Native Texan Michael G. France became interested in finance while an undergraduate at the University of Texas at Austin. Houston's thriving energy job market reinforced his career choice. “As a finance professional, being in a capital-intensive business like oil and gas seemed to make a lot of sense,” he says. Out of college he joined Deloitte & Touche as a senior consultant, working on an integration project for the joint venture between Shell and Texaco among other projects.

He then entered the MBA program at the Jones Graduate School of Management at Rice University. After graduation, he joined Lehman Brothers as a vice president in the natural resources division of its investment-banking group during the dynamic M&A and financing market of the early 2000s. Five years later, in 2007, he joined private-equity provider First Reserve as the firm was raising its $7.8-billion Buyout Fund XI.

Today, he is a managing director of First Reserve and his responsibilities have expanded from deal execution and due diligence to sourcing opportunities. In a recent interview, he discussed First Reserve's strategy and the increasingly significant role private equity is playing for E&Ps.

Investor What are some current themes for First Reserve?

France Within oil and gas, our primary themes are the deepwater and unconventional resources. The deepwater focus has expanded beyond the Gulf of Mexico to include opportunities around the successful discoveries made offshore Brazil and West Africa—the entire Southern Atlantic Basin.

As for the unconventional, that has expanded from backing teams building an E&P business around a focused strategy, to discussions with larger independents seeking financing to fund their large resource development programs. First Reserve could provide development capital through joint ventures or additional equity.

Previously, a large independent with an asset base to develop would have gone to the public markets for equity or debt, but now their capital needs are so large, and with the markets less receptive, they are also interested in exploring more creative types of funding.

Investor What are some examples of smaller E&Ps you've backed in the unconventional arena?

France RKI Exploration & Production, headquartered in Oklahoma City, is one. It's a mid-sized private independent that had captured a large position in both the Permian and Powder River basins and was looking for the next wave of capital to prove up and develop the asset bases. It is developing the Niobrara and testing other stacked pays in the Powder River Basin as well as stacked-pay formations in the Permian- Delaware Basin. Another is Templar Energy LLC, funded in December 2012, which is focused on the Anadarko Basin. Like the Powder River and Permian basins, the Anadarko offers a lot of legacy well control from past verticals and conventional plays are now being developed horizontally. This is a more traditional investment, where we backed a team that had expertise in the Midcontinent and where we had a long-term relationship with the chief executive officer.

Investor And the deepwater?

France We've funded Deep Gulf Energy LP twice, as well as Cobalt International Energy in the Gulf of Mexico, and more recently, Barra Energia, which is exploring in the deepwater subsalt offshore Brazil.

Deep Gulf was our initial deepwater experience, backing a team that had an asset that might not fit a major's capital program. With Barra Energia, we're backing a team of ex-Petrobras executives to pursue pre-salt exploration offshore Brazil.

More and more capital is being spent further and deeper offshore in the Gulf of Mexico, Brazil and West Africa, and the technologies are similar. We have exposure to all three basins, and expect to be expanding that exposure in both E&P and services.

Investor Do any particular investments stand out?

France It's really the combination of all of them. Working with world-class managers in regions where they have decades of experience, you learn from each one.

There was the technical advantage in seismic that Cobalt International applied in the Gulf of Mexico, with all the excitement and risk of the deepwater, versus a company like Templar, which has teams on the ground adding section by section, doing basic blocking and tackling to focus on costs and with a completely different risk profile.

It's the excitement of the early investment in a company like NFR (now Sabine Oil and Gas), that was focused in one region, on the Cotton Valley in East Texas, before anyone had heard of the Haynesville shale; then the Haynesville play developed underneath; and now activity has come full circle with attention again on the Cotton Valley because of its liquids.

Investor What do you like most about your job?

France The opportunity to work with First Reserve team members on the one hand, and to work with high-caliber managers and chief executive officers in building businesses from scratch. It's rewarding to be not just part of the capital strategy but also be involved in the decision making—seeing the strategy play out and realize the original objective.

—Susan Klann