A relentless flow of natural gas from America’s shale basins is drawing bears to the market—and that’s music to the ears of at least one Asia-backed investor.
Kalnin Ventures LLC—an investment company with funding from Thailand’s largest coal miner, Banpu Public Company Ltd.—has spent about $417 million over the past two years snapping up 55,000 net acres in the Marcellus formation in northern Pennsylvania. The company’s co-founder, Christopher Kalnin, was in Thailand earlier this month to drum up more money.
As drillers from Chesapeake Energy Corp. to Carrizo Oil & Gas Inc. shed Marcellus assets to focus on higher-priced crude and liquids in Texas’ Permian Basin, Kalnin is stepping into the void. Rather than chase growth, Kalnin’s BKV Oil and Gas Capital Partners LP fund seeks deals cheap enough to get cash back even as well output dwindles and gas prices remain below their 10-year average.
“People are still pretty skeptical on gas,” Kalnin said in a phone interview from Bangkok. “That’s good. We want them to be skeptical.”
Kalnin says it’s now a top-20 gas producer in Pennsylvania and is looking to get bigger, targeting a 20% rate of return over five years. It’s built up a portfolio of stakes in 355 wells along the state’s upper tier. Denver-based Kalnin’s holdings are currently the only U.S. energy investment for Banpu.
“It’s not a bet on development,” Kalnin said. “It’s a bet on wells that are producing today. The return is lower. That’s OK—I’m taking less risk. This is something the industry has forgotten.”
Banpu Pcl rose as much as 1.2% to 17.30 Thai baht on Thursday, and was trading at 17.20 baht as of 11:46 a.m. in Bangkok. Gas futures are down 18 percent this year to trade at $3.054 at 1:41 p.m on the New York Mercantile Exchange.
Banpu has committed $500 million to Kalnin as part of the coal miner’s strategy to diversify its business to include gas, renewable energy and power plants, Somruedee Chaimongkol, Banpu’s chief executive officer, said in an email. Gas demand in Thailand is set to climb 2.5% a year over the next 30 years, driven by growth in the power industry, she said.
Source: World Oil