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(Jeff McIntosh)
(Jeff McIntosh)

Calgary energy startup secures private equity backing Add to ...

With oil hovering around $80 (U.S.), it certainly isn’t easy for smaller energy players to raise money in public markets. The private market, however, is a completely different story

On Thursday, Petrus Resources, the new baby of Peyto Exploration founder Don Gray, announced that private equity player Natural Gas Partners is writing a cheque for between $60- and $75-million to help fund a new acquisition.

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“We were told by some that the markets were not open for raising capital,” Mr. Gray said in a statement. “I think the markets have just become far more selective and this is a good thing for Petrus.”

For those who don’t know the name, NGP is an American private equity firm with about $10-billion (U.S.) of committed capital. That they are investing again in Alberta appears to highlight a growing trend of U.S. interest in Western Canada. Just recently, Warburg Pincus LLC and Kayne Anderson Capital Advisors LP invested an undisclosed amount of money into West Valley Energy Corp.

NGP didn’t just step up out of the blue – there’s a history here. Petrus chief executive officer Kevin Adair was a co-founder of Spry Energy Ltd., and NGP was one of Spry’s backers. (Spry was ultimately sold to Whitecap Resources Inc.)

What’s interesting about the latest transaction is that Petrus raised $43-million in a private placement just last year at $2 per share. At that time the firm had a strong natural gas focus, and since then the natural gas outlook has only gotten worse. The new financing was priced at $1.75 per share, and this time around Petrus is making sure people know that it is diversifying into oil and natural gas liquids.

The assets being acquired are located in the Peace River area of Alberta, with current production of 1,600 barrels of oil equivalent per day – 50 per cent of which is oil. Following this deal, Petrus’ production will sit at 2,650 boe/day, 41 per cent of which will be oil and natural gas liquids.

The latest financing is worth up to $90-million. NGP will invest a maximum of $75-million, Mr. Gray will invest $5-million, and the rest will be open to existing shareholders and “certain other investors” – or friends, as we like to say.

RBC Dominion Securities acted as lead agent for the private placement.

Follow on Twitter: @timkiladze

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