WPX Energy

Oil and natural gas exploration and production company Terra Energy Partners will acquire a subsidiary from WPX Energy (NYSE: WPX). Terra Energy received an equity commitment from existing investor Kayne Private Energy Income Fund and a new investment from Warburg Pincus LLC.

Warburg Pincus’ previous equity investments include $500 million in energy startup Independence Resources Management (IRM). The firm closed a $4 billion energy fund in October 2014, which has invested more than $50 billion, placed with more than 720 companies.

Under the agreement, Terra Energy will take ownership of Denver-based WPX Energy Rocky Mountain, owner and operator of federal, state, and private oil and gas leases, wells, and associated facilities, for $910 million in cash. The transaction is expected to close during the second quarter.

In addition to the equity commitments, Terra Energy also received debt financing from J.P. Morgan Securities, BMO Capital Markets, which also acted as the M&A adviser to Terra Energy, and Wells Fargo. DLA Piper LLP and Kirkland & Ellis LLP served as legal advisers to Terra Energy.

Short-term expectations for M&A in the energy sector are the lowest we’ve seen in any sector measured by Mergers & Acquisitions’ Mid-Market Pulse (MMP) since we began our monthly surveys in the fall of 2013. Deals involving distressed energy properties are expected to proliferate later in 2016. For more, watch our video interview with Erik Rudolph of Farlie Turner & Co. 

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