American Oil and Gas Reporter - April 2021 - 41

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SpecialReport: Capital Crews
trend for some time, the Energy Council notes. " In 2020, the
onset of yet another lower-price environment, muted demand
and the continuing energy transition disrupted the traditional
hydrocarbons investment model even further. "
Reflecting on the results of the survey, Energy Council
details that " many private equity players now find themselves
with stranded assets and IPOs are off the cards for the foreseeable
months ahead. Even long-standing traditional investors who
remain bullish in their approach to oil and gas production are
diversifying their portfolios to explore potentially more sustainable
Shifting To Offense
investments that can be offered in and around " green gas;
Other capital providers also are practicing prudence. " Our
carbon capture, use and storage; and biofuels, " it says.
firm was anticipating a pullback in the energy space and prices,
And yet the upstream sector is adapting. Operating companies
but the pandemic accelerated depressed commodity prices and
are finding ways to recapitalize, diversify and reduce risk.
bankruptcies, as well as merger and acquisition activity, " reports
Notably, while limited partners and pension funds are shifting
Frost Cochran, managing director at Post Oak Capital. " We do
their priorities, " the current lower-price environment presents
not utilize much leverage in our portfolio, but we used late
opportunity and many are poised to swoop in and acquire
March, April and the first half of May to play defense and make
desirable assets, " according to the Energy Council.
sure our portfolio was set
" The current climate may mean
for the duration. We then
a period of creative deal structurshifted to offense and have
ing, joint ventures and reducedbeen very active in looking
risk investment opportunities as
" Our portfolio was set for the
for opportunities. "
the tug of war between renewable
duration. We then shifted to offense
Prices have recovered
and nonrenewable sources of enand have been very active in looking
" meaningfully, " he adds,
for opportunities. "
ergy continues, " the report sug " and we believe that we
gests. The Energy Council stresses
Frost Cochran, Managing Director
will continue to see conthat " in a world with a rapidly
Post Oak Capital
solidation, which will progrowing population, the energy
vide opportunities for our
mix will not change overnight,
latest fund. We believe Post Oak is in a good position with the
even in the face of hostility. "
amount of dry powder we have to be acquisitive, but also have
One strong positive sign is that the industry is bullish on oil
an existing portfolio that is positioned to generate distributable
prices, even considering the fact that the survey was conducted
cash flows for our investor base over the long term. "
at the start of 2021. " Since then, positive news around COVIDCochran says several management teams are looking for
19 vaccines, the gradual reduction in U.S. shale production,
capital. " Long term, if the team is set to develop an asset and
and the move by OPEC+ to restrain output into mid-2021, and
manage it, than then there should be access to capital, " he coman extra gift from Saudi Arabia to remove another 1 million
ments. " The amount of dry powder in the private equity energy
barrels of oil a day from the market all provide impetus for
sector has declined, and general partners may not be able to
West Texas Intermediate (prices), " the Energy Council states.
raise as much as they have historically, given returns in energy
Many of the survey respondents shared their belief that
as well as ESG concerns. It will be important to have a complete
this trend would continue thanks to demand resurgence. The
team that covers all disciplines to access capital as availability
International Energy Agency shows total demand is expected
is declining. "
to increase and slightly exceed 2019 levels by as soon as
He does not anticipate a quick return to eager lending.
2022. On the other side of the ledger, the changing political
" Banks are not lending as much capital as they have historically
climate, including the results of the U.S. elections last fall
so there is a focus on PDP assets, " Cochran describes. " There
and OPEC+ seemingly resuming its traditional role of
will have to be years where the industry shows capital discipline
managing world prices, point to the likelihood of tighter
before banks become more aggressive on lending. "
supply, IEA suggests.
energy value chain. "
Tailwater reports it has started the year strong, acquiring a
number of premier and strategically located assets in the first
quarter. The firm forges forward with optimism, but not
without caution. " We have been successful in securing assets
in 2021 because of our team's work going back to early
2020, " Cecere reflects. " Those valuations would not have won
the day a year ago, but we were patient and able to see them
through to completion. "

Adapting To Change

Unique Opportunities

The upstream sector has long faced increasing headwinds,
and capital flows into the sector have been on a downward

" No one, regardless of their tenure or life experience, had a
good waypoint for 2020, " offers Bryan Benoit, national managing
APRIL 2021 41

American Oil and Gas Reporter - April 2021

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