Pine Brook’s Newman Sees Opportunities In Energy; Raising Second Fund

Newman, president and chief executive officer of Pine Brook, said he’s charting an “all-of-the-above” strategy of placing bets on oil exploration, infrastructure, development and production.

“This is a business that requires a huge amount of capital and it continues to need to rebuild itself to finance growth,” Newman, who co-founded the firm in 2006, said at the Buyouts Chicago conference, hosted by Buyouts.

An estimated $160 billion is needed over the next five years to help maintain a roughly million barrels per year increase in domestic oil production as the country weans itself off oil imported from the Middle East, he said. 

“The opportunity set is quite broad,” said Newman, who declined to discuss additional details of his fundraising efforts. A Sept. 12, 2012, filing with the Securities and Exchange Commission listed a $2 billion target for Pine Brook Capital Partners II LP.

Pine Brook raised $1.4 billion for its first fund and has closed 22 deals, only one of which was a classic buyout. Instead, Pine Brook provides start-up capital and growth equity to build up companies in the capital-intensive financial and energy industries.

While oil production remains an attractive business, it’s not without risk, Newman said. “You have to have enough shots on goal to have the odds go up for you,” he said. 

Investing in energy at the right phase of the cycle is also important. “If you invest at the wrong time, you can run out of capital,” he said.

Prices of commodities could also derail a deal. In the case of Energy Future Holdings, the largest buyout of all time, private equity firms bet on natural gas prices to continue to go up, but the reverse happened.

Among its more recent deals, Pine Brook co-led a $650 million line of equity financing deal for Brigham Resources LLC, a new exploration and production company based in Texas. Warburg Pincus and Yorktown Partners participated as co-investors.

Pine Brook Partners also led an equity investment of up to $400 million in Elevation Resources, an oil and gas exploration company based in Midland, Texas.

Newman has been a director or observer on the boards of more than 40 companies, including 18 public companies. Prior to his role at Pine Brook, he worked at Warburg Pincus for 22 years, including as vice chairman and senior advisor and as a senior member of the firm’s management and investment committees.