Natural resources fundraising has been strong so far this year, with $31bn in capital raised in 2015 YTD. This is the largest amount of capital raised by natural resources vehicles on record, surpassing the $30bn raised in 2013. This sum has been raised by only 14 funds, with an average fund size of $2.4bn. Collectively, the largest five funds to close this year have raised $23bn; all five have exceeded their initial target sizes. This is a vast improvement on last year’s fundraising effort, when $19bn was amassed by 31 funds with an average fund size of $720mn. Preqin’s Funds in Market online service indicates that there are currently 62 natural resources funds in market targeting more than $33bn.
The largest natural resources fund currently in market is Riverstone Global Energy and Power Fund VI. The vehicle is targeting $7.5bn in capital to invest in oil & gas, energy and power opportunities globally, with $1.5bn in commitments declared as of its first closing in February 2015. This sixth fund in the series is a direct follow-on from the previous Global Energy and Power Fund, which closed above its $6bn target at just over $7.7bn in 2013.
EnerVest Energy Institutional Fund XIV is a North America-focused vehicle targeting $2.5bn. This natural resources fund has a primary objective of making investments in upstream activities of the oil & gas industry in North America. If this fund reaches its target, it will surpass the amount raised by EnerVest’s largest fund, EnerVest Energy Institutional Fund XIII, which closed on $2bn in March 2013.
The largest fund with a primary geographic focus outside North America is Kerogen Energy Fund II. The fund, targeting $1.5bn, aims to invest in the international upstream oil & gas sectors in emerging markets around the world, through the provision of expansion and development capital to small- and mid-sized ’junior’ oil & gas companies. Kerogen Capital has raised just over $1bn previously, with an estimated $232mn in dry powder available from its first fund.
Average Fund Size
In comparison to 2014, the average capital raised by natural resources funds has seen a sharp increase, with fewer funds commanding more capital. This trend coincides with the continuing decline in the price of oil, suggesting that private equity firms are looking to invest in projects that are considered undervalued in anticipation of the resurgence in the price of oil.