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Bloomberg
EnCap Investments LP plans to use a $6 billion war chest to drill oil and natural gas wells, now that dwindling investor interest has made it tougher for private equity players to offload shale assets.
The energy-focussed firm sees “robust drilling economics†in many parts of the US and is running 23 rigs across its portfolio companies, according to Kyle Kafka, a partner at EnCap.
“In today’s $55 or $60 oil price environment, we actually see lots of good opportunities to go make an equity-type rate of return through the drill bit,†Kafka said at the Independent Petroleum Association of America’s Private Capital Conference in Houston.
Private equity firms poured money into the shale industry after the oil-price crash that began in 2014.
Many had the intention of buying up leases, drilling a few wells and then flipping them to a larger buyer for profit. That model has dried up in the past two years as investors soured on the sector and punished companies for making overpriced acquisitions.
“There’s no capital to go buy assets. Sellers of assets don’t want to sell their companies at these low valuations,†Kafka said.