NGP Energy Capital Management is exploring the sale of two Permian basin-focused oil producers which could collectively fetch the private equity firm more than $7 billion, people familiar with the matter said on Wednesday.
Dallas-based NGP is working with investment banks to sell the oil producers, Tap Rock Resources and Hibernia Resources, in auction processes that are expected to kick off in the coming weeks, the sources said.
Efforts to cash out on the assets come as higher energy prices boost valuations of oil producers. U.S. crude has jumped to $81 a barrel since members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia announced on Sunday production cuts of about 1.16 million barrels per day, adding to curbs already in place.
Delivering profits for investors through the divestments will help NGP with its bid to raise its 13th natural resources fund – the first flagship fund from the firm since 2018.
Tap Rock, among the largest private equity-controlled oil producers left in the Permian basin, is producing more than 100,000 barrels of oil equivalent per day from the Delaware portion of the basin in New Mexico, according to its website.
The oil firm could fetch NGP around $5 billion, according to the sources. Hibernia, which operates in the Midland part of the Permian basin in Texas, could be worth upwards of $2 billion, the sources added.
The sources spoke on condition of anonymity to discuss confidential information. Tap Rock declined comment, while NGP and Hibernia did not respond to requests for comment.
Oil and gas dealmaking activity remains strong despite volatility in commodity and financial markets. Much of it has come in the Permian basin, with publicly listed producers, sitting on record cash piles from bumper oil prices, seeking to acquire private operators to expand their footprints.
Ovintiv Inc on Monday agreed to buy assets in the Midland from entities controlled by EnCap Investments for about $4.3 billion. The same private equity firm struck a $1.6 billion deal in January to sell a portfolio company operating in the Delaware to Matador Resources Co.
NGP seeded Tap Rock with capital in 2016 and backed Hibernia with $250 million of equity in 2017. The buyout firm, which has deployed more than $20 billion in energy investments, began raising its NGP Natural Resources XIII fund late in 2022.