Warburg Pincus explores sale of overseas energy assets

Firm may wind down bulk of its international energy assets if they don't attract potential buyers

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Warburg Pincus is considering selling five of its eight international oil and gas investments after the coronavirus crisis hit demand, sources familiar with the matter said.

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The U.S. investment firm, which has more than $54 billion in private equity assets under management, has committed or invested some $13 billion into energy over the last decade, with much of this in North America.

While Warburg Pincus backed the U.S. shale revolution and associated infrastructure, a significant minority of its investment has focused on assets in Africa, Asia and Eastern Europe which are no longer seen as core, the sources said.

The firm has yet to hire advisers and could wind down the bulk of its international energy assets if they do not draw interest from potential buyers, the sources told Reuters.

Warburg Pincus declined to comment.

Private equity funds have plowed more than $100 billion into energy investments since the oil price downturn of 2016, energy data provider Enverus has said.

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As well as greenfield investments, such funds have also been prolific buyers of older assets.

But, as coronavirus lockdowns ease only gradually, some are reassessing investments in a sector that has lost a third of demand since the start of the pandemic, the sources said.

Among the assets Warburg Pincus is reviewing is its stake in Africa-focused oil and gas explorer Delonex Energy, which has curtailed its operations in recent weeks and laid off most of the staff, three sources said.

Warburg Pincus has also been preparing the sale of liquids storage firm Zenith Energy just as the coronavirus pandemic hit, two other sources said, adding that the process would resume once market conditions stabilize.

With the world awash with hydrocarbons, storage facilities have become highly sought-after and Zenith is likely to be the most lucrative asset Warburg Pincus is looking to offload.

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The three other investments which Warburg Pincus is looking to get out of include Egyptian firm Apex International Energy, two of the sources said, with one adding that Sand Hill Petroleum and CAGR were also on the for-sale list.

Sand Hill was formed in 2012 to use American shale techniques in Hungary and Romania, and CAGR focused on natural gas distribution in China.

All of these companies, apart from Zenith Energy, have disappeared from the list of energy portfolio companies on the Warburg Pincus website in the last week.

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Among other private equity changes, Blackstone in March reshuffled its London-based team in charge of energy.

Blackstone's plan to sell North Sea oil and gas producer Siccar Point stalled in January over diverging valuation views with potential buyer EIG-backed Chrysaor.

And a series of planned acquisitions in the North Sea basin, where private equity funds including Carlyle Group, HitecVision and CVC Capital Partners had been prolific buyers, has now come to a halt.