Hey, Buddy, can you spare me a dime?

Only in the case of the $7.15 billion Apollo Global Management-led acquisition of El Paso Corp’s E&P assets, that dime is reportedly $4.5 billion in reserve-based debt financing, or 63% of the purchase price.

Significantly, the Apollo group’s El Paso asset acquisition, which is expected to close in the 2nd quarter, marks the second energy LBO in 90 days following the $7.2 billion KKR/Samson deal that kicked off Thanksgiving weekend last November.

If you don’t think two energy LBO’s in 90 days is more than coincidence, well, think again. Combined value of both deals is $14.35 billion, which falls just shy of the $15.1 billion that BHP-Billiton paid for Petrohawk in July 2011—the largest domestic E&P transaction in 2011.

In transaction currency, that formula suggests one Petrohawk unit equals the combined total of El Paso’s E&P assets in Utah, the Haynesville, the Eagle Ford, and the Permian Wolfcamp plus Samson’s gas rich holdings in 12,500 wells nationwide.

So it’s no coincidence that a lot of folks are looking around the energy industry at private E&P firms with gravitas, or asset packages from larger publicly held firms who are anxious to divest properties in order to fund corporate transition stories from the rags of natural gas into liquid riches as part of a scramble for stock market survival.

Or, consider the assets available through corporate simplification strategies such as Williams Cos’ divestment of its E&P division, Marathon’s downstream asset spin off, or ConocoPhillips’ efforts to cleave itself into separate E&P and refining entities.

No matter where you look, there are target rich opportunities in energy assets these days. And, as the two LBOs illustrate, there is an ocean of money ready to float the acquisition boat during a time when commodities grow ever more interesting globally. So it should be no surprise that the value of private equity deals in energy rose to $32.2 billion in 2011 versus $16.5 billion one year before, and is likely to rise further in 2012, thanks to the group from Apollo.

Of course Apollo/El Paso leaves some short-term questions. Will the new group break El Paso into pieces and make money on the arbitrage? A representative LBO transaction incorporates more than half of the deal value in debt secured by the assets of the target company, followed by a focus on cash flow and debt service that eventually results in flipped assets during a business arc that covers half a decade.

Certainly servicing debt will be an interesting proposition in a natural gas market that values a single Mcf below the tall version of a Starbucks latte.

Or, will the Apollo/El Paso deal evolve into a KKR/Samson lookalike in which cheap money funds a contrarian bet on the long-term viability of domestic dry gas with an eye on LNG export into a global market?

Out In the West Texas Town of El Paso

At the heart of the deal, at least from a financing standpoint, is the 3.4 Tcfe in proved reserves associated with 3.3 million highly prospective largely unconventional acres. El Paso’s E&P assets include the Eagle Ford, where the division is operating four rigs in the LaSalle County, Texas condensate window. Production from 64 wells rose to 14,073 Boe/d in during the fourth quarter 2011 and the division had planned to add a fifth rig to its Eagle Ford efforts in 2012.

El Paso is also operating two rigs in Utah’s Altamont Field, and one rig each in the Permian Wolfcamp and the South Louisiana Wilcox. El Paso plans to let its last Haynesville rig go when it finishes its current well.

The debt service issue for the LBO is an interesting permutation. El Paso’s E&P division recorded $92 million in operating income during the fourth quarter 2011 on an 11% increase in year-over-year gas production volume, which averaged 880 MMcfe/d, and a 7% increase in liquids production to 22.3 Mbbls/d. The division spent $1.6 billion in 2011 and averaged 13 active rigs.

The E&P division reported a 10-year drilling inventory, including 1,145 wells in the Eagle Ford, during its 2011 Analyst Day presentation. The company’s production mix at that time was 48% liquids, though liquids were projected to generate two thirds of the division’s revenues going forward. For analogs, El Paso’s E&P division was similar in production volume to Newfield and Petrohawk during 2010.

El Paso also featured a reputation as a top-quartile performer in the Haynesville and had achieved significant operating successes in the Eagle Ford in terms of reduced drilling days and an increase in footage drilled per day. El Paso’s technical team has been a high-performance unit in unconventional oil and gas compared to peers.

The asset sale comes as a consequence of the Kinder Morgan takeover of the E&P division’s parent, El Paso Corp. Kinder Morgan is looking to pay down debt accrued in the acquisition where the main acquisition target was El Paso’s pipeline infrastructure. The Kinder Morgan/El Paso deal will create the largest pipeline system in the U.S. when it closes in the second quarter 2012. That deal, valued at $37.8 billion in October 2011, included $9.6 billion in equity, $11.5 billion in cash, and $16.7 billion in consolidated debt—hence Kinder Morgan’s interest in selling the E&P assets.

At Last Here I am On the Hill Overlooking El Paso

The Apollo/El Paso deal features similarities to the KKR/Samson LBO. Both involve consortia. Originally, Apollo Global Management was in discussion with India’s Reliance Industries as a potential partner in the El Paso E&P asset acquisition. In the end, those talks fell through and Apollo moved forward with a consortium that included long-time energy and power investor Riverstone Holdings LLC, and Access Industries Holdings Inc, the New York-based investment arm of Russian-born billionaire Len Blavatnik.

Apollo is no stranger to energy assets. The company previously purchased Midland, Texas-based Parallel Petroleum Corp. in 2009. The equity firm then flipped Parallel to Samsung C&T and Korea National Oil Corp. for $771.5 million in 2011.

Apollo bills itself as a contrarian, value-oriented investment firm. El Paso’s natural gas profile certainly fits the contrarian sobriquet. The value-oriented portion may reside in the fact that El Paso’s E&P division was reportedly valued at $10 billion, similar to reports of value for Samson Investment Co. In the end, both entities sold for a little more than $7 billion with the leveraged buyout portion accounting for roughly 60% of deal value on average between the two.