Originally Published in Forbes by Hana Askren and Chad Watt on October 11, 2018
Private equity portfolios are filled with energy businesses awaiting exits, but the pathways to achieve those exits remain constrained, according to several sector experts.
“There are a lot of processes out being run” for energy portfolio investments that are between three and five years old, says one industry banker. However, “it’s hard to get people to show up,” he explains, describing the sector as being in a “weird kind of holding pattern.”
Public buyers in energy services and upstream exploration and production (E&P) have largely been pushed to the sidelines. Energy services companies currently lack liquidity, and their shares are not trading at levels that support these types of deals, which has significantly reduced the pool of potential buyers.
At the same time, public E&P operators are focused on meeting investor demands for capital discipline. They are also looking for alternatives to outdated acquisition strategies that simply focus on adding land and reserves, according to another industry banker. This challenge has further limited exit options for private equity energy investments.
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