Private-equity firm Lime Rock Management has raised $538 million for a new fund focused on acquiring assets in America’s oil patch.
The Westport, Conn.-based firm wrapped up Lime Rock Resources V LP, including a co-investment pool, as a shortage of capital in the upstream oil-and-gas sector and rising oil prices create opportunities for buyers, said Eric Mullins, chairman and chief executive of the firm’s Lime Rock Resources operating unit, which manages the fund.
“The amount of capital available for the sector has diminished over the last several years. Private-equity groups in general just have less access to capital [and] the public markets have pulled back as well," Mr. Mullins said. “But you still have quite a few properties that are coming to market for different reasons."
Oil prices have rebounded from a pandemic-induced slump to record lows two years ago, propelled by the economic recovery and more recently by Russia’s invasion of Ukraine. Rising crude prices are encouraging energy-focused private-equity firms to cash in by exiting their oldest investments, according to industry analysts. Meanwhile, debtholders who took over oil fields through bankruptcies in recent years also have new opportunities to sell, Mr. Mullins said.
Benchmark U.S. crude futures closed at $109.09 a barrel on Friday, up 43% from the start of the year and almost double the price of around $62 last August.
“Debtholders were just waiting for [oil] prices to improve so that they could sell some or all of those assets and get their money back," Mr. Mullins said. “I think part of the huge amount of deal activity that we saw toward the end of 2021 was driven by that."
Divestments by large energy companies are also creating opportunities for private-equity buyers, as producers shed noncore assets following consolidating mergers, Mr. Mullins said.
Lime Rock Resources has already invested about three quarters of its new fund, mostly by acquiring assets over the past six months or so, he added.
Private equity-backed and other privately held oil-and-gas producers sold $31.44 billion worth of assets in the U.S. across 66 deals last year, compared with $3.94 billion in asset sales across 32 transactions in 2020, according to data from energy-focused software and data provider Enverus.
Lime Rock Resources has financed more than $860 million, including debt, in investments across three deals through its new fund, and in January said it bought roughly 46,000 net acres in the Austin Chalk and Eagle Ford regions of Texas for $271.3 million and about 3,500 acres in North Dakota’s Williston Basin for $87.2 million.
Last July, Lime Rock Resources said it would pay $508 million for Delaware Basin oil fields in West Texas that were producing roughly 15,000 barrels a day.
Lime Rock Resources bought some of the assets from other private-equity firms and from owners who acquired their stakes through debt-to-equity conversions, Mr. Mullins said, declining to provide more details.
Formed in 2005, Lime Rock Resources has made at least 36 acquisitions and produces roughly 60,000 to 65,000 barrels of oil and equivalent natural gas daily across all its assets, Mr. Mullins said. Lime Rock Management also backs oil-and-gas companies and service providers to the clean-energy sector through its Lime Rock Partners and New Energy strategies.
Rising commodity prices, improved returns and the belief that natural gas remains important for the shift to clean energy is rekindling the interest of some investors in oil-and-gas-focused private-equity funds, industry consultants say. They add, however, that fundraising remains challenging for sector specialists such as Lime Rock Resources.
U.S. private-equity firms collected $12.94 billion across 35 oil-and-gas-focused funds last year, less than half the $28.11 billion they raised through 40 vehicles in 2020, according to data provider Preqin Ltd.
“Obviously, with all the geopolitical activity going on, people are beginning to look at oil and gas a little bit more strategically," Mr. Mullins said.
This story has been published from a wire agency feed without modifications to the text
