Carlyle partners with Diversified and ADNOC in multi-billion dollar fossil fuel deals

The private equity giant is set to acquire an empire of dying wells in the U.S. and major Liquefied Natural Gas assets in Australia and Papua New Guinea

With two major multi-billion-dollar energy deals announced in the works in June, private equity firm Carlyle appears to be moving full steam ahead on fossil fuels. The deals would result in Carlyle adding an empire of dying wells, Diversified Energy, and Australia’s second-largest gas and LNG producer to its bloated fossil energy portfolio.

Despite Carlyle’s commitment to achieve net zero greenhouse gas emissions by 2050, the firm is picking up the pace with fossil fuel acquisitions. If the two deals finalize as is, Carlyle would be on track to spend more this year than it has on energy deals in any year in the past 10 years, according to data available on Pitchbook. With a potential new Carlyle flagship fund launching towards the end of 2025, investors should be aware that the firm is positioning itself to expand its global fossil fuel footprint.

Diversified’s Dirty Dealings

In June, Carlyle entered a partnership with Diversified Energy, the largest well owner in the country, to invest up to $2 billion in oil and gas assets in the United States. The deal specifies planned investments in “existing proved developed producing (PDP) natural gas and oil assets across the United States;” however, Diversified has been called an“empire of dying wells”. As a result of a class-action lawsuit filed against Diversified for its unplugged and abandoned wells by West Virginia landowners, the company must comply with a $6.5 million settlement to quadruple its well cleanup efforts over the next decade.

Diversified’s Empire of Methane-Leaking, Dying Wells
A 2021 investigative report by Bloomberg found that between 2016 and 2020, Diversified became the largest well owner in the country, amassing about 69,000 wells in the United States, by focusing on acquiring older wells that produce very little, if any, oil or gas. These types of assets have a high risk of becoming stranded or abandoned, as explained in an excerpt from Bloomberg:

“Diversified’s breakneck growth has alarmed some regulators, landowner groups, and industry insiders, not to mention environmental advocates. State laws require that every well be plugged with cement after it runs dry, an expensive and complicated chore. At the rate Diversified is paying dividends to shareholders, some worry there will be nothing left when the bills come due. If a company can’t meet its plugging obligations, that burden falls to the state, which means Ohio, Pennsylvania, and West Virginia could be stuck with a billion-dollar mess.”

A 2016 scientific research study in Environmental Science & Technology found that lower-producing conventional natural gas well sites, which are typically older, resulted in higher methane emissions, also known as methane leaks. Raw, unburned methane is a potent greenhouse gas and is a massive contributor to global warming, and harms human health. A 2022 study by The Environmental Defense Fund found that low-producing oil and gas wells, such as the ones Diversified owns^[1], were responsible for roughly half of well site methane pollution in the United States.

Bloomberg reporters visited 44 of Diversified’s well sites and found methane leaks at most of those sites, with some looking “more or less abandoned.”

Earthworks, a nonprofit environmental organization, carried out field investigations by certified thermographers on Diversified sites in the Appalachian basin and found evidence that the company had failed to conduct frequent inspections of sites, noting that under current regulations, Diversified is not required to conduct frequent inspections for harmful pollution at the vast majority of its wells.  Diversified had not hired nearly enough well tenders and, as of 2023, only deployed 600 hand-held methane detectors to monitor its fleet of over 67,000 wells. Earthworks thermographers recorded methane emissions at several sites that cannot be seen without optical gas imaging.

Video: “Earthworks’ optical gas imaging shows methane gas and volatile organic compound pollution leaking continuously around a corroded hammer union on a Diversified well site in Armstrong Co, PA. Documented in September 2022.”

Diversified Forced to Pay for Polluting Landowners in Appalachia
In March 2025, a federal judge gave final approval to settle a class-action lawsuit against Diversified Energy and EQT Corporation by West Virginia landowners. The settlement agreement reached was for $6.5 million, with each company paying half, for the cleanup of 2,600 wells across six states in the next ten years. While this settlement is progress towards plugging some, not all, of Diversified’s hazardous abandoned wells, the ten year time span means that even wells that are slated to be cleaned up could continue to have significant negative health and land impacts for the next decade. Diversified also appears to be committed to continuing to acquire existing gas assets with no plans to transition to renewable alternatives.

In July 2022, West Virginia landowners filed the lawsuit against Diversified Energy and EQT Production Company, alleging the unplugged abandoned gas wells recently purchased by Diversified from EQT Production were “hazardous to health, damage the environment and harm property values.” EQT Production was included in the lawsuit because the plaintiffs alleged that the company fraudulently transferred ownership of hundreds of nonproducing wells in 2018 and 2020 to Diversified, including the “hundreds of millions of dollars in liabilities in connection with plugging and decommissioning approximately 12,000 wells.”

The lawsuit argued that, under West Virginia law, any gas well that has not produced for twelve months is considered abandoned and must be promptly plugged in order to maintain safety, reduce methane emissions, conserve the state’s gas resources, and restore damaged properties. As of December 2024, roughly ten percent of Diversified’s 23,000 wells in West Virginia are abandoned. In settling the lawsuit, Diversified and EQT denied any wrongdoing.

Abandoned gas wells are a liability to states since regulators are responsible for cleaning up and capping the wells. There are at least 6,000 abandoned or orphaned wells in West Virginia, with estimates of several thousand more being undocumented. This issue goes well beyond Appalichia and Diversified; a 2023 report by PESP and Public Citizen found that investments by private equity firms in nearly 2,700 oil and gas wells on federal and tribal lands in the western United States alone could leave taxpayers with a cleanup bill of up to $380 million.

Diversified Has a History of Partnering with Private Equity Firms
Diversified’s deal with Carlyle is not the first time the company has partnered with a private equity firm to pad its pockets. In 2020, the company entered a $1 billion three-year joint venture with Oaktree to acquire gas assets in Appalachia and beyond. Oaktree Capital is backed by Brookfield, and together the firms earned a D on the 2024 Private Equity Climate Risks Scorecard and own an extensive portfolio of fossil fuel assets, with many of its dirtiest assets, such as coal-fired power plants and upstream drilling operations, in Oaktree’s portfolio.

A 2023 PECR analysis of Brookfield’s energy portfolio found that Oaktree’s investment with Diversified was the highest emitting investment in the portfolio and was responsible for emitting an estimated 31 million tons CO2e a year. Shortly after the publication of the PECR report scrutinizing Brookfield and Oaktree’s dirty investments, Oaktree finalized a $377 million deal to sell off its interest in the portfolio of upstream assets back to Diversified. Now it seems that Diversified’s deal with Carlyle will allow the company to continue to grow its gas well empire.

Carlyle Enters the Largest Take-Private Deal by Acquiring Australia’s LNG Company, Santos 

In June, Reuters reported Abu Dhabi’s National Oil Company (ADNOC) had partnered with Carlyle in a $18.7 billion take-private takeover bid of Santos, the second largest gas producer in Australia.  ADNOC’s investment arm, XRG, and Carlyle offered $5.76 USD per share, and including net debt, the deal values Santos at A$36.4 billion ($23.7 billion USD), which would make it the largest all-cash corporate buyout in Australian history, Reuters reported.

Santos owns and/or operates onshore upstream drilling operations in Australia, Alaska, and Papua New Guinea; offshore drilling sites in Commonwealth waters, and two major liquefied natural gas (LNG) terminals in Australia with stakes in two LNG facilities in Papua New Guinea. Santos also operates four gas processing facilities around the country and a carbon capture and storage project.

The LNG terminals owned by Santos are what the XRG-Carlyle consortium is after; the location of the assets, inside the Asia Pacific basin, are closer to where demand is expected to focus, Reutersreported. While the U.S. LNG market is getting caught in the U.S.-led trade wars, shifting LNG markets in Asia are contributing to some instability in the Australian export LNG market. Overall, the global LNG market is facing an impending oversupply, or “glut”, due to a nearly 50% increase in global LNG export capacity that is set to come online by 2030.

Despite LNG market uncertainty, the completion of this deal would mark Carlyle’s entry into the LNG game in a major way and would increase the emissions of Carlyle’s fossil fuel portfolio significantly. This deal is happening alongside four other private equity acquisitions of LNG export terminals that have been announced since the new Trump administration.

Carlyle’s Soaring Fossil Fuel Spending Ahead of Potential New Flagship Fund
Though it’s unclear at this time how much Carlyle will be contributing to the $18.7 billion Santos deal, even if Carlyle only invested 20% of the agreed price, $3.74 billion, that would still put the firm at over $6 billion in fossil fuel deals alone this year, and at least $9 billion on energy deals overall in 2025.^[2]

See the chart here.

Carlyle struggled through fundraising for its last buyout fund, Carlyle Partners VIII, only raising 54 percent of its stated goal. Despite the fundraising challenges, several limited partners, mostly public pension funds in the United States, ultimately made commitments to the fund.

Carlyle Chief Executive Harvey Schwartz stated plans for a fourth-quarter launch of the firm’s next buyout flagship fund, Fund IX. Private equity fundraising is trending down, down 13 percent in the first half of the year compared to last year. It remains to be seen if Carlyle will face similar challenges this time around.

Investing With Carlyle Means Investing in Risky, Polluting Assets
With two multi-billion-dollar fossil fuel deals in process and energy deal spending trending up, it appears Carlyle is committed to expanding its portfolio of oil and gas assets worldwide. Though the firm makes claims of net zero goals, Carlyle is doubling down on fossil fuels by choosing to partner with Diversified and its empire of polluting and dying gas wells and diving headfirst into the oversaturated and unstable LNG market.

Investing in harmful and financially risky assets increases the financial risks of investment portfolios and can impact returns. Investors should be concerned with Carlyle’s recent investment decisions and misalignment with its stated net zero goals. Investors should withhold future investment commitments to Carlyle unless it commits to cease further investments in oil and gas, to transition its portfolio to renewable alternatives, and retires and cleans up current polluting assets.

Resources

^[1]https://naturalgasintel.com/news/diversified-sees-older-shale-wells-as-next-piece-of-massive-appalachian-position/;  https://www.div.energy/2023/05/02/diversified-energy-touts-gas-well-stewardship-as-key-to-its-emissions-cuts/

^[2] The Pitchbook data was supplemented with additional deals found in the Private Equity Global Energy Tracker database, which was found via company websites, press releases, news reports, and/or SEC filings. The deal amounts for each deal are not all available in Pitchbook, therefore the totals for each year are an under estimation due to missing data.

^[3] Pitchbook