ACON leads $852m oil and gas investment

Oil and gas company Milagro Exploration’s $825 million (€559 million) acquisition of Petrohawk Energy’s Gulf Coast assets has been backed by ACON Investments, Guggenheim Investment Management and West Coast Energy Partners.

ACON was the lead investor in the deal. Though the firm did not disclose the size of its stake, it said it has the largest share of the three backers. Wells Fargo Bank provided a senior credit facility for the deal, and additional financing was arranged by Wells Fargo Energy Capital and Guggenheim Investment Management.

Milagro’s founders, Robert Cavnar, Richard Piacenti and Jack Eells, were formerly managers at another oil and gas company, Mission Resources. In 2005 Mission Resources was sold to Petrohawk. About 40 percent of the properties that Petrohawk sold to Milagro were formerly properties of Mission Resources.

The acquisition gives Milagro an additional 1000 wells producing 104 million cubic feet of natural gas per day. Around 70 percent of the assets are proven, producing properties, while 30 percent are categorised as “probable” properties, according to ACON. The mix affords Milagro downside protection as well as significant upside, allowing the company to lock in current high energy prices.

ACON said the private equity sponsors will continue to foster Milagro’s growth beyond the Petrohawk acquisition, looking for more add-on acquisitions as well as grow the company organically.

ACON, based in Washington DC, has long been an active investor in the energy sector. Over the past few years the company has acquired Signal International, a provider of conversion, repair and retrofit services to offshore oil platforms in the Gulf of Mexico, as well as Mariner Energy, an oil and gas exploration company with reserves in the Gulf of Mexico and Western Texas. This March, the firm bought the power lines component manufacturing business of Asea Brown Boveri.

Guggenheim Investment Management is the investment arm of Guggenheim Partners, a financial services firm founded by members of the Guggenheim family in 1998.

West Coast Energy Partners is a newly formed firm backed by a group of strategic investors focussed on investments in the energy sector.