The Carlyle Group has agreed to fund up to $400 million from its mezzanine debt funds to bankroll oil and gas drilling in Ellis County, Oklahoma, the Washington, DC-based asset manager said on Tuesday.
The joint venture agreement with EOG Resources, an oil and natural gas exploration company headquartered in Houston, Texas, will finance the development of the company’s energy assets for over four years, according to a statement. Once certain performance hurdles are passed, Carlyle’s working interests will mostly revert to EOG.
The agreement deploys funds from the Carlyle Energy Mezzanine Opportunities Fund II, which provides growth and refinancing to energy projects and companies, along with its predecessor fund.
Carlyle and EOG declined to comment further.
CEMOF II held its final close on $2.77 billion, just under its $3 billion target, according to PDI data. Limited partner commitments to this fund include the Pennsylvania Public School Employees' Retirement System ($250 million), Employees Retirement System of Texas ($85 million) and the Texas Municipal Retirement System ($65 million).
The global alternative asset manager said in November that the second mezzanine debt fund targets investments between $50 million and $500 million in power generation, renewable energy, oil and gas companies and projects in the US and Canada.
According to documents from the Pennsylvania Public School Employees’ Retirement System, CEMOF II investments will be secured by hard energy assets, like power plants and pipelines.
The fund is aiming for a gross internal rate of return of 15-18 percent, and investments will have two- to six-year maturities along with an average hold period of three years.
“The second fund enables us to undertake larger transactions and fill a market need by providing investment capital to energy companies challenged to obtain capital from traditional sources,” David Albert, managing director and co-head of the energy mezzanine team at Carlyle, said in a November statement.
Launched in 2010, the first Energy Mezzanine Opportunities Fund held its final close on $1.69 billion, PDI data also shows.
Carlyle has $162 billion of assets under management across 287 investment vehicles as of 31 March, according to the statement.