TPG, Glendale Energy ink $500m JV for buying upstream assets

The partnership will allow TPG Sixth Street Partners to expand its energy strategy beyond providing loans to oil and gas companies.

TPG Sixth Street Partners has formed a $500 million partnership with Glendale Energy Ventures that will acquire and develop upstream oil and gas assets, the two firms announced Thursday.

The joint venture has deployed $55 million of the half-a-billion dollars of capital commitments to buy drilling pads in central Oklahoma, according to the firms. Properties invested in will either be non-operated interests or acquisitions operated by others.

Capital for the vehicle will come from a variety of different funds, a person familiar with the situation said, noting that choices would be made on a deal-by-deal basis.

The strategy is different from the approach to energy that the firm – which declined to comment beyond the announcement – has employed so far. The JV will be buying assets outright.

This is a step out from the loans to drilling companies the firm has made through its myriad vehicles, including its TPG Specialty Lending (TSLX) business development company. Businesses TSLX is currently invested in include MD America Energy, Mississippi Resources and Northern Oil & Gas, according to the firm’s first-quarter earnings report.

TPG’s private equity operations have also been investing in energy. The firm raised a $300 million structured equity vehicle in January of last year, as Private Debt Investor previously reported. That vehicle was focused on the midstream oil and gas sector.

The energy sector has become attractive to private markets firms in recent years due to public markets’ scepticism of energy companies, industry insiders have said.

“Normally everyone aspires to exit to a public market,” Orion Energy Partners’ Nazar Massouh said. “Now, for the most part, in public equities – whether it’s E&P, service companies, even in the midstream sector – multiples are just not there. It’s been driven by a lot of investors that got burned in the energy downturn. The growth assumptions that existed back then completely evaporated.”

Energy also remains one of the few areas in private credit that hasn’t seen an influx of capital as the rest of the asset class has boomed.

“Compared to other areas of private credit that have seen significant capital formation in recent years, the pool of capital targeting energy credit remains limited,” GSO Capital Partners’ energy group head Michael Zawadzki said.