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Exclusive: McClendon's American Energy hires banks to help raise cash
October 15, 2015 / 6:48 PM / 2 years ago

Exclusive: McClendon's American Energy hires banks to help raise cash

(Reuters) - American Energy Partners LP (AEP), the U.S. oil and gas venture of former Chesapeake Energy Corp (CHK.N) CEO Aubrey McClendon, has hired investment banks to find ways to shore up its finances, according to people familiar with the matter.

Aubrey McClendon walks through the French Quarter in New Orleans, Louisiana March 26, 2012. REUTERS/Sean Gardner

The move by the Oklahoma City, Oklahoma-based firm, which was founded by McClendon in 2013, highlights the cash crunch gripping the oil patch, as the industry deals with the worst crude price CLc1 crash in more than six years.

It also illustrates the risks of saddling such investments with debt to juice returns. McClendon, who resigned from Chesapeake in 2013 following a corporate governance crisis, attracted private equity investors in AEP that were keen to use debt alongside their equity investments.

AEP is considering asset sales, partnerships or capital raises, primarily for its assets in the Permian Basin, as part of a wide exploration of strategic alternatives, the people said this week. No decision has yet been taken on a course of action, they added.

The sources asked not to be identified because the deliberations are confidential. An AEP spokesman did not immediately respond to a request for comment.

AEP is a manager of oil and natural gas assets. Its lead investor is Houston-based private equity firm Energy and Minerals Group (EMG), which is run by John Raymond, son of former Exxon Mobil Corp (XOM.N) Chief Executive Lee Raymond. First Reserve Corp, an energy-focused buyout firm, is also an investor in AEP.

AEP’s Permian Basin assets were initially funded with $1.1 billion of equity commitments from Energy and Minerals Group, First Reserve, McClendon and other investors. In addition, that entity attracted $2.8 billion in debt commitments. The assets are now in financial distress because of the debt pile.

Ascent Resources LLC, which AEP formed to manage its assets in the Marcellus and Utica formations, are financially stressed as well and could also undergo restructuring, according to the sources. The assets were separated from AEP last year but are still owned by AEP shareholders.

A representative for Ascent Resources did not immediately respond to a request for comment.

Financial distress in the oil and gas sector has touched many private equity-owned companies. Tulsa, Oklahoma-based oil and gas producer Samson Resources Corp, majority-owned by buyout firm KKR & Co LP (KKR.N), filed for Chapter 11 bankruptcy protection in September after failing to cope with its debt burden.

Reporting by Greg Roumeliotis and Mike Stone in New York; Editing by Bernard Orr and Matthew Lewis

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