Private Equity Activity in the US Oil & Gas Industry

By Mark Froggatt, Senior Consultant in Houston, Maxwell Drummond

Confidence in North America’s oil and gas industry continues to gain momentum and the amount of financial backing the industry is receiving is proof. The first quarter of 2012 showed the highest amount of private equity (PE) interest in 20 years: PE accounted for nearly 1/3 of the $34 billion invested in the oil and gas industry, according to a recent study done by Pricewaterhouse Coopers. Private equity firms are looking to take advantage of the low gas prices by entering during the downturn and riding the natural long-term view of gas pricing.

PE firms are also taking advantage of technologies that are exposing the U.S. to an unparalleled level of new exploration and production activity. The shift from oil to liquid-rich gas reserves creates plentiful opportunities to investors as low gas prices have caused companies to seek capital for new exploration of profitable assets. The support of private equity firms is extremely important to the upstream sector as a large portion of the petroleum produced in North America comes from independent producers, many of whom rely on these firms for growth. This is also true for smaller niche technical companies who require funding to start, grow and take their products to market.

Many different PE firms have similar investment strategies. They look to enter companies early to maximize growth within that company. They normally do so as control or shared control positions. With this position, advisors can make significant contributions at the board of directors level, leveraging industry contacts and know-how to aid their portfolio companies’ operational growth and restructuring challenges. At Maxwell Drummond, we see a high level of involvement with PE firms, both in North America and internationally, looking to strengthen their portfolio companies’ boards of directors and senior management teams.

PE firms are attracted to the U.S. market due to the stable economic and political environment. The booming onshore shale market and increase in available permits for drilling in the Gulf of Mexico mean we expect the PE sector to play a pivotal role in the U.S. oil and gas market for the foreseeable future.

About the author

Mark Froggatt joined Maxwell Drummond’s Houston team as a Senior Consultant in 2012. Mark has held a range of executive and advisory roles in the oil and gas sector over 20 years since graduating in Law from Cambridge University. He maintains close links with many UK- and US-based majors and independents - both exploration and production and services companies - and as a fluent Spanish speaker has undertaken several projects in Mexico and other Latin American countries

Maxwell Drummond International is a world leading retained search consultancy offering professional search services to clients in all sectors of the energy and natural resources industries.