Long-time oilfield-equipment private-equity investor First Reserve Corp. expects to invest a smaller percentage of its current $1.4-billion fund in the sector, than in the past. "We're still investing a lot of money in it but there are fewer opportunities," says Ben Guill, president of the firm which has offices in Houston, Denver and Greenwich, Conn. "There has been a lot of consolidation in the [oil-service] sector and there are fewer companies to buy." The reduced percentage is also a function of the size of the current fund. The $1.4 billion is as much as the firm has handled in its first five funds in its past 20 years of business. In the past, First Reserve has had approximately 70% of its investment funds in the oilfield-equipment sector and the rest in oil and gas production companies (15%) and other energy-sector businesses (15%). Of the $1.4 billion it is currently placing, Guill estimates approximately 40% will go into the oilfield-equipment sector. Some of the rest will go to oil and gas production companies ($200- to $400 million, or about the same percentage as in the past). Making up the difference will be investments in midstream and downstream firms, and in energy infrastucture or power-generation equipment companies. The current fund closed in April. The first investment was $300 million in Dallas-based Dresser Inc. as part of the $1.5-billion management buyout of the business from Halliburton Co. New York-based Odyssey Investment Partners LLC also participated in the buyout. Guill says the Dresser deal is First Reserve's largest investment in oil-service equipment ever, in dollar amount. The firm's specialty is investing in companies that grow through acquisition or sector consolidation. "Most industry sectors are down to four to five participants and one or two of them are dominant," he told an audience at the Andersen accounting and management-consulting firm's annual energy symposium in Houston recently. Among oil-service companies, the firm is presently invested in Dresser Inc. (privately held), contract-driller Pride International, Superior Energy Services, Cidra Corp. (privately held), Entech Industries (now part of the Dresser family), T-3 Energy Services (privately held with holdings in Cor-Val Inc. and Preferred Industries Inc.), First Energy Services, and Canadian firms Canadian Crude Separators and Destiny Resource Services. Among E&P companies, it has funds in Highland Energy, a U.K.-based producer; Berco Resources and Picus Petroleum, both based in the U.S.; and Aspect Energy, a Canadian firm. In the midstream/downstream sector, it has funds in Chicago Bridge & Iron and TransMontaigne Inc. In the coal business, it is invested in James River Coal and Australia Coal Ventures. -Nissa Darbonne

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