EnCap Investments has closed its seventh private equity fund on $2.5 billion (€1.7 billion), exceeding its initial $2 billion target.
The energy-focussed firm, based in Texas, did not use a placement agent for the fund, which was in the market for six months. The “vast majority” of the limited partners from EnCap’s sixth private equity fund, which closed on $1.5 billion in the summer of 2006, returned for the seventh vehicle. The new fund also added a significant number of new investors.
“Given that increase [in fund size] and given that we were coming back to the market relatively quickly, we were in a position where we needed to add some new investors,” said EnCap partner Marty Phillips.
The fund’s investment strategy will be a continuation of that of EnCap’s previous six funds. EnCap first seeks to understand the risks associated with the underlying reserves in any deal, Phillips said. The firm will generally target investments in the upstream sector of the oil and gas industry, as well as one or two midstream deals.
EnCap has already deployed $550 million from the fund to acquire nine portfolio companies. Among these, four companies are led by management teams that EnCap has backed before. EnCap prefers to back known management teams, Phillips said.
“Repeat teams are the lowest risk and the highest quality business we can do,” Phillips said. “We’ve already been through the trenches with those teams.”
Ultimately the fund will seek to invest in between 20 and 30 portfolio companies.
EnCap raised its first private equity fund in 1994. Before, from 1988 when the firm was founded until 1993, EnCap raised three mezzanine debt funds and three property acquisition funds.