K.K.R.’s Energy Billionaires Club



By PETER LATTMAN
K.K.R.’s Energy Billionaires Club
Which of the following individuals is an oil-and-gas magnate who has made billions of dollars through a deal with Kohlberg Kravis Roberts in the last three years?

(A) Jeffrey Hildebrand
(B) Terry Pegula
(C) Stacy Schusterman
(D) All of the above
If you answered (D), you are correct!
The private equity firm K.K.R. has had extraordinary success investing in so-called shale plays. Starting in 2009, the firm has placed three consecutive bets on the business of extracting natural gas from shale rock formations through hydraulic fracturing technology, or fracking.


It had previously sold two of those investments, flipping them to large energy companies and making billions of dollars for the firm and its investors. It further pressed its shale bet earlier this week with its $7.2 billion purchase of the Samson Investment Company, the largest corporate leveraged buyout of 2011.

Most of the frenzied interest surrounding domestic drilling for natural gas has been on its potential as a game-changing resource and the environmental risks associated with fracking. Yet very little has been written about the entrepreneurs who have made fortunes staking their businesses on drilling for shale gas.

Remarkably, K.K.R. has now partnered with three of them.

Who is this trio? All (or at least their families) appear in the Forbes 400 list of wealthiest Americans, yet each has run their businesses far below the media radar. Indeed, before their deals with K.K.R., none had ever been mentioned in either The New York Times or The Wall Street Journal.

Here is a quick snapshot of the three members of the K.K.R. energy billionaires club:

Terrence Pegula

Born into a coal-mining family in Carbondale, Pa., Mr. Pegula borrowed $7,500 from family and friends and began buying up land in the Marcellus Shale, a rock formation that stretches from West Virginia to New York State. In June 2009, his company, East Resources, sold a roughly one-third stake to K.K.R. in exchange for a $350 million cash infusion. Just 11 months later, Mr. Pegula and K.K.R. sold East Resources to Royal Dutch Shell for $4.7 billion.

Since the sale, Mr. Pegula has poured his money into hockey. He paid about $200 million for the Buffalo Sabres professional franchise and donated about $90 million to his alma mater, Penn State, to finance the new Pegula Ice Arena and help establish a Division I hockey program at the school. A resident of Boca Raton, Fla., Mr. Pegula is also the father of Jessica Pegula, a professional tennis player who played in last year’s U.S. Open.

Jeffrey Hildebrand

Trained as a geologist, Mr. Hildebrand started Houston-based Hilcorp Energy in 1989 just three years after earning a graduate degree in engineering from the University of Texas at Austin, according to a biography on the school’s Web site. He bought out his partner, Thomas Hook, a former Goldman banker, for $500 million in 2003, according to Forbes.
In 2010, K.K.R. paid about $400 million for a 40 percent stake in Hilcorp Resources, the company’s roughly 100,000 acres in the Eagle Ford Shale in south Texas. Last June, less than a year later, Hilcorp and K.K.R. sold the assets to Marathon Oil for $3.5 billion.

Stacy Schusterman
Ms. Schusterman is the daughter of Charles Schusterman, the founder of the Samson Investmet Company, an energy business based in Tulsa, Okla. After Mr. Schusterman died in 2000 at the age of 65, Ms. Schusterman — armed with degrees from Yale College and the University of Texas business school — took over the company. Samson, named after Ms. Schusterman’s grandfather, has 1,200 employees and operates more than 4,000 wells and has at least partial ownership of more than 12,500 wells nationwide, according to its Web site.

K.K.R. and three partners said this week it was paying $7.2 billion for most of the company; Ms. Schusterman and her family will maintain ownership of the company’s Gulf Coast and offshore deep-water Gulf of Mexico assets.

The Schusterman family is a major supporter of Jewish causes; Ms. Schusterman, 48, sits on the board of the American Israel Public Affairs Committee among other Jewish organizations.

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