Riverstone Holdings LLC has agreed to invest up to $300 million in Meritage Midstream Services III LLP, a new midstream oil company.
Meritage, headquartered in Denver, is a newly-formed midstream energy company that plans to invest in west Canada. We are expecting to see an increase in M&A activity among midstream energy companies, which focus more on oil transportation, storage and marketing than searching underground for oil. Riverstone is invested in another Meritage business, Meritage Midstream Services II LLC, which provides oil and gas producers in the Powder River Basin (in southeast Montana and northeast Wyoming) with midstream services, including natural gas gathering, compression, treating and processing.
Riverstone's initial $100 million commitment for the deal includes $67 million from Riverstone Global Energy and Power Fund VI and $33 million from Riverstone Energy Ltd.
Riverstone, headquartered in New York, focuses on energy investments. The firm, last August, invested $200 million in Origo Exploration AS, a Norwegian oil exploration business. In July, Riverstone partnered with KKR (NYSE: KKR) to form an oil company.
The Meritage deal comes one day after the firm announced it would invest up to $500 million in oil company Three Rivers Natural Resources Holdings III LLC. Three Rivers, headquartered in Austin Texas, is a newly-formed oil and gas company led by the same executive that grew two similar businesses in which Riverstone also invested. The previous two Three Rivers businesses were sold one to Concho Resources Inc. in 2012, and the second to an undisclosed buyer.
Mike Wichterich, who has been involved with two previous Three Rivers companies, will lead the new company as CEO.
The business will focus on oil and gas deal in the Permian Basin, which is in West Texas and New Mexico. For the Three Rivers transaction, Riverstone is committing $333 million from Riverstone Global Energy and Power Fund VI and $167 million from Riverstone Energy Ltd.
Dealmakers have been buying up assets in the oil space as low crude oil prices bring down acquisition costs. Several companies have made purchases recently, including Utica Gas Services LLC, which paid $575 million for a stake in Utica East Ohio Midstream earlier in April, and Dominion Midstream Partners LP (NYSE: DM), which bought Dominion Carolina Gas Transmission LLC, also in April.