Meet Brad Morse

Brad Morse

Brad Morse may be a third-generation energy professional, but he’s a pioneer in his own right. He grew up in Denver, the son and grandson of oil men, so he was always exposed to the industry. It wasn’t until his experience at Tulane University, however, that he focused on energy. He currently spends about 80% of his time on energy-related investments.

Tulane offered a direct route to his major in business law and finance, after which he worked for investment bank Houlihan Lokey in New York for a few years before joining Equity Group Invest­ments (EGI), Sam Zell’s private investment firm. After just slightly more than two years there, Morse has become a creative dealmaker, focusing on monitoring existing energy investments and evaluating new opportunities. He serves on the board of Wapiti Oil & Gas, Crystal Equity Energy and San Pedro Development, having led the latter’s $80 million recapitalization, and he helps manage EGI’s investment in Par Petroleum.

Morse is a three-time high school state tennis champion and still tries to fit in a game or two around evaluating investments. He also finds time to volunteer at a Chicago charter school and St. Louis HELP, an organization that refurbishes and distributes medical equipment for those without means or insurance.

In a recent interview, Morse reflected on the perspective he has gained in finance and energy.

Investor: When you started, what was the learning curve at EGI? What are some recent investments?

Morse: The learning curve has been steep. Early on I was helping Par Petroleum, which is one of our larger investments. More recently, I worked on a recapitalization of a South Texas nonop interest owner, San Pedro Development.

We had a previous investment in the operator BlackBrush that we sold. Through that investment we became familiar with their projects, and one of them was a drilling deal where San Pedro held an interest but had too much debt to participate. We liked the economics and were able to craft an interesting recapitalization solution where we put in some equity to pay down debt, right-size the capital structure and allow for drilling.

Investor: Much of your work with EGI follows this trend?

Morse: Yes, and I think we’re different than many larger funds. We don’t have their limitations, requirements or defined investment horizons. We have private, flexible, patient capital, and can lend deep expertise and resources to guide and support management teams.

Investor: Has your perspective changed in the past year?

Morse: Well, in just the time since I’ve joined EGI, oil has gone from $100/bbl down to $47/bbl today, so that changes one’s perspective in a huge way. When I speak with more experienced industry people, like my dad, they say they have been through four or five of these cycles. He has always told me that you make your deal when you buy it, and this is a good time to invest. Fortunately EGI has a lot of capital, and Sam is a contrarian investor who identifies good opportunities in this type of environment.

Investor: How has EGI weathered the price decline?

Morse: We’ve found some good distressed investment opportunities. As for our existing portfolio, we’ve had minimal impact. The industry is seeing a number of other investment funds that have to put additional equity into their portfolio companies, but most of our companies were structured in a way that didn’t put too much debt on the company.

Investor: What have you learned about yourself?

Morse: One area in which I think I’ve gotten better is in being better focused on all of the details, the financial models, but also in thinking more about what the relationship is going to be like a year after you close the deal.

Investor: You’ve mentioned Sam Zell a lot. Has he been one of your mentors in all of this?

Morse: Yes. I have learned a lot from Sam and he is involved in every investment, from the conception to the details. He has experienced so many of these cycles in all of his businesses and industries, and has a keen sense for what to do in any scenario.

Bill Pate, EGI’s co-president, who has worked for Sam for over 20 years, has also been a great mentor. For a young person like myself, I cannot think of a better place to learn exponentially. EGI is a flat organization where a young person gets the opportunity to do a lot.

Investor: Any other pieces of advice?

Morse: One important point for somebody who enters the business, or maybe even enters a more private equity investing role, is to go in every day and try to add value—having that weekly, if not daily, conversation with management teams and everybody from the junior engineer to the CEO.

Fostering all of those relationships really makes a difference, and I think a lot of the management teams we have invested with.