The energy sector continued to expand in late 2005 and throughout 2006, adding a number of spin-outs and new company names to the roster of oil and gas players. The commodity-price roller-coaster did little to scare off industry veterans, and strong investor interest, coupled with increasing consumer energy needs, prompted plenty of start-ups and service extensions last year.

"2006 was a great year to launch a new company in the oil patch because of the amount of money available," says Glynn Roberts, president of Houston-based E&P Northstar Interests Inc. "Lots of talented people were convinced to give it a try or, in some cases, give it another try. Well-heeled talent chasing deals is good for the industry."

But not all was rosy in 2006. "Costs were high, management teams were expensive, and acquisitions were difficult with high seller price expectations," says Thomas Glanville, managing partner of Houston-based private-equity firm Eschelon Energy Partners. This year, he expects the beginning of consolidation among start-up teams, with stronger management teams happily snapping up the assets of those with less-than-stellar records or an inability to grow production.

"These start-ups will get capital. The others will not or [will get it] at such a high price that they will sell out or merge."

Roberts adds, "In virtually all cases, private equity flows to prior successes so guys who get funded already have track records. Some of those successes are within someone else's oil company, but they have proven to the money guys that they 'get it.' For these teams to make it in the current market environment, they'll have to stick to the chosen plan and not get impatient."

This year, Roberts, whose Northstar operates in the Gulf of Mexico, expects investment dollars to avoid the Gulf. "Call the darlings long-life acreage positions, low-risk resource plays or whatever, but the Gulf of Mexico will continue to be out of favor and onshore resource plays will be in."

Some 2006 E&P start-ups include the following:

• Denver-based Quantum Resources LP was launched by

Aspect Energy LLC and former executives of Berry Petroleum, Bill Barrett Corp., Burlington Resources and Anadarko Petroleum Corp.

• Mark Doering and others restarted Classic Hydrocarbons Inc. to focus on oil and gas in East Texas and North Louisiana.

• Celero Energy Co. LP, Fort Worth, was restarted by former Celero Energy Partners LP executives.

• Ex-Mission Resources Corp. executives started Houston-based Milagro Exploration to focus primarily onshore the Gulf Coast.

• Houston-based Cobalt International Energy LP was launched for E&P in the deepwater Gulf of Mexico and elsewhere by former Unocal Corp., Mobil Corp., Ocean Energy Inc. and BP executives.

• Augustus Energy Partners LLC, Billings, Montana, was formed by former United States Exploration Inc. executives to focus primarily in the Rockies and Midcontinent and on the Gulf Coast.

• Houston-based Phoenix Exploration Co. was started by ex-Gryphon Exploration Co. management to focus on the Gulf Coast and Gulf of Mexico.

• Broad Oak Energy Inc., Dallas, was formed by former Pioneer Natural Resources and Camden Resources executives to focus on tight gas on the Texas Gulf Coast, and in North Louisiana and New Mexico.

• Nabors Industries Ltd. launched NFR Energy LLC to invest in oil and gas exploitation worldwide.

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