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EnerVest – $2 billion energy investment goes bust

  • A $2 billion EnerVest fund that invested in oil and gas wells has essentially gone bust.
  • Major pensions and other investors could be left with just pennies on the dollar at best.
  • The loss is unusual for a private equity firm of EnerVest’s size and raises concerns that similar funds offered by competitors could fail.

Houston-based private equity firm EnerVest has posted a spectacular loss in one of its energy funds, a troubling sign that other firms could yet face a reckoning after a three-year oil price downturn.

EnerVest’s $2 billion energy fund that borrowed heavily to buy up oil and gas wells when crude prices were soaring has essentially gone bust, The Wall Street Journal reported. The blowup is expected to leave the pensions, endowments and charitable foundations that invested in the fund with just pennies on the dollar at best, according to the newspaper.

The fund’s lenders, which are led by Wells Fargo, are seeking to take control of the assets, people familiar with the situation.

The WSJ traced the failure to EnerVest’s strategy of taking out debt to amplify returns in the fund, which began investing in oil and gas wells in 2013 and focused on improving their output. As oil prices plunged from more than $100 a barrel in 2014 to a low of $26 a barrel last year, the value of the wells, which served as collateral on the debt, eroded. That triggered repayment demands from lenders that EnerVest could not meet.

 

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