Kinder Morgan Inc. (NYSE:KMI) is trying to shed its oil and gas properties in West Texas' Permian Basin in a sale that could fetch more than $10 billion, sources said this week.
Barclays is advising Kinder Morgan and bids are due in late January, one source said.
Spokesman Richard Wheatley said in an email that the Houston pipeline operator doesn't comment on market rumors.
According to Kinder Morgan's website, the carbon dioxide-enhanced oil properties are mostly in the Sacroc area but also the Katz, Yates, Goldsmith and Cotton fields and produce 56,000 barrels of oil per day. One source said they're currently producing 50,000 barrels of oil per day.
Gabriele Sorbara, an oil and gas analyst at Williams Capital Group LP, said the divestiture could fetch more than $10 billion. He bases his estimate on the Texas Railroad Commission reporting the properties as producing 55,751 barrels of oil per day in August and Occidental Petroleum Corp.'s (NYSE:OXY) purchase of carbon dioxide flood properties from unnamed sellers in late October for an estimated $800 million, or $200,000 per flowing barrel of oil equivalent.
The proceeds would go a long way toward paying down Kinder Morgan's large debt load, which stood at more than $40 billion recently and has been weighing down its shares and getting in the way of growth, analysts say. Earlier this year it sold half of its Southern Natural Gas Pipeline to Southern Co. (NYSE:SO) for $1.47 billion along with other assets with the intent of reducing its debt.
Potential buyers of the properties could include Occidental as well as several private equity-backed companies. Among those interested could be Houston-based Windy Cove Energy LLC, which received an $700 million commitment from the Blackstone Group (NYSE:BK) a few years ago to buy carbon dioxide-enhanced oil recovery properties in the U.S. It's led by president and CEO Chuck Fox, who previously was vice president of operations and engineering at Kinder Morgan unit Kinder Morgan CO2 Co., known as KMCO2.
Another potential acquirer is Dallas-based Fleur de Lis Energy LLC, which purchased CO2 enhanced oil recovery properties in Wyoming's Powder River and Green River Basins from Anadarko Petroleum Corp. (NYSE:APC) last year for an undisclosed sum in partnership with KKR & Co. LP (NYSE:KKR). That company, which is led by former Merit Energy Co. vice chairman Porter Trimble, also has properties in the Permian and Mississippi.
Kinder Morgan affiliate Kinder Morgan Energy Partners paid $227.5 million for a 42.4% interest in the Yates field along with 100% of the Yates gathering system and 65% of the Pecos Carbon Dioxide Pipeline Co. from Marathon Oil Corp. (NYSE:MRO) in 2003. Then, in 2013, it picked up the Goldsmith Landreth San Andres oil field unit, which included more than 6,000 acres in Ector County, from Legado Resources LLC for $289 million.
Kinder Morgan claims to be the largest transporter of carbon dioxide in North America, producing 1.2 billion cubic feet per day of C02 from its fields in southwest Colorado and delivering it through 1,300 miles of pipelines for use in enhanced oil recovery in New Mexico and West Texas.
