups.

The transactions are among the latest examples of surging private equity investments in the U.S. oil patch and in Houston, where investors have instructed their publicly traded rivals to focus on making returns and developing the fields they already own, giving private firms armed with billions in newly raised capital an opening to carve out a bigger piece of the oil industry.

"These guys are getting back in the business," said Roger Diwan, vice president of financial services at research firm IHS Markit. "A lot of money is going into infrastructure."

Ares Management, a public New York investment company with $25 billion in private equity assets, made a deal this week with Houston private equity firm ARM Energy Holdings to fund the development of Houston-based Salt Creek Midstream, a firm launched last year with plans to operate oil and gas gathering pipelines, cryogenic processing facilities and other plants in the Delaware Basin in West Texas and New Mexico.

The firms said Salt Creek should be able to process 260 million cubic feet of natural gas per day by the end of the year, with the first steps of its projects launching this month. Permian Basin oil companies with 250,000 acres in Culberson, Reeves, Ward, Winkler and other counties have signed up to use Salt Creek's pipelines and other facilities.
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There is more.

There is certainly a huge need for gas pipelines out of the Permian Basin.  The lack of access to the retail market has slowed the production of oil.  Others are investing in production equipment manufacturing. 

Another area of need that is not being addressed is improvements to refining capacity that would use more of the light crude being produced from shale wells.  Now, much of it is being exported while the US has to import heavy crude for its refineries.  Converting those facilities are building new ones to process light crude would make the US more energy independent.