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Five Point Capital may deploy new midstream fund in two years

Firm: Five Point Capital

Fund: Five Point Capital Midstream Fund I and II LP

Target: $400 mln

Amount raised: $450 mln

Placement Agent: Mercury Capital Advisors

Legal counsel: Debevoise & Plimpton LLP

While Five Point has more time to play with, it’s expecting to close two to three platform deals in 2015 and possibly another two to three in 2016. It’s hitting the acquisition trail with its new fund at a good time, with expected drops in oil production creating opportunities to buy infrastructure assets at more appealing prices, executives at the firm said. 

“We expect to deploy the capital over a two-year period,” said David Capobianco, managing partner of Five Point. “That coincides with when we think the market will be dislocated. We couldn’t be more pleased with the timing.”

Five Point is weighing several deals around infrastructure for water used for hydraulic fracturing (aka fracking), as well other assets. “We’ll be buying infrastructure at lower volume levels,” Capobianco said. “We’ll do transactions that only work in current conditions and keep the upside.”

The firm has $451 million to work with via Five Point Capital Midstream Fund I and II LP, which is a combination of two funds. Fund I is a $27 million special purpose vehicle raised for co-investors in its deal with Blackstone Group’s  GSO Capital Partners to buy a 50 percent stake last March in Twin Eagle Resource Management LLC from Chesapeake Energy Corp and LS Power Group. Around the same time, Five Point raised $424 million for Five Point Capital Midstream Fund II.

Five Point expects to set up future co-investment vehicles.

“From time to time – particularly in larger deals – we’ll bring our investors into a vehicle that will invest alongside the main fund,” Capobianco said.

Overall, Five Point remains bullish about North American energy production despite the current downturn.

“This is a near- to intermediate-term dislocation amid a 10- to 20-year secular growth trend,” he said. “The shale plays in the U.S. have different break-even economics, but they will be developed and infrastructure will be developed. It’s just a question of how long it’ll take.”

Matthew Morrow, partner at Five Point Capital Partners, co-leads the firm with Capobianco. He joined Five Point after working as CEO of Iberdrola Energy Holdings, among other operating experience.

The firm has also funded Redwood Midstream Partners LLC with a $75 million equity commitment announced last February, along with its deal for Twin Eagle.