Blackstone weighs potential $5 billion-plus sale of Beacon Offshore Energy

(Bloomberg) – Blackstone Inc. is in the early stages of weighing a sale of Beacon Offshore Energy, a Gulf of Mexico driller it’s owned for about a decade that could fetch more than $5 billion, according to people familiar with the matter. 

The alternative asset manager is talking to investment banks about bringing the Houston-based company to market as soon as the first quarter, said the people, who asked to not be identified because the discussions are private. 

Beacon is expected to attract interest from large producers with operations in the Gulf of Mexico, the people said. Major operators there include Chevron Corp., bp plc and Shell Plc. 

No final decision has been made and Blackstone could opt against pursuing a sale, they added. 

A representative for Blackstone declined to comment. A representative for Beacon didn’t immediately have a comment. 

US oil explorer consolidation in recent years has focused on shale operators amid lower crude prices and a dwindling inventory of top-tier drilling spots on land. That slowdown in shale has helped fuel a drilling renaissance in the Gulf as Beacon lays claim to some of the most productive wells in the U.S. using new technology to pump hard-to-reach crude.

Harbour Energy Plc agreed to acquire Gulf explorer LLOG Exploration Co. for $3.2 billion in December. 

Beacon is among Blackstone’s legacy fossil fuel assets, after the firm exited most of its oil and gas portfolio in recent years, including a sale last year of Olympus Energy. Blackstone formed Beacon in early 2016 with the goal of building an offshore driller focused on the deepwater Gulf. Today, the company holds interest in 68 deepwater leases across nearly 400,000 gross acres, according to a statement this month. 

Beacon’s biggest wells, which started producing in the second half of last year, are part of the Shenandoah prospect, which Occidental Petroleum Corp.’s Anadarko discovered in 2009 but left behind for quicker, easier output onshore at the start of the shale boom.

The Shenandoah discovery lies in a section of the earth’s crust that is so difficult to drill the industry had to come up with new ways to extract the crude. bp, Chevron and Shell began more than a decade ago to develop a new generation of oilfield gear to reach through miles of water and rock.