EnCap to raise $1bn midstream oil and gas fund

The fund will seek to invest in businesses that gather, process, store and transmit oil and gas products. Its previous funds have been focused on the upstream oil and gas sector.

Energy-focused private equity firm EnCap Investments is planning its first foray into the midstream oil and gas sector in the form of a $1 billion midstream oil and gas infrastructure fund, according to EnCap partner and co-founder Gary Petersen.

Midstream infrastructure:
poised for investment

Speaking to delegates gathered at the California Infrastructure Summit in Anaheim, Petersen defined the midstream oil and gas sector as businesses that gather, process, store and transmit oil and gas products.

Petersen cited the sizable stock of existing assets as an attractive apsect of the midstream market, estimating that “the existing infrastructure value is over $1 trillion currently”.

While bullish on the sector overall, though, Petersen was less optimistic on prospects for liquid natural gas in the US – a method of delivering natural gas (LNG) in a liquid as opposed to a gaseous state using specialised vessels, pipelines and railway tankers.

“We don’t need any LNG right now. We won’t need it for another ten years,” Petersen said.

The fund will chart a new direction for the Texas-based firm, which has focused its investments on the upstream part of the oil and gas sector. A year ago, it closed its seventh upstream oil and gas private equity fund on $2.5 billion, exceeding its $2 billion target.

EnCap closed its first private equity fund in 1994 on $104 million. Between 1988, when the firm was founded, and 1993, EnCap raised three mezzanine debt funds and three property acquisition funds.

The firm won’t be alone in investing in midstream oil and gas infrastructure assets. California-based American Infrastructure MLP Fund also focuses on businesses that transport natural resources in the oil and gas sector. Houston-based Intervale Capital and SCF Partners also invest in the oil and gas sector.