Thursday, January 27, 2011

"Smart Money" Buys Some Dry Gas

News came yesterday that private equity investor KKR purchased a chunk of Barnett Shale property from Conoco Phillips.  The quantity and price were undisclosed, but the assets have total net proved reserves of 93 Bcf.  The land purchased was in the southern part of the Barnett Shale in the dry gas area.  Conoco Phillips retained its acreage in northern part of the play where gas is found with natural gas liquids and oil.

KKR made the acquisition through a recently formed venture KKR Natural Resources, a partnership formed last year with Premier Natural Resources.

I'm sure KKR got a pretty good price for the acreage since dry gas has fallen out of favor with producers, but it might be a smart long-term buy for the investor.  Dry gas assets fit squarely in the strike zone of many patient investors:  it is a currently out of favor asset that has strong long-term potential.  The assets can be bought on the cheap now and if the investor has deep pockets, they can be held until the value is realized.

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