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Avista, EnCap Wrap Up Energy Investment
Deal marks Avista's second oil-and-gas investment in only a week.
July 29, 2008
A private equity investor group comprised of Avista Capital Partners and EnCap said Tuesday that it had completed its $350 million investment in oil-and-gas exploration company Royal Offshore.
As part of the deal, Avista and EnCap, a 20-year-old Houston private equity firm focused on the energy sector, each invested $122.5 million in the target company while a management firm called Royal Group provided the remaining $105 million equity. In addition, the Royal Group will contribute more than 55 leases it holds in the Gulf of Mexico along with seismic data and other information to the venture.
Royal Offshore, a Corpus Christi, Texas-based company that has been operating in the Gulf of Mexico for more than 10 years, plans to use the equity financing to increase its exploration and development activity in the region over the next several years.
“We believe we have assembled an attractive portfolio of properties in the Gulf of Mexico in terms of exploration potential and scale,” said J. Scott Smith, chief executive of Royal Offshore, adding that the company was “excited to partner with Avista and EnCap, two of the most reputable and experienced energy private equity providers, as we explore and develop our Gulf of Mexico properties.”
For Avista the deal represents the New York private equity firm’s latest move to capitalize on the worldwide demand for oil and gas. Last week, the investment group committed $100 million to London oil-and-gas exploration company Hansa Hydrocarbons, which is seeking to tap into natural gas reserves in Northern Europe and the North Sea. It also appointed former Oceaneering International CEO John Huff to serve as an advisor on its energy investment practice.
According to Steven Webster, co-managing partner of Avista, “the offshore Gulf of Mexico represents an attractive opportunity given the ongoing asset transition in the area and that the short reserve lives can generate high returns and quick payouts.”
Gary Petersen, EnCap partner, said Smith and Bill Gregorcyk, another executive at the company, are proven operators and well-equipped to handle operating challenges in the Gulf of Mexico, which include dealing with massive storm systems like Hurricane Dolly’s devastating landfall in the region last week.
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