Blackstone Group Invests $250M+ in Driller Huntley & Huntley

According to the Wall Street Journal, private equity firm Blackstone Group has invested $7 billion in U.S. natural gas. The way the Journal puts it, Blackstone is “betting” $7 billion, implying it’s a risky roll of the dice. A seriously big chunk of that investment was the recent announcement that Blackstone has bought part ownership of Rover Pipeline for $1.57 billion (see Energy Transfer Sells 32% Ownership in Rover Pipe to Blackstone). However, it was a short paragraph in the WSJ article that really caught our attention. The WSJ says Blackstone has invested $250 million in Huntley & Huntley. We’ve written plenty about H&H, including an article today about their challenge in obtaining a well permit in Westmoreland County. H&H is a privately-held, Pennsylvania-based corporation that’s been around since 1912–founded as a geologic and engineering consulting firm for the oil and natural gas industry. Over the years the company has transitioned into a drilling company. The company is now owned by Keith Mangini, a petroleum geologist who started working at H&H in 1978. Mangini acquired the company in 1993 and since that time has served as its CEO. He added Mike Hillebrand as a partner in 1996. Does $250 million in private equity backing sound familiar? It should! That’s the exact amount of backing promised by another private equity firm (Denham Capital) for a different SWPA driller (LOLA Energy). LOLA was recently sold to Rice Energy (see LOLA Energy Sells Out to Rice Energy, Deal Kept Hush-Hush). Which raises a good question: Is such a deal in the cards for H&H?…

We’ll speculate a bit more on H&H’s future in a moment. For now, here’s what the WSJ said about the Blackstone investment:

In Appalachia, Blackstone has placed hundreds of millions of dollars with closely held prospectors, including $250 million with a 105-year-old Pittsburgh outfit called Huntley & Huntley, which it has used to acquire acreage and drill wells near fields that gas giant EQT Corp. has been consolidating.*

MDN has been told by sources the Blackstone investment is not new–it was made in early 2016. Which makes sense of other news MDN reported last year with respect to H&H. You may recall that MDN broke the news that H&H had lured away a big fish–Chris Doyle–to lead the development and expansion of H&H’s Marcellus and Utica Shale operation (see Exclusive: Huntley & Huntley Hires Big Fish to Expand Marc/Utica Program). Doyle was previously executive VP of operations at Chesapeake Energy, where he was in charge of the Marcellus/Utica region for Chessy. He’s also an 18-year veteran of Anadarko Petroleum where, once again, he was in charge of the Marcellus/Utica region. As we said at the time, “H&H has hired themselves a VERY big fish, which can only mean one thing: H&H is planning a major expansion into the Marcellus/Utica.”

Doyle was hired in May 2016, which indicates to us that Blackstone may have committed to funding H&H’s drilling program by that point. Why hire someone like Doyle if you don’t have the money to ramp up a serious drilling program?

Which begs another question: Has H&H drilled any shale wells with the money yet? The answer would appear to be no. We’ve researched the Dept. of Environmental Protection’s online database of permits issued for shale wells and don’t spot a single permit issued to H&H. The company is conducting seismic surveys, as we’ve reported. And they have requested “conditional use” permits from some municipalities, as we’ve reported. Those activities are signs of impending drilling. But we don’t yet spot any requests (with the DEP) to begin drilling shale wells in the PA Marcellus.

MDN heard another rumor–that Blackstone’s investment in H&H is actually higher than the stated $250 million. We reached out to H&H and got this response from Chris Doyle:

I can’t comment on specifics other than to say the investment in Huntley and the Appalachian Basin is significantly larger than the [WSJ] article indicates. Clearly, Blackstone is a significant investor in gas and this basin, and I look forward to being able to share more with you in the near future.

Sell or Drill?

LOLA Energy was another company that got PE backing, and eventually sold. Is the same scenario in the cards for H&H? Hard to say. There are important differences between H&H and LOLA. H&H has been around over 100 years, and Keith Mangini and Mike Hillebrand have owned the company since the 90s–both with roots in the region. Seems to us like H&H is around for the long-term. LOLA was a brand new company, just a few years old when it sold. However, one never knows.

MDN spoke to a finance expert who told us that private equity firms in general are becoming more nervous about their shale investments, with many of them looking to cash in their investments (i.e. sell). Add to that nervousness the poor business climate in Pennsylvania–with regulatory hassles and the very real possibility of a big severance tax–and it’s a prescription for “get out of Dodge while the gettin’ is good.” Will that viewpoint impact Blackstone’s investment in H&H? No idea. We’re just bringing to you some of the scuttlebutt we’ve heard. By all appearances (reading between the lines in the WSJ article), Blackstone appears to be quite happy with their natural gas investments, including H&H.

Let’s take the news that Blackstone has made a “significant” investment in a small but important Marcellus/Utica player as a good sign. Something to celebrate. We hope to see some new holes in the ground soon using Blackstone’s money.

*Wall Street Journal (Aug 15, 2017) – Why Blackstone Is Betting $7 Billion on Natural Gas

Posted: 08-16-2017


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