Latest State of Oil & Gas Private Equity

Also interested.

Agree that funds seem to be transitioning either to an industrials/infra position to raise new capital or building out renewables/energy transition segments. Have seen a list someone put together of the poor energy PE returns since 2010 and that was pre-COVID. Heard that Warburg has stopped raising their Energy Fund II and is scaling down their Houston office.

Not sure on specifics on which funds will survive, but have seen reports of fund merging portcos to save G&A costs. Really hard to see how these funds are going to exit their positions in the near-to-medium term outside of distressed situations.

Definitely. Port-Co consolidation seemed to be well underway even in 2019 when the industry was starting to stagnate. And the macro picture at the time was still considerably better than where things stand today post-COVID/March OPEC debacle. The urgency surrounding the consolidation process has definitely materially accelerated among the broader universe of PE funds playing in the space. Would be curious to see if different funds can work past social issues to find a way to combine some of the most logical private port-co merger candidates... definitely easier said than done. Most of the consolidation I've seen so far has been intra-fund.

Hearing that Blackstone may be taking a step back from upstream investing after the SN/Gavilan debacle.

I am usually an advocate for the O&G sector and despite being optimistic about the outlook of the industry as a whole, I think that the O&G PE world is as good as dead. To expand on what LeonTree mentioned, the banking community has universally turned its back to the industry and leverage multiples are sometimes so limited that you might as well buy assets all cash. Either that, or the interest rates are so high that it is almost impossible to make a profit. This stands in contrast to the green bonds you might access if you are buying wind mills or renewable shit, where interest rates are a pat on the back to the sponsoring bank.

HitecVision, a formerly pure O&G PE house from the Nordics had numerous sales mandates in the lower part of the value chain (oil service, suppliers, machinery companies with exposure to O&G, etc.) in the market pre-COVID and there was essentially no interest in any of the companies. Some might say that these are stranded assets, but even the cash-generating companies, with solid margins and healthy balance sheets were completely ignored by bidders or got ridiculous offers. The PE ended up merging 32 companies and are now going to do a listing with the new conglomerate, because it was impossible to sell it to anyone else.

Well, quite the bleak prognosis. Which funds seem the most likely to still be open to hiring at the Associate level? I imagine that even funds in "portco management mode" will still need Associates for the foreseeable future. And within such funds, I doubt many second and third year Associates will stay on for another 2 years without the possibility of being promoted. Tangentially, I've heard that some of the remaining bright spots (or least dim) in the industry are at some of funds that spun out of NGP ~5 years ago, Quantum, and maybe 2 or 3 others.