Wednesday, July 15, 2015

Investors Who Got The "Commodity Supercycle" Wrong

Incredible WSJ story about private equity firm "First Reserve":

First Reserve earlier this year told investors that the roughly $700 million of their cash that it invested in CHC [helicopter transport to oil rigs] in 2008 was valued at about $56 million at the end of 2014, according to people familiar with the correspondence. [...]

Other First Reserve deals have fared similarly. The value of its stake in Midstates Petroleum Co., an owner of Oklahoma drilling fields, is down about 88% since last summer. The nearly $1 billion it invested in energy producer Sabine Oil & Gas Corp. was valued at year-end 2014 at about $75 million and is at risk of being wiped out as the company negotiates with creditors after missing debt payments. [...]

Committing to the firm’s new fund “wasn’t a slam-dunk for us,” said Gary Bruebaker, chief investment officer of the Washington State Investment Board. But after quizzing First Reserve’s executives on its missteps, the pension board agreed to commit $400 million to the latest fund. “I’m certainly not writing off First Reserve,”
Pretty amazing. Seems like this joins other recent energy/commodity funds like Mount Kellett (invested in SD, EXXI, WPX, GULTU) and Casablanca (big bet on CLF).

Notice that the First Reserve claim to fame was investing in the precursor to NOV, making $270 million on a $10 million dollar investment, and that subsequent funds have raised billions of dollars.

1 comment:

Anonymous said...

Better to be lucky than good