Two large private equity funds — Carlyle/Riverstone and Goldman Sachs Capital Partners — announced yesterday that they are investing $500 million in Cobalt International Energy LP, a new Houston-based exploration company comprised mainly of former Unocal Corp. executives. Former Unocal president Joe Bryant orchestrated the deal and will be the CEO of Cobalt. The Chronicle article on the deal is here.
Although the investment is relatively small by oil and gas industry standards, the investment reflects an increasing trend of private equity funding a proven management team in a promising industry. Given the relatively small capitalization, Cobalt will identify new prospects and then hedge its risk by laying off a substantial portion of its interest in the prospect to investment partners who will share the risk of capital-intensive drilling and completion activities on the prospects, particularly in regard to the deepwater prospects in the Gulf of Mexico that will be one of the company’s target areas.