Oregon bets $100m on Warburg oil and gas effort

The Oregon Investment Council committed $100m to Warburg Pincus joint venture Sheridan Production Partners II, a re-up for the OIC, which committed $100m to SPP I in April 2007.

The Oregon Investment Council has committed $100 million to Sheridan Production Partners II, a Warburg Pincus joint venture fund that targeting $1.3 billion for investments in US oil and gas producing properties.

OIC committed $100 million to Sheridan’s first fund in April 2007. 
Sheridan was formed in 2006 through a 50-50 joint venture between Warburg Pincus and Sheridan chief executive officer Lisa Stewart, an oil industry veteran and former chief executive officer of exploration and production at oil and gas company El Paso.

Fund II will continue its predecessor fund’s strategy of investing directly in US oil and gas producing properties. The fund will target transactions between $100 million and $500 million, a pre-tax IRR in the “mid teens” and a net multiple of 2x invested capital.

Similar to SPP I, Fund II expects to issue debt and preferred equity securities to leverage its investment program. Sheridan expects to target 50 percent leverage.

General partners and “related entities” – including professionals from Warburg Pincus – will contribute a minimum of $50 million, or about 4 percent, to the fund.

Sheridan was expected to hold a first close for SPP II on or about 30 September. The firm was unavailable for comment at press time.

Investments in oil and gas have become increasingly popular recently. Last month, the $10.6 billion New Mexico Public Employees’ Retirement Association announced it was considering committing $20 million to EnerVest’s Energy Institutional Fund XII. The commitment would be the second energy-focused investment for the US pension since August, when the board approved a $25 million commitment to oil and gas-focused EnCap Investments’ Energy Capital Fund VIII.

In June, the Teacher Retirement System of Texas made a $50 million co-investment with Kohlberg Kravis Roberts in a partnership with Hilcorp. KKR pledged to invest up to $400 million to develop Texas oil and gas properties.
KKR has been raising an oil and gas properties fund called KKR Natural Resources, which had collected $257 million by the end of the second quarter.