Private Equity in Oil and Gas – the Guardian Angel of small- and mid-cap operators?
Thomas Wagenhofer, Founder and Partner of Giant Capital, a global energy investor based in the City of London, explains how specialised early stage investment in undervalued oil and gas companies can quadruple the value of smaller operators, and mitigate the risk to bigger lenders later on.
There are a variety of ways in which capital can be raised – through brokers and lenders for example – but companies such as Giant concentrate on early investment in what they consider to be promising but undervalued operators and start-up exploration companies. Often these companies are started with “family money” – low hanging fruit from their own funds, enough to take the step of showing an interest in an asset, or doing the G&G work necessary to justify taking the project further. It is at this stage that financial investment is hard to find – the company does not have enough history, or the asset is difficult to justify to major lenders who want a higher level of security for their investment. This is where “Angel” investors step in – the first “real money”.
Giant Capital is unusual in that their ability to manage private equity investment is backed up by sound technical knowledge. “The London market is distinctly lacking in educated private investment in Oil and Gas” Thomas said. “We choose to “risk” and quantify reserves and resources based on a bespoke assessment methodology rather than a generic formula, and we consider this to be the distinguishing factor of the service we offer to small companies – and is one of the defining elements that contributes to the substantial increase in the value of the companies we invest in”.
Thomas Wagenhofer has over 15 years of experience in technical and commercial evaluations in the upstream oil and gas industry. He is a reservoir engineer by education and practice and has hands-on work experience in most of the world’s prolific hydrocarbon producing regions. He was co-founder, with Andrew Sinclair, and Managing Director of Macquarie Bank’s Energy Capital business in London until 2011. Prior to Macquarie he was Vice President at Ryder Scott Company in Houston where he specialized in reserves studies and reservoir performance optimization.