Seize the day—especially today’s energy values, advises private-equity firm Denham Capital Management LP.

Launched five years ago, Denham is putting to work its $2-billion Fund V; overall invested and committed capital tops $4.3 billion. The company invests globally in energy and commodities, typically in chunks of between $50- and $250 million.

Today is an excellent time for a value investor, especially in energy, says Carl Tricoli, Houston-based founder and managing partner. “We look for value dislocations, and sometimes the best place to buy assets is with the drill bit, and sometimes it makes more sense to focus on the A&D and public markets. Currently, low prices of equities mean that Wall Street can be the cheapest place to buy a barrel.”

Denham’s investments range from basic resources such as oil, gas, coal, timber and minerals to infrastructure, transportation and storage, to power generation and renewable energy sources. Natural resources account for half of its total investments. Deal structures take the form of pure equity investments, debt-to-warrant arrangements and nonoperated working-interest partnerships. More than half of its Fund V portfolio companies are active internationally, and E&Ps and service providers comprise 40% of its portfolio.

“In the oil and gas arena, we are comfortable with most places on the risk spectrum,” says Tricoli.

One Denham investment involves C&C Energy in Colombia. When Denham bought in, C&C was a pure exploration play with no production. “We are comfortable doing that analysis and making that type of investment,” says Tricoli. Denham also has a minority investment in Fairborne Energy Ltd., a Canadian public company. The private-equity firm invested in conjunction with the conversion of Fairborne from a trust to a corporation. Alta Mesa Resources, a bread-and-butter Gulf Coast operator, also is in the company’s portfolio.

Denham’s strategy is three-pronged. It is actively looking at U.S. resource plays, although until last fall, it viewed the U.S. as over-priced. Homegrown assets have become much more appealing in the past year as their prices have retreated.

Six months ago, Denham committed capital to the Marcellus. “The economics are very compelling. The cost structure is such that we can make money selling Marcellus gas even in today’s low-price environment,” Tricoli says. Other plays on its radar include the Fayetteville, Haynesville and selected areas of the Bakken shale.

Global E&P also looks enticing. “We’re assembling a fairly large portfolio of high-potential international drilling prospects, and are in active discussions now with several firms on that front.”

Finally, the funder believes the times are ripe for value investing. “Our expectation is that there will be excellent values in the second half of the year” as borrowing-base redeterminations and weak gas prices increase companies’ need for capital.

“We don’t have any problem companies in our oil and gas portfolio, and we have a lot of capital to put to work. Now is a good time to be a buyer in this business,” says Tricoli.

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