After a lull in energy-related investment activity, Blackstone has been busy deploying capital in energy upstream assets in the third quarter.
“After not investing in any new upstream assets in 2015, this quarter we closed on three upstream deals representing $1.3 billion of aggregate equity capital,” Michael Chae, chief financial officer at Blackstone, said during the firm’s third-quarter earnings conference call on Thursday.
“Together with a fourth deal closed in the second quarter, we deployed about $2 billion of capital in four high-quality upstream oil deals.”
The upstream subsector of energy focuses on the exploration and production of oil and gas, which have been struggling in the past year or so due to volatility in these commodities’ prices.
But Chae explained that for these deals, Blackstone set the prices earlier in the year near the bottom of the market. He added that since the investments closed, there have been multiple deals valuing similar assets at two to three times what Blackstone paid.
At the same time, Blackstone has also focused over the past year on selling power assets. So far this year, it has sold five power assets across North America, Europe, Asia and Africa for aggregate proceeds of $2.4 billion and a $1.4 billion gain, Chae said during the conference call.
One sale closed during the third quarter while the three others are expected to close in the next couple of quarters.
This illustrates well the firm’s approach to investing, Chae said. “Private equity environments are not monochromatic. We look for areas of dislocation and patiently position ourselves when the time is right. And even in a single industry – in this case energy – we’re active buyers in one subsector and active sellers in another.”
Blackstone reported a net economic income of $687 million for the third quarter ended 30 September, up from $520 million in the previous quarter.
The firm had $102.2 billion in dry powder as of the end of the third quarter, including $44.8 billion in private equity. It had $361 billion in assets under management, including $99.7 billion in private equity.