Post Oak plans Fund II launch by year end

The Houston-based firm has invested roughly 50% of its debut fund and expects to be fully committed in the next six to nine months, says managing director Frost Cochran.

Post Oak Energy Capital is expecting to launch the fundraising process for its next oil and gas-focused private equity fund before the end of 2013, according to Post Oak managing director and founding partner Frost Cochran.

The Houston-based firm will likely target between $400 million and $500 million for the fund, well north of the $200 million its debut fund collected in late 2011.

“Given the investment size that we focus on, which is $25 million to $75 million, our natural run rate is probably a $400 million or $500 million fund,” Cochran said. “The only reason we raised a $200 million fund was because it was the first formal fund we had raised.”

Post Oak aims to invest roughly 75 percent of its capital in traditional North American onshore oil and gas and the remaining 25 percent in services related to oil and gas production.

Last week, the firm completed its third investment from Fund I, backing oilfield services company Refinery Specialties. During 2012, the firm invested in Texas-based oil and gas exploration and production company Crown Oil Partners and Core Minerals Management, which focuses on the acquisition, development and management of oil and natural gas properties in Illinois.

Post Oak’s investment in Refinery Specialties brings Fund I to 50 percent invested. The firm expects to be fully committed in the next six to nine months, Cochran said.

On top of the $100 million Post Oak invested in the three deals, the firm brought in co-investors that contributed a combined $40 million of additional capital into the transactions. The co-investors included former investors that previously committed capital to Post Oak when the firm invested on a pledge fund basis.

“We have tremendous loyalty to those investors that supported us before we actually had a fund,” Cochran said. “We continue to make co-investments available to the partners who were long term supporters of us…and I think we’re going to continue to generate a fair amount of co-invest capacity.”

Post Oak was able to close its first fund in an innovative way, bringing on only one limited partner, the University of Texas Investment Management Company, to raise the whole fund.

The fundraise was another example of a general partner forming a customised relationship with a limited partner, coming just weeks after the Teachers’ Retirement System of Texas formed partnerships with Kohlberg Kravis Roberts and Apollo Global Management, committing a total of $3 billion to each firm.