Post Oak eyes $200m for debut oil and gas fund

The firm, founded by energy industry veteran Frost Cochran, is moving from a pledge fund structure to a more traditional private equity fund.

Post Oak Energy Capital, formed in 2006, is gearing up to raise its debut fund that is expected to target $200 million for investments in oil and gas production and development, oil field services and some power and infrastructure.

Post Oak has operated as a pledge fund since its formation with a group of investors, according to the firm’s founder and chief executive officer Frost Cochran. Cochran declined to name the investors.

While most of the term details have not been ironed out on the fund, Post Oak anticipates sharing 100 percent of transaction fees with LPs, Cochran said.

The firm has detected growing appetite on the part of potential limited partners for exposure to the “upstream” oil and gas space, and decided to raise a fund from external investors. Post Oak hired former AIG Investments managing director Chris Casey as chief operating officer to run the fundraising strategy.

The expected returns are good, there's less competition.

Chris Casey

“Some early conversations we’ve had have been very heartening,” Casey told PEO during an interview Thursday. “This is an area people want to focus on. The expected returns are good, there’s less competition, the fund size we’re looking to raise is only $200 million.”

Post Oak targets opportunities in the mid-market, and chases deals that bigger firms moving into the space don’t go after.

Some more “generalist” firms have sought to partner with Post Oak on deals, Cochran said. “We haven’t seen them take deal flow away from us. I’m sure as they develop their own skills in the space, they’ll eventually be in our faces to some extent,” he said.

Prior to founding Post Oak, Cochran served as president of Capital C Energy, a company backed by Carlyle/Riverstone Global Energy and Power Fund II. Capital C held operating interests in oil and gas properties.

TPG recently bought $300 million of preferred equity in Copano Energy, a publicly traded natural gas pipeline and process business in Houston. In February, Kohlberg Kravis Roberts inked a joint venture with an oil and gas company to jointly invest in the sector. The firm also is marketing a $900 million fund devoted to natural gas opportunities.

Highland Capital Management is partnering with commodities investor PetroCap to raise a $200 million fund for oil and gas investments. The fund, called Falcon E&P Opportunities Fund, has a $300 million hard cap and will focus on investments in domestic, onshore oil and natural gas projects that have current production and cash flow.