Investor Lawyers Blog
On July 16, 2017, the Wall Street Journal published an article – From $2 Billion to Zero: A Private-Equity Fund Goes Bust in the Oil Patch – discussing the financial distress besetting Houston based EnerVest Ltd. (“EnerVest”), a private equity firm focused on energy investments. Essentially, the article discussed how falling oil prices (to a then current price of $45 per barrel of crude) had worked against the fund managers at EnerVest, who had borrowed heavily to invest in oil and gas wells before the recent collapse in energy prices.
According to recent reports, several of EverVest’s energy funds employed leverage to purchase oil and gas wells when crude process were much higher. As a result, investors in those funds will undoubtedly suffer significant losses on their investments. Further, recent reports have suggested that EnerVest fund managers have engaged in discussions to recapitalize or otherwise sell assets (presumably at firesale prices) from the $1.5 billion EnerVest Energy Institutional Fund XII, which closed in 2010, as well as the $2 billion EnerVest Institutional Fund XIII, which closed in 2013.
In the way of brief background, EnerVest is a private-equity firm that focuses on energy investments, claiming to operate more U.S. oil and gas wells than any other company operating in that space. EnerVest began raising investor capital in 2013 when oil and gas was trading at an average price of $90 per barrel; since that time, energy prices have collapsed, with crude currently trading around $50 per barrel (as of October 2017).