T?hough some might be hard-pressed to find a silver lining in this recession, Joshua Batchelor believes today’s environment could ultimately lead to some outstanding investment opportunities for investors willing to exercise caution and patience during these uncertain times.

Originally from Oklahoma City, Batchelor always saw himself gravitating toward an entrepreneurial, business-oriented career. After high school, he headed to Northwestern University in Illinois, majoring in economics and applied math, while managing to stick close to his high school girlfriend and future wife.

Upon graduation, he started as a financial analyst at New York-based Morgan Stanley Capital Partners, where he focused on private-equity investment opportunities across a variety of industries. Batchelor then joined the San Francisco office of Behrman Capital, working as vice president of the private-equity firm having approximately $2 billion of equity capital under management.

In 2007, Batchelor headed to Houston-based Quantum Energy Partners, where he is a principal executing new investments and assisting Quantum’s portfolio companies on activities such as financing events, hedging strategies and evaluating and executing A&D.
Batchelor took some time to talk with Oil and Gas Investor about the challenges private equity faces in the current commodity environment and how firms such as Quantum can capitalize on opportunities.


Investor What drew you to Morgan Stanley and Behrman Capital?
Batchelor In each case, it was a combination of the people, investment strategy and focus, and strong institutional reputation. Both opportunities allowed me to work in a challenging environment with some amazing people as well as take on lots of responsibility at a fairly young age.

Investor What led you to Quantum Energy Partners?
Batchelor The greatest single factor was the composition of Quantum’s investment team. Whereas many private-equity firms are comprised largely of finance professionals, Quantum’s investment team comes from three different disciplines: finance, operating and technical backgrounds. Quantum is an operationally intensive, active investment firm, and the in-sourcing of these critical disciplines allows us to make more informed investment decisions.

Investor What are some of the private-equity trends?
Batchelor One trend we are seeing is a growing number of distressed opportunities, and we think this will continue given the drop in commodity prices combined with a deteriorating economic picture. Another trend is a renewed focus on acquisitions of producing properties versus exploration or greenfield, drillbit-oriented strategies. In fact, two of Quantum’s most recent deals, Primary Natural Resources III and RMP Energy, are acquisition-and-exploitation focused.

Investor What are some of the services you provide to Quantum and Quantum’s portfolio companies?
Batchelor Broadly speaking, my job consists of sourcing, evaluating, and executing new investments as well as supporting existing portfolio investments. As active investors, we stay in close contact with our portfolio companies, which means we provide input not only on key strategic, financing, and M&A decisions, but also on day-to-day operating decisions. Given the diverse background of our investment team, we are able to assist our companies with a broad array of skills and services.

Investor What are some issues Quantum faces in raising equity in this current market?
Batchelor Given the recent volatility in commodity prices, the cyclicality of the energy market is top of mind. Many investors want to know if you can successfully invest throughout the cycle. There’s no doubt the energy sector is in a pretty tough spot right now and likely will be for some time. That being said, we believe the current market dislocation will provide opportunities over the next several years to earn outstanding investment returns, perhaps some of the best we will see in our careers. The challenge, of course, is to be sufficiently patient to avoid “catching a falling knife.”

Investor What do you like most about your job?
Batchelor The opportunity to work with and learn from top-flight industry executives, entrepreneurs and colleagues on a daily basis.

Investor Who has been a mentor?
Batchelor My father has been a constant and invaluable source of advice throughout my career. Like in so many other businesses, investing is about exercising sound judgment. He has been a sounding board and offered countless insights into becoming a more effective leader, thinker and decision maker. One insight that has stuck with me is “don’t rush to judgment.” While this may sound obvious, every day you see examples of situations where things are a little more complex, or different, than they may outwardly seem.

Investor Where do you see yourself in five years?
Batchelor I am really enjoying my work, so this is somewhere I hope to be for a very long time. I believe the investments we’ll be making in the next few years will take longer to harvest than those made in the past few years, so I’m looking forward to seeing these investments come to fruition.