El Paso Corp. has begun sending out financial information to potential buyers of its oil-and-gas exploration and production business, which could fetch as much as $10 billion, according to people familiar with the matter.
El Paso’s exploration and production assets, including shale and conventional oil and gas fields in Egypt, Brazil and the U.S., could be sold in parts or as a single unit, the people said. Potential buyers include a mix of private-equity firms and other oil-and-gas companies, they added.
Last month, El Paso agreed to be acquired by Kinder Morgan Inc. for $21.1 billion, excluding debt, a deal that will create the country’s largest natural gas pipeline network. The deal superseded El Paso’s previously announced plans to separate its pipeline and exploration businesses into two standalone entities.
As part of the Kinder Morgan transaction, El Paso’s exploration business will instead be sold, with the proceeds used to pay down some of the debt Kinder is taking on to pay for El Paso. Kinder Morgan Chief Executive Richard Kinder has said that he hopes to have El Paso’s exploration and production business sold shortly after the larger deal’s closing, which is expected in spring.
Spokesmen for Kinder Morgan and El Paso declined to comment.
A potential sale of El Paso’s production assets adds tinder to one of deal-making’s hot spots. While M&A activity broadly has slowed amid shaky markets and sovereign debt woes, oil and gas deals have continued apace. Much activity can be tied to U.S. shale drilling. Because this drilling is so capital intensive, independent producers that pioneer shale fields often sell out to or seek partnerships with larger, richer companies.
The El Paso sale could fetch between $7 billion and $10 billion, some of the people said, although others put the lower end of the expected price range at $5 billion.
Mr. Kinder has said El Paso would prefer to shed the exploration business in one go. And it’s possible a large global energy outfit eager to boost its reserves would buy the entire company.
But it will more likely be sold in pieces because the assets are diverse in geography and quality, the people said, adding they will likely appeal to different buyers.
El Paso’s primary holdings are in the Eagle Ford Shale in south Texas, the Haynesville Shale in Texas and Louisiana, and the Gulf of Mexico’s shallow waters. Its portfolio also includes fields in the Rocky Mountains, offshore Brazil and in Egypt’s Western Desert.
Source: The Wall Street Journal