Deon Daugherty: Hi, I am Deon Daugherty, editor-in-chief of Oil and Gas Investor, here at the Energy Capital Conference in Dallas with Blake Webster, partner at Quantum Capital Group, who was giving us a presentation on private equity today as the spotlight. So Blake, I guess let's begin with, where are the opportunities today in the market?

Blake Webster: Sure. Well, maybe I'll highlight just for a few of our different capital pools. First on the QEP [Quantum Energy Partners] side. On the private equity side, we've had good success working with some of our portfolio companies, really basin focused experts. In today's market, it's really about how can you source and find deal flow, and we've had good success behind those teams to name a few Firebird [Energy] in the Midland Basin, Bison [Oil & Gas] in the D-J, and then some things we're doing offshore with Houston Energy, a company called HEQ. Really partnering with these basin experts who are very commercially active, have their own sources of deal flow, which really helps prevent you from focusing more on marketed processes. Then on the QCS [Quantum Capital Solutions] side, that's our structured capital pool. We've been working with public companies in the era of public investors, focused on return of capital policies, putting more constraints on what they can do from a spend standpoint. We've been able to structure creative partnerships coming in both on the non-operated side and the operated side to provide drilling capital to those companies.

DD: So where are you excited to put money in the market right now?

BW: Yeah, I mean, look, we're certainly seeing opportunities from a valuation standpoint. We're seeing some of the most compelling values that we've seen in a few decades. And really as you look at the landscape, you've seen a lot of corporate consolidation, which then on the back of that has put a lot of assets onto the market and at a time when there's just less capital, there's more capital scarcity out there, and these parties are looking for cash in those transactions. And so we've had success, again, working with our portfolio companies in their areas of expertise to really identify and try to acquire those assets. And just, these have been coming at historically low multiples.

DD: And let's talk a little bit more about the consolidation era that we're in. It seems to be continuing. So how does private equity compete longer term in this sort of consolidation/post consolidation era?

BW: Sure. Well, look, certainly for us, it's going to be tough to compete with a strategic in a basin if it's an asset that they really want to own or they already have offset synergies to that. But for us, we're, we're willing to go off the beaten path and look at other areas. Again, we think those acquiring companies will ultimately core up and rationalize their portfolios, which will create opportunities. And then for us, we can also look at focusing on other areas that are, again, a little bit off the beaten path.

DD: How have hold times and exit strategies morphed over the years for private equity?

BW: Sure. So I'd say with the Lower 48 continuing to mature and just you're seeing more maturity. You've also seen buying, acquiring companies looking for a more mature asset when they buy it just to help with their overall metrics. That's naturally extended the hold timeframe for many of these assets. I'd say for us internally, we still look at underwriting based on a traditional private equity hold window of, call it five years. But we'll also run extended hold timeframes in that eight to 10 where you are making more of your return through distributions and distributing that cash flow. And again, if you get to the end of that timeframe, and there's still more to do with the asset, there are other things that your fingertips, like a fund continuation vehicle, which could be another way to continue beyond a traditional private equity lifecycle.

DD: And then, so what sort of tips can you share for folks who are trying to access capital right now?

BW: Yeah, look, I'd say despite the fact that we are in a more capital scarce environment, there's still a lot of competition for assets. So really it's about how you differentiate, how do you identify deal flow? Is there a way to create your own weather, so to speak, and find things that aren't marketed and are more proprietary? I think those business plans are getting a lot more traction.

DD: Okay. Blake Webster, partner at Quantum Capital Group, thank you for joining us today. I'm Deon Daugherty, Oil and Gas investor, at ECC 2024 in Dallas. Thank you very much for joining us.

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