Warburg Pincus strikes oil

Global private equity firm Warburg Pincus has sold Gryphon Exploration to a subsidiary of Australian energy company Woodside Petroleum for $297 million (€238 million), including $14 million in assumed debt.

Gryphon, which focuses its exploration efforts in the shallow waters of the Gulf of Mexico, was formed in October 2000 by Warburg Pincus, Houston-based Cheniere Energy and Gryphon president and chief executive officer Michael Harvey, who had previously founded and sold two other Gulf of Mexico-focused energy concerns. Warburg first contributed $25 million to the entity in the form of preferred stock with a cumulative dividend of 8 percent – the private equity firm subsequently invested an additional $60 million into the company. At the end of 2004, the private equity firm and Gryphon management owned slightly more than 90 percent of the joint venture.

In addition to Gryphon, Warburg Pincus has been an active investor in the sector for a number of years, investing approximately $1.5 billion in more than 20 energy-related companies since the late 1980s. Last year, Warburg teamed up with The Blackstone Group to provide $300 million of equity backing to Kosmos Energy to fund the acquisition, exploration and development of oil and gas ventures in West Africa. Last month, Targa Resources, a Warburg Pincus portfolio company, agreed to purchase the midstream operations of Dynegy for approximately $2.35 billion. And earlier this year, the firm sold Antero Resources to XTO Energy for $685 million, a deal that reportedly earned Warburg Pincus a return of 7 times its initial investment.

Given the current dynamics in the energy sector, a number of other private equity firms have been active recently. In the past two months for example, LS Power and AIG Highstar closed energy-focused funds on $1.2 billion and $800 million, respectively.

Warburg Pincus, which invests in a variety of industries, closed its ninth private equity fund last month on $8 billion.