A pump jack draws oil from the ground near a hydraulic fracturing operation near Bowden, Alta.Jeff McIntosh/The Globe and Mail
A pair of banker brothers has started a private equity firm that aims to track an eventual recovery in energy markets.
Paul Colucci, who headed Dundee Securities' London office until last year, and Matt Colucci, previously at AltaCorp Capital Inc., are in the process of identifying investments and amassing capital for the firm, PillarFour Capital, as oil and gas markets sputter.
The focus is on the small- and mid-capitalization Canadian and international energy category, where a growing number of senior executives are looking to start new energy ventures after downsizings that have spread throughout the sector.
"That's kind of where our relationships and expertise lie," Paul Colucci said by phone from London, where he runs one of two PillarFour offices. The other is in Calgary.
"We think there's going to be good opportunity there, which is largely going to be overlooked by some of the bigger private equity houses that will be looking to deploy much bigger chunks of capital."
Meanwhile, more than three dozen Canadian companies have assets up for sale, which presents opportunity for new energy ventures.
Because of the downturn, and 18 months of market losses, traditional energy company investors, such as pension funds and mutual funds, have soured on the sector. That provides an opportunity for private equity to fill the void.
Indeed, the value of such investments in Canada climbed to $8.2-billion in the first nine months of 2015 from $7.5-billion in the same period in 2014 and $3-billion in 2013, according to the Canadian Venture Capital & Private Equity Association. PillarFour sees active Calgary-based energy investment firm ARC Financial as an example of what it is aspiring to, he said.
"There's going to be incredible investment opportunities over the next six to 36 months. I think the biggest question for everybody is, when does this thing actually bottom? If you're talking about investments that we're going to be targeting – investments that can actually weather a $30 or $20 [U.S. per barrel] oil environment and can come out the other side of this when it turns ... you're going to be well positioned."
Jeffrey Jones