Private equity firm ArcLight Capital Partners LLC is partnering with industry executives to invest $200 million for the formation of a new oil company, Element Petroleum III LP.

Arclight is investing through ArcLight Energy Partners Fund IV LP and partnering with Element Petroleum LP management for the deal.

The newly-formed business will find, develop and acquire oil and gas reserves in the Permian Basin, which is in Texas and New Mexico. The Midland, Texas-based business is the third partnership between ArcLight and Element's management team, led by CEO Todd Gibson.

Boston-based ArcLight is an energy-focused private equity firm. Since it was founded in 2001, the firm has invested more than $12.8 billion, mainly in North American energy infrastructure assets. ArcLight closed its sixth fund in July with $5.6 billion in commitments.

Dealmakers have been flocking to the energy sector because volatile crude oil prices have some businesses on shaky footing, which means certain assets and businesses are less expensive to buy. Recent transactions in the oil sector include the purchase of Louisiana gas properties by GSO Capital Partners LP and GeoSouthern Haynesville LP, and Pine Brook's formation of Cahill Services LLC, an energy services company. For more, see Investors Flow Into Oil & Gas

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