3i has announced details of an investment in CH4 Energy, a newly-established business seeking to acquire interests in marginal and dormant gas discoveries from major energy players.
3i, which has a strong franchise in European oil and gas related private equity investment, has agreed to invest up to £30m for a minority interest in CH4, which plans to raise further capital from other parties to gear its capital with debt up to £200m.
Major oil companies are coming under increasing pressure to divest their less profitable fields in the light of increased taxation and encouragement from UK government to divest fallow acreage. “We aim to come in to the market where the bigger companies struggle to meet increased production targets,” said CH4 Energy CEO Mark Routh, formerly of Amerada Hess. “We’re already talking to one or two businesses about possible deals although discussions are still at an early stage.”
3i is looking to act as lead investor in transactions although the intention is to syndicate deals to gain access to some of the larger divestments anticipated in the industry. “We’re not specifying a certain number of deals or a typical deal size,” he said. “We are targeting businesses with values of anything up to £200m.”
Routh is joined as a founding partner by a number of senior employees from Amerada Hess, including finance director Phil Kirk and chairman Francis Gugen, a former CEO of Amerada Hess in Northwest Europe. CH4 is planning to expand its team over the coming months as it acquires assets and increases its portfolio.
The move by 3i follows a similar investment made by Warburg Pincus in late September, which committed $100m to Insight Energy, a US business planning to make small to medium size power plant acquisitions of between $10m and $100m in North America and Western Europe.