Five Minutes with Andre Burba

Pine Brook managing director Andre Burba talks to PEI about the changing opportunity set for private equity investment in the US energy sector.

How has unconventional oil and gas changed the opportunity for energy-focused private equity investors?

We’re now entering a phase where these unconventional resources – shale plays and other “tight rocks” that require horizontal drilling and stimulation – are going to be commercialized and produced. This next phase is going to take a lot of capital. It takes a lot of dollars to drill these wells and convert the resource in the ground into production and reserves. The expertise within the management teams we invest in has to be not only good geo-science but good operational expertise. So that’s the big opportunity as we look ahead. 

Is the exit environment for these oil and gas assets also changing?

The types of exit opportunities that we have seen in the last couple years where you capture an asset, de-risk it and sell it very quickly, I think that opportunity is going to be less available going forward. We are bracing ourselves for having to hold these investments a little longer, for developing the resource that we capture rather than simply de-risking it and selling it and for having to invest more capital into the resource that we’re capturing. 

You also invest in oilfield services. How compelling is that opportunity?

We think that the opportunity in the oilfield service sector is quite attractive. The capital that’s going to drilling and producing these reserves is really a revenue opportunity for the oilfield service sector, so if you are building oilfield service companies that provide products and services that are being used in the development of these unconventional plays, you are likely to see substantial growth in these businesses. We made an investment in a company called Global Oilfield Services that manufactures the type of equipment that effectively accelerates production out of unconventional wells.  That investment was a big success for us and we are actively looking for similar opportunities.

How does that compare to oil and gas infrastructure opportunities?

That’s a little less of a focus for us but a very attractive opportunity exists there as well. As we are ramping up domestic production as a result of the development of these unconventional projects, you need to create additional infrastructure to transport and process those hydrocarbons. One of the most obvious opportunities out there is an opportunity to build additional pipeline infrastructure to move product out of these growing basins to markets. Opportunities to build oil and liquids pipelines are going to be quite attractive going forward and one of our focus areas is finding management teams that have the expertise in executing that kind of business plan.

What other predictions do you have for the private equity industry related to oil and gas investing?

Because the business is going through a transformation there is an opportunity for PE funds to take directional views with commodity prices. You will increasingly see private equity firms investing in themes, such as recovery of gas prices or collapse of oil prices for example. It’s not what we do, but I think you will see private equity firms making investments based on that thematic approach.