Bloomberg News

KKR to Acquire Samson for $7.2 Billion in Year’s Biggest LBO

November 25, 2011

(Adds banker’s comment in fourth, sixth and seventh paragraphs.)

Nov. 23 (Bloomberg) -- KKR & Co. agreed to acquire most of Samson Investment Co., a family-owned oil and natural-gas producer, for $7.2 billion in the largest corporate leveraged buyout of the year.

A KKR-led investor group will buy all of Samson’s assets with the exception of its onshore Gulf Coast and deep-water Gulf of Mexico assets, the companies said today in a statement. The Gulf assets will continue to be owned by the Schusterman family, which founded the Tulsa, Oklahoma-based company in 1971.

The deal is the biggest company takeover by a private- equity firm announced this year and a record for an oil and gas producer, according to data compiled by Bloomberg. The KKR group -- including private-equity firms Natural Gas Partners and Crestview Partners and Japanese trading company Itochu Corp. -- lined up $4.5 billion in committed financing from 11 lenders led by JPMorgan Chase & Co., according to a person familiar with knowledge of the matter.

KKR found a good opportunity to buy a “big” family-owned exploration and production company, Allen Brooks, a managing director at PPHB LP, an energy investment bank in Houston, said today in a telephone interview. “A $7 billion deal, even though they had to bring in partners, is commensurate with what they need and what I think their strategy is.”

10,000 Wells

Samson owns interests in more than 10,000 wells, including 4,000 that it operates in the U.S., according to the statement. Among its holdings are oil-producing properties in North Dakota’s Bakken region, where crude output has almost doubled in two years, and the Powder River in the northwest U.S. It has shale-gas fields in Haynesville in Texas and Louisiana, and Bossier in Louisiana. In some cases, it extracts oil and gas from rock formations where the company injects chemicals and sand to free tight reserves.

The decision to exclude the Gulf of Mexico properties from the purchase makes sense for a private-equity buyer, Brooks said.

“It’s a lower risk being onshore than offshore, less capital intensive,” he said.

KKR, the New York-based firm run by Henry Kravis and George Roberts, beat out oil and gas companies to enter exclusive talks with Samson. New York investment bank Jefferies Group Inc. worked with Samson to seek buyers or joint-venture partners.

Tulsa Connection

Samson was founded by petroleum engineer Charles Schusterman, who died in 2000. His daughter, Stacy Schusterman, became co-chief executive officer in 1999 and assumed full control in 2005, according to the company’s press releases.

The company’s chief operating officer, David Adams, will become CEO after completion of the deal, which the companies expect by Dec. 31. The company will be renamed Samson Resources and its headquarters will stay in Tulsa, where Kravis was born.

KKR fell 2.4 percent to $11.52 at 10:13 a.m. in New York trading as U.S. stocks declined. Its shares have lost 19 percent this year, compared with the 7 percent drop in the Standard & Poor’s 500 Index.

The private-equity firm earlier this month hired Claire Scobee Farley and David Rockecharlie, energy-industry bankers from Jefferies & Co., as managing directors focusing on its oil and gas investments. Farley and Rockecharlie founded Houston- based RPM Energy LLC, which helps manage those investments.

Deal Advisers

Financial advisers for KKR, Natural Gas Partners and Crestview were Bank of America Merrill Lynch, Barclays Capital, BMO Capital Markets, Citigroup Global Capital Markets, Credit Suisse, RBC Capital Markets, Tudor, Pickering, Holt & Co. and Wells Fargo.

Mizuho and Evercore Partners acted as financial advisers to Itochu.

Simpson Thacher & Bartlett LLP served as legal counsel to the investor group and the Dallas office of Jones Day served as legal counsel to Samson. Natural Gas Partners was also advised by Latham & Watkins LLP.

U.S. oil and gas producers have announced $57 billion in mergers, sales and joint ventures in 2011 as small companies raise cash to fund drilling operations and large, international companies seek to buy into U.S. oil and gas fields, according to Bloomberg data.

Pennsylvania Shale

The value of private-equity deals in the energy industry this year has climbed 80 percent to $26 billion compared with a year earlier, Bloomberg data show. The surge included the $3.5 billion agreement in June by KKR and Hilcorp Energy Co. to sell oil and gas leases in southern Texas to Marathon Oil Corp. The deal almost tripled the value of KKR’s $400 million investment in a year.

KKR made a fourfold return on its first shale-gas investment, in Warrendale, Pennsylvania-based East Resources Inc., when the company was sold to Royal Dutch Shell Plc in May 2010. KKR has attracted more than $1 billion for its natural- resources fund, exceeding its target, a person familiar with the matter said last month.

KKR did one of its first oil- and gas-production deals in 1985, buying a 50 percent stake in Allied Corp.’s Union Texas Petroleum unit for about $250 million, according to “The New Financial Capitalists” by George Pierce Baker.

From 1992 to 2007, Samson spent at least $885 million buying oil and natural-gas assets in the U.S. and Canada, according to Bloomberg data. Since then, it sold non-U.S. assets and has spent $4 billion on drilling and acquisitions, according to its website.

--With assistance from Mike Lee in Dallas, Edward Klump and David Wethe in Houston and Jim Polson in New York. Editors: Larry Edelman, Steven Crabill

To contact the reporters on this story: Cristina Alesci in New York at; Devin Banerjee in New York at

To contact the editors responsible for this story: Jennifer Sondag at; Christian Baumgaertel at

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