Over the past decade, there has been an increase in private equity investment in the energy industry. Investors are attracted to the large size of the energy market, variety of investment opportunities along the energy production value chain, and potential for long-term growth. A significant amount of capital is required to meet global demands in the growing energy industry. Private equity firms have been eager to help meet those demands and take advantage of the opportunities within the sector. As investments in the energy industry have increased, initial public offerings have grown dramatically over the past few years, as well.
For example, last month, one of the larger energy-focused investors, Riverstone Holdings LLC (Riverstone), went public in order to establish more permanent capital for the firm. To date, Riverstone has received strong demand from buyers for the minimum $1.1 billion value it is looking to raise in an initial public offering.
Founded in 2000 by Pierre Lapeyre and David Leuschen, Riverstone has raised about $25 billion of equity and has enjoyed a net overall rate of return of 20 percent. The company held the largest U.S. energy-focused capital commitment during the first nine months of 2012 with its $3 billion fund.
While Riverstone awaits the outcome of its IPO, the equity firm recently announced its plan to invest up to $300 million in Carrier Energy Partners LLC (Carrier). With offices in Texas, Carrier is dedicated to the acquisition and use of upstream oil and gas assets. Carrier is focused on forming a range of partnerships with operators in North America that are developing unconventional and conventional reservoirs. Together, Riverstone and Carrier will organize a non-operated oil and gas acquisition approach.
Oil and gas has long been recognized as a capital intensive industry. However, new technological developments have driven the industry forward. In addition, new discoveries in North America have led to significant increases in oil and gas extraction, capturing the attention of investors interested in profiting from this growing sector. In order to support the increase in oil production, transportation, processing and delivery, infrastructure needs will become more prevalent.