EnCap Flatrock invests $350m equity in Lucid Energy II

The private equity firm, a joint venture between EnCap Investments and Flatrock Energy Advisor, is an existing investor in the midstream energy service provider.

EnCap Flatrock Midstream has committed $350 million in equity to midstream energy service provider Lucid Energy Group II.

The investment also included cash from Lucid II management team.

“As access to capital in public markets is increasingly constrained, EnCap Flatrock’s equity commitment to Lucid II provides Lucid with the ability to expand relationships and ensure upstream producers that Lucid has the financing necessary to develop new projects that will meet their needs,” EnCap Flatrock managing director Morriss Hurt said in a statement written to Private Equity International. This marks the second time it is partnering with Lucid, according to a separate statement.

Lucid operates a gas gathering system in the Midland Basin in Texas and a crude oil gathering system in Irion County, Texas, that has a capacity of 75,000 barrels per day, according to its website. Thanks to the EnCap Flatrock commitment, it is now pursuing opportunities in areas outside the Midland Basin, it said.

Lucid II will seek organic development projects and strategic acquisitions in production basins, the company said.

Lucid president and chief executive Mike Latchem also said in a statement that it is an exciting time in the business to be chasing new opportunities. “Our existing assets have performed at record volume levels in spite of the current commodity environment,” he added.

Established in 2008, EnCap Flatrock Midstream is a joint venture of EnCap Investments and Flatrock Energy Advisor that specialises in growth equity investments in the North American energy sector, according to PEI’s Research & Analytics division. EnCap Flatrock manages about $6 billion in assets.

It is currently investing its EFM Fund III, the firm said. EFM Fund III closed on $3.06 billion above the $2.25 billion target in May 2014, according to PEI Research.

Its investor base includes the California State Teachers’ Retirement System, which committed $60 million, the Florida State Board of Administration, which committed $50 million, New Mexico State Investment Council, which committed $25 million, the State of Wisconsin Investment Board, which committed $50 million, and the University of Texas Investment Management Co., which committed $75 million, according to PEI Research.

Lucid II’s predecessor, Lucid Energy Group, was also backed by EnCap Flatrock. Lucid’s assets include more than 700 miles of pipeline, multiple compressor stations, 345 million cubic feet per day of gas processing capacity, nitrogen rejection facilities, condensate stabilisation facilities and a crude oil gathering system, according to the company.

Locke Lord advised Lucid II. Thompson & Knight advised EnCap Flatrock.