* OCTOBER 26, 2010, 7:26 P.M. ETKKR Looking Across The 'Big Six'...

* OCTOBER 26, 2010, 7:26 P.M. ET

KKR Looking Across The 'Big Six' Of Shale


By Daniel Hausmann
Of DOW JONES LBO WIRE


Kohlberg Kravis Roberts & Co. announced another shale-gas investment, this time bringing a pair of advisers the firm has worked with on some of its successes in the space.

The firm is teaming up with a pair of former Jefferies Randall & Dewey bankers on a joint venture to pursue exploration and production companies in large unconventional-resource plays in North America.

Claire Scobee Farley and David Rockecharlie are the bankers behind RPM Energy LLC, KKR's partner in RPM Energy Partners LP. Farley was co-president of Jefferies Randall until August 2008; Rockecharlie was co-head of the firm until June 2010. Farley and Rockecharlie officially launched RPM--named after the abbreviation for "revolutions per minute"--in September, after working since early summer with KKR.

"We told them of our observation that the capital markets--public and private--would have a hard time funding all of the drilling that would be necessary; that it would be a great opportunity to get invested in a number of projects," Farley said.

Besides the large acreage opportunities--where being ahead of strategics is the name of the game--KKR and RPM believe there is value to be offered to small-to-medium sized drillers, according to Marc Lipschultz, global head of KKR's energy and infrastructure business.

"We think we can be a special partner to them in terms of capital, plus the skill and knowledge of Claire and David, plus the capabilities of KKR in building businesses," Lipschultz said.

KKR has already scored big in 2010 on shale, selling its stake in Marcellus Shale natural gas explorer East Resources Inc. as part of a $4.7 billion acquisition by Royal Dutch Shell PLC. Jefferies advised East Resources on that deal as well as KKR on its $400 million investment this year in a joint venture with Hilcorp Energy Co. to develop the Eagle Ford Shale in South Texas. Earlier this year, the firm also invested in E&P company Premier Natural Resources LLC.

RPM Energy Partners will look to invest in the "Big Six" of shale plays: the Barnett, Marcellus, Haynesville, Woodford, Fayetteville and Eagle Ford shales. In addition the company will look at the Bakken Shale and other unconventional resource plays, assets that may involve horizontal or fracture drilling.

"We're looking for assets that have some liquids, or pure dry gas plays where we can do drilling at a more moderate pace so we don't put loads of capital to work at low [natural gas] prices," Farley said. Rockecharlie added the company was looking for good geology that would be likely to result in declining costs and increasing recoveries per well over time.

RPM Energy Partners would like to be in three to five resource plays a year from now, worth anywhere from $100 million to $200 million and higher.



(Dow Jones LBO Wire covers news about private equity.)



-By Daniel Hausmann, Dow Jones LBO Wire; 212-416-2039; [email protected]

http://online.wsj.com/article/BT-CO-20101026-721788.html