Inside Pine Brook’s Energy Investing

Energy is a specialty of private equity firm Pine Brook Partners.

Andre Burba, a managing director at the firm, spoke with Privcap as part of a three-part panel discussion featured in our special report, The Energy Opportunity. He discusses Pine Brook’s recent investment involving the U.S. transportation landscape and the Canadian heavy oil business, and how the firm goes about finding management teams that gel with their macro point of view.

Pine Brook recently completed an investment in Canada that made them start thinking about the implications of changes in the U.S. transportation landscape on the Canadian heavy oil business, and how those changes would lead to investment opportunities. Burba cited the Keystone XL Pipeline as an example, questioning what it will do to Canadian heavy oil prices.

“We concluded that, long-term, we think those bottlenecks will be solved. And so we started looking for opportunities in the area where our capital could make a difference,” Burba says. Pine Brook found a management team that had a micro opportunity to capture small-scale thermo projects in Saskatchewan, and put them in business with a $250M line of equity.

The pool of people well-versed in energy management techniques, who are able to make challenging plays work, is largest in the U.S., Burba says. The transfer of technological techniques from the U.S. to other countries has been slow, with the only opportunities in this unconventional area in Pine Brook’s portfolio happening in South America and Canada, he says.

Burba says that management teams are a scarce resource in the business, but that “the types of management teams that we would be excited to back tend to gravitate towards private equity firms that are in the business permanently, rather than transitioning in and out of the sector.”

“What we look to do is try to marry a very talented management team with some aspect of our macro thinking,” says Burba, in reference to Pine Brook’s energy investment style. “We spend a lot of time thinking about where the industry’s going, the implications of what we’re seeing in the business.

As far as skillsets they look for within management teams, Burba says Pine Brook looks for competencies that are married well to the business plan. They parse out the exploration and production sector into roughly six different business plans from prospect generation to development.

When Pine Brook does find a management team with the same view on where some aspect of the industry’s going “that a bull’s eye,” he says.