US private equity firms Avista Capital Parters and EnCap Investments have led a $350 million (€223 million) equity commitment to Royal Offshore, a joint venture to develop oil and natural gas properties in the Gulf of Mexico.
Each of the private equity firms will contribute $122.5 million, while the Royal Group and management will contribute $105 million.
Led by Scott Smith and Bill Gregorcyk, Royal Offshore owns more than 55 leases in the Gulf of Mexico, which it said it intends to “aggressively develop over the next several years”.
Gary Peterson, EnCap partner, said in a statement that Smith and Gregorcyk have an impressive track record and have assembled an experienced management team.
Steven Webster, Avista co-managing partner, said: “We continue to believe that the offshore Gulf of Mexico represents an attractive opportunity given the ongoing asset transition in the area and that the short reserve lives can generate high returns and quick payouts.”
The deal represents the second for Avista in as many weeks; the DLJ spin-out last week agreed to invest $100 million in Hansa Hydrocarbons, which is focused on acquiring and developing oil and natural gas properties in the North Sea and Northern Europe, which can then be used to fuel supplies to Western Europe. The firm is investing its $2 billion debut fund.
Twenty-year old EnCap closed a $2.5 billion energy fund in December 2007.