Ridgewood Energy closes third private equity fund at $1.9bn

September 2015 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

The private upstream oil and gas investment company Ridgewood Energy Corporation has closed its latest private equity fund, Ridgewood Energy Oil & Gas Fund III, L.P.

Ridgewood Energy’s Fund III is the Texas and New Jersey-based investment company’s largest fund to date, significantly exceeding its $1.5bn target and closing with total capital commitments of more than $1.9bn. The firm also manages substantial capital and commitments for investment in the deepwater Gulf of Mexico on behalf of Riverstone Holdings, LLC, which has invested in Ridgewood Energy’s funds since 2010.

Fund III is also a continuation of Ridgewood Energy’s investment program which is focused on finding and developing oil in the deepwater Gulf of Mexico for $20 per barrel or less. Fund III’s commitments were sourced from leading institutional investors, including state and corporate pension plans, university endowments and foundations, as well as a number of private wealth managers and family offices.

Fund III, which began marketing in November 2014, attracted around two-thirds of the limited partners that committed to its second fund, confirms Ridgewood Energy senior managing director Bob Gold. “We appreciate the very strong level of support for Fund III from both new and existing investors, which underscores Ridgewood’s success to date, as well as our robust project pipeline,” he said. “The reason the fundraising happened so quickly is because we got tremendous support from our Fund II investors. We set realistic closing dates and they responded.” Ridgewood Energy’s second fund closed at $1.1bn in early 2014, well in excess of its initial $750m target.

Managing private investment funds that drill and develop oil and gas projects in the US waters of the Gulf of Mexico, Ridgewood Energy and its partners focus on developing and producing new oil and gas reserves with multibillion dollar revenue potential. To this end, the firm deploys a team of energy-industry professionals who bring extensive operating, technical and geological expertise to all stages of the investment process, from project evaluation and selection through drilling, development and production.

According to Mr Gold, Fund III will typically invest between $50m to $100m to support oil drilling and production projects in the deep water off the Gulf of Mexico, generally in areas that yield 20 million to 70 million barrels of oil. The senior managing director also stated that the drop in oil prices has benefited Ridgewood as public companies have cut back on exploration and production activities and the cost of exploration activities has also fallen.

Additionally, notes Mr Gold, dislocation in the energy market has provided an attractive market for energy investors to sell their production operations when exiting an investment.

Among the investors to Fund III was the Teachers Retirement System of Texas with a $250m commitment.

“Our limited partners continue to recognise the outperformance potential of Ridgewood Energy’s deepwater Gulf of Mexico oil strategy, where we have the ability to find and develop significant oil reserves for a very low cost per barrel,” said Kenny Lang, Ridgewood Energy’s president and chief operating officer. “Our disciplined approach allows us to deliver strong returns across a range of oil price environments, and recent dislocation in the sector has created even more compelling opportunities for investment.”

For the duration of Fund III, Connecticut’s Eaton Partners served as placement agent and Vinson & Elkins provided counsel.

“The success of our strategy is driven by the discipline and rigor with which our outstanding team of industry professionals executes every phase of investment,” said Robert Swanson, Ridgewood Energy’s founder and chairman. “We look forward to continuing to deliver on Ridgewood’s deepwater oil strategy with Fund III.”

Fraser Tennant