Wednesday, July 19, 2017

Alaska News Boiling Under the PEU Surface?

Disruption made big profits for The Carlyle Group when it correctly read market geography.  It cost Carlyle big when affiliates experienced unanticipated adverse conditions.  Lately Carlyle bet big on energy, trying to get access to undervalued energy assets.  Less than two years ago it struck a deal with Hilcorp Energy to invest in North America energy.  Carlyle's press release stated:

Hilcorp Energy Company ("Hilcorp"), a privately owned oil and gas exploration and development company based in Houston, Texas, today announced the establishment of a newly formed partnership, Hilcorp Energy Development, L.P. (the "Company"), which seeks to acquire, operate and develop onshore oil and natural gas properties and related assets in North America.  In conjunction with the establishment of the Company, the Carlyle Energy Mezzanine Opportunities Fund, L.P. and Carlyle Energy Mezzanine Opportunities Fund II, L.P. ("Carlyle"), funds controlled by The Carlyle Group, have entered into a definitive agreement to invest up to $1.24 billion in the newly formed partnership.
Fast forward to summer 2017 and Hilcorp Alaska is the only bidder for 14 tracts of potential energy assets under Alaska's Cook Inlet.

Hilcorp Alaska LLC, a unit of privately held Hilcorp Energy Co. and an emerging force in the Alaska oil and gas industry, spent over $3 million for exploration rights to 14 federal offshore leases covering about 76,615 acres in Cook Inlet.

It's also the developer of a pipeline that would run across Cook Inlet.

Hilcorp Alaska is moving ahead with its $75 million plan to transport oil across Cook Inlet by subsea pipeline and close a tank farm that is dangerously close to Redoubt Volcano, according to a permit application filed with the U.S. Army Corps of Engineers.
The company's Alaska operation has the following characteristics:

Hilcorp Alaska has over 500 employees, 90 percent of whom are Alaska residents. Alaska is our home. 
Hilcorp acquired its first Cook Inlet assets in 2011.
Earlier this year Hilcorp had a leaking gas line under Cook Inlet:
This line was previously used to transport oil and was converted to natural gas use a decade before Hilcorp acquired it in 2015.
Carlyle's joint venture with Hilcorp was incorporated on 10-16-2015.  It's not clear how Hilcorp Energy Development, L.P. has invested Carlyle's up to $1.24 billion and whether the partnership put any of that money to work in Alaska.

Carlyle co-founder David Rubenstein's wife Alice Rogoff Rubenstein owns Alaska Dispatch News, which reported a number of stories on Hilcorp.  None of them mentioned any potential conflicts of interest due to Rubenstein family investments..

Rogoff bought into Alaska news in 2014 and 2016 saw her commit to publishing a physical newspaper for fifteen years

The story deepens with reports from Alaskan blogger Craig Medred.  His report from July 3rd:

In Alaska, the state’s largest newspaper and by far largest news organization is teetering on the edge of financial disaster with losses reportedly running to several million dollars per year and owner Alice Rogoff now reported to have tried to shop the publication to at least four different corporations. As of yet, there have been no takers.
His June 26th piece offered details about ADN's financial distress:
Rumors circulating around Anchorage that the Alaska Dispatch News was no longer paying its bill have been given credence by a lawsuit filed by the newspaper’s newsprint provider.
Catalyst Paper went into an Anchorage court on June 22 asking for an order forcing Dispatch, which also does business as, to pay its March and April paper bills.

Based in Richmond, British Columbia, Canada, Catalyst is the largest producer of newsprint on the West Coast. 

Its suit against the ADN follows another filed against Arctic Partners, Inc., the Tacoma, Wash., company which owns a building on Arctic Boulevard that Dispatch was renovating  as its new print plant and Alaska news headquarters.

Only last fall, the building was emblazoned with a banner proclaiming “Alaska Dispatch News – COMING SOON.” The banner is gone now, and Dispatch appears to have been locked out of the building housing its new press after running up a bill of approximately $1 million with M&M Wiring, an Anchorage electric contractor.
Should Alaska Dispatch News implode it would follow Rogoff's Alaska House in New York City.  It closed in the summer 2010 despite efforts to obtain private and public funding.

Rogoff-Rubenstein's plan to raise $1 million per year from Alaska Permanent Fund money managers mired in Wall Street's meltdown. Oddly, while her husband's personal finances recovered in 2009 and Carlyle monetized affiliates, donors remained hard to find.

Alice Rogoff-Rubenstein turned to the government, which did not deliver. Senator Murkowski failed to submit a $1.5 million federal earmark to fund operations. The Alaska State Legislature passed on a requested $600,000 appropriation.
Will Rogoff-Rubenstein once again seek public support from the state or feds for her pet project?  Her husband hates throwing good money after bad.  He cut off Alaska House.  Is Alaska Dispatch News next?

Update 8-1-17:  Must Read Alaska ran a story on the missing Mr. Rubenstein.