Like shoppers on Black Friday, Wall Street titans have a keen smell for deep discounts. At the moment, they're sniffing in oil fields.
Many parts of the U.S. stock market look expensive these days, but prices have fallen dramatically in the energy sector from over $100 a barrel in the summer to under $50 now.
Private equity firms are raising vast sums of money to buy oil assets on the cheap.
Blackstone Group (BX) alone launched a $4.5 billion energy fund on Monday. That gives the private equity giant a formidable war chest to deploy on distressed assets like beaten-down oil companies and drilling projects thrown in disarray by the oil meltdown.
Given its history in the industry, Blackstone said it's well positioned to "take full advantage of the significant recent cyclical downturn in oil and gas prices."
Private equity pounces: They aren't alone. Warburg Pincus, the New York firm where former Treasury secretary Tim Geithner works, launched a $4 billion energy fund in October.
These sophisticated investors realize traditional sources of capital like banks and the junk bond market are increasingly shutting oil companies out.
"Private equity companies are uniquely positioned to capitalize on this. Not only do they have the deep pockets, but they can also take a long-term approach," said Tamar Essner, an energy analyst at Nasdaq Advisory Services.
Certain projects in the U.S. shale and Canadian oil sands no longer make economic sense with oil below $50 a barrel. Sophisticated investors are sensing desperation.
http://money.cnn.com/2015/02/23/investing/oil-prices-private-equity-buying-energy/
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