Calgary-based private equity Waterous Energy Fund LP has closed its debut fund and raised C$1.4 billion ($1 billion) in committed capital, exceeding an original target of C$1 billion.
The fund was launched last year by CEO Adam Waterous, a former investment banker at Bank of Nova Scotia.
The company’s strategy is to invest up to C$500 million in late-stage control deals involving mature North American oil and gas companies with liquids-weighted assets, but which have run into challenges.
“We believe the North American oil and gas sector presents an opportunity-rich environment for our value-based approach to oil and gas investing, taking advantage of 'special situations' to generate attractive risk-adjusted returns for our partners,” the CEO said.
The fund is “making later-stage control equity investments in established North American oil and gas companies with liquids-weighted, top quality assets, but whose corporate entities have run into challenges. These special situations typically require recapitalizing, restructuring, and repositioning to unlock the assets' underlying values.”
Investments being targeted typically require between C$300 million and C$500 million of equity capital, he said.
After it was formed last year, Waterous invested in Calgary-based producers Strath Resources Ltd. and Northern Blizzard Resources Inc. Northern Blizzard then changed its name to Cona Resources Ltd. The new fund already has invested more than 60% of its capital in Strath and Cona.
Strath develops oil and gas properties in the Kakwa area of Alberta’s Deep Basin, including the Montney formation. Last month Strath paid C$340 million, half in cash supplied by Waterous, and half in company shares, to acquire Paramount Resources Ltd.’s assets in the Resthaven/Jayar area of the Kakwa region. Production is estimated at 5,300 boe/d, 36% weighted to liquids.
The acquisition, directly offsetting Strath’s existing Kakwa property, includes 152 net sections of land, including 75 net with Montney rights, along with 62 MMcf/d of processing capacity at the Pembina 8-11 and Cenovus 1-36 Resthaven gas plants. At closing, expected this month, Paramount would own 15.6% of Strath. Strath also is appointing Paramount CEO Jim Riddell to its board.
Cona, a heavy oil producer in Saskatchewan, agreed in March to take the company private. Waterous, with shareholder approval, paid C$2.55/share, a 31% premium over Cona’s 20-day volume-weighted average price as of March 6. Through the offer, Waterous acquired a 67% ownership in Cona and is the sole shareholder.