A major U.S. private equity firm has agreed to delay a contentious deal involving a stake in a significant gas drilling company. This decision comes after a Middle Eastern sovereign wealth fund filed a lawsuit to block the sale.
Energy & Minerals Group, based in Houston, has put on hold its plan to sell its 30% stake in Ascent Resources, a leading U.S. natural gas driller, to another fund within its firm. This move follows claims from the Abu Dhabi Investment Council that the deal undervalues the investment.
The lawsuit, reported on Wednesday, sought an emergency injunction to stop Energy & Minerals Group from completing the sale to a sibling fund by the year’s end. On Thursday, both parties agreed to postpone the transaction until at least late February, allowing for a review by a commercial arbitrator, as confirmed by a Delaware court.
The conflict highlights potential issues when private equity firms sell assets among their own funds to exit older investments. The Abu Dhabi Investment Council, part of the $300 billion Mubadala investment group, accused Energy & Minerals Group of orchestrating a “conflicted sale” at an excessively low valuation to benefit itself at the expense of other investors, including ADIC.
The sovereign wealth fund objected to the offered price for Ascent Resources, which sits on vast gas reserves in Ohio’s Utica shale. It also claimed that this fund-to-fund sale was intended to reset performance fees, which might not generate substantial profits if the asset were sold to an independent buyer or taken public.
Observers have raised concerns about similar fund-to-fund transactions, as private equity firms often act as both the seller and the buyer. Such arrangements have gained popularity as these firms have struggled to find buyers for billions of dollars in unsold assets, with continuation deals comprising a record 19% of all private equity asset sales in the first half of 2025.
Alongside seeking an injunction against its continuation fund deal, the Abu Dhabi sovereign fund is urging Energy & Minerals Group to pursue a full sale process for Ascent Resources, believing it could attract strategic buyers or be taken public.
The sovereign wealth fund has refrained from commenting on the ongoing legal matter, and Energy & Minerals Group has not responded to requests for comments from the media.