What question or industry issue are you most looking forward to hearing about at the World Energy Capital Assembly (WECA)?
The energy industry has been one of the primary drivers of the dramatic increase in global economic activity and human productivity for over 150 years, but it is in the early stages of a shift from being dominated by hydrocarbons toward other forms of energy. Given that, I am most interested in hearing about the factors affecting each of the speakers’ specific businesses and markets and considering how they are likely to interplay with one another and impact global energy supply and demand in the future. Because the speakers and attendees come from around the world and include senior executives, financiers, government officials and key service providers, I expect the dialog to range across a wide variety of issues that are likely to play out over the next few decades.
After several years of reduced investment, the industry is witnessing a mini renaissance with U.S $3.3 trillion committed in spending 2018-2025. As a provider of private equity capital to middle-market oil & gas companies in the United States, do you believe this mini renaissance is a sign of things to come in the industry?
I do expect investment in oil and gas companies and projects to continue to grow, albeit at a measured pace. The period of 2015 – 2017 demonstrated that with enough investment, production of oil can be grown substantially, even to the point of being oversupplied on a global basis. Now that worldwide demand has increased to match supply, and global inventories have been reduced to more normal levels in 2018, more investment is required to continue to grow the production of oil to meet expected demand in the future. But I think those investment decisions are being made much more cautiously due to the downturn in prices and industry activity we recently experienced.
You’ll be sitting on the ‘Capital Raising Trends’ panel at WECA. How does M&A activity in the US compare to M&A activity in oil and gas elsewhere and do you expect these trends to continue in to 2019 and beyond?
Because the U.S. oil & gas market is populated by thousands of individual companies, each with their own specific assets and strategy, M&A activity there tends to be much more active in terms of the number of transactions but typically smaller in terms of average transaction size. M&A activity in the U.S. has been driven by a few key trends in the past few years, including:
1. The financial distress of many oil & gas companies has forced some assets to be sold,
2. The Permian Basin has exploded in rig count, production and overall M&A activity as companies reposition themselves to focus on the enormous opportunity there, and
3. Many companies in the industry have chosen to divest of their “non-core” assets so they can raise capital to invest in their key properties. I expect M&A activity driven by financial distress is in its final stages for now in the U.S.; however, I do think the Permian Basin will continue to be a focus of companies looking to either gain access or grow their resources there, and I believe we will continue to see non-core assets sales. Additionally, I expect other areas, like the Powder River Basin and the Eagle Ford/Austin Chalk trend, to also be a growing focal point of M&A activity over the next few years due to their competitive economic returns and currently superior well-head pricing. I also expect to see more corporate-level consolidation in the U.S. as companies with assets in the same area combine to become more efficient and less vulnerable to a potential future downturn in activity.
What has been the greatest challenge you have faced in the founding and managing of Juniper Capital and how did you overcome the challenge?
I think starting any organization or business comes with new challenges at each stage of its development. One of the most challenging stages is the initial push to get it going and make the idea become “real” because it involves so many crucial decisions and each has ramifications on the organization for years to come. In our case, we had a number of initial challenges including selecting the right team members and discerning which investments present the most attractive risk-reward opportunity out of the hundreds we have reviewed over the past few years. One of our most difficult tests was fundraising for our first institutional fund while oil prices and public energy company valuations were falling by over 50% over the same period. From the beginning, we believe that we have an outstanding team, differentiated strategy and attractive opportunity set; however, the severely negative market backdrop when we began fundraising in early 2015 combined with the multitude of competing private equity firms, made raising that initial capital a substantial challenge. I think we overcame it by remaining consistent with our strategy and approach, and by demonstrating our model with now over a dozen investments, all of which align with our strategy and approach. And I think we have achieved this through maintaining a consistent team culture with alignment from top to bottom.
What are Juniper Capital’s ambitions for 2019?
My goals for 2019 are simple – we want to continue doing what we have been doing and continue to improve upon our process along the way. We will seek to identify new opportunities for equity investments in the lower-middle market oil & gas industry while developing our existing investments and potentially exiting some of our previous investments. And with each new closed or even failed investment process, we will learn from those successes or mistakes. By maintaining a consistent focus and team, we believe we can continue to identify attractive risk-adjusted return opportunities for Juniper and our partners.
About Edward Geiser:
Mr. Geiser is the founder and Managing Partner of Juniper Capital Advisors, Juniper Capital II and Juniper Capital III (collectively “Juniper”). Juniper, along with its affiliates, provides private equity capital to middle-market oil & gas companies in the United States and currently owns assets located in several of the primary oil producing areas of the U.S including the Permian, Powder River, DJ, and Eagle Ford. Juniper has raised over $1.2Bn in private capital since 2015 and is actively deploying that capital across its existing investments while seeking new investments that align with its investment mandate.
Prior to the establishment of Juniper Capital Advisors, Mr. Geiser was a Managing Director at Och-Ziff Capital Management where he oversaw Och-Ziff’s private investing activity in the upstream and midstream oil & gas industries in the U.S. for over five years. Also during his career, he worked at each of the Merrill Lynch and Morgan Stanley Investment Banking Groups in Houston, where he provided strategic advisory and capital markets services to companies involved in the energy industry. Mr. Geiser received a B.S. in Finance from Louisiana State University.
Edward will be presenting on the ‘Capital Raising Trends' panel at the 10th World Energy Capital Assembly (WECA).