New York private equity firm Bregal Partners is one of many companies getting involved in the oil and gas services sector. Over the past few years, largely because of an increase in hydraulic fracking, companies have been investing in equipment manufacturers, compliance companies, geospatial software groups and other businesses that provide services to traditional energy.
Bregal decided to make a move into the oilfield services industry with the formation of Aqua Terra Water Management LP and acquisition of Four Winds Energy Services Ltd. in November, says co-founder Scott Perekslis. "The growing use of hydrofracturing techniques to complete wells in emerging and unconventional light oil plays is creating increased demand for the handling of both frac water and water produced over the life of a well," Perekslis adds.
Why did Bregal select Four Winds to add to Aqua Terra Water?
We have been literally all over the place - in the northern reaches of Alberta, to West Texas, to Ohio, looking at salt water disposal operators and management companies. Four Winds is one that we first met at the very beginning of this year. They are very well positioned in some key plays in Alberta. They also have relationships that could be helpful for acquisition opportunities in the near future. What has been happening with shale and horizontal drilling and hydrofracturing techniques, the production of heavy oil - that trend has really taken off in the past few years. That population of wells will produce an increasing amount of water that will need to be managed.
What inspired Bregal to get involved in the oil and gas services industry?
The advent of hydraulic fracturing and the opening of the oil shale plays around the country and up in Canada is really creating huge demand for water management and water disposal, for both the frac water and also a need to deal with the water that flows out with the oil from the oil wells. The water that flows out with the oil is very dirty; it's not water that you would want near the surface. The safest way to handle it is to inject it below the ground. When you look at recent drilling activity, there is an enormous amount of activity in drilling shale oil wells. As those wells age, they tend to produce more and more water. We realized there will be increased demand for water management and water disposal almost regardless of new drilling.
Of the different subsectors, why did Bregal choose to invest in wastewater transportation industry?
Last fall, I sat down with colleagues and we developed a thesis for investing in the energy services area. We wanted to focus on service areas that were tied to the well count and the drill bed. That supplies opportunities to provide services to existing well population and for drilling and completion of new wells. Drilling of wells is cyclical, but once wells are drilled they are there and they produce for quite some time.