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Against All Odds Resource Investment Is At Record Highs

Against All Odds Resource Investment Is At Record Highs

Many investors will be shocked at a new report this week. Showing that investment in the downtrodden natural resources sector is actually hitting record highs right now.

Research firm Preqin, as covered by Law360, reported that resource-focused private equity funds have raised an incredible $28 billion so far in 2015.

That lofty figure puts resource investors on pace to eclipse -- and likely crush -- the $30 billion that was raised during full-year 2013. Which currently stands as the highest-ever year for natural resource investment. Related: EIA Capitulates Under Cover Of Darkness

The interesting thing is that this massive pool of capital is coming from an increasingly concentrated group of investors. With this year's $28 billion figure being raised by just 13 funds.

That's well below the 32 funds that closed in 2014, and down significantly from the 42 groups that raised cash for resources investment during 2013.

Much of this year's cash is being earmarked for the North American oil and gas sector. Led by Houston's EnCap Energy, which raised $6.5 billion for energy-focused investments. Related: US Shale: How Smoke And Mirrors Could Cost Investors Millions

Not far behind came NGP Energy Capital Management, which closed on a $5.3 billion fund for resources. And Blackstone Group, which raised $4.9 billion.

Preqin in fact reports that all of those massive capital pools may be eclipsed later this year by energy investment giants Riverstone Holdings. With that group reportedly being near to closing a $7.5 billion fund.

All of which suggests that money is still out there for resource projects. And a lot of it. It just comes down to having the right projects and development team. Related: Benefits Of Geothermal Power Outweigh The Risks

On that front, big investors like the ones above appear to be favoring start-ups over existing companies. With groups like EnCap having recently funded start-ups such as American Resource Development LLC -- a company composed of top former executives from a number of large E&Ps, which is seeking acquisitions in the Permian Basin of Texas.

In any case, the news should be encouraging for resource investors during these leaner times. There's still a lot of capital betting on this left-behind sector.

Here's to capital gains,

Dave Forest

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  • SpongeBob on August 04 2015 said:
    @Dave Forest: Interesting article! Does not this allow for the conclusion that investors are following the principle "buy low - sell high"? I.e. investment founds are buying cheap oil assets from other shareholders "betting" on higher oil prices in the near or mid future? Or are we talking about fresh capital funding for new oil projects, as indicated in the article? This would conclude that the drilling capital expenditures form oil companies has increased. At least this is not what I have seen from the mayor oil companies..
    I am just trying to understand, whether this investments are acquisitions of shares from other shareholders. And if so to which extend. And to which extend it is fresh capital influx for the oil industry to complete cash negative projects (valued with the current oil price)?
    Best regards, Carl

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