HOUSTON-- There is no question that private equity is a huge source of capital, one that seems to be ever-replenishing itself for those seeking financial backing in the oil and gas business.
In fact, Murphy Markham , an EnCap Investments LP partner, said the availability of private equity today is somewhere near $30 billion. That alluring stack of cash has cranked up competition among private-equity providers, which in some ways has altered the profile of who wants to go prospecting.
“We’re seeing more entrants. Some buyout firms are coming in and even some generalists. But I think what they’re coming into are the existing asset plays,” said Markham, who added that several experienced management teams are returning for another run.
Markham, along with James Burgoyne , a managing director for GE Energy Financial Services , and Phillip Pace , the managing director of Chambers Energy Capital , gathered for a panel discussion about private equity at Hart Energy’s Energy Capital Conference last month.
Chambers Energy is primarily involved in $20 million to $200 million deals, Pace said. Even though Chambers is situated in the lower end of the market, Pace said competition among lenders of similar stature is sizzling.
“Energy markets have been overbanked since the dawn of time. But it’s always competitive out there. The only difference between now and 2006 is that there are not 50 hedge funds providing private equity,” he said.
Burgoyne also noted the competitiveness trend, and he acknowledged that private-equity fund managers have a lot of money to lend. Yet, he warned, the deal landscape doesn’t come without some frustrating twists.
“The thing we’ve struggled with the most is that it’s been hard during the past couple of years to get access to really good properties,” he said.
While oil- and gas-producing properties are high on GE’s preferred list, so is partnering with smaller, private companies that may not have access to public equity markets or might want to stay private. “We can provide acquisition and monetization equity capital, as well as drilling capital,” Burgoyne said. “We tend to be more PDP [proved developed producing]-heavy and PDP-focused because we’re looking for assets that can be hedged, as opposed to just outright drilling assets.”
GE is interested in financing both oil and gas projects, Burgoyne said. “The one sector we’re not spending a lot of time on is offshore. We have found that to be