67 WALL STREET, New York - September 29, 2012 - The Wall Street Transcript has just published its Investing in Energy and Other Strategies Report offering a timely market review for serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Investing in Energy - North American Shale Development - Investing in Technology - Oil and Gas - E&P - Value Investing
Companies include: Linn Energy, LLC (LINE), Southwestern Energy Co. (SWN), Goldman Sachs Group Inc. (GS) and many others.
In the following excerpt from the Investing in Energy Report, a leading private equity fund manager discusses the economic basis for successful energy sector investing:
TWST: Please tell us about Quantum Energy Partners.
Mr. VanLoh: Quantum Energy Partners has been around since 1998. I actually cofounded the firm almost 15 years ago. We are an energy-focused private equity firm. Our bread and butter is upstream oil and gas. We also do midstream. We have a pretty active power practice as well, and more recently we've gotten into the oilfield service sector. So there are four different kind of verticals of the energy space that we invest in, with upstream being our most active area. We have about $6.5 billion of capital under management focused on investments in the $200 million- to $500 million-size range.
I think we are a little unique from most of the players in this space in the sense that about half of our senior team here are actually professionals who came out of industry as opposed to professionals who came out of Wall Street. We have a number of technical and operating partners here that have run energy companies, either their own or big divisions for large public companies, and they are very technically steeped in the petroleum engineering, geology and geophysical disciplines. That gives us much more of a knowledgeable industry-insider perspective on investing in the space as opposed to coming in purely from a financial perspective.
Additionally, we typically invest in a lot fewer companies per fund, but make larger, more significant commitments, and then really work with the companies as partners as opposed to just financial sponsors to really build the companies into substantial enterprises, and either take them public or sell them to a public company.
We have been pretty involved in innovating within the energy space. We did the first-ever upstream MLP back in 2006. We took a company public called Linn Energy (LINE), and it was the first of its kind. It started a new asset class as far as public companies go. Linn has gone on to be a very successful company. I think they have a $14 billion enterprise value today. So we have done three of those.
We are based in Houston, the capital of the U.S. energy sector, and we have a very active presence throughout North America. We've got a portfolio of companies in almost every major basin in the U.S. and Canada, have some activity over in Eastern Europe as well as Kurdistan over in the Middle East, but principally we are a North American-focused investor.
TWST: Why did you choose the private equity route rather than another type of investment approach?
Mr. VanLoh: I started on Wall Street. I was with Kidder, Peabody back in the early 1990s in the energy investment banking group. I was doing M&A deals and capital raisings and stuff for upstream and midstream companies. I left Kidder in 1994 and started my own boutique investment bank helping private companies access private equity, and of course, back in early 1990s, there was not a lot of private equity for energy at all. I think there were six investors in the whole country that would put money into upstream oil and gas companies from a private equity standpoint. I wanted to be involved in starting and building businesses, and as I started representing these private companies in private placements and reinvesting most of my fees back into these companies. I fell in love with principal investing. I decided that was what I wanted to do.
We built a nice little track record from 1994 to 1998, taking small pieces of deals that we were raising money for, and in about four or five years we were able to parley that track record into raising our own fund in 1998. Working with entrepreneurs is exhilarating. It doesn't feel like it's work. You create things and build companies, and it's a lot more exciting than the transactional side of the business to me.
TWST: When you are looking at potential investments, what are the most important factors you evaluate? What do you look at and how do you identify them?
For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.