Blackstone Adds $10 Billion in Energy Assets With Harvest Deal

(Bloomberg) -- Blackstone Group LP will add $10 billion in assets by buying energy investor Harvest Fund Advisors, betting that demand for pipelines and facilities will continue to rise despite sluggish energy prices.

Blackstone is acquiring the Wayne, Pennsylvania-based firm for an undisclosed amount of cash and future incentive payouts, Blackstone partner Dwight Scott said in a telephone interview Thursday. Harvest’s 18-person team will remain at their headquarters and continue to be led by Eric Conklin, who will report up through Blackstone’s credit unit.

Led by Chief Executive Officer Steve Schwarzman, Blackstone has primarily built investment capabilities in-house rather than through acquisitions, with some notable exceptions. Its credit unit was created with the transformational purchase of GSO Capital Partners in 2008, and in 2013 Blackstone bought Credit Suisse Group AG’s business that buys and sells stakes in private equity funds.

Harvest invests in U.S. midstream assets such as pipelines and export terminals through master limited partnerships. Like real estate investment trusts and business development companies, MLPs pass their federal tax duties on to individual investors, lowering overall rates.

In buying Harvest, Blackstone is betting on increased need to transport, refine and ship hydrocarbons including oil and gas. The infrastructure assets, which typically have long-term contracts that kick off cash, are less at risk from fluctuating commodity prices, Scott said.

Pipeline operators stand to gain as U.S. energy output surges. Crude production is projected to average 9.91 million barrels a day in 2018, up from an expected 9.35 million barrels this year, according to the Energy Information Administration. That’s led several companies to announce capacity expansions this year, especially in Texas’s Permian Basin, which has driven the shale resurgence.

With assistance from Meenal Vamburkar and Matthew Monks. To contact the reporters on this story: Melissa Mittelman in New York at mmittelman@bloomberg.net; Tim Loh in New York at tloh16@bloomberg.net. To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net; Lynn Doan at ldoan6@bloomberg.net Devin Banerjee.



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