KKR Finds Cash Cow in Shale

Private equity firm KKR KKR said Wednesday that Marathon Oil MRO has agreed to pay $3.5 billion for its Eagle Ford Shale project in Texas, a joint venture between KKR and Hilcorp Energy. KKR will see $1.13 billion from the transaction, almost treble its investment of $400 million in the venture last year. This is the second time KKR has seen a big gain from shale gas. The company took a minority stake in East Resources, a Pennsylvania-based oil and gas business, in 2009. East Resources was sold to Royal Dutch Shell (RDS-A) last year. KKR's $330 million investment netted $1.5 billion. RPM Energy, a joint venture between KKR and a former Texaco executive, is seeking partners that already have shale tracts but are in need of capital to develop them. But as profitable as shale gas ventures may be, they are not without controversy. The hydraulic fracturing technology used, known as fracking, has been tied to pollution of ground water. Federal regulators are investigating the process and some states and cities have already restricted its use. France has outlawed the practice altogether.