Sanchez, Blackstone May Team Up to Buy Anadarko's South Texas Assets

Sanchez Energy Corp. is in talks to partner with Blackstone Group LP on a deal for Anadarko Petroleum Corp.'s South Texas oil-and-gas assets, according to people familiar with the matter.

While the exact contours of the deal aren't yet clear, Blackstone and the private-equity firm's credit arm, GSO Capital Partners, would likely fund or participate in the purchase, the people said. The deal is expected to value the Anadarko assets at between $3 billion and $3.5 billion, they added.

A deal could be announced in the next few weeks, the people said.

As always, the talks could fall apart. In recent weeks, Sanchez had also been in talks with Apollo Global Management LLC and energy-focused private-equity firm EIG Global Energy Partners to participate in the bid, some of the people said. While Blackstone and GSO are currently Sanchez's preferred partners, other backers could supplant them if the alliance were to break down, one of the people said.

The deal would be a big bite for Sanchez, which has a market capitalization of $472 million and $1.7 billion in long-term debt.

It also would secure the company's position in the Eagle Ford drilling region—specifically an area some 100 miles southwest of San Antonio the company calls the Catarina. Sanchez has focused on drilling this patch of land since 2014, when it agreed to pay Royal Dutch Shell PLC $639 million in cash for its existing position there. At the time, the deal more than doubled Sanchez's production.

Since then, a slump in oil and gas prices has curbed Sanchez's capacity for big deals. Unprofitable the past two years, Sanchez's heavy debt load limits its ability to pay for assets or sell securities to finance acquisitions.

For Blackstone, the deal would add to a recent pickup in oil and gas bets. The firm has invested $2.7 billion in 10 such deals this year, focusing on financing capital-starved energy producers and bringing adjacent parcels of land under the control of a single owner, Blackstone Chief Executive Stephen Schwarzman said on a call with analysts Thursday to discuss the firm's third-quarter results.

Anadarko said in July it planned to sell as much as $3.5 billion in assets this year, using proceeds to pay down debt. It said it would also consider using proceeds to invest in its best assets if commodity prices improve.

Intrepid Partners, Citigroup Inc. and J.P. Morgan Chase & Co. are working with Sanchez on the deal, according to people familiar with the matter.

Write to Matt Jarzemsky at [e-mail] and Dana Mattioli at [e-mail]

(END) Dow Jones Newswires

October 27, 2016 15:55 ET (19:55 GMT)

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