EnCap Seeks $2.5B For Fund VIII

EnCap Investments LP has launched the fundraising process for its eighth fund, targeting $2.5 billion, David Miller, the co-founder of the firm, told Buyouts.

Buyouts had reported in November that that the Houston-based buyout shop was preparing the fundraising launch and looking for a placement agent, though firm executives at the time had not decided on a target. EnCap has since hired Park Hill Group, the placement agency owned by the Blackstone Group, to help it raise the fund.

EnCap, which targets upstream oil and gas investments, will try to raise the same amount it raised for its previous fund, EnCap Energy Capital Fund VII, which closed in 2007. The firm closed its sixth fund, EnCap Energy Capital Fund VI, at $1.5 billion in 2006.

The University of Texas Investment Management Company, the University of Virginia Investment Management Company and the California State Teachers Retirement System are among 160 investors that have supported previous EnCap funds.

Encap has a unique investment model compared to typical buyout shops. Rather than investing in a target company all at once, the firm provides its equity capital to portfolio companies incrementally, typically over three to five years, almost like an equity line of credit. Pine Brook Road Partners, a New York-based firm that targets energy and financial services, employs a similar strategy.

EnCap is also wrapping up fundraising for EnCap Energy Infrastructure Fund, which seeks to provide growth capital to companies involved with oil and natural gas gathering and processing, water handling and disposal, and carbon dioxide gathering and transportation. Firm executives were targeting $750 million for the fund and expect to close it at more than $600 million.

EnCap’s early funds have fared well, according to UTIMCO perormance data as of Nov. 30, 2009. EnCap Energy Capital Fund III-B LP, a $492 million fund raised in 1997, has a 1.88x investment multiple and a 21.20 percent internal rate of return, and EnCap Energy Capital Fund IV-B LP, a $613 million fund raised in 2001, has a 1.65x investment multiple and a 50.79 percent IRR, according to UTIMCO.