VP, Peter Ray, Discussed NGP’s Investment Strategy for Portfolio Companies

NGP Vice President Peter Ray joined Weaver, East West Bank and Seaport Global for the Spring Energy Leadership Series in Fort Worth to discuss the state of the oil and gas private equity market and the general energy investment environment.

Mr. Ray discussed the macro commodity market and supportive backdrop of strong oil demand growth and base production declines creating massive needs for future investments. In addition, the lack of buy side participation from public E&P companies has generated unique acquisition opportunities for private equity.

• Global oil demand has been steady for over the past twenty years growing at approximately 1.3 million barrels per day.
• Emerging economies are driving overall oil demand growth and have more than offset the decline of developed economies oil demand.
• The U.S. has been the global driver of oil production growth and has added 1.3 million barrels per day of production since the beginning of 2017 with the Permian basin contributing more than 50% to overall oil production growth.
• The lack of global oil investments over the past three years has led to much better balance of global oil supply and demand and oil prices have responded accordingly.
• Within the U.S. approximately 50% of all horizontal drilling is taking place in only 15 counties.
• Growing oil, natural gas and NGL volumes in the U.S. will provide significant midstream investment opportunities especially with the effectively closed MLP market.
• E&P public companies need equity capital markets to support acquisitions and the public equity spigot has been shut off after material stock underperformance in 2017 relative to the S&P 500.
• Capital markets volatility benefits private equity by providing entry and exit opportunities throughout the life cycle of a portfolio company.
• Private equity has become a larger market participant and is filling the A&D gap with approximately 50% of the M&A market share, especially outside of the Permian Basin.
• NGP’s experience over the past 30 years has shown that property divestitures are a constant, but for different reasons at different times.

Founded in 1988, NGP is a private equity firm making direct equity investments in the energy sector with over $20 billion of cumulative equity commitments. The firm is recognized by the industry as setting a standard for portfolio company support, providing resources and creativity to assist the growth of its portfolio companies. NGP partners with “owner-managers” to build growth companies in the upstream, midstream and oilfield services sectors in North America.

The Energy Leadership Series focuses on providing industry insights, as well as addressing trends and challenges in an engaging, open discussion format.