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-KKR partners with Exco.

BANKING AND CREDIT NEWS-August 1, 2013--KKR partners with Exco(C)2013 M2 COMMUNICATIONS

1 August 2013 -- New York-based KKR (NYSE: KKR) said it has closed its Eagle Ford Shale drilling partnership with Texas-based oil and natural gas exploration and production company Exco Resources.

The partnership marks KKR's seventh investment in the Eagle Ford Shale and the firm's fourth investment within its oil and gas drilling and development strategy.

KKR's development drilling strategy provides capital to strong operators by investing in oil and gas working interests at the asset level.

As part of a participation agreement with Exco, entities advised by or affiliated with Kohlberg Kravis Roberts & Co. L.P., including KKR Financial Holdings LLC (NYSE: KFN), acquired an undivided 50% interest in certain undeveloped Eagle Ford acreage for approximately USD 131 m in cash after preliminary closing adjustments.

Exco and KKR will jointly fund future development of the undeveloped acreage.

KKR will fund and own 75% of each well drilled and Exco will fund and own 25% of each well drilled. When each quarterly tranche of wells drilled has been on production for one year, Exco has the right to offer to purchase KKR's 75% working interest at fair market value, subject to specific well criteria and return hurdles.

Exco would make its first offer for wells that have been online for one year during the fourth quarter of 2014.

KKR said its development drilling strategy is part of an effort to support the large capital needs of oil and gas companies in attractive unconventional resource basins.

With the announcement of the Exco transaction, the firm has now invested in four drilling partnerships over the past 12 months, providing capital to strong operators by investing in oil and gas working interests at the asset level. As an asset class, real asset investments in oil and gas can provide meaningful current yield, inflation protection and low correlation with many other asset classes.

Since 2009, KKR, through its investment funds and vehicles, has invested or committed approximately USD 4.0bn to oil and gas investments spanning buy-outs, minority equity investments, joint-ventures, and various asset-level and structured investments, making KKR one of the more active private-market investors in the oil and gas space across this period.

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1 USD = 0.659717 GBP

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Publication:M2 Banking & Credit News (BCN)
Date:Aug 1, 2013
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