KKR, Chesapeake Energy Partner to Invest in Mineral and Royalty Interests

Private-equity investor Kohlberg Kravis Roberts & Co.(NYSE: KKR) and Chesapeake Energy Corp. (NYSE: CHK) announced a partnership to invest in mineral and royalty interests in prominent oil and gas basins in the U.S.

Driven predominantly by the recent advancements in unconventional oil and gas technology, we continue to see attractive opportunities to invest behind the domestic exploration and production of oil and gas, said Robert Antablin, a director at KKR who leads the firm's royalties investment strategy. Royalties represent an important extension of this opportunity set and offer an attractive risk/reward for our investors in the current environment.

The partnership with Chesapeake, the No. 2 U.S. producer of natural gas, serves as KKR's latest foray into the energy sector, which began in 1985 with its investment in Union Texas Petroleum. Late last year, a group including KKR said it had acquired Samson Investment Co. for $7.2 billion. It also has entered into a recent partnership with Premier Natural Resources to acquire producing oil and natural gas assets.

It's part of a trend of investment companies putting more money into oil and gas. Last week, Cheniere Energy announced $2 billion in funding from The Blackstone Group to build a natural gas export plant in Louisiana. Value of private-equity investments in the energy sector has about doubled within the last year -- from $16.5 billion to $32.2 billion -- according to Bloomberg data.

In the latest deal, KKR, based in New York, and Chesapeake, based in Oklahoma City, together will initially contribute $250 million. Chesapeake said it will contribute 10 percent -- $25 million -- of the total partnership. Both companies will jointly oversee the partnership, and Chesapeake will source, acquire and manage the royalty investment opportunities.

Aubrey McClendon, CEO of Chesapeake, said the company has acquired about $900 million in royalties over the last decade.

Chesapeake has been the world's leading discoverer and developer of oil and gas shale plays, which are revolutionizing energy exploration worldwide. We hope that today's partnership is just the beginning; we have long admired Aubrey and the Chesapeake team and we look forward to broadening our relationship over the years ahead, said Marc Lipschultz, head of KKR's global energy and infrastructure business.

Shares of KKR fell 41 cents to $13.44 in midday trading, while shares of Chesapeake fell 44 cents to $23.79.