Last week I had the opportunity to interview a major figure in the oil industry at the LAVCA Colombia Forum in Bogota – before targeting Colombia to found oil & gas (O&G) exploration company Vetra Energia, Humberto Calderon Berti was head of OPEC and of Venezuela’s PDVSA, and has also held multiple cabinet posts in Venezuela. Earlier this year, Vetra was acquired by LAVCA member firms Capital International and Acon Investments, representing one of the larger O&G sector deals in the region in 2013.
At the Colombia Forum, Calderon Berti shared the stage with Mauricio Salgar of Advent International; this week the WSJ reported that Advent is taking a minority stake in Colombia’s Ocensa oil pipeline for US$1.1b.
Across Latin America, and notably in Brazil and Colombia, private equity investors are taking advantage of expanding opportunities in the oil & gas industry. And global institutional investors are bullish on the sector, according to the results of the annual Coller Capital/LAVCA LP survey published in September. Oil & gas ranked third among attractive sectors for investment in the region, with consumer/retail and financial services occupying the top two spots.
Investment strategies focus on three plays – exploration and production, infrastructure, and services – with local, pan-regional and global firms taking part.
Colombian managers have been particularly active in O&G, with both sector-dedicated funds and opportunistic deals closing. The third O&G panelist in Bogota was Eduardo Elejalde, former Chairman of LAVCA and the Founder of a hydrocarbons fund which has been investing in E&P projects in Colombia since 2005.
But sector agnostic funds in Colombia have also been active – Altra Investment’s portfolio includes oil services company Tiger, Tribeca invested in E&P company Petrolatina, and earlier this year Linzor backed R2 Solutions, an oilfield service company. Southern Cross Group backed Estrella International Energy Services in 2011, an O&G services company active in Colombia, the Andean region and Argentina; this year Estrella further expanded into Colombia with the acquisition San Antonio International.
Anecdotal reports point to some of the world’s largest private equity O&G deal makers making trips to Colombia in 2013, but some of these same players have been active in Brazil for several years.
In 2010, First Reserve committed US$500m to Barra Energia, an independent O&G exploration company based in Rio de Janeiro, and Riverstone provided another US$500m in 2011. EIG Global Energy Partners has also been active in Brazil, targeting infrastructure plays with a US$220m stake in a Latin America’s largest natural gas pipeline between Brazil and Bolivia in 2012. Most recently EIG took a majority stake in Eike Batista’s logistics platform, LLX.
Local investors are also taking advantage of the need for major investment in O&G infrastructure in Brazil. Earlier this year BTG Pactual closed on over US$1b for an infrastructure fund which is prioritizing opportunities related to O&G. Another Brazil PE investor active in this space is Modal Private Equity, which manages a dedicated O&G fund investing in services and infrastructure, closed in 2010. Modal joined LAVCA this year and is aiming to raise money internationally for an additional sector-focused fund.
Other LAVCA member firms with O&G deals in Brazil include Darby Overseas (investing through their Brazilian infrastructure mezzanine fund), and Capital International, which backed Constellation QGOG, an onshore drilling services company in 2010, and then injected additional capital in the company this year.